PART IV Financial Plan6. Revenue EstimationFinancial benefits in Sweden results from electricity sales and subsidies.6.1. SubsidiesThe subsidy scheme in Sweden consists of a combination of renewable obligations and renewable energy certificates (Deloitte, 2015).Figure xxx. Subsidy scheme in Sweden(1) The energy producers receive one electricity certificate for each megawatt hour (MWh) of renewable energy produced, over a maximum 15 years.(2) The electricity certificates are sold in a market where prices are determined by supply and demand. In this way, the producers receive extra income in addition to the energy price.(3) Demand for electricity certificates arises in that energy suppliers and certain electricity customers are obligated by law to buy electricity certificates corresponding to a certain proportion (quota) of their calculation-relevant electricity consumption.(4) The electricity end users pay for the development of renewable energy production because the cost of the electricity certificates is included in electricity bills.(5) Every year, the market participants with quota obligations must cancel electricity certificates in order to fulfil their quota obligation.The prices may change drastically in one year based on the market situation. Accordingly, in order to estimate the representative value we’ve used averaged market price. The electricity certificates were generally traded for between SEK 130 per MWh to SEK 165 per MWh (Energymyndigheten, 2015) in 2015. A mean value of 137.5 SEK/MWh is used for financial analysis purposes.6.2. Electricity market priceAccording to Nordpoolgroup the Swedish electricity market was in 2012 divided into zones SE1 until SE4. The SE2 zone includes the described site for Ljungdalen wind farm project.Averaging the historical market data for the year 2017 the mean electricity market price is determined as 290,1 SEK/MWh (Nordpoolgroup, 2017).Considering mean electricity market price, mean green certificate prices and annual energy production (AEP) we’ve estimated revenues for different turbine scenarios (Table xxx).AEP (MWh)Annual income from electricity selling (MSEK)Estimated annual income from Green Certificates (MSEK)Total Annual Income (MSEK)Vestas V112-3.45192 75055,9226,5082,42Vestas V105-3.45182 08252,8225,0477,86Vestas V90-3.0161 32646,8022,1868,98Siemens SWT-3.2-108178 76251,8624,5876,44Siemens SWT-3.4-108185 97053,9525,5779,52Siemens SWT-3.2-101174 39650,5923,9874,57Siemens SWT-3.4-101181 43552,6324,9577,58GE 3.2-103165 44848,0022,7570,75GE 3.4-130202 51158,7527,8586,59Table xxx. Revenue estimation for different turbinesSelected turbine, GE.3.4 130 turbine has the highest revenue because of its annual production. Approximately %70 of this revenue comes from electricity selling and %30 of it comes from the subsidy, by considering all the green certificates are traded in the market in a year.7. Cost EstimationCosts taken into account for this project are divided into two sections, such as initial investment costs and lifetime costs. Costs taken into account are listed below and explained later on in this chapter.Initial investment costs:-Turbine costs-Access Roads-Cable costs-Measurement campaign-Permits-Project costs-Land lease Lifetime costs:-Service costs by contract-Additional annual costs-Reliability insurance costs-Electrical operation reliability-Inspection costs7.1. Initial investment costs7.1.1. Turbine costsTurbine costs includes; wind turbine, foundations, all installation costs, anti icing system and environmental mitigation measure costs. Unit prices per MW for 90m hub height and additional costs per meter are listed in the table below according to turbine type. These data is used as a reference for turbine costs calculations (Expert report, 2017)Gearbox type turbinesDirect driven type turbinesTurbine costs per MW(MSEK)Additional costs per meter(MSEK)Turbine costs per MW(MSEK)Additional costs per meter(MSEK)11.670.15150.25Table xxx. Reference costs for different turbine typesReference costs are given for the IEC class III wind turbines. Since turbines used in this project are IEC class I, final costs of the turbines are increased by 15%, to take into account this difference.After analyzing the data, total costs for different types of turbines for the wind farm can be seen in below table. BrandReferenceTypePower(MW)Rotor Diam. (m)Hub Height(m)Unit Price(MSEK)No WTGTotal costs(MSEK)Total Power(MW)1VestasV112-3.45Gearbox3,451129440,851047034,52V105-3.45Gearbox3,4510572,537,631043334,53V90-3.0Gearbox3908033,5011424334SiemensSWT-3.2-108Direct Driven3,21089449,0010564325SWT-3.4-108Direct Driven3,41089452,0010598346SWT-3.2-101Direct Driven3,21019449,0010564327SWT-3.4-101Direct Driven3,41019452,0010598348GEGE 3.2-103Gearbox3,2103,27034,3310395329GE 