NREL is a national laboratory of the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, operated by the Alliance for Sustainable Energy, LLC.

Getting from Goals to 

Projects in the Ground

Renewable Energy Roundtable

Bob Springer

March 27, 2012

NREL/PR-7A40-54591
2

The Challenge

Components 

identify top 

project (s)

Receive 

technical 

assistance from 

NREL

Completed 

project!
3

Intent

3

We will introduce a methodology which 

serves the intent of actually building “the 

project” at the end of the day, and driving to 

that conclusion while managing risk. 
4

Project Motivation &Development
5

Project Motivation &Development Project Development & Project

Finance What is RPS? 

“and then”

Project 

Or? He that doesn’t make sense!

And
6

Portfolio Context

6

Portfolio Context 

STEP 1 STEP 2

STEP 3 STEP 4
7

Key Concepts 

• Project Context & Motivation

o What are the basics of your energy environment (e.g. utility 

relationship, governance structure, energy sources and costs, 

key decision makers)?

o Is the project viable, are you motivated?

• Project Development Framework 

o Overall process environment – situational awareness

o Framework of information management – SROPTTC

o Process of incremental investment seeking fatal flaws – Risk 

Management

o Tools: Pro formas and project checklists.

 Use this process to organize the project and determine viability.

 Bankable projects can move on to determine the potential for 

different financing options. 
8

STEP 1 

DETERMINE MARKET 

FUNDAMENTALS (BEPTC)

STEP 2

DECIDE: BEHIND THE METER OR 

UTILITY SCALE?

STEP 3

EVALUATE PROJECT’s 

CRITICAL FACTORS

(SROPTTC) 

STEP 4

ASSESS & SECURE 

FINANCING OPTIONS 

Project Development & Finance Road Map
9

Project Fundamentals

Baseline Economics Policy Technology Consensus

Energy 

Resource/Needs

Fundamental

Drivers

Conditions for 

Success or 

Constraint

What, When, 

Where, How

Among Decision 

Makers & Stakeholders 

Current Use

Electricity 

Fuels

Future Needs

Energy cost 

projections

Ratepayer 

perspective

Social: costs/ 

benefits (jobs)

Environmental: 

costs/benefits 

Types: 

Regulatory 

Government

Internal

Topics: 

Energy Standards 

Economic 

Development 

Interconnection 

Transmission access

Tested/Viable 

Appropriate for 

location

Access to resource

Volume of resource

Integration concerns

Stakeholder 

identification

Community strategies

Identify key decision 

makers

Establish Context and Motivation
10

Process for Strong Motivation

Baseline

Economics

Technology Policy

Consensus

Energy Resource/ 

Needs

Fundamental Drivers

Conditions for 

Success or Constraint

What, When, 

Where, How

Among Decision 

Makers & 

Stakeholders 
11

Key Concept: Fundamentals = Motivation

11

• Developing project concepts into reality requires 

a strong foundation of drivers to overcome 

challenges, uncertainty, and maintain forward 

momentum – we call this project motivation.

• A “motivated project” wants to exist on the 

fundamentals.

• To manage risk in early stage project 

development, motivation is first established in a 

market analysis.
12

Baseline

• Purpose

o Establishes the key driver or characteristic 

of the local energy market

o A good example is something that defines 

the competition and is the trade-off with 

renewables

o Example: Hawaii and petroleum

• Considerations

o Energy sources and fuels

o Market dynamics; growth, contraction

o Import or export environment

Baseline

Economics

Technology Policy

Consensus
13

Economics

• Purpose

o Economic trade-off

o Competition and market for energy

o Establish go-no go; acknowledge the 

environment and make plan to mitigate 

economic challenges

• Considerations

o Retail vs. wholesale rate(s)

o Future cost growth of grid power

o Fuels and inputs, environmental policy, growth

Baseline

Economics

Technology Policy

Consensus
14

Policy

• Purpose

o Often the pathway to executing project

o Identify supporting policies

o Taking steps to mitigate, remove, or deal with 

impeding policies to create the conditions for 

success are imperative

• Considerations

o Government (Fed/state/local)

o Internal (to your organization)

o Market (regulation, market structure)

Baseline

Economics

Technology Policy

Consensus

Photo by Warren Gretz, NREL/PIX 11732
15

Technology

• Purpose

o Preliminary resource assessment

• Considerations

o Assessing commercial technologies

o Reliability

o Bankability 

Baseline

Economics

Technology Policy

Consensus

Photo from Alstom 2010, NREL/PIX 18207
16

Consensus

• Purpose

o Once factual data exists, share it!

o Use the framework to establish consensus 

o This support will be needed later; looking 

for commitment based on the facts

• Considerations

o Stakeholders

o Patience – don’t move ahead without this

o If unable to get it, should you go forward?

