Renewable Energy Financial Analysis
Budget: $30 – $250 USD
Course: Renewable Energy Economics & Finance
Format: Essay responses with figures/tables from a student-built Excel model
Instructions:
• Build or modify your Excel calculator to evaluate each scenario.
• Use appropriate financial modeling techniques (discounting, cash-flow modeling,
sensitivity analysis, market revenue forecasting, etc.).
• All numerical results must be generated from your Excel file.
• Each response should be well written to illustrate understanding of the scenario, with
supporting graphics embedded (cash-flow charts, tornado diagrams, price projections,
etc.).
• Justify all assumptions.
BACKGROUND FOR ALL SCENARIOS
You are an analyst working for GreenWave Infrastructure Partners, a firm evaluating investment
opportunities in renewable energy.
Your team must assess the financial viability of various solar PV and onshore wind assets under
different technological, regulatory, and market conditions.
Unless otherwise noted, assume:
• Discount rate (unlevered WACC): 7%
• Corporate IRS tax rate: 21%
• Inflation: 2.5%
• Project lifetime: 25 years
• Nominal PPA escalation: 1% per year (if applicable)
• Base-year construction cost:
o Solar PV: $1,050/kW
o Onshore wind: $1,450/kW
• Fixed O&M:
o Solar PV: $17/kW-yr
o Wind: $42/kW-yr
• Variable O&M:
o $0 for solar,
o $3/MWh for wind
You may adjust any assumptions in your model as long as you clearly justify them.
QUESTION 1 – Solar PV NPV Under CAPEX Shock
A 150-MW solar plant is under consideration in Arizona. Extreme supply-chain volatility has
introduced a potential CAPITAL EXPENSE (CAPEX) increase of +20%. The developer has a 25
year PPA offer at $32/MWh (nominal) with 1% annual escalation.
Tasks:
1. Using your Excel model, calculate NPV under:
o Base CAPEX
o +20% CAPEX scenario
2. Show a cash-flow table for both cases (revenue, O&M, taxes, net cash flow).
3. Explain—using at least one chart—how CAPEX sensitivity impacts financial viability.
Essay Prompt:
Discuss whether the project remains financeable after the CAPEX shock. Explain which
components of the cash flow drive value changes, referencing the tables/graphs generated by
your spreadsheet.
QUESTION 2 – Internal Rate of Return (IRR) for an Onshore Wind Project Under Changing
Wind Resource
You are analyzing a 200-MW wind farm in Iowa. Updated weather studies indicate that annual
energy production could fall by 12% compared to the developer’s initial estimate.
Tasks:
1. Compute IRR for:
o Original production forecast
o -12% production scenario
2. Provide a comparison chart showing how lower output affects revenues and IRR.
3. Explain why IRR may respond more strongly than NPV to energy-yield reductions.
Essay Prompt:
Write a memo explaining to senior management how wind-resource uncertainty affects investor
risk. Reference your Excel-generated graphs and justify the project's viability thresholds.
QUESTION 3 – Levelized Cost of Energy (LCOE) Impact from O&M Inflation
Your firm is comparing two O&M contract structures for a new 100-MW solar plant in Texas:
1. Fixed-price O&M contract: $17/kW-yr, no escalation rate
2. Escalating O&M contract: $11/kW-yr with 4% annual escalation rate
Tasks:
1. Calculate total project LCOE under each O&M Scenario.
2. Present a 25-year cost breakdown table.
3. Discuss whether lower initial O&M costs offset long-term inflation.
Essay Prompt:
Explain which contract is financially preferable and why. Include key figures and demonstrate
how escalating O&M interacts with discounting in your model.
QUESTION 4 – Market Revenues Under Merchant Exposure
A 250-MW wind farm in ERCOT will sell 40% of its output under a 25-year PPA at $29/MWh,
and the remaining 60% merchant into the free market.
Your analytics team provides the following mid-range market price forecast for ERCOT North
Hub (nominal pricing):
Table Breakdown of Pricing Changes for Merchant (free market) plan
Year 1 = $31 per MWh
Year 5 = $36 per MWh
Year 10 = 43 per MWh
Year 15 = 51 per MWh
Year 20 = 59 per MWh
assume linear interpolation between years for finding escalation rate of Merchant(Market Plan).
Tasks:
1. Build a mixed-revenue model blending PPA and merchant exposure based on their
percentage of utilization.
2. Compute NPV and IRR for a mixed revenue model.
3. Create a chart showing revenue streams by source (PPA vs merchant).
4. Run a ±25% merchant price sensitivity and summarize results.
Essay Prompt:
Discuss the risk/return implications of merchant exposure, referencing your spreadsheet
outputs. Assess whether revenue diversification strengthens or weakens the project’s financial
feasibility.
