Up-Scaling of Wind Power in Viet Nam

Practical training on wind power and financing

Thursday, June 07, 2018
Practical training on wind power and financing
Thursday, June 07, 2018 2
Seminar outline (1/3)
About RENAC
Introduction
Wind turbine technology review
Fundraising and valuation; stakeholders' perspectives
Cash flows of wind power projects
Wind power revenues
Annual energy production (AEP)
Estimation with capacity factor and full load hours
Calculation with wind speed distribution and wind turbine power
curves
Estimation with synthetic wind speed distributions ( k and A values)
and wind turbine power curves
Source: RENAC, 2016
Thursday, June 07, 2018 3
Seminar outline (2/3)
Wind Power Laboratory
Calibration of wind blower
Wind power mini grid and power measurement
Blade design
Rotor blade number
Theoretical maximum and measured power output
Rotor blade pitch angle
Power curve measurement– lift and drag effect
Power coefficient calculation
Tip speed ratio λ
Wake effect losses
Yawing losses
Source: RENAC, 2016
Thursday, June 07, 2018 4
Seminar outline (3/3)
Uncertainty analysis with probability distribution of annual energy
production
Costs of wind power
Cash flow valuation
Backup:
Levelized costs of wind energy
Risk in wind power cash flows
Financial terms in wind power
Source: RENAC, 2016
Thursday, June 07, 2018 5
Learning objectives
A participant who has met the objectives of the course will be able to
define the capacity factor for wind turbines
define the full load hours of wind turbines
recognize typical full load hours and capacity factors for wind farms and
wind turbines
list parameters influencing the capacity factor and full load hours
apply wind energy yield estimation with capacity factors and full load
hours
6
Learning objectives
A participant who has met the objectives of the course will be able
to explain
how to calculate the power output of a wind turbine with voltage
and current data
the effect of rotor blade design, the pitch angle and the rotor blade
number on the wind turbine power output
the maximum power output of a wind turbine
the power coefficient and the tip speed ratio
yawing losses and wake effect losses and
measure a power curve of a laboratory wind turbine
Thursday, June 07, 2018 7
About RENAC
Thursday, June 07, 2018
About RENAC
RENAC is a Berlin-based training specialist for renewable energy and energy
efficiency
RENAC has trained more than 10,000 people from over 145 countries
RENAC’s clients are from public and private sectors
RENAC offers
Short training for individuals
Academic programs (MBA-Renewables)
Capacity building services (RENAC supports third parties to build up their
own training capacities)
RENAC is a private sector company with 35 employees
RENAC is independent Source: RENAC, 2016
Thursday, June 07, 2018 9
RENAC-Online
Flexibility to study at any time and from any location
Multimedia learning material and Contact: Kira Romashko
self-evaluation tests Editor E-Learning
romashko[at]renac.de
Extensive support and live virtual
classrooms Further information on trainings:
https://www.renac.de/trainings-
Certified by the German Authority
services/trainings/renac-online/
for Distance Learning (Staatliche
Zentralstelle für Fernunterricht -
ZFU)
RENAC certificate upon successful
finalisation of the training
Two course intakes per year:
1st April and 1st October
10
MBA-Renewables (online study)
MBA renewables
5 semester eLearning
(online via internet)
Part time study
Certificate from a German
university
Language: English
www.mba-renewables.com
Application deadline
in September
11
Introduction
Thursday, June 07, 2018
Wind farm project
Exercise: Which factors might influence the success of a wind
farm project?
Task: discuss with your neighbor. Collect as much answers as
possible and write them on a piece of paper.
1. Which aspects might influence the success of a wind
farm project?
2. Which of these factors have a strong effect on the
economic success of a wind farm project?
Thursday, June 07, 2018 13
Introduction: Wind Turbine
Technology Review
 Wind turbine standard design:
3. Asset: Wind turbine
Upwind, 3 blades
…& internal Horizontal axis
cabling
Grid-connected
Rotor blades
Cable to
substation /
grid
Nacelle with generator
Tower
(and gear box)
Area for crane works
Foundation
Wind farm in France © Nordex SE / Francis Cormon
Thursday, June 07, 2018 17
Development of wind turbines: rotor and hub height
88.5 m blade, Adwen (June 2016) Offshore 2016
83.5 m blade, Samsung (year 2014) Vestas V164
8.0 MW
81.6 m blade, Mitsubishi
80 m blade, Vestas (year 2013)
75 m blade, Siemens (year 2012)
60 m blade, Enercon (year 2008)
Onshore 2016
Vestas V136
3.35 MW
Hub height:
160 m
Thursday, June 07, 2018 18
 Increase of annual energy production (AEP) with
hub height
120
Annual energy production (MWh/a)

17% higher AEP from 78 m to

Source: http://www.wind-fgw.de/eeg_referenzertrag.htm

118
138 m (Enercon E-82, 2 MW
116 generator, 5281 m2 swept
114 rotor area)
112
20% higher AEP from 61,5 m
110 to 111,5 m (Nordex N77, 1.5
108 MW generator, 4657 m2
106 swept rotor area)
104 AEP calculation according to
102 FGW technical standard 5
100
60 80 100 120 140
Hub height (m)
Source: AGORA energiewende „Vergutung von
Windenergieanlagen an Land uber das
Referenzertragsmodell”, Tabelle1, 2014
Average hub height of wind turbines built in Germany in 2013: 117 m
19
Power curves of different wind turbines
Power output as share of rated power of
Turbine A
Turbine B

Source: Amay von Oehsen, Fraunhofer, 2012, ReGrid Seminar

Turbine C
Turbine
Turbine D
D
Specific wind turbine power
Rated power of generator Swept rotor area
Rated power of generator(W)
Specific wind turbine power (W/m2)
Swept rotor area (m2)
The specific wind turbine power depends on the size of
the generator that produces electricity and the area that
is swept by the rotor blades.
It is used to compare the suitability of wind turbines for
sites with different wind speeds:
High specific wind turbine power for sites with
strong winds
Low specific wind turbine power for sites with
weak winds Wind farm in France © Nordex SE / Francis Cormon
21
Exercise: specific wind turbine power
Rated power of generator
Exercise: calculate the specific wind turbine
power of the three wind turbines
2500 m2 2500 m2
1MW 2 MW
3333 m2
1MW
Sweapt rotor area
Wind farm in France © Nordex SE / Francis Cormon
22
 Specific wind turbine power, market data examples
Specific power Generator Rotor diameter
Wind turbine manufacturer
(W/m2) capacity (W) (m)
230 2300 113 SIEMENS SWT 2,3-133
236 2400 117 Nordex N100/2400
241 3000 126 Vestas V90-2MW
314 2000 90 Vestas V126-3MW
318 2500 100 Nordex N100/2500
338 2300 93 SIEMENS SWT 2,3-93
436 2300 82 Enercon E82-2,3
568 3000 82 Eneron E82-3,0
24
Specific power of wind turbines, example market data
Specific wind turbine power =
Rated power of generator (W) / rotor swept area (m2)
600

Source: Molly, 2011, „Rated Power of Wind Turbines: What is Best?“

Specific wind turbine power (W/m2)

500
400
300
200
100
0
1000 5000 8000
Rated power of generator (W)
25
Exercise: specific power of wind turbines
Exercise: Calculate the rotor blade length of different wind turbines
Source: Molly, 2011, „Rated Power of Wind Turbines: What is Best?“

1. What is the specific

wind turbine power of
ca. 2 and ca. 3 MW
wind turbines (see
yellow ranges)?
2. How long are the
rotor blades (r) of
these turbines?
2000 3000
r = ((swept rotor area) / 3.145))^(-0.5)
swept rotor area = rated power of generator / specific wind turbine power
26
Introduction:
Fundraising and Valuation
Stakeholders' Perspectives
Thursday, June 07, 2018
Wind Power Financing: Fund raising & valuation
Fundamental aspects of wind financing:
FINANCING FINANCING
1. Fund raising 2. Valuation
process process
(qualltative) Decision (quantitative)
How? How much?
FINANCING FINANCING
Thursday, June 07, 2018 28
Perspectives of Developer, Lender, Investor, OEM
Opposing views on the same project Developer
Developer maximizes his value by
minimizing CapEx and maximizing funding
(e.g. maximize debt- and equity-volume)
Lender maximizes his security by lending
on restrictive conditions reduces the
Turbine Project Lender
offered debt volume and risk in the loan supplier
Value (debt)
Investor maximizes his value by
demanding high required returns. Or:
Dividends are given by the project cash
flows, reducing the offered equity volume
increases his return Investor
(equity)
Manufacturer (OEM*) maximizes his value
by selling at a high price to the project
*OEM: Original Equipment Manufacturer Source: RENAC, 2016
Thursday, June 07, 2018 29
 Introduction:
Cash Flows of Wind Power Projects
Thursday, June 07, 2018
Wind Power Cash Flows
Content
1. Overview of key drivers of project cash flows
2. Cash flows, return and risk
3. Cash flows and financial viability
4. Probability distribution of annual energy production (AEP)
5. Production: Expected AEP P50 and P-Cases: P75/P90
6. Cumulative probability of exceedance of AEP
Source: RENAC, 2016
Thursday, June 07, 2018 31
Wind Power Cash Flows
The next slides answer the following practical questions
1. How can return and risk become financially measurable?
2. Why is valuation relevant for lenders, investors and developers at all?
3. How can financial key drivers be identified? (how to know what’s
important?)
4. What are the most important project parameters for project value?
Source: RENAC, 2016
Thursday, June 07, 2018 32
Wind Power Cash Flows
1) Cash flows and financial viability assessment (return and risk)
Viability
Return Risk
Source: RENAC, 2016
Thursday, June 07, 2018 33
Wind Power Cash Flows
1) Cash flows and financial viability assessment (return and risk)
The term “return” (µ=E(X)) can be absolute or relative.
Absolute return is the difference between the invested amount
and the repaid cash.
The relative return is defined as absolute return divided by the
invested amount and therefore a percentage number with no
physical unit.
Source: RENAC, 2016
Thursday, June 07, 2018 34
Wind Power Cash Flows
1) Cash flows and financial viability assessment (return and risk)
The term “risk” can also be absolute (σ=SDX) or relative
(volatility= σ/µ).
Risk is usually associated to negative events that lower the
expected value (µ),
The concept of “standard deviation” (SD) captures all deviations
from the mean value (E(X)).
Source: RENAC, 2016
Thursday, June 07, 2018 35
Wind Power Cash Flows
1) Cash flows and financial viability assessment (return and risk)
• In finance, risk (σ) is measurable and data-based, while uncertainty indicates the
absence of data and measurability. This means risk is different from uncertainty
(Keynes).
• But uncertainty in wind studies is data based and referring to the standard
deviation relative to the expected or most likely annual energy production (AEP).
The wind uncertainty is a percentage figure.
• NOTE: To assess the project viability the overall project return AND the overall
risk in cash flows and/or overall uncertainty need to be qualified and quantified.
Source: RENAC, 2016
Thursday, June 07, 2018 36
Wind Power Cash Flows
2) Cash flows, return and risk determine the financing
Cash flow and risk
Cash inflow and
Cash outflow
deviation from
(investment)
expected value
Source: RENAC, 2016
Thursday, June 07, 2018 37
Wind Power Cash Flows
2) Cash flows, return and risk determine the financing
In financing it is key to quantify the physical relations of cash flows and the
risk.
Assessing risks from a financial perspective demands to
quantify cash flows and
take into account all possible reasons that can impact any of the
project’s cash in- and outflows
They can affect
the cash flow to the lender (debt service) or
the cash flow to the equity investor (equity cash flow / dividend).
Source: RENAC, 2016
Thursday, June 07, 2018 38
Wind Power Cash Flows
2) Cash flows, return and risk determine the financing
In financial terms todays certain cash outflows (investment) into the
project will be repaid from future uncertain/risky cash inflow: return
Uncertain/risky cash inflow have a given probability to deviate from the
expected outcome, called risk.
Lenders can refer to the expected loss (EL) to price the margin on the
interest rate to compensate the risk,
equity investors can refer to the capital asset pricing model (CAPM, µ/σ-
approach) for an indication of their expected equity-return.
Note: Risk assessment requires and implies a risk identification first.
Source: RENAC, 2016
Thursday, June 07, 2018 39
Wind Power Cash Flows
3) Identification of key drivers of financial value and risk
Key drivers can be identified by measuring the impact on cashflows and value:
Cashflow-Model: setting up a model (in excel or as written equations) is the
underlying basis to measure input and output changes.
Sensitivity Analyis: changing only one single input of the (cashflow) model
leads to a change in the output measure (for example project margin)
Relative sensitivity is given as:
(outputafter change /outputbefore change)/(inputafter change /inputbefore change)
Absolute sensitivity is given as:
(outputafter change - outputbefore change)/(inputafter change - inputbefore change)
Note: Simplification of complex models to cover only the most important inputs
is possible after identifying the key drivers with a sensitivity analysis.
Source: RENAC, 2016
Thursday, June 07, 2018 40
Wind Power Cash Flows
3) Overview: Key drivers of project cash flows (and risk); 1/2
Important key driver that impact project cash flows are:
Quantity: naturally volatile output of energy production due to wind
fluctuations impacts the revenues, which is a natural volumetric risk.
Price: the price paid per production unit (price for 1 MWh) is a volatile
market price, traded at the power exchange. PPAs, feed-in, auction or quota-
systems support some mitigation of this important economic price-risk.
Source: RENAC, 2016
Thursday, June 07, 2018 41
Wind Power Cash Flows
3) Overview: Key drivers of project cash flows (and risk); 2/2
Important key driver that impact project cash flows are:
OpEx: all costs of the operating wind farm change over time due to
adjustments to inflation (fixed costs) or bonding of costs to revenues or
production (variable costs), inducing uncertainty or risk about the costs.
CoC: Cost of capital or financing costs change on a daily basis and can
massively impact the project value (prior to financing), implying a major
source of risk.
CapEx: Investment costs are market prices and change during the
development phase until major contracts are signed, imposing a risk.
Source: RENAC, 2016
Thursday, June 07, 2018 42
Introduction:
Wind Power Revenues
Thursday, June 07, 2018
Revenues in Wind Power
Content: Revenue valuation
1) Revenue: Quantity times price
2) Quantity: Resource assessment
3) Quantity: Expected annual energy production (AEP)
4) Quantity: Losses to AEP
5) Quantity: Source of return and risk
6) Price: Feed-in tariffs, quotas, power purchase agreement
7) Revenue calculation
8) Questions and answers Source: RENAC, 2016
Thursday, June 07, 2018 44
Revenues in Wind Power
Questions to answer
The next slides answer the following practical questions?
1. How are revenues determined?
2. What main information is needed to determine annual energy production
(AEP)?
3. How to calculate the AEP with wind speed distribution data and power curve
data?
4. Which losses occur regularly and reduce AEP?
Source: RENAC, 2016
Thursday, June 07, 2018 45
Revenues in Wind Power
Revenue: Quantity times Price
The revenues (Rev) of a wind power project are determined by two factors:
1. Quantity (Q) of output or annual energy production (AEP) and
2. Price (P) or tariff, quotas, off-take-price in PPAs with:
Rev = Q * P
Quantity (AEP) = estimations of annual energy production (AEP) are based on
relevant topographic, meteorological, and technical input factors like power
curve or Cp-curve and applicable losses and on the mathematical methods
(WaSP or CFD) applied to derive them.
Note: the course focusses on estimastion of Quantity (AEP), not on Price/Tariff
Source: RENAC, 2016
Thursday, June 07, 2018 46
Annual Energy Production:
Estimation with Capacity Factor
and Full Load Hours
47
Learning objectives
A participant who has met the objectives of the course will be able to
define the capacity factor for wind turbines
define the full load hours of wind turbines
recognize typical full load hours and capacity factors for wind farms and
wind turbines
list parameters influencing the capacity factor and full load hours
apply wind energy yield estimation with capacity factors and full load
hours
48
Wake effect
The most problematic obstacle for a wind turbine is a wind turbine
Downwind of a wind turbine the wind
speed is reduced (less energy in the
wind, up to 40 %)
Back-row wind turbines losing power
relative to the front row
Wind turbines with unfavorable
distances between them and under
unfavorable wind directions face
increased loads and energy yield is
reduced
Wind farm efficiency always lower
than that of single wind turbine
Source: RENAC, 2016
Thursday, June 07, 2018 49
 Wake effect
www.popsci.com/technology/article/2010-01/wind-turbines
-leave-clouds-and-energy-inefficiency-their-wake
Clouds form in the wake of the front row of wind turbines at the Horns Rev
offshore wind farm in the North Sea
Back-row wind turbines losing power relative to the front row
50
Distance between turbines to reduce the wake effect
3- 5 rotor
diameters
Legend:
Predominant wind direction
Position of wind turbine
Wind turbine rotor diameter
5- 7 rotor diameters
51
Vertical wind shear profile
Height
Height

