Page 303 - Fluid Power Engineering

CHAPTER13

Financial Modeling

of Wind Projects

Failure to prepare is preparing to fail!
—John Wooden

Introduction
Financial models for wind projects are unique in many respects. The
uniqueness is in the fact that (i) wind energy projects are capital in-
tensive, with large amount of upfront investment, (ii) no raw material
costs, (iii) relatively small operating costs, and (iv) significant tax-
related incentives.
In this chapter, various aspects of a financial model for wind
projects are covered. The chapter starts with detailed description of
the revenue, capital costs, and recurring costs. The next section deals
with depreciation and tax issues. Financial statements and the per-
formance metrics are covered next. The final two sections deal with
financing and organizational structure of wind projects, and exam-
ples of scenarios and alternatives that are evaluated to optimize the
performance of a wind project.

Financial Model
The three major components of a financial model of a wind project
are: Revenue model, capital costs, and recurring costs.

Revenue Model
Revenue generated from a wind project is from the sale of energy. The
sale price of energy is either: (a) Negotiated through a power purchase

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