QUESTION 5 – Projecting Solar Output Under Degradation & Repowering
A solar developer wants to model long-term performance considering 0.6% annual degradation
on your 100 MW solar project. They are also considering repowering in Year 15 for $150/kW,
restoring output to 98% of original capacity.
Tasks:
1. Compute the 25-year generation profile with and without repowering.
2. Update your financial model to determine the NPV or IRR change due to repowering in
year 15.
3. Include a generation-over-time graph for 25 years in length and a before/after cash
f
low comparison table for both scenarios of with and without repowering.
Essay Prompt:
Explain whether repowering is economically justified. Discuss how degradation affects value
accumulation and how capital reinvestment interacts with discount rates.
QUESTION 6 – Scenario Comparison: Solar vs Wind Under Carbon Price Projections
Your firm must choose between a 150-MW solar project, a 150-MW wind project, and a 150
MW Natural Gas Generation Project for investment. A new federal policy proposes a carbon
price beginning at $20/ton, rising 6% per year into perpetuity, which is expected to increase
wholesale market prices proportionally to emissions factors:
• Solar output: 0 tCO₂/MWh
• Wind output: 0 tCO₂/MWh
• Natural Gas Grid Generator output: 0.43 tCO₂/MWh
Assumptions to consider
• Assume the carbon price is fully passed through to market prices in proportion to the Gas
generator’s emissions.
• Assume that the grid generator has a nameplate capacity of 150 MW and an 85%
Capacity factor.
• Assume the natural gas generation plant should have a fuel cost associated with the
current MMBtu average cost for natural gas in the United States.
• Assume that the fuel requirement is 10 MMBtus per hour of generation.
Tasks:
1. Use your Excel model to project energy revenues for solar, wind, and gas generation with
and without carbon-price–driven price adders.
2. Compute NPV and IRR for the three technologies with and without the carbon policy.
3. Produce a scenario comparison chart summarizing NPV, IRR, LCOE, and revenue change
for wind, solar, and Natural Gas Generation, showing simple profit breakdowns
considering only the market price, the penalty rate, and the fuel rate for 25 years in
length.
Essay Prompt:
Evaluate which asset is the superior investment under each scenario. Explain how carbon
pricing shifts competitive dynamics and which project benefits more from long-run market price
adjustments.
Format: Essay responses with figures/tables from a student-built Excel model
Instructions:
• Build or modify your Excel calculator to evaluate each scenario.
• Use appropriate financial modeling techniques (discounting, cash-flow modeling,
sensitivity analysis, market revenue forecasting, etc.).
• All numerical results must be generated from your Excel file.
• Each response should be well written to illustrate understanding of the scenario, with
supporting graphics embedded (cash-flow charts, tornado diagrams, price projections,
etc.).
• Justify all assumptions.
BACKGROUND FOR ALL SCENARIOS
You are an analyst working for GreenWave Infrastructure Partners, a firm evaluating investment
opportunities in renewable energy.
Your team must assess the financial viability of various solar PV and onshore wind assets under
different technological, regulatory, and market conditions.
Unless otherwise noted, assume:
• Discount rate (unlevered WACC): 7%
• Corporate IRS tax rate: 21%
• Inflation: 2.5%
• Project lifetime: 25 years
• Nominal PPA escalation: 1% per year (if applicable)
• Base-year construction cost:
o Solar PV: $1,050/kW
o Onshore wind: $1,450/kW
• Fixed O&M:
o Solar PV: $17/kW-yr
o Wind: $42/kW-yr
• Variable O&M:
o $0 for solar,
o $3/MWh for wind
You may adjust any assumptions in your model as long as you clearly justify them.
QUESTION 1 – Solar PV NPV Under CAPEX Shock
A 150-MW solar plant is under consideration in Arizona. Extreme supply-chain volatility has
introduced a potential CAPITAL EXPENSE (CAPEX) increase of +20%. The developer has a 25
year PPA offer at $32/MWh (nominal) with 1% annual escalation.
Tasks:
1. Using your Excel model, calculate NPV under:
o Base CAPEX
o +20% CAPEX scenario
2. Show a cash-flow table for both cases (revenue, O&M, taxes, net cash flow).
3. Explain—using at least one chart—how CAPEX sensitivity impacts financial viability.
Essay Prompt:
Discuss whether the project remains financeable after the CAPEX shock. Explain which
components of the cash flow drive value changes, referencing the tables/graphs generated by
your spreadsheet.