Baseline

Economics

Technology Policy

Consensus

Photo by Patrick Corkery, NREL/PIX 15919
17

Summary of Market Fundamentals

17

Key Elements of Market Fundamentals

• Baseline: existing energy “reality”

• Economics: fundamental driver(s)

• Policy: create conditions for success

• Technology: what, when, where, how many?

• Consensus: establish, advance, defend

Establish and maintain motivation using this 

framework as a guide – “BEPTCTM”

BEPTCTM and SROPTTCTM are trademarks of the Alliance for Sustainable Energy, LLC, the operator of the National Renewable Energy Laboratory
18

STEP 1:

DETERMINE MARKET 

FUNDAMENTALS (BEPTC TM)

STEP 2

DECIDE: BEHIND THE METER OR 

UTILITY SCALE?

STEP 3

EVALUATE PROJECT’s 

CRITICAL FACTORS

(SROPTTCTM) 

STEP 4

ASSESS & SECURE 

FINANCING OPTIONS 

Project Development & Finance Road Map

BEPTCTM and SROPTTCTM are trademarks of the Alliance for Sustainable Energy, LLC, the operator of the National Renewable Energy Laboratory
19

• If not commercial, will community scale work? What 

is interconnection/regulatory environment? Is behind 

the meter allowed? How? FIT, Net Metering, Other? Is 

it economic? 

DIRECT OWNERSHIP

Behind the Meter: facility 

buys output

• Is access available to get energy to the market? (e.g. 

Transmission) - Interconnection/Regulation); Legal 

Environment. If yes, does the market have an 

appetite? At what price? Is that economic for project? 

YES / NO? 

THIRD PARTY PARTNERSHIP

Utility Scale – Sell to Utility

Two Paths Forward:

Step 2: Directional Decision
20

STEP 1:

DETERMINE MARKET 

FUNDAMENTALS (BEPTC TM)

STEP 2

DECIDE: BEHIND THE METER OR 

UTILITY SCALE?

STEP 3

EVALUATE PROJECT’s 

CRITICAL FACTORS

(SROPTTCTM) 

STEP 4

ASSESS & SECURE 

FINANCING OPTIONS 

Project Development & Finance Road Map

BEPTCTM and SROPTTCTM are trademarks of the Alliance for Sustainable Energy, LLC, the operator of the National Renewable Energy Laboratory
21

Risk Mitigation

• Project Development is a risky endeavor

• Successful risk management and effective capital 

budgeting are two of the factors associated with 

rewarding developers

• Renewable Energy Project development risk 

include:

o Federal policy uncertainty

• Inform about some risks and providing risk 

management tool/process

• Will instruct on how these tools have been put in 

practice that is relevant for Indian Country

21
22

Development Risk Capital Project Finance 

(Construction) Asset Finance

Site

Resource

Off-take

Permits

Technology

Team 

 

Capital

Unknowns Risk

$

Time

BEPTCTM and SROPTTCTM are trademarks of the Alliance for Sustainable Energy, LLC, the operator of the National Renewable Energy Laboratory
23

BEPTCTM and SROPTTCTM are trademarks of the Alliance for Sustainable Energy, LLC, the operator of the National Renewable Energy Laboratory
24

COD Financial 

 Close

Sponsor 

investment

in early stage

development

Private developer investment

In later stage development

through COD and Beyond

Transition Process (RFP)

Ongoing sponsor participation as 

project counterparty
25

Process Discipline: SROPTTCTM

Using this framework to visualize the development 

process: 

o Best practice: process is iterative; each iteration aims to find a 

fatal flaw and end project – manage development risk. 

o Best practice: not making the GO/NO-GO decision until the end; 

incremental decisions followed by incremental investments, 

managed investment risk. 

o Best practice: focus on (invest in) pro forma inputs incrementally, 

maximizing yield on every dollar invested. 

