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Flashcards in Week 7 Deck (22):
1

EU’s “Energy Package” (Dec. 2016)

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2

The two dimensions of Climate Action

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3

Who finances Climate Action?

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4

Feed-in tariff definition

ypically make use of long-term agreements and pricing tied to costs of production for renewable energy producers. By offering long-term contracts and guaranteed pricing, producers are sheltered from some of the inherent risks in renewable energy production, thus allowing for more diversity in energy technologies.

Generally, FITs have 3 provisions.

  1. They guarantee grid access, meaning energy producers will have access to the grid.
  2. They offer long-term contracts, typically in the range of 15-25 years.
  3. They offer cost-based purchase prices, meaning that energy producers are paid in proportion to the resources and capital expended in order to produce the energy. 

5

Green bond

a tax-exempt bond issued by federally qualified organizations or by municipalities for the development of brownfield sites. Brownfield sites are areas of land that are underutilized, have abandoned buildings or are underdeveloped, often containing low levels of industrial pollution. Green bonds are short for qualified green building and sustainable design project bonds.

Green bonds are created to encourage sustainability and the development of brownfield sites. More specifically, green bonds finance projects aimed at energy efficiency, pollution prevention, sustainable agriculture, fishery and forestry, the protection of aquatic and terrestrial ecosystems, clean transportation, sustainable water management and the cultivation of environmentally friendly technologies.

The tax-exempt status makes purchasing a green bond a more attractive investment compared to a comparable taxable bond, providing a monetary incentive to tackle prominent social issues such as climate change and a movement to renewable sources of energy. To qualify for green bond status, the development must take the form of any of the following:

  • At least 75% of the building is registered for LEED certification
  • The development project will receive at least $5 million from the municipality or state
  • The building is at least 1 million square feet or 20 acres in size

 

6

Green Bond Principles

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7

Private Finance for RE: What are the Cashflows?

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8

Exceedance probability

expresses the chance that a particular measure will be surpassed in value by another, randomly selected measure.

–P90 is a high-confidence measure, because it implies a high probability for exceedance: P90 denotes the level of annual electricity generation that is forecasted to be exceeded 90% of the period (e.g. 1 or 10 year(s)).

–P50 is the mean i.e. the average level of generation: half of the year’s output is expected to surpass this level, and the other half is predicted to fall below it.

9

What is co-generation?

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10

Quasi equity

A form of company debt that could also be considered to posses some traits of equity, such as being non-secured by any collateral.

Quasi-equity is a product that’s unique in the market to EIB. It aims to fill the market gap that afflicts about 2 500 European companies of medium size, where the financing needed is between EUR 10 million to EUR 17 million. Here’s how it works:

The EIB makes a long-term loan to an innovative company. Steady repayment of the loan would drain the company’s coffers just when it needs to be investing in research and development. Alternatively, an equity investment would dilute the people who bore the risk of financing the early years of development.

So quasi-equity provides non-dilutive equity risk capital that is remunerated based on the company’s performance, just as an equity investment is.

 

11

Bankability

Put simply, a PPP project is considered bankable if lenders are willing to finance it. The majority of PPPs are funded on a project finance basis where a special purpose vehicle is established to ring fence the project revenues and debt liabilities. Note that PPP projects is also sometimes funded on a “corporate basis” (i.e. the project funding requirement is met by one or more sponsors of the PPP Company).

12

Issues with offshore wind turbines usage

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13

The “negawatt” factor

one EUR spent in EE improvement is most often more economical than one EUR spent for new E/RE capacity

14

The ESCO Model

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15

The price rate of change (ROC) 

a technical indicator of momentum that measures the percentage change in price between the current price and the price n periods in the past. It is calculated by using the following formula:

ROC = (Most recent closing price - Closing price n periods ago) / Closing price n periods ago x 100

16

Gearing

Gearing refers to the level of a company’s debt related to its equity capital, usually expressed in percentage form. It is a measure of a company’s financial leverage and shows the extent to which its operations are funded by lenders versus shareholders. The term "gearing" also refers to the ratio between a company’s stock price and the price of its warrants.

17

The levelized cost of electricity (LCOE)

the net present value of the unit-cost of electricity over the lifetime of a generating asset. It is often taken as a proxy for the average price that the generating asset must receive in a market to break even over its lifetime. It is a first-order economic assessment of the cost competitiveness of an electricity-generating system that incorporates all costs over its lifetime: initial investment, operations and maintenance, cost of fuel, cost of capital.

18

Contract for Difference (CFD)

a private law contract between a low carbon electricity generator and the Low Carbon Contracts Company (LCCC), a government-owned company, introduced as part of the now implemented Electricity Market Reform (EMR) programme A generator party to a CFD is paid the difference between the ‘strike price’ – a price for electricity reflecting the cost of investing in a particular low carbon technology – and the ‘reference price’– a measure of the average market price for electricity in the GB market. 

19

 

Interface risk in construction

Physical interfaces occur where different contractors are engaged on the same project, particularly where their respective works interact or connect in some way.

Relationship interfaces occur between different stakeholders on a project, such as; contractors, local community groups, regulatory bodies, the client, and so on.

Interface risk, and the failure to manage it effectively, is a common cause for problems on construction projects, giving rise to:

  • Delays in completion.
  • Claims for damages.
  • Stakeholder complaints.
  • Loss of profit.
  • Industrial action.
  • Regulatory infringements.
  • Reputational damage.

20

To deliver an effective pricing signal, the (listed) price of the ton of carbon should reach.  Since 2008, it has mostly remained in the range of

EUR 40 to 80 (depending on the estimates); EUR 5-10

21

Renewable energy generation 

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22

turnkey contract

a contract in which a company is given full responsibility to plan and build something that the client must be able to use as soon as it is finished without needing to do any further work on it themselves: The stadium is being built under aturnkey contract.