Profile above area with low Profile above area with high
roughness (sea, low grass) roughness (forest, town)
Revenues in Wind Power
Free, gross and net AEP (annual energy production)
Energy yield calculations are based on relevant topographic, meteorological,
and technical input data and on the mathematical methods applied to them
Aim of a wind resource assessment is to derive the: expected Annual Energy
Production (AEP)
Free AEP = annual energy production without any losses
Farm AEP or gross AEP = free AEP minus wake loss
Net AEP = gross AEP minus all other energy losses
Source: RENAC, 2016
Thursday, June 07, 2018 53
Revenues in Wind Power
Benchmark data for losses on AEP
Shading losses in the wind farm (wake effect) [%], approx. 3% - 15% or larger
Internal grid losses [%]: approx. 1.5% - 3%
Technical availability losses [%]: approx. 3%
Availability of grid connection [%]: approx. 0.5%
Sector Management [%]: depends on regulations / no rule of thumb
Blade Degradation [%]: approx. 0% - 0.5%
Icing [%]: depends on climate at site / no rule of thumb
Curtailments [%]: depends on regulations and permits / no rule of thumb
NOTE: Possible losses are depending on turbine size and number
NOTE: All indications are highly project specific and can be higher or lower.
Web links [1] [2] [3] Source: RENAC, 2016
Thursday, June 07, 2018 54
Exercise: free, gross (farm) and net AEP
Task: Answer the following questions and note results.
1. What is the difference between free, farm (gross) and net AEP?
2. Calculate the gross and the net AEP for a wind farm with 10 wind turbines
Free AEP of a single wind turbine: 12,0 GWh / WTG
Farm efficiency of 90% (wake effect)
Losses for
availability of 3%,
in- & external grid of 3%,
curtailments of 2% and
all other losses of 2%.
3. Which additional impacts might change the result of the AEP?
Source: RENAC, 2016
Thursday, June 07, 2018 55
Annual energy production estimation with capacity factor
and full load hours
Capacity factor
Definition: capacity factor is the ratio of the actual energy produced in a given
period, to the hypothetical maximum possible, i.e. running full time at rated
power.
Wh
Annual energy production a
Capacity factor %
Rated power of wind turbine W !"#$ #% &' "#( )/
Data source:
Annual energy production (Wh/a) has to be measured for a project
Rated power of wind turbine (W) is know from the turbine fact sheet
Duration of period is usually one year = 8760 h/a
57
Annual energy production estimation with capacity factor
and full load hours
Full load hours
Definition: Full load hours are calculated by dividing the turbine’s average
annual energy production by its rated power
Wh
h Annual energy production a
Full load hours
a Rated power of wind turbine W
Data source:
Annual energy production (Wh/a) has to be measured for a project
Rated power of wind turbine (W) is know from the turbine fact sheet
Full load hours can also be calculated by multiplying the capacity factor by the
duration of the period of operation (usually one year with 8760 h/a)
58
Annual energy production estimation with capacity factor
and full load hours
Typical full load hours and capacity factors for wind farms and
wind turbines
Site Capacity Full load
factor (%) hours (h)
Onshore at coast line in Germany,
~ 0.35 ~ 3050
hub height 100m
Onshore average in Germany (all
~ 0.2 ~1750
turbines)
Small wind turbines, 0.15 – 0.2 or higher at
1300 - 1750
good sited good sites
Small wind turbines,
< 0.05 < 450
bad sited
Offshore wind farm in German
0.4 – 0.5 3500 - 4000
North Sea
59
Exercise: Annual energy production estimation with
capacity factor and full load hours
Task: Calculate the capacity factor and full load hours
Input data turbine A:
300 kW rated power of wind turbine
811 MWh/a generated energy during one year
Input data turbine B:
Wind turbine with 2500 kW rated power
8442 MWh/a (MWh generated energy during one year)
Results:
Capacity factor Full load hours / year
Turbine A
Turbine B
60
Exercise: annual energy production estimation with
capacity factor and full load hours
Task: Calculate the annual energy output of turbine A and B
Wind turbine A:
2300 kW rated power and 4150 full load hours
Calculate the annual energy production and the capacity factor
Wind turbine B:
2300 kW rated power and 0,415 capacity factor
Calculate the annual energy production and the full load hours
Results: Rated power Annual energy Full load hours Capacity
(kW) generation (kWh/a) (h/a) factor
Turbine A 2300 4150
Turbine B 2300 0,415
62
Exercise: Estimate the annual energy generation for a
25 km2 wind farm
Assume you have an area of 25 km2 for your wind farm
Assume a capacity factor of 0.35
Assume the distance between wind turbines standing in main wind direction is 7
rotor diameter; and standing in in rarely occurring perpendicular wind direction is
5 times the rotor diameter
Calculate the following parameters for every wind turbine:
Number of turbines in the area
Installed wind power capacity (MW)
Annual energy production (GWh/a
Wind turbine input data:
Turbine A Turbine B
Specific turbine power (rated power per swept rotor area (W/m2)) 196 568
Rated power of wind turbine, MW 2 3
Rotor diameter of wind turbine, m 114 82
64
Exercise: Estimate the annual energy generation for a
25 km2 wind farm
Table for results
Turbine A Turbine B
Specific power (rated power per swept rotor area, W/m2) 196 568
Rated power of wind turbine, MW 2 3
Rotor diameter of wind turbine, m 114 82
Number of turbines in the area
Installed wind power capacity, MW
Annual energy production with capacity factor of 0.35, GWh/a
65
Exercise: Estimate the annual energy generation for a
25 km2 wind farm, wind turbine A
Main wind direction
Area for the wind farm:
5 km x 5 km
Rotor diameter
turbine A = 114 m
Rarely occurring
wind direction
66
Exercise: Estimate the annual energy generation for a
25 km2 wind farm, wind turbine B
Main wind direction
Area for the wind farm:
5 km x 5 km
Rotor diameter
turbine B = 82 m
Rarely occurring
wind direction
67
Exercise: Capacity factor and full load hours
Task: Answer the following questions and note results.
1. Which effects might influence the capacity factor and full load hour of a
wind farm?
2. Can capacity factors and full load hours be used for a bankable wind farm
report and an investment decision?
69
 Annual Energy Production:
Calculation with Wind Speed
Distribution and Wind Turbine
Power Curves
Annual energy production with power curves and
measured wind speed data
Methodology
With wind speed distributions and wind turbine
Ei in kWh

power curves:
vi = wind speed class i [m/s]
hi = relative frequency of wind speed class in
%
Pi = power output of wind turbine at wind
speed class vi [kW]
Ei= energy yield of wind speed class i [kWh]
Pi in kW
vi in m/s
Power curve of a
hi in % specific wind turbine
vi in m/s

