Project Planning & Financial Analysis Flashcards

A developer is comparing a 30-year project life to a 25-year project life for the same wind farm. Assuming equal annual cash flows, the 30-year scenario will have a:

Answer: Lower IRR but potentially higher NPV depending on the discount rate

A longer project life adds cash flows that increase NPV but dilutes the IRR by extending the payback period if early-year returns are high.

In renewable energy project development, 'notice to proceed' (NTP) is most significant because it:

Answer: Releases the EPC contractor to begin construction and starts the timeline for liquidated damages

NTP formally instructs the EPC contractor to mobilize and begin construction, starting the clock on the guaranteed completion date and associated LD provisions.

Which environmental review process is required for renewable energy projects on federal land in the United States?

Answer: National Environmental Policy Act (NEPA) review

NEPA requires federal agencies to assess the environmental impacts of proposed actions on federal land through an EA or EIS process.

A community solar project differs from a utility-scale PPA project primarily in that:

Answer: Community solar subscribers receive bill credits rather than the developer selling power through a single offtake contract

Community solar distributes the economic benefits of a shared solar array to multiple subscribers through utility bill credits, rather than a single-buyer PPA.

Which risk mitigation tool protects a renewable energy project from revenue loss caused by grid curtailment beyond the developer's control?

Answer: Curtailment compensation provisions in the PPA or interconnection agreement

PPA or interconnection agreement provisions for curtailment compensation, such as deemed energy payments, protect developers when the grid operator reduces output for system reasons.

A geothermal project developer is conducting a 'resource risk assessment.' What is the primary uncertainty being evaluated?

Answer: Uncertainty about the temperature, flow rate, and sustainability of the underground reservoir

Geothermal resource risk centers on whether the subsurface reservoir will deliver sufficient heat and fluid flow to sustain the project's rated output over time.

When sizing the debt for a renewable energy project, lenders typically use the P90 energy estimate rather than P50 because:

Answer: P90 is a conservative estimate that ensures debt service can be covered even in below-average energy years

Using the conservative P90 estimate for debt sizing ensures the project can service its debt obligations even if actual energy output is below the median expectation.