Pitfalls: 

(1) Mistaking each iteration for final “go/no-go,” vs. “go forward/stop” 

(2) Not getting out early enough on bad projects (even if investment would be lost) 

(3) Not investing for fear “it won’t work;” BEPTCTM probably not fully developed, which may indicate 

that doing nothing is riskier than investing under uncertainty 
26

Framework for Information

Site Resource Off-Take Permits Technology Team Capital

No Site, No 

Project

Engineering 

Assessment

Off-take 

Contract –

(Revenue)

Anything that 

can stop a 

project if not in 

place...

Engineered 

System

Professional, 

Experienced, 

Diverse

Financing 

Structure

• Site control

• Size and shape

• Location to load 

and T&D

• Long-term 

control

• Financial control

• Clear title 

• Lease terms

• Collateral 

concerns

• Environmental

• Access

• O&M access

• Upgradable

• Volume/ 

Frequency

• Variability

• Characteristics 

(power/speed)

• 24-hour profile

• Monthly, 

seasonal and 

annual variability

• Weather 

dependence

• Data history

• Std. Deviation 

• Technology 

suitability

• Credit of 

counterparty

• Length of 

contract

• Terms and 

conditions

• Reps and 

warranties

• Assignment

• Curtailment

• Interconnection

• Performance

• Enforcement

• Take or pay

• Pricing and 

terms

• Permitting/ 

entitlements

• Land disturbance

• Environmental 

• Cultural impacts

• Resource 

assessments

• Wildlife impacts

• Habitat

• NEPA, EIS

• Utility interconnection

• Other utility or 

PUC approvals

• Engineering 

design plans

• Construction plans

• Not generic solar 

panel and inverter

• Engineered 

resource/

 conversion 

technology/ 

balance of system 

designs

• Specifications

• Bid set

• Business 

management

• Technical 

expertise

• Legal expertise

• Financial expertise

• Utility 

interconnection 

expertise

• Construction/ 

contract 

management

• Operations

• Power marketing/ 

sales

• Development 

equity 

• Project equity 

• Project debt

• Mezzanine or 

bridge facility

• Tax equity

• Grants, rebates, 

other incentives

• Environmental 

attribute sales 

contracts (RECs)

• Bond finance

• Non-recourse 

project finance

BEPTCTM and SROPTTCTM are trademarks of the Alliance for Sustainable Energy, LLC, the operator of the National Renewable Energy Laboratory

CONTINUOUS, ITERATIVE PROCESS
27

Iterative Process

Site

Resource

Off-take

Technology Permits

Team

Capital

No Site, No Project

Engineering 

Assessment 

Off-take Contract –

(Revenue)

Anything that can stop a 

project if not in place... Engineered 

System

Professional, 

Experienced, Diverse

Financing Structure
28

Site

• Purpose: 

o Understanding site availability 

and characteristics.

• Considerations:

o Site control

o Size and shape

o Distance to usable transmission

o Upgradeable

o Road access for operations 

and maintenance

Site

Resource

Off-take

Technology Permits 

Team

Capital
29

Resource

• Purpose: 

o Understanding what renewable 

resources are 

available and usable on site.

• Considerations:

o Resource availability

o Resource variability

o 24-hour resource profile

o Weather dependence

o Technology suitability

Site

Resource

Off-take

Technology Permits 

Team

Capital

Photo from SkyFuel, Inc., NREL/PIX 18227
30

Off-Take

• Purpose: 

o Understanding the power buyer and 

utility interactions.

• Considerations:

o Utility operations

o Regulatory governance (e.g. PUC)

o Interconnection agreement 

o Parameters

o Pricing and terms

Site

Resource

Off-take

Technology Permits 

Team

Capital

NREL/PIX 19498
31

Permits

• Purpose: 

o Understanding necessary 

regulatory 

requirements for the project

• Considerations:

o Interconnection

o Environmental (NEPA, EIS)

o Cultural

o State use permits

Site

Resource

Off-take

Technology Permits 

Team

Capital

Photo from Catherine Hart; Greensburg GreenTown, 

NREL/PIX 17013
32

Technology

• Purpose: 

o Identifying specific technology 

type to develop the resource.