© RENAC 2014
Wind speed distribution
vi in m/s for a specific site
Thursday, June 07, 2018 72
Annual energy production with power curves and
measured wind speed data
Methodoloy
Ei = Pi x ti
Ei = energy yield of wind class, i = 1, 2, 3 …n
[Wh, watthours]
ti = duration of wind speeds at wind class
[h/a, hours/year]
Pi = power of wind class vi of wind turbine power curve
[Watt, joule per second]
EΣ = E1 + E2 +…+ En
EΣ = energy yield over one year [Wh/a, watthours / year]
Source: RENAC, 2016
Thursday, June 07, 2018 73
Annual energy production with power curves and
measured wind speed data
Example: combination of wind speed distribution and power curve
vi vi
(m/s Time ti Power curve Energy Ei (m/s Time ti Power curve Energy Ei
) (h/a) P (kW)
i (kWh/a) ) (h/a) Pi (kW) (kWh/a)
1.0 20.2 0 0 9.0 1,162.6 1180 1,371,891
2.0 113.3 3 340 10.0 796.4 1612 1,283,808
3.0 305.0 25 7,624 11.0 443.4 1890 838,036
4.0 593.4 82 48,661 12.0 196.0 2000 391,938
5.0 938.3 174 163,265 13.0 67.0 2050 137,333
6.0 1,256.0 321 403,163 14.0 17.2 2050 35,312
7.0 1,439.5 532 765,811 15.0 3.2 2050 6,630
8.0 1,408.3 815 1,147,750 16.0 0.4 2050 881
Example: @ vi=7.0 m/s the annual energy production is
1,439.5 h/a x 532 kW = 765,811 kWh/a
The calculation ends at 16 m/s because higher wind speeds
contribute very little to the total energy output
Source: RENAC, 2016
Thursday, June 07, 2018 74
Annual energy production with power curves and
measured wind speed data
Example: summation over all wind speed classes
vi Time Power curve Energy
(m/s) ti (h/a) Pi (kW) Ei (kWh/a)
1.0 20.2 0 0
2.0 113.3 3 340
3.0 305.0 25 7,624
4.0 593.4 82 48,661 Summation over all wind
5.0 938.3 174 163,265 speed classes = annual
6.0
7.0
1,256.0
1,439.5
321
532
403,163
765,811
∑ energy production = 6.603
8.0 1,408.3 815 1,147,750 MWh/a (for a specific
9.0 1,162.6 1180 1,371,891 wind turbine at a specific
10.0 796.4 1612 1,283,808 site)
11.0 443.4 1890 838,036
12.0 196.0 2000 391,938
13.0 67.0 2050 137,333
14.0 17.2 2050 35,312
15.0 3.2 2050 6,630
16.0 0.4 2050 881
17.0 0.04 2050 80
Source: RENAC, 2016
Thursday, June 07, 2018 75
Exercise: Annual energy production with power curves and
measured wind speed data
Task: Calculate and compare the revenues of wind farm A and B
Available data:
Turbine A power curve (data see next slide), rated power 3300 kW,
115 m hub height, 250 W/m2 specific WT power
Turbine B power curve (data see next slide), rated power 3450 kW,
117 m hub height, 280 W/m2 specific WT power
One year side specific measured wind speed data (data see next slide)
Assumptions
technical availability of 98% for the entire wind farm
Assume a wake effect of 7% for the entire wind farm
Assume a tariff of 78 $/MWh, 20 year of operation and 10 wind turbines
76
Exercise: Annual energy production with power curves and
measured wind speed data, turbine A
Turbine A: Wind speed distribution and power curve
vi vi
(m/s Time ti Power curve Energy Ei (m/s Time ti Power curve Energy Ei
) (h/a) (kWh/a)
Pi (kW) ) (h/a) Pi (kW) (kWh/a)
0.50- 8.50- 2,576.9
1.50 83 0.0 9.50 928
1.50- 9.50- 3,111.4
2.50 259 0.0 10.50 686
2.50- 10.50- 3,273.9
3.50 510 41.4 11.50 452
3.50- 11.50- 3,297.3
4.50 785 179.1 12.50 265
4.50- 12.50- 3,299.9
5.50 1,029 410.2 13.50 137
5.50- 13.50- 3,300.0
6.50 1,186 756.8 14.50 62
6.50- 14.50- 3,300.0
7.50 1,219 1,235.8 15.50 25
7.50- 15.50- 3,300.0
8.50 1,123 1,856.2 16.50 9
Source: RENAC, 2016
Thursday, June 07, 2018 77
Exercise: Annual energy production with power curves and
measured wind speed data, turbine B
Turbine B: Wind speed distribution and power curve
vi vi
(m/s Time ti Power curve Energy Ei (m/s Time ti Power curve Energy Ei
) (h/a) (kWh/a)
Pi (kW) ) (h/a) Pi (kW) (kWh/a)
0.50- 8.50-
1.50 83 0 9.50 928 2,471.70
1.50- 9.50-
2.50 259 0 10.50 686 3,201.90
2.50- 10.50-
3.50 510 24.3 11.50 452 3,449.70
3.50- 11.50-
4.50 785 172.8 12.50 265 3,450.00
4.50- 12.50-
5.50 1,029 391.7 13.50 137 3,450.00
5.50- 13.50-
6.50 1,186 712.3 14.50 62 3,450.00
6.50- 14.50-
7.50 1,219 1,158.30 15.50 25 3,450.00
7.50- 15.50-
8.50 1,123 1,740.60 16.50 9 3,450.00
Source: RENAC, 2016
Thursday, June 07, 2018 78
Annual energy production with power curves and
measured wind speed data
Exercise: Comparison of wind farm A and B during 20 years
Gross Gross AEP Revenues,
Installed Free AEP Revenues
(farm) AEP during 78 $/MWh
capacity 1 year differences
1 year 20 years Tariff
Mio. $ / Mio. $ /
MW MWh/a MWh/a MWh/a
20a 20a
Turbine A
Turbine B
Thursday, June 07, 2018 79
Exercise: full load hours and the capacity factor
Task: Answer the following question and note results.
1. What are the full load hours and the capacity factor of turbine A and
turbine B taking into account the 7% wake effect and 98% technical
availability?
Gross AEP (including 7%
Installed wind Capacity Full load
wake effect + 98% techn.
farm capacity factor hours
availability)
MW MWh/a % h/a
Turbine A 33
Turbine B 34.5
83
 Wind direction
Wind direction
in % for each
sector
5% 10%
85
Example: Gross annual wind farm energy production,
wind direction analysis
Wind study results for 16x Siemens SWT-3.3-130
Free Annual Energy Production (AEP) = gross AEP + wake loss = net AEP + all losses
The uncertainty associated to this result quantifies possible deviations.
Free AEP
Wake losses
Gross AEP
Free AEP
Wake losses
Gross AEP
LI: „wind resource assessment for wind farm project , Sout Korea“, Annex E, 2016
Thursday, June 07, 2018 86
 Annual Energy Production:
synthetic wind speed distribution
Annual energy production: estimation with wind atlas data
Synthetic wind speed distributions (Weibull equation)
Wind speed distribution data (m/s)
can be described with a mathematical
equation. The most common
equation is the Weibull-curve.
hw(v) = Wind speed distribution (h/a or percentage)
k = shape parameter; It specifies the shape or from of a wind speed

J.liersch; KeyWindEnergy, 2009

distribution. A small value for k signifies very variable winds, while constant
winds are characterized by a larger k. K can take value of 1 to 4.
A = scale parameter [m/s]; It is a measure for the characteristic wind speed of
the distribution and it is proportional to the mean wind speed vavg ~ 0.9 x A
88
Annual energy production: estimation with wind atlas data
Synthetic wind speed distributions (Weibull equation)
Weibull-curves with different k and constant A value (A = 4.4 m/s)
Source: http://www.ammonit.com/en/products/sensors/anemometers

k = 2 (Rayleigh distribution)
89
Annual energy production: estimation with wind atlas data

Source:, http://www.windatlas.ca/en/maps.php?field=E1&height=80&season=ANU
Weibull data examples
Typical k factors ranges
1.2 < k < 1.7 Mountains
1.8 < k < 2.5 Typical North America and Europe
2.5 < k < 3.0 Where topography increases wind speeds
Canadian wind atlas, latitude = 50.853, longitude = -57.007 at 50m height
Weibull shape Weibull scale
Period
parameter (k) parameter (A)
Annual 1.81 10.37 m/s
Winter (DJF) 1.94 11.76 m/s
Spring (MAM) 1.85 10.16 m/s
Summer (JJA) 1.96 8.87 m/s
Fall (SON) 1.94 10.65 m/s
90
Annual energy production: estimation with wind atlas data
Errors in Weibull wind speed distributions
A synthetic Weibull wind speed distribution approximates a measured wind
speed distribution. underestimation
It can over- or
underestimate
hw(v)

certain wind
speed classes.
overestimation
Recommendation: use measured wind speed data instead of synthetic data for
investment decisions because the measured data are more precise and the
uncertainty will be smaller
91
Exercise: k and A values of a Weibull wind speed distribution
Task answer the questions:
1. Which of the graphs has a k-factor of 15, 2 and 3.5?
2. What would be the A factor of the three graphs (they have all the same A factor)?
1,400
1,200
Frequency (h/a)

1,000
800
600
400

© RENAC
200
0
0 5 10 15 20 25
Wind speed (m/s)
92
 Annual Energy Production:
unexpected losses
Power curve certification according to IEC 61400-12,
test report extract for Vestas V90
Source: BWE „Wind Energy Market 2010/2011“
Report No. Riso-I-2201-1, 23.6.2004
Guideline IEC 61400-12
Test laboratory Risö National Lab, Roskilde, DK
95
Annual energy production with power curves and
measured wind speed data
Exercise: How would the revenues change in case the wind farm A has more
losses due to bad power curve certification or bad quality of wind data.
Assumptions:
Case A-O: same data as in the previous exercise
Case A-I: 2% of additional losses
Case A-II: 4% of additional losses
Tasks:
Calculate the revenues of wind farm cases A-I and A-II.
Compare the revenues of wind farm B with wind farm cases
A-0, A-I and A-II
96
Exercise: Annual energy production with power curves and
measured wind speed data
Table for results: Compare annual energy production and revenues of wind farm
A (case 0, case I and case II) and wind farm B
Revenue
AEP without AEP including AEP during Revenues, differences
Wind farm Installed
losses during 1 losses during 20 years 90 $/MWh compared
case capacity
year 1 year operation Tariff to wind
farm B
MW MWh/a MWh/a MWh/a Mio. $ / 20a Mio. $ / 20a
A-0 33
A-I 33
A-II 33
B-0 34.5 reference
Thursday, June 07, 2018 97
Exercise: Annual energy production with power curves and
measured wind speed data
Exercise 4: full load hours and the capacity factor
Task: What are the full load hours and the capacity factor of turbine A and
turbine B taking into account the 7% wake effect and 98% technical
availability?
Installed wind farm
Wind farm case AEP including losses Capacity factor Full load hours
capacity
MW MWh/a % h/a
A-0 33
A-I 33
A-II 33
B-0 34.5
99
Wind Power Laboratory
Learning objectives
A participant who has met the objectives of the course will be able
to explain
how to calculate the power output of a wind turbine with voltage
and current data
the effect of rotor blade design, the pitch angle and the rotor blade
number on the wind turbine power output
the maximum power output of a wind turbine
the power coefficient and the tip speed ratio
yawing losses and wake effect losses and
measure a power curve of a laboratory wind turbine
Thursday, June 07, 2018 102
Calibrate wind blower
1. Change knob position of blower and measure wind
speed
2. Plot data
Blower Anemometer
103
 Wind speed data of blower
Table for blower calibration Knob Measured
position wind speed (m/s)
1
2
3
4
5
6
7
8
9
10
104
Plot graph with measured wind speed data
16
15
14
13
12
11
wind speed (m/s)

10
9
8
7
6
5
4
3
2
1
0
0 1 2 3 4 5 6 7 8 9 10
Blower knob position
105
 Wind Power Laboratory: Wind
Power Mini Grid and Power
Measurement
106
Volt / ampere meter
A = display
B = Selection of measurement F
range
C, D and E = Cable input
F = Direct current (DC) –
voltage measurement
G = Direct current (DC) – G
current measurement
107
Wind turbine without rotor blades
A = Rotor hub
B = Hole to insert rotor blades
C = Socket for cables to the minigrid
D = Screws to fix a rotor blade
108
Wind turbine with rotor blades
F
A
CF
A = Rotor blades; Note: wind
turbines rotate clockwise
B = Rotor hub with screws
C = Socket with cables from
wind turbine to the load
D = Screw driver B
E = Cover for wind turbine
operation to avoid that rotor C
blades can fly around in the
room (must be used as a
protection during operation)
F = Rosette to measure the D
pitch angle (printed on the
protection cover) E
109
Cabling for a mini-grid with wind turbine, load,
voltmeter and amperemeter
Put the load to position
number 5.
110
Wind Power Laboratory: Effect
of Blade Design on Wind
Turbine Power Output
111
Pitch angle measurement
A = Cover for protection and pitch angele
measurement
B = pitch angle measurement 90°
C = Magnets to connect cover with the ground
plate
45°
0°
112
Vane and working position of wind turbine blades
Real wind turbines operate the rotor blades close to 0°. To stop the wind
turbine the rotor blades are moved towards 90°.
Wind
90° 90°
45° 45°
0° 0°
Working position = 0°
Vane position= 90°
113
How to determine the 45° pitch angle
45°
90°
Wind Rotor blade
45°
0°
114
How to determine the 30° pitch angle
30°
90°
Wind Rotor blade
45°
0°
115
How to determine the 15° pitch angle
15°
90°
Wind Rotor blade
45°
0°
116
Effect of blade design on power output of a wind turbine
1. Change the blade design and measure the power output at
different wind speeds and at a pitch angle of 15°.
= flat
= curved
= optimised
2. Measure Voltage and Current
3. Calculate the power output (P = U x I )
4. Compare the power output of different rotor blade
designs.
117
Effect of blade design on power output of a wind turbine
1. Measure the power output of a three different blade designs at
the following wind speeds. The pitch angle is 15°.
Blade design wind speed Voltage Current Power
m/s V mA mW
low
flat 7 m/s
12 m/s
low
curved 7 m/s
12 m/s
low
optimised 7 m/s
12 /s
118
Effect of blade design on power output of a wind turbine
1. Which is the highest power output of the three different rotor blades?
Flat Curved Optimised
mW mW mW
at low
at 7 m/s mW mW mW
at 12 m/s mW mW mW
119
 Wind Power Laboratory: Effect
of Rotor Blade Number on Wind
Turbine Power Output
120
Effect of rotor blade number on power output of a
wind turbine
1. Change the number of rotor blades and measure the power
output at different wind speeds and at a pitch angle of 15°.
Use curved rotor blades.
2 blades
3 blades
4 blades
2. Measure Voltage and Current.
3. Calculate the power output (P = U x I ).
4. Compare the power output of different rotor blade numbers.
121
Effect of rotor blade number on power output of a wind
turbine
1. Measure the power output of rotor blade numbers at the following
wind speeds. The pitch angle is 15°.
Blade
number wind speed Voltage Current Power
m/s V mA mW
low
2 blades 7 m/s
12 m/s
low
3 blades 7 m/s
12 m/s
low
4 blades 7 m/s
12 /s
122
Effect of rotor blade number on power output of a
wind turbine
1. Which is the highest power output of the three different rotor blades?
2 blades 3 blades 4 blades
at low mW mW mW
at 7 m/s mW mW mW
at 12 m/s mW mW mW
123
 Wind Power Laboratory:
Theoretical Maximum and
measured Power Output
124
Maximal wind power density, Betz limit and power
curves of real wind turbines
1000
Wind power density of Efficiency losses
Power density [W / m2]

resource and power control

800
PWPD = ½ * ρ * v3 limitations
PWPD = wind power density Ideal turbine (Betz limit)
600 PWPD, Betz= 16/27 * ½ * ρ *
[W/m2]
A = rotor area [m²] v3

