Structuring renewable energy projects to enhance bankability

Abstract

Renewable Energy undoubtedly have numerous benefits including providing a long-term solution to mitigation of climate change. Many countries are now having national energy strategies which define the role of renewable energy in meeting energy demand. To meet the rapidly growing global demands for energy, particularly in the fast-growing emerging markets of China, India, Brazil, as well as other markets in Asia, Africa, the Middle East, and Latin America, hundreds of billions of dollars in project finance will be needed to bring online the new energy capacity. Even at the low end of estimates the large amounts of capital investment required remains well beyond the reach of the governments and capital markets. Project finance and private capital will therefore play a critical role in meeting this need for investment. However the project financing of renewable energy power projects is hindered by perceived high risk. This paper explores the structuring of project finance for renewable energy power projects to enhance success. The core projects risks are discussed and suggestions are provided on their mitigation. Appropriate risk mitigation and management approaches can enhance the viability of project financing renewable energy power projects. © 2011 Cape Peninsula Univ of Tec.