CHAPTER 1

Introduction and Notes to the Reader

From my over twenty years of experience as a project developer, the process of financing an energy project can be compared to sailing a boat over the high seas. As a sailor possesses a collection of essential implements—a seagoing vessel, detailed plans, a map, navigational equipment, and food supplies—so too does a project developer require their own specific tools.

Taking an energy project to financial close (the point at which all financings has been secured and that the construction phase is ready to begin) and beyond operation requires the timely execution of a series of steps. These steps include feasibility studies, Front End Engineering and Design (FEED) studies, ESIAs, Engineering, Procurement and Construction (EPC) contracts, Power Purchase Agreements (PPAs), financing agreements, and Operations and Maintenance (O&M) contracts, among many others.

A breakdown of the main elements that underpin project finance are summarized in Table 1.1.

Even if you make sound progress putting the above elements in place, the completion of the project is far from guaranteed. Any one of the abovementioned agreements may “fail” at any point. Other factors beyond the control of the developer can cause major delays or even cause developers to shelve plans completely after having invested time, effort, and substantial amounts of money.

This book aims to assist burgeoning developers by showing them how to reduce the risk of external factors undermining a project; it seeks to help the reader to ensure that all of those elements that are under the developer’s control are put together in the best possible manner given the resources at the developer’s disposal. Good project developers are drawn to the challenge. This book is for the intrepid sailor, the project developer, who is focused on renewable energy in frontier and emerging (developing) market, who dares to sail to parts that are uncharted and yet present enormous potential.

Table 1.1 Breakdown of project finance elements

The book draws on my experience of developing energy projects under challenging circumstances in every corner of the globe. Such projects include onshore and offshore wind farms, solar photovoltaic (PV) farms, biomass, and waste-to-energy plants.

We shall take a holistic approach to the development and financing of such projects by laying out the common building blocks of sustainable energy projects. This will provide the reader with the practical tools required to work their way through concept, design, feasibility, and reality. In the interests of clarity, the words entrepreneur, project developer and student are interchangeable.

While this book is written with very much the developer at its center, it can be of use to others as well. For example, policymakers, investors, bankers, lawyers, contractors, government agencies, and nongovernmental agencies can all draw some benefit from the book. The fact that these are usually key stakeholders in such projects is no coincidence and their role as actors in the energy sector will be examined in more detail later.

Having a firm grasp on the essentials of the framework will increase one’s chances of success; however, it offers no guarantee. My intention is to put the reader on the path toward mastering the core tools and frameworks for developing a sustainable energy project to the point where the project’s location (developing or otherwise) matters less.