Source: KWE, 2009; amended by RENAC

P = Power [W]
400
ρ = air density [kg/m3]
v = wind speed [m/s] Pitch
200 cP = power coefficient Real turbinecontrolled
PWPD, Turbine= cP * ½ * ρ * v3
0
0 2 4 6 8 10 12 14 16 18 20
Wind speed [m/s]
125
Compare power of wind turbine with the Betz limit
1. Calculate the theoretical maximum of power that the wind
turbine could generate if it would be a perfect wind turbine
without any losses (Pmax. Betz ) for each wind speed
Pmax. Betz = 0.593 x PBlower
With:
PBlower = power of wind in front of wind turbine (W)
2. Measure the wind power output of a three blade wind turbine
with a pitch angle of 15° at different wind speeds (see next table)
3. Compare the theoretical maximum of power output (Pmax. Betz)
with the measured power output (PTurbine ) for the higest wind
speed
126
Equations
PBlower = ½ ρ A v3
ARotor = r2 π
PTurbine = U I
Cp = PTurbine / PBlower
With:
PBlower = power of wind in front of wind turbine (W)
PTurbine = power output of wind turbine (W)
v = wind speed (m/s)
A = area enclosed by a circle or swept rotor area
r = radius of circle or of swept rotor area, rLab-Wind = 0.06 m
ρ = air density in kg/m3 ; ρStandard = 1.225 kg/m3
π = 3.1415…
U = voltage
I = current
127
Compare power of wind turbine with the Betz limit
1. Compare the measured power output data of three different blade
designs with the calculated maximum power output according to Betz
at the following wind speeds. The pitch angle is 15°.
Maximum
Measured power output
Blade design wind speed power output according to Betz
m/s mW mW
low
flat 7 m/s
12 m/s
low
curved 7 m/s
12 m/s
low
optimised 7 m/s
12 /s
128
Wind Power Laboratory: Effect
of Rotor Blade Pitch Angle on
Wind Turbine Power Output
129
Effect of pitch angle on power output of a wind turbine
1. Change pitch angle of the rotor blades and measure the power
output at different wind speeds. Use the measuring device on
the protection cover to measure the pitch angle. Build a wind
turbine with 3 curved rotor blades.
45° pitch angle
30° pitch angle
15° pitch angle
2. Measure Voltage and Current
3. Calculate the power output (P = U x I )
4. Compare the power output of different pitch angles and wind
speeds
130
Effect of pitch angle on power output of a wind turbine
1. Measure the power output of a three blade wind turbine at different
wind speeds and different pitch angles.
pitch angle wind speed Voltage Current Power
m/s V mA mW
low
45° 7 m/s
12 m/s
low
30° 7 m/s
12 m/s
low
15° 7 m/s
12 /s
131
 Effect of pitch angle on power output of a wind turbine
1. Which pitch angle leads to the highest power output at lowest wind
speed? A B C
Wind
90° 90° 90°
45° 45° 45°
0° 0° 0°
2. Which pitchA angle leads to the highest
B power output at 12Cm/s?
Wind
90° 90° 90°
45° 45° 45°
0° 0° 0°
132
Wind Power Laboratory: Power
Curve Measurement for
Different Pitch Angles –
Lift and Drag Effect
133
Power curve measurement
1. Change pitch angle of 3 curved blades and measure the
power output at different wind speeds. Use three curved
rotor blades.
45° pitch angle
30° pitch angle
15° pitch angle
2. Change wind speed and measure Voltage and Current
3. Calculate power output (P = U x I )
4. Plot power output (Milli Watt)
5. Compare the power output of different pitch angles
134
Power curve measurement at 45° pitch angle
Lift principle wind turbine with 3 curved blades
pitch angle: 45°
Knob position wind speed Voltage Current Power
m/s V mA mW
1
2
3
4
5
6
7
8
9
10
135
Power curve measurement at 30° pitch angle
Lift principle wind turbine with 3 curved blades
pitch angle: 30°
wind speed Voltage Current Power
Knob position
m/s V mA mW
1
2
3
4
5
6
7
8
9
10
136
Power curve measurement at 15° pitch angle
Lift principle wind turbine with 3 curved blades
pitch angle: 15°
wind speed Voltage Current Power
Knob position
m/s V mA mW
1
2
3
4
5
6
7
8
9
10
137
Power output of resistor wind turbine
Persian wind mill, 700 AD
Quelle: www.wikipedia.de
138
Power output of resistor wind turbine
1. Put wind turbine in resistor position
2. Change wind speed and measure voltage and current
( 3 flat blades)
3. Calculate power output ( P = U x I )
4. Plot power output (milli-watt)
5. Compare the power output with lift principle wind turbine
139
Measure wind speed with resistor principle wind turbine
Resistor principle wind turbine with 3 flat blades
Resistor principle
Position of
wind speed Voltage Current Power
knob
m/s V mA mW
1
2
3
4
5
6
7
8
9
10
140
Plot graph
(power output of different pitch angles / wind speed)
30°, lift
Power of wind turbine (mW)
0 2 4 6 8 10 12
Wind speed (m/s)
141
Lateral cut through a rotor blade
blade
lateral cut
143
Blade in wind: lift and drag, laminar flow
lift
drag
wind blade
144
Blade in wind: lift and drag, separation of flow / turbulences
lift
turbulences
drag
wind blade
145
Pitch angle, rotational speed of rotor and electrical power
output of a wind turbine at different wind speeds
PR 4/4
Electrical
power

nR

Source: Robert Gasch, Jochen Twele, Wind Power Plants, Heidelberg (2012), S. 401
Rot. speed

85°
Pitch angle
65°
25°
0° wind speed
Idling Pitch Pitch variable Idling / Stop
const.
Vcut-in VR Vcut-out
149
Effective wind speed on the rotor blade
The next four slides explain the effective wind speed on the rotor blade. The
picture below shows the positions on the rotor blade that the four slides take
into account.
Slide 4 Slide 3 Slide 2 Slide 1
Fotos: Steil Kranarbeiten, Stefan Dürr; RENAC, A. Tiedemann
150
Effective wind speed on the rotor blade
The effective velocity v´ (i.e. the
wind speed indicated by a
hypothetical measuring device

Source: Lucas-Nuelle, Course number: SO2800-3D Version 1.0,

mounted on the moving blade)
is not equal to the wind speed.
Instead, it is composed of the
wind speed v1 and rotor blade's
circumferential speed vu.
Near the hub, vu is much lower
than near the blade tip, the
approach speed consequently
varying all along the length of
the blade.
151
Effective wind speed on the rotor blade
v´ = effective velocity
Source: Lucas-Nuelle, Course number: SO2800-3D Version 1.0,

v1 = wind speed in front of the

turbine
vu = rotor blade's circumferential
speed
Effective wind speed on the rotor blade
v´ = effective velocity

Source: Lucas-Nuelle, Course number: SO2800-3D Version 1.0,

v1 = wind speed in front of the
turbine
vu = rotor blade's circumferential
speed
Effective wind speed on the rotor blade
v´ = effective velocity
Source: Lucas-Nuelle, Course number: SO2800-3D Version 1.0,

v1 = wind speed in front of the

turbine
vu = rotor blade's circumferential
speed
154
Power control / limitation concepts
αA αA
≠
αA αA
156
 Maximal wind power density, Betz limit and power curves of
real wind turbines
1000
Wind power density of resource Efficiency losses
Power density [W / m2]

PWPD = ½ * ρ * v3 and power control

800 limitations
PWPD = wind power density [W/m2] Ideal turbine (Betz limit)
600 PWPD, Betz= 16/27 * ½ * ρ * v3
A = rotor area [m²]
P = Power [W]
ρ = air density [kg/m3]
Source: KWE, 2009; amended by RENAC

400
v = wind speed [m/s]
cP = power coefficient Pitch
200
Real turbinecontrolled
PWPD, Turbine= cP * ½ * ρ * v3
0
0 2 4 6 8 10 12 14 16 18 20
Wind speed [m/s]
157
Wind Power Laboratory: Power
Coefficient Calculation
158
Power of wind in front of a wind turbine
Pw = ½ x ρ x A x v3
PW = power of wind [watt; joule per second]
ρ = air density [kg/m3; kilogram per cubic meter]
A = area = π * (½ D) ² [m2; square meter]
D = rotor diameter [m]
v = wind speed [m/s; meter per second]
Definition of power coefficient
The power coefficient (Cp) of a wind turbine is a measurement of how
efficiently the wind turbine converts the power in the wind into electric power
or
The power coefficient (Cp) is the ratio of power extracted by the wind turbine
(PT) to the total power contained in the wind resource in front of the wind
turbine PW).
Cp = PT/PW
160
 Power coefficient curve and power curve
400 0.6
350
0.5
300
Power [kW]

Power coefficient cP

Power P (kW) 0.4

250
200 Power coefficient Cp 0.3
150
0.2
100
0.1
50
0 0
0 5 10 15 20 25
Wind speed [m/s]
161
Exercise: Power coefficient curve
Task: How large ist the power coefficient ot the turbine at the
following wind speeds
Wind Power
speed coeffcient
(m/s) Cp
3
5
7
9
15
25
162
Calculate the power coefficient
1. Calculate the power that is generated by the blower (PBlower) for
each wind speed for a three blade wind turbine at various tilt
angles.
2. Calculate the power generated by the wind turbine (PTurbine); use
measured data with three blade wind turbine and 15°pitch angle
for each wind speed
3. Calculate the power coefficient (Cp) for each wind speed and pitch
angle.
164
Equations
PBlower = ½ ρ A v3
ARotor = r2 π
PTurbine = U I
Cp = PTurbine / PBlower
With:
PBlower = power of wind in front of wind turbine (W)
PTurbine = power output of wind turbine(W)
v = wind speed (m/s)
A = area enclosed by a circle or swept rotor area
r = radius of circle or of swept rotor area, rLab-Wind = 0,06 m
ρ = air density in kg/m3 ; ρStandard = 1,225 kg/m3
π = 3,1415…
U = voltage
I = current
165
Power coefficient of wind turbine
(3 blades, 45° pitch angle, curved blades)
Measured Power of blower Measured power Calculated
Knob
position wind speed (W/m2); length of output of wind
rotor blade = 0.06
power
coefficient
(m/s) m turbine, 45° CP
(mW)
1
2
3
4
5
6
7
8
9
10
166
Power coefficient of wind turbine
(3 blades, 30° pitch angle, curved blades)
Measured Power oflength
blower Measured power Calculated
Knob
position wind speed (W/m2); of
rotor blade = 0.06 output of wind
power
coefficient
(m/s) m turbine, 30° CP
(mW)
1
2
3
4
5
6
7
8
9
10
167
Power coefficient of wind turbine
(3 blades, 15° pitch angle, curved blades)
Measured Power of blower Measured power Calculated
Knob
position wind speed (W/m2); length of output of wind
rotor blade = 0.06
power
coefficient
(m/s) m turbine, 15° CP
(mW)
1
2
3
4
5
6
7
8
9
10
168
Summary: Power coefficient of laboratory wind turbine at
45°, 30° and 15° pitch angle with 3 curved blades
Measured Calculated power Calculated power Calculated power
wind speed coefficient CP coefficient CP coefficient CP
(m/s) at 45° at 30° at 15°
169
 Wind Power Laboratory: Tip speed
ratio λ measurement
170
Theory: Tip speed ratio λ (lamda)
Definition: Quotient of the circumferential speed at the blade tip (VBladeTip) to the
wind speed far upwind the rotor to the undisturbed wind velocity upstream of
the rotor (VWindUpstream)
λ = VBladeTip / VWindUpstream
Tip speed ratio bigger 1 means: the
blade rotates faster than the wind
Circumferential speed can be up to

Source: http://www.mstudioblackboard.tu
150 m/s; due to noise protection
larger than 15 m/s not realized
Tip speed ratio is the most
important criteria for rotor blade
dimensioning of large and small
machines. Maximum value
determines the rotor blade loading.
171
 The power coefficient (Cp) is not a constant, but a function
of the tip speed ratio λ and pitch angle β
Pitch angle, beta
Source: Lucas-Nuelle, Course number: SO2800-3D Version 1.0,
Power coefficent

Tip speed ratio

172
Exercise: The power coefficient (Cp) as a function of the tip
speed ratio λ and pitch angle β
What is the maximum power coefficient and the maximum tip speed ratio at the
following pitch angles?

Source: Lucas-Nuelle, Course number: SO2800-3D Version 1.0,

Pitch Maximum Maximum
angle, tip speed power
beta ratio coefficient
0
6
10
173
 Theory: Typology of wind turbines
Source: RENAC, 2012 and BWE-Marktübersicht Spezial „ Kleinwindanlagen“, Berlin, 2011

Principle Axis Tip speed ratio λ

direction
Horizontal λ>1
rotor λ<1
Lift
effect
Vertical λ>1
rotor
λ<1
Drag Vertical
λ<1
effect rotor
Special forms
175
Safety Precautions
For this exercise you measure the rotational
speed with a laser. The device emits a visible
laser beam which emerges at the top of the
unit. The following safety precautions must be
observed.
1. The device should only be handled with
extreme caution, and avoid physical
contact with the laser. (Laser emission)

Source: www.peaktech.de
2. Never point the laser at people or animals
3. Never look directly into the laser beam, since
it can cause serious eye damage.
4. Avoid the use of lasers at eye level.
5. Avoid possible reflections off reflective surfaces
such as glass and polished metal.
Thursday, June 07, 2018 176
How to use the meter.
1. Follow the safety instructions.
2. Press MEAS button to start the
measurement.
3. The display shows the actual
rotational speed
Source foto: www.peaktech.de

4. By pressing the MEM button

you can read the last
measurement
177
Exercise: Tip speed ratio λ (lamda)
1. Measure the rotational speed of the wind turbine
at different wind speeds (3 curved rotor blades,
pitch angle 15°) in rpm (round per minute).
Use the digital tachometer. It has a detecting
distance of 5 to 50 cm. Follow the safety
instructions.

