WEMO24-Compiled Report-Interactive compressed (002) 4154-7882-8116 v.1 - Flipbook - Page 55
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Better financing
Adjusted ownership strategies
Diversification and innovation
Since renewable projects are capital-intensive, access to low-cost
financing and favorable terms can enhance IRR.
Using farm-down as sources of funding
Two key ways to boost profitability are
diversifying revenue streams and innovating to
maximize the value of renewable electrons
To improve financing renewable power assets, it’s essential to define
a financing strategy tailored to the project’s context – location,
technology, regulatory environment, and risk profile. Early access to
non-recourse financing, which relies on project assets rather than the
developer’s balance sheet, can significantly enhance financial stability
and attract investors without over-leveraging the company.
Exploring new financing schemes, such as green bonds, publicprivate partnerships, or crowdfunding, can create innovative funding
opportunities. Diversifying funding sources reduces reliance on
traditional lenders and boosts financial flexibility.
Additionally, industrializing the financing process and optimizing
modeling streamlines operations and can improve accuracy.
Developing robust templates, checklists, and replicable procedures,
can significantly reduce time, costs, and complexity from project
conception to financial close, which is particularly beneficial when
scaling portfolios of projects.
A best-in-class organization is required to support the financing
process effectively. Invest in top-tier tools and skilled personnel to
ensure models are robust, transparent, and adaptable.
In the dynamic renewable energy sector, companies must adopt
adjusted ownership strategies to remain competitive and maximize
long-term portfolio value. This involves capital recycling, structured
products, and active asset management throughout their lifecycles.
Using non-conventional funding sources, such as farm-downs,
divestment of non-core assets, and hybrid capital, can provide
additional financial flexibility. The farm-down or “Build-Sell-Operate”
(BSO) model allows developers to sell stakes in their renewable assets
at various development stages to institutional investors seeking longterm, stable yields.
By selling a portion of their mature assets, companies can de-risk their
investments, secure immediate capital, and still benefit from future
returns. BSO is less capital intensive due to debt deconsolidation,
sell-down margin, and limited equity injection. An example is
TotalEnergies Renewables’ $689 million deal in 2023 for a 25.5%
equity stake in the Seagreen offshore wind farm. Several players like
Orsted, Engie, EDPR or Nextera also have implemented farm-down
strategies.
Regularly evaluating the portfolio to identify assets suitable for
divestment helps optimize the asset mix and maintain a highperforming portfolio.
This approach can be industrialized by implementing standardized
procedures for executing farm-down deals, including thorough due
diligence, accurate asset valuation, and strategic partner selection to
ensure favorable terms and successful transactions.
HOME
GLOBAL
OUTLOOK
Renewable hydrogen, biofuels, and energy storage are providing
new markets and revenue streams. For example, as demand for
clean hydrogen increases, this could become a significant source of
revenue.
Renewable energy can be made more profitable by combining its
output with other sectors, using synergies to stimulate growth and
create partnerships with other industries. For example, partnerships
with electric vehicle charging operators can lead to increased demand
for renewable energy, boosting revenues for renewable players.
Diversification and new revenue stacking will mainly be enabled by
the accelerated deployment of large-scale battery energy storage
systems (BESS), as battery prices reduce. BESS will play a crucial
role in building a new paradigm: while current electricity markets
assume electricity cannot be stored, the introduction of a flexible
generation asset will offer developers opportunities to generate
new revenue from renewable generation, such as arbitrage trading
on the wholesale market, capacity payments, and monetized ancillary
services.
Therefore, the development and integration of BESS is crucial for
diversifying renewable revenue streams. Rapid advancements in
battery management technology are essential to ensuring the longterm reliability of storage assets and their seamless integration into
grid infrastructure and trading ecosystem.
WEMO 2024
How to make money
from renewables
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