L R AS Published on Monday 1 July 2019 - n° 283 - Categories:funding
The kWh price of power plants is increasingly dependent on the market.
As purchase contracts become shorter and shorter, U.S. developers and investors are increasingly dependent on spot market sales of electricity. With five or seven-year contracts, it is not possible for a power plant owner to amortize construction costs. This is no longer the case,
Contracts finance 15% to 20% of the initial costs and 80 to 85% of the revenue remains to be found on the market, or with other contracts. This is not only an American phenomenon, but in many countries. In Texas, investors are testing how long it takes to get coverage on investments, and are ready to go for it.
As a result, investors are taking more risk, but are still interested in investing in power plants. This is a risk that many seem to want to take. The risk would be diminished if there were a storage facility to sell energy when it is lacking in the region or country.
"If you find a 25-year purchase contract, that means the price will be low.
PV Magazine of 24 June
Editor's note Investors rushing into construction with a five or seven year power sales contract should carefully calculate how they will amortize the remaining 80% to 85% of the initial cost. Indeed, after five years, the cost of construction will have fallen and so will the selling price per kilowatt-hour on the market. Many power plant owners may not be able to recover their initial investment.