Source foto: www.peaktech.de

2. Calculate the tip speed ratio λ at
different wind speeds
178
Equations for calculations
Tip speed ratio, λ = VBladeTip / VWindUpstream
VWindUpstream = measured data [m/s]
VBladeTip = C * rpm / 60
C = length of circumference [m]
C=2 *π * r
r = radius of circle or of swept rotor area, rWind-Lab = 0,06 m
π (Pi) = 3.1415…
Rpm = round per minute [1/min]
179
Exercise: Tip speed ratio
Knob Measured Measured Calculated tip speed Calculated tip
position wind speed rotational in meter per second speed ratio
VWind (m/s) speed (rpm) V Blade(m/s) λ
1
2
3
4
5
6
7
8
9
10
180
 Wind Power Laboratory:
Wake Effect Losses
181
Wake effect
The most problematic obstacle for a wind turbine is a wind turbine
Downwind of a wind turbine the wind
speed is reduced (less energy in the
wind, up to 40 %)
Back-row wind turbines losing power
relative to the front row
Wind turbines with unfavorable
distances between them and under
unfavorable wind directions face
increased loads and energy yield is
reduced
Wind farm efficiency always lower
than that of single wind turbine
Source: RENAC, 2016
Thursday, June 07, 2018 182
Wake effect – power output of a wind turbine standing in
the shadow of an other turbine
1. Use wind turbines with three curved blades and put the pitch angle
to 15°. Set all blowers to maximum speed (knob position 10).
2. Arrange the wind turbines and the blowers according to the next
slide. It is important to put the wind turbines in the correct
distance to each other (3 to 7 times the rotor diameter).
3. Measure the voltage and current of the green wind turbine in the
case A, B, C and D for the following cases
a) without the obstacles and
b) with the obstacles
(without other wind turbines in front of the green wind
turbine).
4. Measure calculate the power output and compare the results.
183
Case A
Foto of case A
184
 Case C
Foto of case C
185
Wake effect – power output of a wind turbine standing in
the shadow of an other turbine
d = rotor diameter
= blower = wind turbine
= Rotor diameter
Case O Without
obstacles
Distance:
7 times d
186
 Wake effect – power output of a wind turbine standing in
the shadow of an other turbine
d = rotor diameter
= blower = wind turbine
= Rotor diameter
Case A Distance:
7 times d
Distance:
Case B 3 times d
187
Wake effect – power output of a wind turbine standing in
the shadow of an other turbine
d = rotor diameter
= blower = wind turbine
= Rotor diameter
Turbine in
parallel row;
Case C distance:
7 times d
Turbine in
Case D parallel row;
distance:
7 times d
188
Wake effect – power output of a wind turbine standing in
the shadow of an other turbine
Losses = Power with obstacle /Power without obstacle
With / without Voltage Current Power Losses
obstacle** (V) (mA) (mW) (%)
Without obstacle
Case A
With obstacle
Without obstacle
Case B
With obstacle
Without obstacle
Case C
With obstacle
Without obstacle
Case D
With obstacle
189
Wind Power Laboratory:
Yawing Losses
Yawing losses
1. Use a wind turbine with three curved blades with a pitch angle of 15°.
Set the blower to maximum speed (knob position 10).
2. Use the Paper stencil to measure the yawing angle α between the
wind turbine and the blower. Ensure that the blower is directed
towards the center of the wind turbine.
3. Measure the power output for different angles and compare the
results.
Correct
yawing (α = 0°) α
191
Yawing losses
Measure the power output for different yawing angles and compare the results.
Ensure that the blower is directed towards the center of the wind turbine.
Relative losses (%)
Yawing angle α Voltage (V) Current (mA) Power (mW)
compared to α = 0°
0° 0%
10°
20°
30°
40°
192
 Costs of Wind Power
Thursday, June 07, 2018
Costs in Wind Power
Content: Revenues and costs in wind power: Part II
1. Overview: Costs components of wind power
2. Cost life cycle and value added of wind farm
3. Investment cost & capital expenditures (CAPEX) of wind power
4. Operating and capital cost indicators & cost of decommissioning
5. Cost of debt for a euro area onshore project & yield expectations
Source: RENAC, 2016
Thursday, June 07, 2018 194
Costs in Wind Power
The next slides answer the following practical questions
1. What are the most important major costs in wind power finance?
2. Which costs can be related to the contribution of value added?
3. How are CapEx composed?
4. Which relevance have cost of capital (COC) on the project value?
Source: RENAC, 2016
Thursday, June 07, 2018 195
Costs in Wind Power
Overview: Costs components of wind power
Source: EWEA (2009), web links: [1], [2], [3], [4], [5],[6],[7]
Thursday, June 07, 2018 196
Revenues and Costs in Wind Power
Value Added over the Cost life cycle and of wind farm
Construction Operational
Development Phase
& Financing
Investment in Wind Farm

Phase Ownership /
Phase
Investment
Value Added

Administrative Services
O&M
Source: ENERTRAG Structured Finance

Construction
Financing, Structuring & Marketing
Development (Siting, Permitting, Procurement of Land Rights)
Phases of the Project Life Cycle
Thursday, June 07, 2018 197
Costs in Wind Power
Investment cost of wind turbine generator (WTG)
Onshore Wind Farm
Components of a wind
turbine and their share
of the overall turbine
cost. Cost of turn-key
ready wind turbines are
about 1,700 – 2,450 USD
/ kWi.
Source: IRENA (2012)
Thursday, June 07, 2018 198
 Costs in Wind Power
Capital expenditures (CapEx) of wind power
Generator
Grid Connection Transformer
Power Converter
Turbine cost breakdown

Foundation Gearbox
17%
Rotor blade
Tower
Planning &
miscellaneous
9% Source: IRENA 2015
Wind Turbine Other
63%
Wind Turbine Planning & miscellaneous Foundation Grid Connection
Thursday, June 07, 2018 201
Costs in Wind Power
Break down of investment cost in wind power
Thursday, June 07, 2018 202
 Costs in Wind Power
Cost of debt for a euro area onshore project
Costs of debt
change daily
Source: New Energy Finance/Bloomberg; Data as of 15 January 2011

and together
with it does
the project
value
Thursday, June 07, 2018 203
Costs in Wind Power
Costs of capital or yield expectations of investors, Euro-Area2017
Indicative figures illustrate the rising yield expectation for increasing risk
Uncertainty Yield Expectation
15% -12% USD\EUR
Wind Risk P50 [%] Equity Debt
Output in MWh

ECF = Equity
Cash flow

Source: Augusta & Co, numbers changed by RENAC

P 50 100% 8 - 10% 2 - 4%
P75 90% - 92% 4 - 7% 2 - 4%
DS = Debt
Service
P90 81% - 85 % 0 - 3% 2 - 4%
Thursday, June 07, 2018 204
Costs in Wind Power
Cost of decommissioning
1. Budgeting of decommissioning costs in German projects follows the
recommendation of the German wind energy association:
~ € 25,000 – 50,000 / MWi
Decommissioning costs are accumulated during the last 5-6
years of operations to avoid unnecessary cash reserves in the
SPV
2. The decommissioning schedule on the right contains a more
detailed estimate also taking into account the salvage value of the
turbines
Source: http://puc.sd.gov
Thursday, June 07, 2018 205
Costs in Wind Power
Decommissioning estimates for a 306 MW wind power project
General Conditions $1,433,620
Operation & Maintainance Buildings $94,804
Substation Deconstruction $64,349
Towers, wind turbine deconstruction and access road preparation $780,249
Blade disposal $2,030,463
Foundation Removal $2,556,964
Site Restoration $2,633,421
Tower Dismantle and Salvage Preparation $6,387,298
Transmission line and pole removal $155,465
Total estimated decommissioning cost $14,543,889
Total estimated decommissioning cost per turbine $90,805 / WTG
Salvage value per turbine $79,355 / WTG
Total net decommissioning cost per wind turbine minus salvage value $11,450 / WTG
Source: http://puc.sd.gov
Thursday, June 07, 2018 206
Costs in Wind Power
Operating and capital cost indicators: Euro Area 2017
1. Operating costs in % of revenues – “rules of thumb“:
1. Operations & maintenance: ~ 8% (gearless) – 12% (with gearbox)
2. Technical management: ~ 1.0% - 3.0%
3. Insurance costs: ~ 0.5% - 1.0% (depending on turbine type)
4. Commercial management: ~ 0.5% - 2.0%
5. Land leases: ~ 1.0% - 12.0% (highly country specific)
6. Decommissioning: : ~ -2.0% - +2.0% (technology specific)
2. Cost of capital (CoC) - “rules of thumb“:
1. Equity: ~7% - 17% (depending on P-Case and risk; here P50 see next page)
2. Debt: ~ 2.5% - 7.5% (varying with market & availability of subsidized loans)
3. CoC significantly higher in emerging markets due to country risk premia
Thursday, June 07, 2018 207
Costs in Wind Power
Summary on cost structure
1. Operating revenues (sale of electricity, green / CO2 certificates, etc.)
2. Investment costs (planning and construction)
3. Operating costs (land leases, operations and maintenance, commercial services
etc.)
4. Investment costs of the wind farm mainly influenced by WTG-purchase price
(approx. 70 to 80% for onshore projects)
Pure turbine prices at highest levels in 2008/2009 (~1,600-1,750 USD / kWI, since
then declining and as of 2nd half 2012 ~1,400 USD / kWI
Price for turnkey-ready wind farm (incl. infrastructure, planning, project rights
etc.) approx. 1,700 – 2,450 USD / kWI Source: RENAC, 2016
Thursday, June 07, 2018 208
Costs in Wind Power
Post mortem: cost structure and what can go wrong (1/2)
Significant postponements in the development and permitting
process can lead to changes in the price of equipment and capital
cost. Both can impact the project margin defined as the difference
between the project value (present value of unlevered project cash
flows, FCF) und the investment cost (CAPEX).
Cost for operations & maintenance (O&M) become increasingly
under competitive pressure in auctioning tariff schemes and from
ISPs (independent service providers). Lenders still prefer more
expensive full service contracts from the original equipment
manufacturer (OEM,) for more security of replacement/availability.
Source: RENAC, 2016
Thursday, June 07, 2018 209
Costs in Wind Power
Post mortem: cost structure and what can go wrong (2/2)
Costs for ground and foundation works can exceed the budget, if
the site does not meet the conditions required by the suppliers.
A detailed professional soil study for each site prior to the start
of construction (~ USD 20,000 per WTG) can reduce this risk
significantly.
Any reduction in revenues and any increase in costs
(development, CapEx, OpEx, CoC) reduces the project margin.
Source: RENAC, 2016
Thursday, June 07, 2018 210
 Annual Energy Production (AEP)
Uncertainty Analysis and
Cash Flow Valuation
Thursday, June 07, 2018
Cash Flow Valuation
Content
1. Uncertainty analysis and probability density distribution
of an annual energy production
2. Simple full cash flow model and valuations of debt,
equity, entity value and project margin
3. Questions / checklist for project valuation
Source: RENAC, 2016
Thursday, June 07, 2018 212
Uncertainty analysis of annual energy production
Learning objectives
A participant who has met the objectives of the course will be able
to calculate the overall uncertainty of a wind farm project
to explain examples for wind and energy related uncertainties of
wind farms
to calculate the probability density distribution of an annual
energy production
To quantify the effect of different p-cases and uncertainties on the
annual energy production
Thursday, June 07, 2018 213
Cash flow valuation
Learning objectives
A participant who has met the objectives of the course will be able
to simplify the business case without losing too much accuracy
to explain a simple but still meaningful valuation methodology for
debt, equity, project value and margin
to assess key drivers and their impact on debt, equity, project
value and margin
Thursday, June 07, 2018 214
Uncertainty analysis of annual energy production
Most wind studies show different P-values (probabilities of
exceedance) of the Annual Energy Production(AEP )
1. Given the expected value (μ) of the AEP and its standard deviation (overall
uncertainty, σ), probabilities of exceeding certain annual energy production
levels can be derived from the AEP’s distribution curve.
2. The probabilities of 50 %, 75%, and 90 % (or other) are used for a static
cash flow scenario analysis. This allows to take different degrees of risk
tolerance into account.
3. Annual Energy Production in P50 = AEPP50= expected value (μ) over project
life time (t)
4. AEPrisk =standard deviation of AEP relative to AEPP50 =SDAEP/AEPP50 =rSDAEP
Source: RENAC, 2016
Thursday, June 07, 2018 215
Uncertainty analysis of annual energy production
Probability distribution of annual energy production (AEP)
The graph shows the
probability to undercut
(y-axis) over outcome 5% remaining risk
(95% certainty)
(x-axis)
1% remaining risk
(99% certainty)
Negative change in outcome 1.64 times
Positive change in outcome
standard deviation
Most wind studies show the probability to exceed equal to (1- prob. to undercut)
Thursday, June 07, 2018 216
Uncertainty analysis of annual energy production
Probability of Exceedance for long-term Energy
Example: Cumulative Yield of Wind Farm
probability of AEP exceedance
100%
1. The graph shows the 90%
cumulative probability of 80%
Probability of Exceedance

exceedance for the long 70%

term (20 years) average 60%
production & its overall 50%
uncertainty. 40%
2. Natural fluctuations of 30%
AEP due to volatile wind 20%
resource risk is included in 10%
uncertainty but differs in its 0%
21.000 26.000 31.000 36.000
21000 26000 31000 36000
nature. Wind Farm Energy Yield [MWh/a]
Net AEP ( MWh/a)
3. The graph states that over
20 years the average long term output exceed with shown probabilities the given AEP.
Thursday, June 07, 2018 217
Exercise: Uncertainty analysis of annual energy production
Probability of Exceedance for long-term Energy
Yield of Wind Farm
Task: Analyse the graph
and answer the questions: 100%
1. What would be the net 90%
annual energy production 80%

