REP Project Planning & Financial Analysis 4

Question 1

A battery storage project paired with solar earns revenue through energy arbitrage. Which market mechanism allows it to also earn capacity payments in many US wholesale markets?

Accepted Answer

Capacity markets or resource adequacy programs

Answer

Capacity markets compensate resources for being available during peak demand periods, providing a revenue stream independent of actual energy production.

Question 2

Which financial metric is most commonly used by lenders as a covenant in renewable energy project finance loan agreements?

Accepted Answer

Debt Service Coverage Ratio (DSCR)

Answer

DSCR measures a project's ability to cover debt payments from operating cash flow and is the primary covenant lenders monitor throughout the loan term.

Question 3

A developer is planning a 50 MW solar project and must post a transmission deposit with the grid operator. This deposit is typically based on:

Accepted Answer

A per-MW amount set by the interconnection tariff to fund study costs and network upgrades

Answer

Interconnection deposits are set by tariff on a per-MW basis and cover the cost of interconnection studies and, ultimately, required system upgrades.

Question 4

In US project finance, a 'tax equity flip' structure refers to the point at which:

Accepted Answer

The tax equity investor's ownership percentage decreases after achieving its target return

Answer

After the tax equity investor has claimed sufficient tax credits and depreciation to reach its target IRR, its ownership share flips down (typically from ~99% to 5%), leaving the developer with majority control.

Question 5

Which renewable energy project development risk is best characterized as 'basis risk'?

Accepted Answer

The difference between the PPA price and actual market prices at the delivery point

Answer

Basis risk is the difference between the nodal price where a generator delivers power and the hub or reference price used in a financial hedge or PPA.

(REP) Certified Renewable Energy Professional Practice Test

(REP) Certified Renewable Energy Professional Practice Test

REP Project Planning & Financial Analysis 4