3.4-130Gearbox3,41308538,921044834Table xxx. Turbine costs for different scenariosAs we can see on the table above, chosen turbine GE 3.4 130 is in the mid-range in terms of turbine costs.7.1.2. Access roadsLjungdalen wind farm will be located on the hills and at the actual state there are no access roads to wind farm site. Site has high hills and rocky soil. An approximative layout of access roads (Figure xxx) created in WindPro for financial analysis purposes. Roads are connected to Ljungdalen town. While creating the layout we’ve avoided the rivers on the site and tried to have minimum slopes on the roads for logistics purposes.Figure xxx. Proposed layout for access roads to Ljungdalen windfarmCosts of the roads varies between 1000 SEK/m and 4000 SEK/meter (Expert report, 2017). Since the area is difficult to build roads, 4000 SEK/meter value is used to calculate the road costs. Total estimated road costs can be found in the table below which is high because of the difficult location.Total road length (m)Road costs (SEK/m)Total road costs (MSEK)36862,44000147,45Table xxx. Total access road cost for Ljungdalen wind farm7.1.3. Cable costsFor this study we only took into account the cable costs between turbines and connection to suitable grid point, we neglect all connection costs and transformer substation.Suitable grid point is approximately 26 km away from the wind farm which is located in 63°7’14.49″N, 12°25’39.20″E coordinates and total length of the cables between turbines is 24,3 km (Figure xxx)Figure xxx. Cables length between turbinesTwo different types of cables, one for between turbines and another one to connect the farm to grid, are chosen by taking into account the electrical voltage level, electrical current and cross sectional area of the cables. For the array cables a 24kV which has 50-70 mm2 cross sectional area cable and for the grid connection cable 245kV which has 42m2 cross sectional area are chosen. Costs for these cables are shown in below table.Table xxx. Cable costs for wind farmApproximately 61.67 M SEK cable costs will be added in project investment and %80 of this cost will be for the grid connection cable.7.1.4. Permit costsPermit costs include building permit and environmental impact assessment costs. According to the world bank obtaining a building permit in Sweden costs around 92 000 SEK and according to RICS the average costs for an EIA inside the EU comes to 610 000 SEK. A total of 702 000 SEK is added in initial investment of the project. (Reference needed Anastasija)7.1.5. Measurement campaign costsTo be able to accurately estimate the wind resource in the Ljungdalen wind farm, a measurement campaign designed which took place during one year with a 150 m lattice tower met mast. Also a SODAR device used in order to gather additional data, and to be able to extrapolate wind measurements to other heights or locations.Costs for measurement campaign equipment’s are shown in below table.Table xxx. Measurement campaign costs break down7.1.6. Project costsProject costs consist of internal time spent on project for the project group, overhead costs and software costs.The cost of the internal time has a monetary value of EUR 25.40, which is the average hourly labour cost in 2016 for the EU-28 (Eurostat, 2017). Total time spent for the project is approximately 300h for 4 person in project group. Also project group had a common budget of 100 Euro that can be spent on the meetings materials (printing agendas…), food and beverages and other miscellaneous costs. 50 Euro of this budget has been used for the project.For the softwares Project group used WindPro and WindSIM. The licensing cost for using windPRO and WindSim listed in below table (WindSim Price List, 2017), (WindPro Price List, 2017).Software/moduleEUROWindPRO16850 BASIS1000 METEO1000 MODEL1000 MCP1250 PARK1250 LOSS AND UNCERTAINTY1250 OPTIMIZE1250 DECIBEL1000 SHADOW1000 Environment, ZVI1250 Environment, IMPACT500 Visual, PHOTOMONTAGE1500 WASP3600WINDSIM 7 (One month, 1 user)1600TOTAL SOFTWARE18450Table xxx. Used software costsBy summing up above costs project costs amount 48 980 euro for Ljungdalen wind farm project.7.1.7. Land leaseA land lease agreement has been already signed with Berg and Åre municipalities. As the land planned for the project belongs to these municipalities, all of the people of the kommun will feel the benefit of the socio-economic impact of the wind farm and the infrastructure. Since municipalities were willing to help to develop this project a symbolic amount of fee for the land lease is used for the project, which is not included in financial analysis.7.2. Life time costsAnnual costs are divided into service costs and additional annual costs. Additional annual costs includes reliability