Probability of Exceedance
that is exceeded with the 70%
60%
following probability taking
50%
into account long term
40%
average production & its 30%
overall uncertainty. 20%
Probability of exceedance: 10%
50% 0%
21.000 26.000 31.000 36.000
21000 26000 31000 36000
75% Wind Farm Energy Yield [MWh/a]
Net AEP ( MWh/a)
90%
Thursday, June 07, 2018 218
Uncertainty analysis of AEP (wind speed and energy)
The methodology to determine all uncertainties of the project influence the
annual energy production is as followed?
A) split the uncertainty evaluation into a wind speed and energy related
field; Important: wind speed related uncertainties in m/s have to be
translated into energy related uncertainties in MWh/a
B) In case uncertainties are stochastically in depended: Calculate the root of
the squared sum
-!#! . -1 0 1 -2 0 1 -3 0 1 ⋯ 1 - 5 0
With:
Utotal = total uncertainty in absolute values (MWh/a) or in % of AEP
U1, to UN = single uncertainties
Thursday, June 07, 2018 220
Sonic / light detection and ranging (SODAR/LIDAR)
Device emits sound up and Measuring towers Measurements
measures the sound/light that is with height up to up to 200 m

in NS COMFIT for small wind” Adam Wile, Kenny Corscadden

Source: „Measuring Wind Speeds using SoDAR technology: Engaging farmers
120 m
reflected back
The reflected sound changes its
sweapt rotor
frequency proportional to the area
wind speed along the sound
propagation path, according to
the ‘Doppler Effect’
SODAR and LIDAR are
used in addition to
measuring towers
221
Seasonal changes of wind speed
J.liersch; KeyWindEnergy, 2009
Long term wind energy generation (Germany)

Source: BWE 2010

120
115
% of long term aveage

110
105
100
95
90
85
80
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Wind speed related uncertainties
Exampel: Measurement and data processing uncertainties
1. Measurement uncertainty (cup anemometer, wind vane and mounting)
Deviations of the mast setup from the recommended practice of the IEC
61400-12 standard
Influences to the measurements from the mast itself, from the booms and
mounting clamps.
Quality, calibration and configuration of measurement system equipment
2. Data processing (data integrity, data analysis and long term correlation)
Data integrity (quality of technical information and documentation)
Data analysis (duration of the measurement campaign, data coverage,
measurement consistency, data synthesis)
Long term correlation (representatively of the reference data, the correlation
between site data and reference data)
Measurement and data processing Uncertainty Uncertainty
uncertainties (% of m/s) (% AEP)
Range 4–8% 6 – 12%
Example data from wind study Korea 5.0 % 7.9 %
Thursday, June 07, 2018 224
Energy related uncertainties
Power curve uncertainties: Uncertainties of power curve measurement
(deviation from IEC 61400-12 standard procedure)
Power curve uncertainty Value (%)
Range 5 – 12%
Example data from wind study Korea 6.2 %**)
Wake effect losses: The wind speed behind a wind turbine is reduced and
the wind has turbulences (wake effect). The wind turbine model has
limitations to take this into account.
Wake effect uncertainty Value (%)
Range 2–6%
Example data from wind study Korea 3.8 %**)
Thursday, June 07, 2018 225
Energy related uncertainties
Flow modelling
Transferring the wind speed data from the meteorological mast to the
wind turbine locations
Using the model specific horizontal and vertical wind speed
extrapolations.
uncertainties resulting from the surface roughness description, orography
(topographical description) as well as general limitations of the model.
Flow modelling Uncertainty (%)
Range 6 – 10 %
Example data from wind study Korea 7.8 %
Thursday, June 07, 2018 226
Exercise: Uncertainty analysis of annual energy production
Task: caluclate the total uncertainty for the example 1, 2 and 3
with the follwing data
With:
-!#! . -10 1 -20 1 -30 1 ⋯ 1 -5 0 Utotal = total uncertainty
U1, to UN = single uncertainties
Uncertainties in % related to annual energy
AEP change due to uncertainty of production (AEPP50)
Case 1 (%) Case 2 (%) Case 3 (%)
measurement and data processing 6.0 8.0 10.0
prediction horizon (1 year) 3.0 4.0 6.0
modelling 5.0 7.0 9.0
power curve 5.0 6.0 9.0
losses (wake losses) 2.5 3.5 5.0
Total uncertainty
Thursday, June 07, 2018 227
Uncertainty analysis of annual energy production,
Excel tool, table “1b.P.Case”
Thursday, June 07, 2018 229
P50, P75 and P90 depend on overall uncertainty
P9015% = 110 GWh/a
P9012% = 120 GWh/a
Source: Enertrag, 2010a
 Exercise: Uncertainty analysis of annual energy production
Task: Calculate annual energy production P75 and the P95 of the wind farm A-0 and
B-0 (see exercise in previous chapter for P50) for different uncertainties
Assume Net-AEP-P50 of wind farm A-0 and B-0 as given below
Assume a total uncertainty of annual energy production of
10.1%, 13.3% and 18.0% (relative standard deviation, rSD)
Use the Excel tool (previous slide) to create the probability
density equation and to calculate the P-cases P75 and the P95
P-Case Annual energy production P-Case Annual energy production
of wind farm case A-0 (GWh) of wind farm case B-0 (GWh)
10.1% 13.3% 18.0% 10.1% 13.3% 18.0%
P50 115,982 115,982 115,982 P50 114,250 114,250 114,250
P75 P75
P95 P95
Source: RENAC, 2018
Thursday, June 07, 2018 231
Exercise: Uncertainty analysis of annual energy production
Task: Calculate the revenues of the wind farm A-0 and wind farm B-0 for
different uncertainties
Assume the uncertainties and the results for annual energy production at P50,
P75 and P90 of the previous exercise (Assume an tariff of 90$ / MWh, 100
turbines and 20 years of operation)
P-Case Wind farm A-0, revenues P-Case Wind farm B-0, revenues
during 20 years (Mio. $) during 20 years (Mio. $)
9.2% 13.3% 18.0% 9.2% 13.3% 18.0%
P50 P50
P75 P75
P95 P95
Source: RENAC, 2018
Thursday, June 07, 2018 233
Cash Flow Valuation
Financial valuation of annualized cash flows (in 9 steps)
Annualized (constant) cash flows are assumed to simplify cash flow modelling
Note: the present value (PV) at a constant discount rate of regular payments of a
constant cash flow(cCF) results by multiplying the cash flow times annuity factor.
1. PVcCF =cCF *AF, with AF =((1-(1+r)-t)/r, and AF for debt(AFd) =((1-(1+rd)-td)/rd
2. Annual Energy Production in P50= AEPP50= Quantity(Q) over project life time(t)
3. AEP-risk =standard deviation of AEP relative to AEPP50 =SDAEP/AEPP50 =rSDAEP
4. Tariff =Price(P), variable Costs(vC), fixed Costs(fC), rt=tax rate, I=CapEx+Devl
5. Capital-conditions: capital rate(rd), tenor(td), P-Case and coverage ratio (DSCR)
…see next slide for steps 6. to 9. (for a risk-sensitive reduction of revenue)
Source: RENAC, 2016
Thursday, June 07, 2018 235
Cash Flow Valuation
Financial valuation of annualized cash flows (in 9 steps)
Annualized (constant) cash flows are assumed to simplify cash flow modelling
Note: the present value (PV) at a constant discount rate of regular payments of a
constant cash flow(cCF) results by multiplying the cash flow times annuity factor.
6. P-Case is the probability to exceed a given case or scenario i.e. for debt = P-Cased
7. The P-Case is an exceedance-probability and equals 1 less short fall probability
8. The term Ninv(Pexceed)=Ninv(1-Pshortfall) and is equal to (AEPPxx-AEPP50)/SDAEP
9. Safety-reduction of AEPP50 for debt is given by: Ninv(1-P.cased)*rSDAEP
…see next slide for the formalization of the 9 steps described above
Source: RENAC, 2016
Thursday, June 07, 2018 236
 Debt Cash Flow Valuation
Formalizing and simplifying debtconditions and its volume
A single-line equation for a rough first “guesstimation” (for debt volume):
AF=Annuity Factor, rd=debt rate, td= debt tenor, DSCR=debt service coverage ratio, I=Investment, rt=tax rate,
D=I/t= linear depreciation, t= project life time, P=price=tariff, vC=variable costs, fC=fixed costs, Q=AEPP50,
rSDAEP= Standard Deviation relative to AEP, N(1-P.case)=inverse normal distributed, P.cased=debt probability
1. Debt: D =DS*AFd with AFd =((1-(1+rd)-td)/rd
2. Debt service: DS =(FCFd)/DSCR with DSCR > 1
3. Free Cash to Firm: FCFd =CFd -txd with txd=(CFd -D)*rt => CFd*(1-rt)+D*rt
4. CF before tax: CFd =(Qd*(P-vC)-fC) =(Qd*P -Qd*vC –fC)
5. reduced Quantity: Qd =Q*(1+S) with Q=AEPP50 and S=Safety reduction
6. Saftey-reductionAEP: S =rSD*N(1-P.cased) with Safety-reduction S<0
D=((Q*(1+rSD*N(1-P.cased))*(P-vC)-fC)*(1-rt)+D*rt)/DCSR*((1-(1+rd)-td)/rd)
Source: RENAC, 2016
Thursday, June 07, 2018 237
Equity Cash Flow Valuation: FCF x AFe –DS x AFe
Formalizing and simplifying equity conditions and its volume
Using the simple Annuity approach to evaluate non-uniforn equity cash flow (ECF)
REMEMBER: Cash Flows of the different types of Capital:
ENTITY: Entity CF= FCF (uniform)
DEBT: Debt CF= DS (uniform)
EQUITY: Equity CF= ECF (non-uniform => L-shaped, compare CF-Model)
WITH: FCF –DS= ECF
GENERAL: Capital Value= Capital-CF at Capital Cost over Capital lifetime =CF x AF
ENTITY: Entity Value= FCF at Entity Cost (rev) over Entity lifetime (tev) =FCF x AFev
DEBT: Debt Value= DS at Debt Cost (rd) over Debt lifetime (td) =DS x AFd
EQUITY: Equity Value= ECF at Equity Cost (re) over Equity lifetime (te) non-uniform!
REPLACEMENT of non-uniform ECF by uniform FCF and uniform DS (maintaining equity discounting)
ECF= FCF –DS=> EQUITY= (FCF –DS) at Equity Cost (re) over Equity lifetime = FCF x AFe –DS x AFe
EQUITY: = +FCF at Equity Cost (re) over Equity lifetime (+FCF x AFe )
–DS at Equity Cost (re) over Equity lifetime (–DS x AFe )
Source: RENAC, 2016
Thursday, June 07, 2018 238
Cash Flow Valuation
Formulas for Entity Value(EV), Debt(D)- and Equity(E)-Volume
The same formula adjusted for entity-, debt-, equity-value in an overiew
EV= ((Q*(1+rSD*N(1-Probev))*(P-vC)-fC)*(1-rt)+I/t*rt)/DCSR*((1-(1+rev)-t)/rev)
D = ((Q*(1+rSD*N(1-P.case))*(P-vC)-fC)*(1-rt)+I/t*rt)/DCSR*((1-(1+rd)-td)/rd)
E = ((Q*(1+rSD*N(1-Probe))*(P-vC)-fC)*(1-rt)+I/t*rt)/DCSR*((1-(1+re)-te)/re)
-((Q*(1+rSD*N(1-Probd))*(P-vC)-fC)*(1-rt)+I/t*rt)/DCSR*((1-(1+re)-te)/re
Q=P50-AEP, SD=AEP-Risk, rSD=SD/AEP P.case=banking probability, P=tariff, vC=variable costs, fC=fixed costs,
rt=tax rate, rd=debt rate, td=tenor of debt, I=CapEx, t= project life time, DSCR= debt service coverage ratio
Lookup Table: Nr P-CASE P95 P90 P85 P80 P75 P70 P65 P60 P55 P50
Row 4. schows 1. Prob.ShortFall 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
2. Prob. Exceedance 95% 90% 85% 80% 75% 70% 65% 60% 55% 50%
An example for
3. N(1-Prob. Exc.) -1,64 -1,28 -1,04 -0,84 -0,67 -0,52 -0,39 -0,25 -0,13 0,00
rSD = 15 % 4. 3. x 15% (=rSD) -0,25 -0,19 -0,16 -0,13 -0,10 -0,08 -0,06 -0,04 -0,02 0,00
NOTE: In the P50-Case, the term N(1-Probev) is =0 therefore the term (1+SD*N(1-Probev)) is =1 !
Source: RENAC, 2016
Thursday, June 07, 2018 239
Cash Flow Valuation, Excel tool, table “CF-Valuation”
Form to calculate INPUTS Project A-0 Project 1b Project 1c Project B-0 Project 2b Project 2c
CAPEX 0 0 0 0
volume of: Balance of Plant (BOP) 0 0 0 0 0
Developlment (Dvlm) 0 0 0 0 0
• debt (D), Invest/WTG 0 0 0 0 0 0
• equity ( E),
Nr. of WTG 0 0 0 0 0
• entity value (EV) and MW/WTG 0.00 0.00 0.00 0.00
• project margin (M) Net AEP/WTG 0 0 0 0
Uncertainty 0.0% 0.0% 0.0%
Tariff USD/MWh 0 0 0 0 0
Var. Costs USD/MWh 0 0 0 0 0
Fix.Costs/WTG USD p.a. 0 0 0 0 0
Tax Rate % 0% 0% 0% 0% 0%
DSCR 0 0 0 0 0
Tenor debt 0 0 0 0 0
P.case 0% 0% 0% 0% 0%
Debt rate 0.00% 0.00% 0.00% 0.00% 0.00%
Project Life time 0 0 0 0 0
Equity rate 0.00% 0.00% 0.00% 0.00% 0.00%
Entity rate (COC) 0.00% 0.00% 0.00% 0.00% 0.00%
Source: RENAC, 2016
Thursday, June 07, 2018 240
Case study exercise of wind power valuation
Case study: assessing a project’s financial viability
Answer the following questions (group-wise):
Assume yourself in the position of a bank’s, shareholder’s or developer’s executive, who is
responsible for an investment of up to 100 M$ into a large wind power project and ask yourself
which risks can threat your success and payback of the project. Perform the following steps:
1. Make a rough checklist in bullet points
2. Make suggestions what actions will comfort your risk position sufficiently
3. Try to quantify roughly the expected return and the main risks (=question your inputs).
Using the simplifying formulas requires to explain why an application makes sense or is
maybe misleading. So argue why or where the simplifying approach makes sense or not.
4. Give a financial explanation, if, when, under which conditions and how much funds (debt
and equity) can be invested into the project (this requires the main calculations).
5. Discuss the investment offers of the class: try to identify the key drivers of the highest and
lowest offer and potential risk of the highest offer.
Source: RENAC, 2016
Thursday, June 07, 2018 241
Case Study: annualized financial valuation
Case study (simplified/annualized): project information
Calculate project values for different turbines
1. Project A-0: 10WTGs, Q=11,598 MWh/WTG, rSD=10,1\13.3\18%, P=78 $/MWh,
vC=12$/MWh, fC=0.06 M$/WTG , rt=20%, Pd=95%, rd=4%, td=15, DSCRd= 1.25, Pe=50%,
re=16%, te=20, DSCRe= 1.0, CapEx+BoP+Dvlm=I=5.3= 4.1+0.9+0.3 M$/WTG, rev=8.26%
2. Project B-0: 10WTGs, Q=11,425 MWh/WTG, rSD=10,1\13.3\18%, P=78 $/MWh,
vC=12$/MWh, fC=0.06 M$/WTG , rt=20%, Pd=95%, rd=4%, td=15, DSCRd= 1.25, Pe=50%,
re=16%, te=20, DSCRe= 1.0, CapEx+BoP+Dvlm=I= 5.5= 4.3+0.9+0.3 M$/WTG, rev=8.26%
Note: Changing the turbine usually changes the AEP, the AEP-uncertainty, the turbine price
(CAPEX) and regularly the O&M-cost (here same for simplicity).
Source: RENAC, 2016
Thursday, June 07, 2018 242
 Case Study: valuation exercise
Case study, project 1: debt, equity, project value and margin
1. Project A-0: 10WTGs, Q=11,598 MWh/WTG, rSD=10,1\13.3\18%, P=78 $/MWh,
vC=12$/MWh, fC=0.06 M$/WTG , rt=20%, Pd=95%, rd=4%, td=15, DSCRd= 1.25, Pe=50%,
re=16%, te=20, DSCRe= 1.0, CapEx+BoP+Dvlm=I=5.3= 4.1+0.9+0.3 M$/WTG, rev=8.26%
Capital Volumes Wind farm A-0, revenues during 20 years (Mio. $)
with I = 53 M US$
10.1% 13.3% 18.0%
D
E
EV
M (D+E-I)
M (EV-I)
Source: RENAC, 2016
Note: further
Thursday, June 07,results
2018 are distributed at the end of workshop 243
Case Study: valuation exercise
Case study, project 1: debt, equity, project value and margin
2. Project B-0: 10WTGs, Q=11,425 MWh/WTG, rSD=10,1\13.3\18%, P=78 $/MWh,
vC=12$/MWh, fC=0.06 M$/WTG , rt=20%, Pd=95%, rd=4%, td=15, DSCRd= 1.25, Pe=50%,
re=16%, te=20, DSCRe= 1.0, CapEx+BoP+Dvlm=I=5.5= 4.3+0.9+0.3 M$/WTG, rev=8.26%
Capital Volumes Wind farm A-0, revenues during 20 years (Mio. $)
with I = 55 M US$
10.1% 13.3% 18.0%
D
E
EV
M (D+E-I)
M (EV-I)
Source: RENAC, 2016
Note: further
Thursday, June 07,results
2018 are distributed at the end of workshop 245
 Project valuation checklist
Thursday, June 07, 2018
Project valuation checklist
Selected critical questions to ask I / II
NOTE: Questions intend to question the assumptions of the financial valuation
1. Are EPC, turbine supply, grid connection and O&M signed, binding & valid?
2. Is there an legally binding EPC and a turbine supply contract?
3. Are warranties in the EPC, turbine supply and O&M sufficient?
4. Are construction, delay and other risk mitigated or insured and are
liquidated damages sufficient in case major risks will occur?
5. Are at least two independent wind studies available and your own one?
6. What is the basis for the tariff payment (governmental law or other?) and
which risks can lead to reduced prices or off taking of the produced energy?
Source: RENAC, 2016
Thursday, June 07, 2018 250
Project valuation checklist
Selected critical questions to ask II / II
NOTE: Questions intend to question the assumptions of the financial valuation
7. Are all construction permits and easements for each plot of land complete?
8. Are wind studies counter-checked from independent experts to verify it?
9. Conduct a post-mortem analysis (think about things that can go wrong)
10. What are possible reasons for delay of commissioning and operation?
11. What are the project’s very individual characteristics and which are critical?
12. What are two major “pros and cons" in a very short SWOT*- analysis?
*SWOT: strength, weakness, opportunities, threats
Source: RENAC, 2016
Thursday, June 07, 2018 251
Thank you
Albrecht Tiedemann
Felix Hulsch
Renewables Academy (RENAC) AG
Schönhauser Allee 10-11
D-10119 Berlin
Tel: +49 30 52 689 58-71
Fax: +49 30 52 689 58-99
www. renac.de
[email protected]
Thursday, June 07, 2018 252
Backup slides
Thursday, June 07, 2018 253
Levelized costs of wind energy
Thursday, June 07, 2018
LCOE in Wind Power
Content: Revenues and costs in wind power: Part II
1. Levelized costs of energy (LCOE): Definition
2. Pros and cons of Wind Power
3. LCOE of wind power in different regions
4. Sensitivities
Source: RENAC, 2016
Thursday, June 07, 2018 255
LCOE in Wind Power
The next slides answer the following practical questions:
1. What is the practical use for LCOE?
2. How to compare costs of generation even across technologies?
3. What are typical sensitivities?
Source: RENAC, 2016
Thursday, June 07, 2018 256
LCOE in Wind Power
1) Levelized Cost Of Electricity (LCOE)
LCOE is the effective cost or price per unit of electricity at which it has to be sold to cover
really all costs of its generation: development, CapEx, OpEx, CoC.
Approach: Present value of all costs divided by the present value of net power production.
The discount rate (i) takes the cost of capital (debt and equity) into account.
Formula has the input parameters:
LCOE: Levelized Cost of Electricity Generation in $/kWh (or $/MWh)
I 0: Investment costs: CapEx including development costs
At: Annual total operating costs including taxes in $ in each year t
Qel: Quantity of electricity generated each year (AEP) in kWh p.a. or (MWh p.a.)
i: Interest rate of capital including cost of debt and equity in % p.a.
n: Useful economic life in years
t: Current year during the useful life (1, 2, …n)
Source: RENAC, 2016
Thursday, June 07, 2018 257
LCOE in Wind Power
Pros and Cons of LCOE
Analytical tool allows comparing different technologies with
different scales of operation, investments or life time
PROS
One simple easy to understand monetary value
Break even benchmark, including all types of costs
Strongly depends on underlying assumptions i.e. interest rate
CONS
Assumptions (interest rate) difficult to derive from market
Interpretation needs understanding of present value concept
Only a cost measure, no accounting for revenues nor margin
Source: RENAC, 2016
Thursday, June 07, 2018 258
LCOE in Wind Power
Levelized costs of energy (LCOE) of wind power worldwide
Levelized cost of energy (LCOE) of wind energy is a function of wind speed
(full load hours) and capital and investment costs.
LCOE shows prices from 40 USD/MWh to 160 USD/MWh often with wide
spreads of 80 USD/MWh per region except China and India
Source: IRENA
Thursday, June 07, 2018 259
LCOE in Wind Power
Levelized costs of energy (LCOE) of wind power worldwide