QUESTION 2 – Internal Rate of Return (IRR) for an Onshore Wind Project Under Changing
Wind Resource
You are analyzing a 200-MW wind farm in Iowa. Updated weather studies indicate that annual
energy production could fall by 12% compared to the developer’s initial estimate.
Tasks:
1. Compute IRR for:
o Original production forecast
o -12% production scenario
2. Provide a comparison chart showing how lower output affects revenues and IRR.
3. Explain why IRR may respond more strongly than NPV to energy-yield reductions.
Essay Prompt:
Write a memo explaining to senior management how wind-resource uncertainty affects investor
risk. Reference your Excel-generated graphs and justify the project's viability thresholds.
QUESTION 3 – Levelized Cost of Energy (LCOE) Impact from O&M Inflation
Your firm is comparing two O&M contract structures for a new 100-MW solar plant in Texas:
1. Fixed-price O&M contract: $17/kW-yr, no escalation rate
2. Escalating O&M contract: $11/kW-yr with 4% annual escalation rate
Tasks:
1. Calculate total project LCOE under each O&M Scenario.
2. Present a 25-year cost breakdown table.
3. Discuss whether lower initial O&M costs offset long-term inflation.
Essay Prompt:
Explain which contract is financially preferable and why. Include key figures and demonstrate
how escalating O&M interacts with discounting in your model.
QUESTION 4 – Market Revenues Under Merchant Exposure
A 250-MW wind farm in ERCOT will sell 40% of its output under a 25-year PPA at $29/MWh,
and the remaining 60% merchant into the free market.
Your analytics team provides the following mid-range market price forecast for ERCOT North
Hub (nominal pricing):
Table Breakdown of Pricing Changes for Merchant (free market) plan
Year 1 = $31 per MWh
Year 5 = $36 per MWh
Year 10 = 43 per MWh
Year 15 = 51 per MWh
Year 20 = 59 per MWh
assume linear interpolation between years for finding escalation rate of Merchant(Market Plan).
Tasks:
1. Build a mixed-revenue model blending PPA and merchant exposure based on their
percentage of utilization.
2. Compute NPV and IRR for a mixed revenue model.
3. Create a chart showing revenue streams by source (PPA vs merchant).
4. Run a ±25% merchant price sensitivity and summarize results.
Essay Prompt:
Discuss the risk/return implications of merchant exposure, referencing your spreadsheet
outputs. Assess whether revenue diversification strengthens or weakens the project’s financial
feasibility.
QUESTION 5 – Projecting Solar Output Under Degradation & Repowering
A solar developer wants to model long-term performance considering 0.6% annual degradation
on your 100 MW solar project. They are also considering repowering in Year 15 for $150/kW,
restoring output to 98% of original capacity.
Tasks:
1. Compute the 25-year generation profile with and without repowering.
2. Update your financial model to determine the NPV or IRR change due to repowering in
year 15.
3. Include a generation-over-time graph for 25 years in length and a before/after cash
f
low comparison table for both scenarios of with and without repowering.
Essay Prompt:
Explain whether repowering is economically justified. Discuss how degradation affects value
accumulation and how capital reinvestment interacts with discount rates.
QUESTION 6 – Scenario Comparison: Solar vs Wind Under Carbon Price Projections
Your firm must choose between a 150-MW solar project, a 150-MW wind project, and a 150
MW Natural Gas Generation Project for investment. A new federal policy proposes a carbon
price beginning at $20/ton, rising 6% per year into perpetuity, which is expected to increase
wholesale market prices proportionally to emissions factors:
• Solar output: 0 tCO₂/MWh
• Wind output: 0 tCO₂/MWh
• Natural Gas Grid Generator output: 0.43 tCO₂/MWh
Assumptions to consider
• Assume the carbon price is fully passed through to market prices in proportion to the Gas
generator’s emissions.
• Assume that the grid generator has a nameplate capacity of 150 MW and an 85%
Capacity factor.
• Assume the natural gas generation plant should have a fuel cost associated with the
current MMBtu average cost for natural gas in the United States.
• Assume that the fuel requirement is 10 MMBtus per hour of generation.
Tasks:
1. Use your Excel model to project energy revenues for solar, wind, and gas generation with
and without carbon-price–driven price adders.
2. Compute NPV and IRR for the three technologies with and without the carbon policy.
3. Produce a scenario comparison chart summarizing NPV, IRR, LCOE, and revenue change
for wind, solar, and Natural Gas Generation, showing simple profit breakdowns
considering only the market price, the penalty rate, and the fuel rate for 25 years in
length.
Essay Prompt:
Evaluate which asset is the superior investment under each scenario. Explain how carbon
pricing shifts competitive dynamics and which project benefits more from long-run market price
adjustments.