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Renewable energy finance opens up new possibilities


An ever-expanding number of financial avenues are available to support the development of renewable energy projects. In contrast to the conventional method of Project Funding through a commercial bank, the new sources of financing do not call for the creation of a PPA and are more willing to tolerate the market price risk associated with full merchant projects.

An engaging discussion over the altering forecast for the financing of renewable energy projects took place at the analysis table of the Spanish version of the 27th edition of the monthly webinars organized by AleaSoft Energy Forecasting and AleaGreen. In addition to the hosts, Antonio Delgado Rigal, CEO of AleaSoft, and Oriol Saltó I Bauzà, Associate Partner at AleaGreen, participated in the discussion at the analysis table. Jaime Vázquez is the Director of PPA & Finance at Soto Solar, and Tomás Garcá is the Senior Director of Energy & Infrastructure Advisory at JLL. On the website of the company, clients of AleaSoft Energy Forecasting have the ability to submit a request to receive the recording of the event.

It is a common misconception that a renewable energy project may only be financed if the developers are able to get a power purchase agreement (PPA) and obtain project financing from a traditional financial institution. This was the scenario in the most recent years, and project finance is still an option for financing, but it is a difficult choice to obtain if the cash flows for the project are merchant, which means if the energy that is generated is sold in the wholesale market for electricity. Because of this complete merchant condition, the income from the project is subject to the ebb and flow of market pricing, which is a riskier proposition than the prices that were agreed upon in the PPA.

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According to the industry professionals who were invited to participate in the webinar, in the most recent few months, more and more choices for the financing of renewable energy projects have been developing, and these new possibilities do not require the signing of a PPA. Crowdfunding, pension funds, and debt funds are some examples of the new types of finance that are becoming available and that are becoming increasingly interested in financing renewable energy projects. For a project that does not have a PPA in place, the terms of financing offered by these alternatives are more favorable than those provided by traditional banks. These new sources are willing to take the market price risk that comes with a complete merchant project and offer flexibility when it comes to the process of projects locating the necessary financing to be developed.

The upcoming webinar in this ongoing series of monthly events will take place on December 15th, and preparations are now underway. It will be the 28th edition, and on this occasion, the experts from AleaSoft Energy Forecasting and AleaGreen will analyze all of the most important elements regarding the energy transition, the decarbonization, and the future of the European energy system. Analysis will be done on the possibilities and effects on markets that will result from the widespread adoption of renewable energy sources, the switch to electric vehicles, the storage of energy in batteries, international interconnections, and the central role that green hydrogen will play as the fuel of the future.

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