Renewable energy developers – Creating value for investors

Renewable energy developers must use proprietary skills and experience to overcome a range of critical challenges on the development pathway – by Michael Macnamara

As they overcome these challenges and deliver new projects, they are being rewarded with rising returns on these new projects. In this report, we intend to show how successful developers overcome a myriad of challenges to secure critical permits while simultaneously maximising value to shareholders.

Project returns are rising

 
Returns on projects in the development pipeline are improving, driven by higher energy prices and, in the case of solar, falling panel prices. This improvement is remarkable given that higher wind turbine prices and higher interest rates have increased the long-term cost of renewable energy for the first time in 20 years.
 

Experience is king

 
Experienced developers promote renewable energy projects from greenfield to fully permitted status more efficiently and at the lowest cost possible. In addition, they are adept at identifying those early-stage projects that are unlikely to materialise and channel resources towards more promising ones. Along with rising project returns, this acts as a further tailwind for these developers.
 

Local presence is vital

 
Renewable energy development is an intensely localised industry. Land access, grid connection, permitting and a range of other critical steps on the development pathway are handled at a local level. Developers must establish a local presence to bring their development expertise into play.
 

Grid connection is a global challenge

 
Developers must know where and at what cost grid access is possible and which regulatory criteria are necessary. Proven ability to secure grid access in a developer’s target market(s) is an absolute must for developers.
 

PPA/offtake agreements

 
Developers must be able to provide power purchase agreements (PPAs) as part of the project development pathway. This is becoming an increasingly important and complex role as the world shifts away from feed-in tariff (FIT) regimes for standalone renewable projects towards competitive PPAs combined with hybrid renewables plus storage projects. Some large purchasers of renewable projects have their own PPA channels, although they remain a minority of buyers.
 

Storage will play an increasingly important role

 
As penetration of intermittent renewable energy rises and increases stress on grid stability, storage is fast becoming mandatory in many developed markets. The integration of storage boosts the attractiveness of projects to grid operators and may lead to higher returns in some cases. Developers must know how to integrate storage, not only in the project itself but also in the prevailing regulatory regime.
 
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