• Considerations:

o Engineering design plans

o Construction plans

o Technology specifications 

development for bid

Site

Resource

Off-take

Technology Permits 

Team

Capital

Photo from Jenny Hager Photography, NREL/PIX 15989
33

Team

• Purpose: 

o Ensure all relevant players 

(internal and external) are 

engaged in the project at the right 

time, levels, and roles

• Considerations:

o Engage: 

– Decision Makers

– Project & Business Management

– Professionals & Staff 

o Employ Experts:

– Legal & Financing

– Technical & Construction

– Power Marketing 

Site

Resource

Off-take

Technology Permits 

Team

Capital

Photo from Central and South West Services, NREL/PIX 06594
34

Capital

• Purpose:

o With all other elements in 

place, capital can be attracted 

to the project.

• Considerations:

o Business Structures

o Achievable Capital Structure

o Timing 

o Perception of Risk/Reward

Site

Resource

Off-take

Technology Permits 

Team

Capital
35

STEP 1:

DETERMINE MARKET 

FUNDAMENTALS (BEPTC TM)

STEP 2

DECIDE: BEHIND THE METER OR 

UTILITY SCALE?

STEP 3

EVALUATE PROJECT’s 

CRITICAL FACTORS

(SROPTTCTM) 

STEP 4

ASSESS & SECURE 

FINANCING OPTIONS 

Project Development & Finance Road Map

BEPTCTM and SROPTTCTM are trademarks of the Alliance for Sustainable Energy, LLC, the operator of the National Renewable Energy Laboratory
36

Renewable Project Finance

• Economics are Dependent on Tax Equity/Other Policy

o Governments/non-profits have no tax appetite

o Utilities may value Renewable Energy Credits (REC) to 

satisfy legal requirements 

o 3rd party finance is the solution

• Key Contract: Power Purchase Agreement (PPA)

o A long term, financeable commitment to buy project 

output – in kWh’s and/or attributes (like RECs)

o Allows developer to monetize tax or other policies

 Several common financing structures and financing sources are used 

by the renewable energy industry to finance a PPA
37

Site (Lease) Project

Resource 

and 

Technology 

Permits

Off-Take 

(PPA)

Capital 

Financing

Project Finance
38

Project Finance Capital Examples (For Illustration Only)

References: 2010 Barclays Capital; Alyra Renewable Energy Finance; Fulbright & Jaworski -For Information Only

Project Debt Tax Equity Lease 

Equity DOE

Bank Private Bond Term Loan Levered Unlevered

Investor 

Universe

Commercial 

Banks

Private or 

144A Offering

Institutional 

investors 

w/energy 

focus

Financial investors and some 

corps. with tax appetite.

Lease equity 

market, 

institutional 

DOE supports 

100% or 80%

Target 

Rating

“Investment 

Grade” no 

rating needed

BBB-/NAIC 2 B is doable; BB 

is preferred NA (Investment Grade Offtaker) NA (Invest. Grade Offtake) NA

Market 

Capacity

Up to $1 

Billion; up to 

1.0XDSCR in 

Low Case

+$1.0 Billion $750 Million Sized to target IRR

Sized to 20-

49% of Capital 

Stack

No Limit

Indicative 

Pricing

L+250-350

2007: 100-150

+fees 1.5-2.0%

7% Area; T + 

5%-6% Fixed

L+250-500; 

425 - 450 Libor 

floor;

11-13.5; IRR by 

Flip

9-10.5% IRR by 

Flip

9.0-12.5% 

after tax yield T+75-100 bps

Tenor

5-7 years 

typical, up to 

15

Term of PPA 

(20-25); 

Prepayment 

Penalty

Up to 7 years Target IRR reached by year 10 

with PTC; 6-7 with ITC

80% of Useful 

Life Up to 30 years

Sizing 

Profile

DSCR Requirements 1.30-1.40X; 

lockbox; PPA ‘Tail’; EPC with 

credit support; LIBOR Swaps; 

Reserves

1% 

amortization 

with cash 

sweep 

Downside flip dates: +3 years in 

downside; +6 years in severe 

downside

1.30-1.40 

“RSCR” Like 

Project Debt

Driven by 

required 

Ratings
39

Tax Equity Financing Structures

Options How Tax Equity Return is Earned

Partnership 

Flip

Tax equity invests capital to achieve target IRR. Upon 

achievement to target IRR ownership interest automatically 

“flips” down to contract percentage.

