The range of financing options for renewable energy projects is increasingly wide. The new sources of financing, unlike the traditional Project Finance with a commercial bank, no longer require a PPA and more naturally accept the market price risk of full merchant projects.
At the analysis table of the Spanish version of the 27th edition of the monthly webinars organised by AleaSoft Energy Forecasting and AleaGreen, there was an interesting conversation about how the outlook of renewable energy projects financing is changing. The analysis table had the participation of Jaime Vázquez, Director of PPA & Finance at Soto Solar, and Tomás García, Senior Director of Energy & Infrastructure Advisory at JLL, as well as the hosts Antonio Delgado Rigal, CEO of AleaSoft, and Oriol Saltó i Bauzà, Associate Partner at AleaGreen. The recording of the event can be requested by AleaSoft Energy Forecasting’s clients on the company’s website.
Paradigm shift in renewable energy financing
The general belief is that a renewable energy project can only be financed by managing to sign a PPA and with a Project Finance with a commercial bank. This was the situation in recent years and Project Finance continues to be a financing option, but it is a difficult option to achieve if the cash flows for the project are merchant, that is, if the generated energy is sold in the electricity wholesale market. This full merchant condition exposes the project’s income to the volatility of market prices, which entails a higher risk than the prices agreed in a PPA.
According to the experts invited to the webinar, in recent months more and more options have been appearing for the financing of renewable energy projects, and these new options no longer require the signing of a PPA. Among the financing products that are appearing, and that are increasingly interested in renewable energy financing, are crowdfunding, pension funds and debt funds.
These alternatives offer more favourable financing conditions than those offered by traditional banks for a project without PPA. These new sources accept the market price risk that a full merchant project entails and provide flexibility when it comes to projects finding the necessary financing to develop.
AleaSoft Energy Forecasting’s analysis on the prospects for energy markets in Europe and the valuation of renewable energy assets
The next edition of this series of monthly webinars is being prepared for December 15. It will be the 28th edition and, on this occasion, the experts of AleaSoft Energy Forecasting and AleaGreen will analyse all the key aspects for the energy transition, the decarbonisation and the future of the European energy system. The prospects and impacts on the markets of the massive implementation of renewable energies, the transition to electric vehicles, the energy storage in batteries, international interconnections and the key role of green hydrogen as the fuel of the future will be analysed.