Capacity Building Program “Pricing Renewables: Feed-in Tariff (FiT) Design and Structure for Wind Farms and Solar Plants” - October 23-27, 2011

1. ECONOMIC AND FINANCIAL CONCEPTS
FOR
RENEWABLE ENERGIES
CAPACITY BUILDING PROGRAM
PRICING RENEWABLE ENERGIES
CAIRO, EGYPT, 24 OCTOBER 2011
EGYPTERA, RCREEE & NREA
Mohamed Salah ELSOBKI (Jr.)
Professor Electric Power Systems
Director Energy Research Center
Faculty of Engineering
Cairo University

2. ECONOMIC AND FINANCIAL CONCEPTS FOR
RENEWABLE ENERGIES
• Financial Concepts (project oriented)
• Economic Concepts (country oriented)

3. FIXED COSTS
The major items of the fixed costs are :
1- Interest.
2- Depreciation and/or amortization
3- Insurance
4- Taxes (property taxes)

4. OPERATING COSTS
In general, the main components of
operating costs are:
1- Energy
2- Labor
3- Administration and supervision
4- Materials, supplies and services
5- Maintenance
6- Taxes (operating taxes)

5. Project Feasibility
Profitable Revenues-Cost=
Profit Incentives
and Policies
Economical Revenues-Cost=
profit+ jobs created+ Environmental
benefits+ Social benefits+ sustainability+
increase exports+ ----
Policies and
Strategically Revenues-Cost= Regulations
profit+ jobs created+ Environmental
benefits+ Social benefits+ sustainability+
increase exports+ ---- + Future prospective+
R&D + local Technology development+
Independence

6. Project Planning
(Example power generation plant)
Identification Demand forecast (future electricity demand)
Assessing alternatives of location and technologies, Fuel,
land
Preparation Preparing the feasibility study (Financing, Economical
analysis, packages
Preparing Environmental Assessment
Appraisal Evaluating the project
Securing financing
Project detailed design
Implementation Project procurement activities
Project implementation, supervision
Project integration and testing
Operation Project commissioning and operation

7. Project monitoring stages
Objectives Activities Output Outcomes/results
(Indicators) Indicators
Capacity kW
Procurement
Energy kWh
Access Installation Access
Electricity security Testing Electricity security
Reliable operation Integration Reliable operation
operation
Risk mitigation

8. Renewable Project Costs & Revenues
Costs Revenues
Electricity
Capital Equip.,
Sales (prices)
O&M
Finance
Resource Supply/ Equity &/or Debt Subsidies/
Uncertainty Incentives
Cost of Money Attribute Sales
Debt: Interest Rate (e.g. RECs)
Equity: ROI

9. Reference Scenario: Generating costs of
renewable energy technologies
Dollars (2007) per MWh
700
600
500
400
300
200
100
0
2006
2015
2030
2006
2015
2030
2006
2015
2030
2006
2015
2030
2006
2015
2030
2006
2015
2030
2006
2015
2030
Hydro Geothermal Wind onshore Wind offshore Biomass Concentrating Solar PV
solar
The costs of power generation from renewables are set to fall in response to increased
deployment, which accelerates technological progress & increases economies of scale
(world energy outlook)

10. Cost of UK electricity Generation

11. Cost of Generation US 2000 &2005

12. Electrical Generation Today? [2008 Bus-bar Costs: ¢/KWh]
Gas Super Integrated IGCC Nuclear
Combined Critical Gasification With C
Cycle Coal Combined Capture Storage
Cycle
[IGCC]
9.582 10.554 11.481 17.317 15.316
7.3-10.01 10.4-13.41 13.51 9.8-12.61
Biogas Wind Geo- Hydroelectric Concentrated Biomass
Thermal Solar Thermal
8.55 8.91 10.18 10.52 12.65 16.49
5-9 9-14.5
Solar PV Fuel Cells Solar PV thin film Land fill Gas Geothermal
crystalline
11-15 11.5-12.5 9.6-12.4 5.0 -8.1 4.2-6.9
Source: CA Energy Comm.; CA Public Utilities Comm. May 2008,
Lazard Analysis June 2008

13. Global Marginal GHG Abatement Cost
Curves - 2030

14. Energy
Government Utility
(Electric,
Central gas
planning utility
Residential department
Electricity
users Legislators
Media
RE Parliament
manufacturers NGOs

15. Government Electric
Central utility
planning
Residential department
Electricity
users Legislators
Media
PV Parliament
manufacturers NGOs

16. Policy, Strategy, Social status ,
Energy Mix Needs End-
Gov. Target user
Feasibility study,
product survey,
statistics Planner
Awareness
Potential, GDP
Energy Saving, Co2 Emission,
Install Capacity, Fuel,
Measurements, Elec. Growth
rate, Environment Impact
Manu.
R&D, Product NGO’S
Specifications

17. Feasibility study,
product survey, Unemployment End-
Planner statistics
user
Subsidy, soft loans,
Policy, Strategy,
Feed in Low, Income
Energy Mix Target
Government Tax Reduction
Case Study, Draft
Incentives, Tax, Lows
Copyright (Intel actual
property) , Control the
Prices
Manu. Prices, Risk assessment, Submit Lows &
Creating Jobs Regulation Lig.

