Analysis of a Portfolio of Wind Projects
Advisory Services
The Situation
An owner of a portfolio of current wind projects and development opportunities, all located in the US, sought bids to purchase a minority interest in their portfolio. Our client is a global investor in power projects and sought an independent analysis of the gross margins of the portfolio. The portfolio included projects located in seven different power markets: ERCOT, WECC-CA, WECC-RMPA, WECC-NWPP, SPP, MISO, and PJM.
NERA's Role
The portfolio of existing projects and development opportunities included a combination of merchant projects and contracted projects with merchant tails. Our analysis focused on forecasts of long-term power markets with an emphasis on the long-term energy value from the wind projects. We also used our renewable energy credit (RECs) model to provide a forecast of the long-term value of the RECs from the wind projects.
Our analysis of the value of wind energy incorporated forecasts regarding the demand for wind energy, long-term natural gas prices, CO2 price forecasts, and the cost of new entry for wind and conventional thermal generation. The assessment of the demand for wind energy incorporated current projects, announced projects, requests in interconnection queues, and individual state RPS requirements. Our model of REC prices was driven of the differences in energy costs from the least-cost thermal resource option and the cost of wind projects.
The Result
NERA provided a forecast of gross margins for each project and the portfolio, and included a comparison with the sell-side model. Our analysis highlighted differences in assumptions and analysis methodology and the associated differences in revenue projections. Our analysis was factored into the client's bid price.
