Offshore Wind Spread Installation and Construction Costs

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danielle.jensen
Topic Author

09 Jul 2023 20:00 #12297 by danielle.jensen

Offshore Wind Spread Installation and Construction Costs was created by danielle.jensen

Is there a way to distribute or spread the installation costs over a number of years? It is typical for Offshore Wind projects to gain debt financing at FID and then spend 3-5 years in construction before the start of operations, the ITC injection, and the start of debt repayment. This has a significant impact on project NPV and IRR estimates and when solving for PPA price. Is this possible now or possible to add as a feature in a future version? Thanks!

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pgilman

10 Jul 2023 15:20 #12303 by pgilman

Replied by pgilman on topic Offshore Wind Spread Installation and Construction Costs

Hi Danielle,

SAM applies the costs you define on the Installation Costs page to Year 0 of the project cash flow.

You can use the construction financing inputs on the Financial Parameters to calculate the financing cost of constructions loans for a period (defined in months) before Year 0 begins. This could be used to calculate the cost of debt during the 3-5 year construction period.

Best regards,
Paul.

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danielle.jensen
Topic Author

12 Jul 2023 11:25 #12314 by danielle.jensen

Replied by danielle.jensen on topic Offshore Wind Spread Installation and Construction Costs

Hi Paul, thank you for the quick answer. I am trying to test the sensitivities of different lease prices for offshore wind which also occur quite a few years before Construction Loan periods. Is there any way to input that there would be a lease in Year -8, development from Year -7 through -4 and then a Construction Loan from Year -3 through Year 0 before Operations in Year 1?

Thanks again!

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pgilman

12 Jul 2023 22:07 #12318 by pgilman

Replied by pgilman on topic Offshore Wind Spread Installation and Construction Costs

Hi Danielle,

You could use the construction loan calculator on the Financial Parameters input page to represent lease and development costs. The calculator uses "Months prior to operation" but does not limit the number of months, so, for example, you could use 7 years * 12 months/year = 84 months for a pre-installation cost that is spread over 7 years.

Alternatively, you could calculate these costs outside of SAM and assign them to one of the capital cost categories on the Installation Costs page.

SAM applies the "total construction financing cost" from the Financial Parameters page to Year 0 of the cash flow (you can see that value on the Cash Flow tab of the Results page under "Investing Activities), so the two approaches are equivalent.

Best regards,
Paul.

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