18. Demand,
Potential, GDP
Needs,& Market End-
Ability
Planner user
R&D, Product
Specifications
Manufacture
Technical Support,
Price, Payback period
Prices, Risk
assessment,
Creating Jobs
Gov. Incentives, Tax, Copyright
(Intel actual property)
,Control the Prices

19. Stakeholders Relationships

20. Planners

21. GDP, energy security strategy,
feasibility study, market
analysis
Government/
Politicians Planners
environmental concerns,
statistics, potential
Awareness
Manufacturers
End Users

22. GDP, energy security strategy,
feasibility study, market
analysis
Government/
policies
Politicians Planners
environmental concerns,
statistics, potential
Awareness
case studies
Manufacturers
Legislators
End Users

23. GDP, energy security strategy,
feasibility study, market
analysis
Government/
policies
Politicians Planners
environmental concerns,
statistics, potential
Awareness
case studies
Issue laws
Manufacturers
Legislators
End Users

24. GDP, energy security strategy,
feasibility study, market
analysis
Government/
policies
Politicians Planners
environmental concerns,
statistics, potential
case studies, decree laws
Awareness
Issue laws
Manufacturers
Legislators
End Users

25. GDP, energy security strategy,
feasibility study, market
analysis
Government/
policies
Politicians Planners
environmental concerns,
statistics, potential
incentives,
case studies, decree laws
taxes, custom
Awareness
duties
Issue laws
Manufacturers
Legislators
subsidies, loans, feed-in tariffs, laws End Users

26. GDP, energy security strategy,
feasibility study, market
analysis
Government/
policies
Politicians Planners
prices, specs, risk environmental concerns,
assessment statistics, potential
incentives,
case studies, decree laws
taxes, custom
Awareness
duties R&D, create
jobs
Issue laws
Manufacturers
products,
pricing, quality,
technical support
Legislators
subsidies, loans, feed-in tariffs, laws End Users

27. GDP, energy security strategy,
feasibility study, market
analysis
Government/
policies
Politicians Planners
prices, specs, risk
environmental concerns,
assessment
statistics, potential
incentives,
case studies, decree laws
taxes, custom environmental
concerns,
Awareness
duties R&D, create
technology
jobs
Issue laws
requirements,
demand,
Manufacturers social status
purchasing
power, feedback
products,
pricing, quality,
technical support
Legislators
subsidies, loans, feed-in tariffs, laws End Users

28. Stake holders Relations

29. Manufacturers Planers
Survey 
Prices Technical data 
Demand Pilot project 
Market study
End user Government Legislation
Prices  Study 
Survey 
Maintenance  Jobs 
Technical data 
Services  Demand 
Pilot project 
Efficiency 
Old equipment 
Opposition
Study 
Jobs  Concerns and
Demand 
General Relations

30. Legislator Planner
Government
& Opposition
Manufacturers Media
End users
Main Stakeholder
• According to the chart and as a conclusion of the analysis in my
opinion the government/opposition have the main influence on
the technology being applied or not.
• All stakeholders have a big influence and it would be unlikely that
a technology is applied without the participation of any of them.
They are so interconnected ..!!

31. Manufacturers Planers
• Prices  Survey
Numerical
• Demand Technical data
Numerical
• Market study Pilot project
Laws
Numerical Numerical
End user
Politicians Legislation
 Prices
 Maintenance Study Laws
Survey
 Services
 Efficiency Jobs Technical data
 Old equipment Demand Numerical Pilot project
Influence Influence
Media Opposition
 Awareness Discussion
Numerical &
 Promotion
 Introduction of products non-numerical (Awareness) Complicated/expens
 Create market
 Competitiveness
Alternatives ive technology
Public opinion

32. Manufacturers
Prices 
Demand 
Market study 
Numerical
Numerical
End user Politicians
Prices  Study 
Maintenance  Jobs 
Services  Demand 
Efficiency 
Old equipment 
Influence Influence
Media Opposition
Awareness 
Numerical & Discussion (Awareness) 
Promotion 
Introduction of products 
Alternatives 
non-numericalPublic opinion 
Simple/cheap
Create market 
Competitiveness  technology

33. I am end user!!

34. Who is end user??
• The one who use the technology and consume
the power and gain money!!!

35. End user needs
• Reliable system .
• Less maintenance.
• Taxes reduction.
• Facilitate the connection between the
customers and media.
• Applying Win to Win concept (feed in tariff).
• Awareness on Renewable energy.

36. Result
36 11/9/2011

37. Government
Electrical
Media utility
parliament
End User NGO’s
legislator manufacturer
Planner
37

38. Thank for your participation
Mohamed Salah ELSOBKI (Jr.)
sobki54@hotmail.com
Your are required to give your input re the sack
holders for possible RE projects
Clarifications & further contributions