Source: IRENA
Thursday, June 07, 2018 260
 LCOE of Renewable Energy technologies and conventional
power plants in Germany, 2013
ELECTRICITY RENEWABLE ENERGY TECHNOLOGIES”, STUDY, NOVEMBER 2013
Source: FRAUNHOFER INSTITUT FOR SOLAR ENERGY SYSTEMS ISE: “LEVELIZED COST OF

250
200
LCOE € /MWh

150
100
50
0
GHI = Global horizontal irradiance [kWh/(m²a)], FLH = Full load hours [h/a]
261
External cost theory
Economic externalities represent the impact of production and consumption on
other entities other than those entities actual producing and consuming, which are
not reflected in prices
Externalities taken into account in an Ecofys-study (from 2014) for the European
Union are:
Impacts on human health
Effects on ecosystems and biodiversity
Resource depletion, primarily water, metals and fuels but also including crops,
buildings and other assets
Ecofys assessed external costs using the External-E tool. This calculation tool
integrates life cycle assessment (LCA), actual power production data and
monetisation methodologies to estimate and value total environmental impacts
262
External costs of energy - monetary values for climate
change for (EU28 average, in €2012/MWhe)
The blue bars indicate the
range of external costs found in the
sensitivity analysis. The green line
indicates the results for the
central assumption of 50
€2012/tCO2e.
263
External costs of energy - monetary values for climate
change for (EU28 average, in €2012/MWhe)
264
 LCOE + external costs
Note: exact costs depend on local circumstances, LCOE for Germany and
external cost data for Europe
200 Min+Min, €/MWh Max+Max, €/MWh
150
100
50
0
Wind PV utility, PV small, Gas CC, Lignite, 6600 Wind Hard coal,
onshore, 1800-2000 1800-2000 3000- 4000 - 7600 FLH offshore, 5500 - 6500
1300 - 2700 GHI GHI FLH 2800 - 4000 FLH
FLH FLH
265
LCOE in Wind Power
LCOE sensitivity against full load hour and cost of capital
LCOE of wind energy in €Cents/kWh as a function of full load hours (x-axis)
at three different discount rates (of 5%, 7.5%, 10%) . Web links: [1]
with:

