Source
https://www.nrel.gov/docs/fy20osti/76881.pdf — original source (opens in a new tab; the file is not redistributed)
Summary
NREL/LBNL technical report (July 2020) documenting US-specific financing-cost benchmarks — WACC, after-tax levered equity returns, debt interest rates, leverage, and debt service coverage ratios — for utility-scale renewable and conventional electric generation. Produced as the financing inputs to NREL’s Annual Technology Baseline (ATB) model. Benchmarks land-based wind, offshore wind, utility PV, distributed PV, CSP, geothermal, hydropower and natural gas, both at current (2018) values and projected to 2030 under tax-credit phase-out and rising-rate assumptions.
Key thesis insights
- Financing cost is a function of three axes, not just interest rates — technology risk (construction risk + operation risk), project ownership structure (IPP vs investor-owned utility vs publicly-owned utility), and electricity-sales agreement type (long-term PPA vs merchant vs regulated tariff). The same physical asset can attract materially different WACC depending on how these three are configured. Useful framing for the analysis on community-scale technology economics: financing terms are a design variable, not an exogenous market input. OT_020
- Solar PV sits at the low-risk corner of the technology-risk plane (low construction risk, low operation risk — modular, few moving parts, predictable resource), which is why it attracts the lowest cost of capital among renewables. This empirically validates a thesis claim that PV-led community energy strategies have a structural financing advantage even before considering subsidies. OT_020
- Ownership type changes financing access more than scale does — POUs (publicly-owned utilities) and cooperatives in the US access tax-exempt municipal debt at materially lower rates than IPPs, but cannot directly monetise federal tax credits without partner structures. The US tax-equity workaround (~40% of solar / 55% of wind project capital in 2018–2019) is a US-specific instrument with no NZ analogue, but the underlying pattern — cooperative/community ownership trading tax-credit access for cheaper debt — is the structural question the thesis must address in the NZ CHFA/CHP context (cross-reference OT_003, OT_005). OT_020
- Long-term offtake contracts (10–30 year PPAs) are the primary mechanism by which renewable IPPs lower their WACC — they collapse revenue uncertainty, which lets debt providers underwrite higher leverage at lower spreads. The NZ corollary for the thesis: community-scale projects without an analogous long-term offtake instrument (i.e. relying on retail buy-back tariffs that reset annually — see CR_011) carry a structural financing disadvantage that is not about technology cost but about contract architecture. OT_020
- The US WACC forecast trajectory is not transferable to NZ — the report’s 2018–2030 WACC curves (Figure ES-1) are driven by phase-out of ITC/PTC and CBO 10-year Treasury yield forecasts (2.1% → 3.1%). None of these instruments or assumptions apply to NZ. Cite as methodology only; do not extract numbers. OT_020
Notes
US Department of Energy report, freely available at https://www.nrel.gov/docs/fy20osti/76881.pdf. Co-authors at NREL (Feldman, Schwabe) and Lawrence Berkeley National Laboratory (Bolinger). Pre-pandemic data — authors explicitly flag that benchmarks do not capture any COVID-era impacts. Forward projections to 2030 anchored on 2019 CBO interest-rate forecasts which have since been superseded by events (Fed hiking cycle from 2022). Treat as a snapshot of pre-2020 US utility-scale renewables finance.
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