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you can set it into stone from the start (given that you need most of the money upfront to build the windfarms). Markets (banks, anyway) are happy to give you a fixed rate
Part of the insanity of the markets comes from insisting on returns which can only be created by bubbles.
Stability isn't quantified or considered a financial good - which is unfortunate, because volatility and uncertainty are excellent ways to destroy opportunities for real wealth creation.
I wonder if most people realise the meaning of required rate of return when they learn the basics of finance.
The required rate of return by an investor in gold or in energy, on the other hand is zero per cent. These investors are not aiming to make a profit: they are aiming to avoid a loss.
There are currently tens of billions invested in energy markets - typically through futures markets and structured finance, but occasionally directly "peer to peer" (eg Shell's transaction with ETF Securities) - at zero percent in dollar terms.
Such funds could easily be deployed as direct investment in future energy production. Renewable energy, and energy savings, then have an advantage over all other forms, since it is possible to monetise energy which is essentially free. "The future is already here -- it's just not very evenly distributed" William Gibson
Meanwhile in the real economy, volatility and high returns mean unemployment and impoverishment.
But an off-market return on capital for a 5-year old farm maybe doesn't look that good any more. If interest rates are lower you'd want to refinance to take advantage of the lower costs, or new developments will price you out of the market. If interest rates are higher the present value of your production drops.
This is part of what drives the business cycle: the conditions at which a project is financed may be wholly inappropriate years later. By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
And you will hardly be priced out of the market by new more cheaply financed windfarms, when wind is just a few percent of the total power supply. Peak oil is not an energy crisis. It is a liquid fuel crisis.
If interest rates are lower you'd want to refinance to take advantage of the lower costs, or new developments will price you out of the market.
There is no problem with that which can't be solved by a 20-year take-or-pay contract with the receiving utility.
Feed-in-tariffs and preferential scheduling laws are, as far as I can tell, simply a way to force utilities into long-term take-or-pay contracts with an industry that isn't considered Serious, and/or where the utilities have more market power than the individual wind development.
- Jake Friends come and go. Enemies accumulate.
Balance-sheet risk doesn't go away just because all your debt instruments are fixed-rate.
Possibly.
But a going concern with a fixed-rate loan portfolio and sufficient net revenue to cover financial costs, investment and maintenance of its capital plant can tell The Market to sod off and value its assets according to its own internal discount rate.
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