Quick summary

For a project to be viable and attractive to investors the business case needs to be credible.  Over the lifetime of the project it needs to make returns for the owners so that they can pay off any money that was borrowed to build the farm and still make a profit.  Some key inputs to this business case are listed below:

  • Wind simulations have demonstrated that the project can generate enough Annual Energy Production (AEP);
  • It is possible to actually install the project (!), given the seabed conditions and size of the wind turbines;
  • If there is a government subsidy mechanism, that the project meets the criteria and is guaranteed this return (assuming that the wind blows!) through the lifetime of the project;
  • The financial indicators such as IRR (Internal rate of return) and NPV (net present value) are satisfied taking into account other factors such as WACC (weighted average cost of capital);
  • Project risks have been fully assessed and are represented in the financial budget if necessary (often as separate line items).  Risks not to be forgotten about are governments being late with collector stations and grid connections;
  • The suppliers of the main components (e.g. WTG’s, foundations etc) are financially stable, and lenders are also reliable;
  • The service and maintenance costs have been properly accounted for.  For example, what provision is there for component failures after year 5?
offshore wind turbines WTG

1. Wind farm yield simulations (AEP)