Sale Leaseback Tax equity buys project and leases it back to developer for a term 

of years.

Inverted Lease Tax equity invests capital for a preferred return that includes a 

“pass through” of credit by operation of tax election.
40

Capital/Cash Flows and Deal Structuring 

40

• Partnership Flip Example – Anatomy of a Deal

– An illustration of participants’ roles in a partnership flip transaction

– A PPA is assumed to be in place – for kWh sales and/or REC sales

– We will visualize the cash flows for each participant

• Key Contract: PPA

– A long term, financeable commitment to buy project output – in kWh’s 

and/or attributes (like RECs)

– Allows developer to monetize tax or other policies
41

TAX EQUITY 

INVESTORS

UTILITY/OFFTAKER

PROJECT

PROJECT 

DEVELOPER

Electricity

PPA

Development

Revenue:

1% Pre-Flip

95% Post-Flip

Revenue: 

99% Pre-Flip

5% Post-Flip

Development

ITC, PTC, MACRS

Source: Graphs adapted by NREL from ‘Renewable Energy Project Finance in 

the U.S.: An Overview and Midterm Outlook’ (Mintz Levin Green Paper , 2010)

Financing Option: Partnership Flip
42

 -

 100.00

 200.00

 300.00

 400.00

 500.00

 600.00

 700.00

 800.00

Pre-DevelopmentPre-Development

DevelopmentDevelopmentDevelopmentDevelopment

ConstructionConstruction

OperationOperationOperationOperationOperationOperationOperationOperationOperationOperationOperationOperation

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Developer

Tax Equity Investor

Lender

Project Development Project 

Construction Project Operation

Years

Development 

Costs

Capital 

Investment

Cash Flows and Tax Benefits

Cash Flows in Time - Illustration
NREL is a national laboratory of the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, operated by the Alliance for Sustainable Energy, LLC.

THANK YOU!

Robert Springer: 

Robert.Springer@nrel.gov 
44

Useful Resources

• Deregulated states: 

http://www.eia.gov/cneaf/electricity/page/restructuring/restructure_

elect.html

• Renewable Portfolio Standard of States: 

http://en.openei.org/wiki/Renewable_Portfolio_Standard

• Net Metering: http://en.openei.org/wiki/Net_Metering

• Incentives: http://www.dsireusa.org/

PROEJCT 

MOTIVATION 

“POLICY”

• Resource Maps: http://www.nrel.gov/gis/maps.html

PROJECT 

MOTIVATION 

“TECHNOLOGY” 
45

Useful Resources

• For General Project Development & Finance: 

http://www.nrel.gov/applying_technologies/financing.html

PROEJCT 

DEVELOPMENT & 

FINANCE 

“GENERAL”

• See RE 101 Slides from Andy Walker

PROJECT 

DEVELOPMENT 

“RESOURCES” 

• Power Purchase Agreement Checklist: 

http://www.nrel.gov/docs/fy10osti/46668.pdf

• Renewable Portfolio Standards: 

http://apps1.eere.energy.gov/states/maps/renewable_portfoli

o_states.cfm

PROJECT 

DEVELOPMENT 

“OFF-TAKE” 
46

Useful Resources (Cont’d.) 

46

• Federal Energy Management Program Environmental Siting Guide: 

http://www1.eere.energy.gov/femp/technologies/derchp_envsiting.html

• http://www1.eere.energy.gov/tribalenergy/guide/permitting_licensing.html.

• http://www1.eere.energy.gov/tribalenergy/guide/regulatory_agencies.html. 

PROEJCT 

DEVELOPMENT 

“PERMITTNG”

• General resource/technology page at: http://teeic.anl.gov/er/index.cfm

• For renewable energy resource assessment: 

http://www1.eere.energy.gov/tribalenergy/guide/assessing_energy_reso

urces.html.

PROJECT 

DEVELOPMENT 

“TECHNOLOGY” 

• For General Project Development & Finance: 

http://www.nrel.gov/applying_technologies/financing.html

PROJECT 

DEVELOPMENT 

“CAPITAL”