Investing in the Renewable Power Market

THOMAS FOGARTY has spent his entire career managing energy industry project development and financing electric power projects. He has written an editorial in the Daily Bankruptcy Review and has been quoted on the many current challenges facing renewable power. ROBERT LAMB is a Professor at New York University's Stern School of Business and a management consultant. He was previously strategy advisor and debt advisor to the New York State Power Authority and, over the past twenty-five years, has developed and taught customized courses for investment banks and corporations, including Goldman Sachs, Deutsche Bank, Merrill Lynch, Morgan Stanley, Citibank, and American Express. Dr. Lamb has written numerous books and contributed chapters on the financing of public power projects and is a founding member of Standard & Poor's Academic Counsel of Advisors.

• Acknowledgments xiiiIntroduction xvChapter 1 An Overview of Renewable Power 1It’s All About Natural Gas 2Control of CO2 Emissions is Not Currently Possible 3Reality of Demand-Side Management 6Summary 7Chapter 2 Analyzing Power Project Economics 9Regulated Utilities 9Evaluating a Power Plant 12Financing a Power Plant 15Hedge Providers 17Opportunities with Distressed Renewables 19Summary 21Chapter 3 The Challenges of Renewable Power Projects 23Tax Issues 23Special Exemptions 25Summary 28Chapter 4 Risk Assessment for Power Projects 31Project Risk Assessment and Risk Mitigations 32Precompletion Risks/Mitigants 32Postcompletion Risks/Mitigants 39Summary 39Chapter 5 Exploiting Profitability of Distressed and Abandoned Municipal Power Plants 41Waste-Fuel Projects Have Key Financial Advantages for Investors 42Duties of Professionals in a Municipal Power Plant 42The Professional Feasibility Study Engineer 44Disclosures of Risks in the Bond Offering Materials 45Calculation of Debt Service Coverage 50Investment Opportunities at Troubled Municipal Power Plants 53Summary 54Chapter 6 Energy Storage 55Cheap Energy Storage—TheMost Vital Game Changer in the World 56Opening theMarket for Historic Energy Storage Financing 58Categories of Energy Storage Technologies 60U.S. Regional Multi-Energy Storage Collaborations 63Flywheel Technology Energy Storage Has the Lowest Cycle-Life-Cost 65Summary 67Chapter 7 Shale Natural Gas and Its Effect on Renewable Power 69Fracking 69New Attitudes in Natural Gas 70Cost of Production 72Summary 76Chapter 8 Solar PV and Solar Thermal Power Plants 77The Economics of Solar Power 77Financing Techniques 78The Technology 80Summary 82Chapter 9 Wind Power Plants 83Projects Overview 83Wind Project Economics 85Wind Project Power Contracting 87Wind Energy Prediction 90Summary 92Chapter 10 Electric Power Transmission 93Overview 93Grid Input, Losses, and Exit 98High-Voltage Direct Current 99Controlling the Components of the Transmission System 99Electricity Market Reform: Costs and Merchant Transmission Arrangements 100Additional Concerns 102Summary 104Chapter 11 Natural Gas Power Plants 107Gas Turbine Engines 107Benefits of Gas Turbine Engines 109Gas Turbines and CO2 109Gas Turbine Operations 110Summary 111Chapter 12 Coal-Fired Power Plants 113Coal’s High Output Capacity 113Life of a Coal Plant 115Extending Coal Plant Operations 116Coal Technologies 118Summary 120Chapter 13 Biomass Energy and Biomass Power Plants 123Wood Waste 123Economics of Biomass 125Summary 126Chapter 14 Nuclear Power Energy Plants 127Global Impact of Japan’s Three Nuclear Plant Meltdowns 128Comparative Costs of Energy 130Key to the EIA Cost Estimates 130Nuclear Power Plants’ 50 Years of Electricity Globally 135Required Up-Front Payment for Nuclear Waste Disposal before a New Plant’s Approval 136Asia Will Lead the Next Shift to Nuclear Power Plant Development 137China’s New Nuclear Reprocessing is a Vast Expansion of Atomic Fuel 139Summary: Nuclear Power Faces a Capital Cost and Ongoing Local Approval Challenge 141Chapter 15 Hydropower Plants 143A Unique Renewable Technology 143Hydropower and RECs 145Hydropower Economics 149Summary 151Chapter 16 Geothermal Power Plants 153Steam Technology 153Geothermal Project Costs 155Hydrothermal Power Systems 156Ground-Source Heat Pumps 156Standing Column Wells 158Enhanced Geothermal Systems 158Direct Use of Geothermal Energy 159Summary 161Chapter 17 Energy Efficiency and Smart Grid 163Demand-Side Management 163Advanced Meter Infrastructure 166Increasing Energy Needs 167Summary 169Conclusion 171Where Do We Stand Today in Terms of Renewable Energy? 175Appendix A 177Appendix B: DTC’s Coal vs. Natgas Displacement Model Methodology, January 6, 2009 183DTC’s Coal/Natgas Displacement Model Methodology 183How Much Natgas is Needed to Displace Coal? 190About the Authors 193Index 195