Source: EWEA (2009),

LCOE: Levelized cost of electricity
EUR / kWh
Io: Capital investment
At: OPEX in EUR in year t
Mel : Produced energy in kWh / a
in year t
i: Discount rate
Thursday, June 07, 2018 266
LCOE in Wind Power
LCOE usual sensitivities
A project’s capacity factor and installed cost have a significant impact on the LCOE
Operation and maintenance costs can be important for the availability of the
project and the capacity factor but their overall impact on the LCOE is small
Target-IRR or CoC can have an moderate to significant influence on the LCOE
Thursday, June 07, 2018 267
LCOE in Wind Power
Questions and answers
What information is needed to calculate LCOE of wind power projects?
Costs (investment costs, OpEx, CoC), production (AEP) and project life time
What practical use or benchmark in financing a project will LCOE provide?
LCOE indicate minimal tariff or maximal turbine or capital cost to get a positive project value.
Assess the LCOE of a 20yr.-project with 5 WTGs , a Net-AEP of 9 GWh per WTG, a PPA of
80$/MWh, variable costs of 12 $/MWh and fixed costs of 60.000 $/WTG assuming costs of
capital of 5% p.a., costs of investment per WTG of $4.5M, balance of plant (BoP) of $1M and
$0.5M for development (no taxes assumed). Assume annualized (constant) cash flows and
calculate the present value using the annuity formula AF= (1+(1+i)-t)/i with: PV(CF) = AF*CF.
Before you calculate, in which area of magnitude should the expected result range?
Range of result should be around or below the tariff of 80$/MWh, means 50-100$/MWh
LCOE= [CapEx + PV(variable OpEx) + PV(fixed OpEx)]/PV(Annual Energy Production),
PV=>Annuity Factor (AF)= (1-1,05-20)/0.05= 12.46;
LCOE=((4.5+1+0.5)+(12*9/103*12.46)+(60.000/106*12.46))/(9/103*12.46)= 72.16 $/MWh
Source: RENAC, 2016
Thursday, June 07, 2018 268
 Risk in Wind Power Cash Flows
Thursday, June 07, 2018
Risk in Wind Power Cash Flows
Content
1. Revenue: quantity
2. Revenue: price/tariff (feed-in, quota, auction, power purchase agreem. PPA)
3. Costs of operation: Operational Expenses (OpEx)
4. Costs of operation: Cost of Capital (CoC)
5. Costs of investment (before operation): Capital Expenditures (CapEx)
6. Costs of investment (before operation): Development costs
Source: RENAC, 2016
Thursday, June 07, 2018 271
LCOE in Wind Power
The next slides answer the following questions
1. Which are the most relevant risk (for financing) wind power?
2. How to measure the impact of changes (with sensitivities)?
3. How to focus commercially on the main risk factors?
4. Which costs are most relevant for different stakeholders?
5. How to identify measure and handle risk in practice?
Source: RENAC, 2016
Thursday, June 07, 2018 272
Risk in Wind Power Cash Flows
Quantity: Source of return and risk
Changes in the quantity (AEP) impact the key driving cash flow of revenue.
1. The AEP of produced power changes on daily basis or even by 5 minutes.
This implies a risk for the revenues, as the product of price times quantity.
2. The quantity risk in most countries is reduced through a national
compensation scheme such as a feed-in, quota or auction, that assignes
offtake priority to renewable energy. The off-take-risk remains if the off-
taker (grid supplier) fails for any reason. Country risk is an indication.
3. In general, the off take quantity and its risk is a function of the national
stability or the default risk of the country or the private off-taker.
NOTE: Revenues are the key driver of (positive) project value.
Source: RENAC, 2016
Thursday, June 07, 2018 273
Risk in Wind Power Cash Flows
Exercise: Quantity
Assume the following simplified project:
a 20yr.-project with 5 WTGs , a Net-AEP of 9 GWh p.a. per WTG, a PPA of 80 $/MWh,
variable costs of 12 $/MWh and fixed costs of 60.000 $/WTG assuming cost of capital of 5%
p.a., costs of investment per WTG of 4.5M$, BoP of 1M$ and 0.5M$ for development ,
together an investment (I) of 6 M$ per WTG.
Annuity Factor =(1-1,05-20)/0.05 = 12.46 (=AF)
Project value =5*(((80-12)x0.009-0.06)*12.46)= 34.4 M$
Project margin =34.4-5*(4.5+1+0.5)= 4.4 M$ = Project value – Investment
1. A 1,8GWh-decrease per WTG from 9 to 7.2 is a relative change of -20% (=1.8/9) and
reduces the project value by 7.6 M$ from 34.4 M$ to
Project value =5*((80-12)*0.0072-0.06)*12.46= 26.8 M$
Project margin =26.8-5*(4.5+1+0.5)= -3.2 M$
2. The sensitivity (change of output / change of input) on project value is
Relative sensitivity = (26.8/34.4-1)/(7.2/-9 -1) = 864%
Absolute sensitivity = (26.8-34.4)/(5*7.2-5*9) in [$M]/[GWh] = 0.84
Source: RENAC, 2016
Thursday, June 07, 2018 274
Risk in Wind Power Cash Flows
Price: Source of return and risk
Changes in the price impact the key driving cash flow of revenue.
1. The price of power received per energy unit changes over time. This implies
a risk for the revenues, as the product of price times quantity.
2. The price risk in most countries is reduced through a national
compensation scheme such as a feed-in, quota or auction. If no such scheme
is in place a private power purchase agreement (PPA) can replace a national
scheme but introduces a counterparty default risk.
3. In general, the energy price and its risk is a function of the national stability
or the default risk of the country or the private off-taker.
NOTE: Revenues are the key driver of (positive) project value.
Source: RENAC, 2016
Thursday, June 07, 2018 275
Risk in Wind Power Cash Flows
Exercise: Price
Assume the following simplified project:
a 20yr.-project with 5 WTGs , a Net-AEP of 9 GWh p.a. per WTG, a PPA of 80 $/MWh,
variable costs of 12 $/MWh and fixed costs of 60.000 $/WTG assuming cost of capital of 5%
p.a., costs of investment per WTG of 4.5M$, BoP of 1M$ and 0.5M$ for development ,
together an investment (I) of 6 M$ per WTG.
Annuity Factor =(1-1,05-20)/0.05 = 12.46 (=AF)
Project value =5*(((80-12)x0.009-0.06)*12.46)= 34.4 M$
Project margin =34.4-5*(4.5+1+0.5)= 4.4 M$ = Project value – Investment
1. A 16$/MWh-decrease from 80 to 64 is a relative change of -20% (=16/80) and reduces
the project value by 9 M$ from 34.4 M$ to
Project value =5*(((64-12)*0.009-0.06)*12.46)= 25.4 M$
Project margin =25.4-5*(4.5+1+0.5)= -4.6 M$
2. The sensitivity (change of output / change of input) on project value is
Relative sensitivity = (25.4/34.4-1)/(64/80-1) = 1023%
Absolute sensitivity = (25.4-34.4)/(64-80) in [$M]/[$/MWh] = 0.56
Source: RENAC, 2016
Thursday, June 07, 2018 276
Risk in Wind Power Cash Flows
OpEx (Operational Expenses): Source of costs and risk
OpEx are cash outflows that reduce the project value if they increase
1. The operative expenses change over time due to inflation, new or expiring
contracts or unforeseeable cost overruns.
2. Changes from the planned/prospected or expected cash flows imply a risk
to default on financial obligations (debt service) or the residual dividends
(equity cash flow).
3. Major impacts on the project cash flows represent a financial risk and need
to be considered and priced, but not all possible events can be covered,
which demands a rational reduction to focus on main risks.
NOTE: OpEx are cash outflows that reduce (or add negative) project value.
Source: RENAC, 2016
Thursday, June 07, 2018 277
Risk in Wind Power Cash Flows
Exercise: OpEx
Assume the following simplified project:
a 20yr.-project with 5 WTGs , a Net-AEP of 9 GWh p.a. per WTG, a PPA of 80 $/MWh, variable
costs of 12 $/MWh and fixed costs of 60.000 $/WTG assuming cost of capital of 5% p.a., costs of
investment per WTG of 4.5M$, BoP of 1M$ and 0.5M$ for development , together an investment
(I) of 6 M$ per WTG.
Annuity Factor =(1-1,05-20)/0.05 = 12.46 (=AF)
Project value =5*(((80-12)x0.009-0.06)*12.46)= 34.4 M$
Project margin =34.4-5*(4.5+1+0.5)= 4.4 M$ = Project value – Investment
1. A 2.4$/MWh-rise from 12 to 14.4 $/MWh is a relative change of 20% (=-2.4/-12) and
reduces the project value by 1.4 M$ from 34.4 M$ to
Project value =5*(((80-14.4)*0.009-0.06)*12.46)= 33.0 M$
Project margin =33.0-5*(4.5+1+0.5)= 3.0 M$
2. The sensitivity (change of output / change of input) on project margin is
Relative sensitivity = (3.0/4.4-1)/(14.4/12-1) = 159%
Absolute sensitivity = (3.0-4.4)/(14.4 - 12) in [$M]/[$/MWh] = -0.58
Source: RENAC, 2016
Thursday, June 07, 2018 278
Risk in Wind Power Cash Flows
CapEx (Capital Expenditures): Source of costs and risk
CapEx are the main outflows in the investment phase impacting the margin
1. The CapEx can change as long as the prices for necessary investment costs
into the manufacturers hardware are not contractually fixed.
2. Changes in CapEx translate 1:1 into the project margin which is the
differential between project value (present value of revenues minus OpEx)
and investments costs (CapEx including development costs).
Source: RENAC, 2016
Thursday, June 07, 2018 279
Risk in Wind Power Cash Flows
Exercise: CapEx
Assume the following simplified project:
a 20yr.-project with 5 WTGs , a Net-AEP of 9 GWh p.a. per WTG, a PPA of 80 $/MWh,
variable costs of 12 $/MWh and fixed costs of 60.000 $/WTG assuming cost of capital of 5%
p.a., costs of investment per WTG of 4.5M$, BoP of 1M$ and 0.5M$ for development ,
together an investment (I) of 6 M$ per WTG.
Annuity Factor =(1-1,05-20)/0.05 = 12.46 (=AF)
Project value =5*(((80-12)x0.009-0.06)*12.46)= 34.4 M$
Project margin =34.4-5*(4.5+1+0.5)= 4.4 M$ = Project value – Investment
1. A 1.2M$-increase per WTG from 6M$ to 7.2M$ is a relative change of 20% (=1.2/6) and
this does not changes the project value at all but the project margin !
Project value =5*(((80-12)*0.009-0.06)*12.46)= 34.4 M$
Project margin =34.4-5*(4.5+1+0.5+1.2)= -1.6 M$
2. The sensitivity (change of output / change of input) on project margin is
Relative sensitivity = ((-2.8-4.4)/4.4)/(5*((7.2-6)/6)) = -682%
Absolute sensitivity = (-2.8-4.4)/(5*(6-7.2))) in [$M]/[$M] = -1.0
Source: RENAC, 2016
Thursday, June 07, 2018 280
Risk in Wind Power Cash Flows
5) CoC (Cost of Capital): Source of costs and risk
Costs of capital (debt service and dividends) are most important outflows
1. One of the most massive cash outflow in a project financing is the cost of
capital (sum of debt service and equity cash flow or dividend).
2. The main part is the fixed cost position of debt service, while the dividend
adapts like a variable cost position the available free cash.
3. Changes in the price of capital (interest) have a major impact on project
value which is the present value of unlevered free cash to firm.
Note: The interest rate is used exponentially and many times in the discount
factor that determines the present value of the project cash flows.
Source: RENAC, 2016
Thursday, June 07, 2018 281
Risk in Wind Power Cash Flows
Exercise: CoC
Assume the following simplified project:
a 20yr.-project with 5 WTGs , a Net-AEP of 9 GWh p.a. per WTG, a PPA of 80 $/MWh,
variable costs of 12 $/MWh and fixed costs of 60.000 $/WTG assuming cost of capital of 5%
p.a., costs of investment per WTG of 4.5M$, BoP of 1M$ and 0.5M$ for development ,
together an investment (I) of 6 M$ per WTG.
Annuity Factor =(1-1,05-20)/0.05 = 12.46 (=AF)
Project value =5*(((80-12)x0.009-0.06)*12.46)= 34.4 M$
Project margin =34.4-5*(4.5+1+0.5)= 4.4 M$ = Project value – Investment
1. A 1%-change from 5% to 6% is a relative change of 20% (=1%/5%) and it changes the
annuity factor by 0.99 to (1-1,06-20)/0.06 = 11.47 and the
Project value =5*(((80-12)*0.009-0.06)*11.47)= 31.7 M$ and the
Project margin =31.7-5*(4.5+1+0.5)= 1.7 M$
2. The sensitivity is (change of output / change of input) for the project value
Relative sensitivity = (31.7/34.4-1)/(6%/5%-1) = -307%
Absolute sensitivity = (31.7-34.4)/(6%-5%) in [$M]/[%] = -2.7
Source: RENAC, 2016
Thursday, June 07, 2018 282
Financial Terms in Wind Power
Thursday, June 07, 2018
Financial Terms in Wind Power
Content
1) Introduction
2) Term sheet of lenders
3) Financial conditions of debt translating into debt volume
4) Sales and purchase agreement of equity investors
5) Financial conditions of equity translating into equity volume
6) Entity value investment
7) Financial conditions of institutional investors translating into entity value
8) Entity value = Debt + Equity
Source: RENAC, 2016
Thursday, June 07, 2018 284
Financial Terms in Wind Power
The next slides answer the following questions
1. Where are financial terms found in wind power financing?
2. What types of financial terms are found in practice?
3. What is their main content?
4. How do financial terms affect financial and project value?
Source: RENAC, 2016
Thursday, June 07, 2018 285
Financial Terms in Wind Power
Introduction to Financial Terms in Wind Power
The financing conditions of different types of investor affect their valuation
1. Efficient markets usually produce coherent prices, independent of the
source of financing (might it be debt, equity or entity value).
2. If the financial terms of debt, equity and entity value lead to different
valuations, this will create opportunity to arbitrage.
3. But the illiquid nature of wind power projects can create valuation gaps.
4. The three typical sources of financing, equity, debt and entity value, have
different financial terms, but their valuation results should match.
Please note, that the following valuation approaches are highly simplifying for
an illustrative purpose and the reason of transparency.
Source: RENAC, 2016
Thursday, June 07, 2018 286
Financial Terms in Wind Power
Lender’s Term Sheet
The debt term sheet indicates the most financing conditions and covenants
1. Conditions such as upfront banking fee around 0.5-1.5%
2. Interest rate including and the interest margin of around 0.75-2.5%
3. Term loan facilities volumes and the different tranches
4. Optional value added tax (VAT) facility, working capital (WC) facility
5. Loan tenors and precise repayment schedules
6. Covenants: average, annual or minimum DSCR in the financing P-case
7. Probability of the financing scenario (P-case) P70, P75 or P90
8. Debt service or maintenance reserve account DSRA or MRA
9. Optional cash-sweep mechanisms and or hold-back amounts
10.Conditions precedent to loan draw-downs
Source: RENAC, 2016
Thursday, June 07, 2018 287
Financial Terms in Wind Power
Sales and purchase agreement (SPA)
The sales and purchase agreement (SPA) indicates conditions of investors
1. Similar to the lender’s term sheet, valuation conditions are indicated:
2. P.case is often the P50 or expected mean or average value of AEP
3. Equity tenor is equal to the project life time, exceeding the debt tenor
4. DSCRs are not mentioned which is equal to assume a DCSR of 1.00
5. Covenants can include hold backs or performance related payment
mechanisms.
Note: SPAs do not have standard structures but often include similar type of
information indicating similar approaches to value equity in the industry.
Source: RENAC, 2016
Thursday, June 07, 2018 289
Financial Terms in Wind Power
Entity value investment
The conditions of entity investors should compare to those debt & equity
1. Assuming efficient capital markets, the entity value should be comparable
to the sum of debt and equity.
2. The conditions of entity investors include again similar dimension such as
tenor, interest rate, P-case and also comparable covenants.
3. If capital markets are close to be efficient, there should be no difference
between the two separate valuations of debt and equity and the single
valuation of entity value.
Note: SPAs do not have standard structures but often include similar type of
information indicating similar approaches to value equity in the industry.
Source: RENAC, 2016
Thursday, June 07, 2018 291
Financial Terms in Wind Power
5) Entity Value = Debt + Equity
Assuming efficient financial markets, the following relation should hold true
1. As rule of thumb the entity value should be equal debt plus equity
2. Capital volume is derived from the financial terms and future cash flows
3. Unlevered free cash to firm during operation corresponds to entity value
4. Debt service corresponds to debt volume
5. Equity cash flows (dividends) correspond to the equity volume
6. Discount rates correspond to required return and its risk for each volume
Note: financial conditions change, but are similar in the type of information
such as interest rates, tenors, discounts, fee, covenants ect.
Source: RENAC, 2016
Thursday, June 07, 2018 293