Introduction to Levelised Cost, Economics & Risk for Renewable Power Projects

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Course objectives

Many reports, articles, conference presentations and promotional materials in the renewables industry refer to metrics such as “$ per W”, “LCOE (levelised cost of electricity)” and others, using them to draw conclusions, make comparisons and support or argue against the value of developing power projects. While these concepts are not new to the power industry, renewable generation brings very different cost structures, risks and attributes to consider when analysing such metrics. This interactive course provides a clearly explained and illustrated introduction to the derivation of such metrics, an analysis of the factors and risks which cause them to vary, and their relationship to other economic measures such as cash flows, net present values and rates of return.

Level & Style

All Green Power Academy courses run in an informal and extremely interactive manner, encouraging discussion and questions, to ensure that participants get the most value from the day. This course is designed to be of value to those with commercial and business interest in the energy industry. It assumes no prior financial expertise, explaining all economic and financial concepts in clear language.
Although neither essential nor a requirement of the course, delegates may find it useful to bring along an Excel-equipped laptop.

Approximate Timing

Course begins:                     09:00
Course ends:                        17:00

(Timings are approximate and include lunch plus morning and afternoon refreshment breaks)

What attendees say about us:

• “It was fascinating and inspiring”
• “Very solid introduction from a very knowledgeable instructor”
• “Rich in discussion” 
• “Good balance between theoretical and interactive”
•  “The trainer was very good at getting people involved”
• “Simple presentation of complex issues”

About your trainer

Dr John Massey is Green Power Academy's founder, Training Director, in-house renewables expert and lead trainer.  He combines a strong academic background with almost twenty years’ experience of commercial industry research, analysis and training across a variety  of “new technology” sectors, including conventional and renewable energy, telecoms and IT. He holds a 1st Class Honours degree in Natural Sciences from the University of Cambridge, a PhD in Earth Sciences and a Diploma in Economics, Innovation and Sustainability.

He delivers training globally, to senior executives from a wide range of organisations from project development to finance and has also developed educational material for both live and distance learning courses.

Course Content

Wind Focus: while most of the concepts below are applicable to any power project, not just wind, this course will aim to focus on specific issues and data applicable to wind when illustrating these concepts.
 
The economics of power projects:

• The factors determining profitability:
• energy resource vs. cost to convert vs. power sale price
• Understanding renewable power opportunities and associated risks:
• Resource risks, such as forecasting risks and sustainability
• Technology risks and power conversion issues
• Power markets: their attributes and challenges for renewables:
• Merit-order power pricing
• Grid balancing and demand management, including balancing costs

Cash flows for renewable power projects:

• Basic cash flows from energy sales, capital and operating costs
• The impact of additional factors such as: tax and depreciation; inflation; renewable policy incentives; fixed prices (PPAs or FiTs); fuel costs etc.
• Evaluating the impact of mistakes or uncertainties in resource evaluation, cost estimates, project lifetimes and more.
• Quantifying the potential returns from energy storage

Levelised Cost of Electricity (LCOE)

• Understanding the variety of ways used to derive of LCOE; some simple, some complex.
• Relating LCOE to the project cash flow, and to other project measures such as NPV, IRR and payback times.
• Evaluating the factors which most impact LCOE; including both project costs and energy generation and financing factors such as discount rates and debt/equity splits.
• LCOE versus marginal cost and electricity price.
• The dangers of interpreting others’ LCOE figures and its limitations as a metric: what it can and cannot tell about the value of a project.