insurance, electrical operation reliability and inspection costs. These costs depends on the turbine type used.Below table shows the additional annual costs for different turbine types (Expert report, 2017)ADDITIONAL ANNUAL COSTS GEARBOX TYPEADDITIONAL ANNUAL COSTS DIRECT DRIVE TYPEReliability insurance0,07M SEKReliability insurance0,05M SEKElectrical operation0,02M SEKElectrical operation0,01M SEKInspection0,02M SEKInspection0,02M SEKTOTAL0,10M SEKTOTAL0,07M SEKTable xxx. Additional annual costs for different type of turbinesService costs depends on the electricity produced from WTG’s and type of the turbine. Values used for this analysis are shown on the below table (Expert report, 2017).Service Costs GearBox Type (centSEK/kWh)Service Costs Direct Drive Type (centSEK/kWh)7,8 -8,44,8-5,4Table xxx. Service costs for different types of turbinesBy taking AEP’s from different turbines and by using the maximum values on above tables service costs and total annual O&M costs are calculated for different turbines (Table xxx).BrandReferenceTypeProduction(MWh/year)Service costs (M SEK)TOTAL ANNUAL COSTS (M SEK)VestasV112-3.45Gearbox19275016,1916,29V105-3.45Gearbox18208215,2915,39V90-3.0Gearbox16132613,5513,65SiemensSWT-3.2-108Direct Driven1787629,659,72SWT-3.4-108Direct Driven18597010,0410,11SWT-3.2-101Direct Driven1743969,429,49SWT-3.4-101Direct Driven1814359,809,87GEGE 3.2-103Gearbox16544813,9014,00GE 3.4-130Gearbox20251117,0117,11Table xxx. Service and total annual costs for different scenariosAs we can see on the table direct driven turbines has lower lifetime costs. Chosen turbine GE 3.4 -130 has highest lifetime costs, that is mostly due to the high annual energy production of this turbine. 7.3. Review of cost estimationA table including all the costs for different turbine models are shown below. Chosen turbine GE 3.4-130 has mid-range investment and highest annual costs which is due to the high production rate.Table xxx. Review of Ljungdalen wind farm costs estimation8. Financial analysisA financial analysis is made to clarify whether or not the wind farm project is financially feasible for the chosen site and types of wind turbines and several other parameters.8.1. Weighted average cost of capitalOne of the main financial parameter in financial analysis is W.A.C.C. According to Fraunhofer ISI (2016), the W.A.C.C. in Sweden is 6.7 %. However, referring to interviewees, the WACC varies from 7.4 to 9 %.To determine the WACC for Ljungdalen project we have used the following formula with following financial parameters. Financial parameters are taken from DiaCore report and maximum values are used. Table xxx. Financial parameters used to calculate WACCIf we account a tax shield for approximately 30%, Tax shielded WACC amounts 6,37. This value is used for further calculations.8.2. Payback time, Net present Value (NPV) and Internal Rate of Return (IRR)For Ljungdalen, 9 different wind turbine scenarios with a lifetime of 25 years is planned and results are compared.Payback timeVestas V112-3.4510,3YearsVestas V105-3.4510,3YearsVestas V90-3.011,5YearsSiemens SWT-3.2-10811,6YearsSiemens SWT-3.4-10811,7YearsSiemens SWT-3.2-10111,9YearsSiemens SWT-3.4-10112,0YearsGE 3.2-10310,7YearsGE 3.4-1309,5Years Payback time does not include time value of the money and cost of capital. If we look at different scenarios for payback time the chosen turbine has the lowest payback time with 9,5 years.NPVVestas V112-3.45-672,9MSEKVestas V105-3.45-636,4MSEKVestas V90-3.0-628,5MSEKSiemens SWT-3.2-108-766,8MSEKSiemens SWT-3.4-108-800,3MSEKSiemens SWT-3.2-101-767,0MSEKSiemens SWT-3.4-101-800,6MSEKGE 3.2-103-599,3MSEKGE 3.4-130-650,3MSEK Net present value is the most popular evaluation method and which also includes time value of the money and cost of capital. Since a negative NPV represents a net loss all the projects are not acceptable and the value of the chosen scenario is -650.3 MSEK.IRRVestas V112-3.458,39%Vestas V105-3.458,37%Vestas V90-3.07,13%Siemens SWT-3.2-1087,00%Siemens SWT-3.4-1086,97%Siemens SWT-3.2-1016,73%Siemens SWT-3.4-1016,70%GE 3.2-1037,95%GE 3.4-1309,39% Internal rate of return also includes time value of the money. All the scenarios are higher than the tax shielded WACC. According to this evaluation method all the projects are acceptable. Chosen turbine, GE 3.4-130 has the highest IRR with 9,39%. However, it is safer to prefer the NPV ranking when there is conflict between IRR and NPV. This is due to the realistic assumption and theoretical soundness of the method.If we keep the financial parameters and energy income same to have a “0” NPV the project’s initial investment should only be 10.95 MSEK.If we keep all the other parameters same the Tax shielded WACC should be between 0.9-1 % to have a “0” NPV for the chosen turbines.