Sridhar Yendamuri 2025 Article | Optimizing Project Finance Strategies For Renewable And Conventional Energy Blends

A blended energy generation financial model integrates multiple energy sources (e.g., solar, wind, and battery storage) into a single project to optimize resource utilization, reduce costs, and improve efficiency. This approach is particularly beneficial in addressing intermittency issues of renewables while meeting diverse energy demands. Let’s explore how to build such a model with a creative, number-based example.

Step-by-Step Approach

1. Define the Energy Mix

Determine the types of energy sources in the project, their capacities, and expected outputs. For instance:

• Solar: Daytime generation.

• Wind: Nighttime or high-wind conditions.

• Battery Storage: Backup and grid stabilization.

2. Assess Capital Expenditure (CapEx)

Estimate the costs of building and commissioning each energy source:

• Solar: Land, panels, inverters.

• Wind: Turbines, installation.

• Storage: Batteries, converters.

3. Calculate Operational Expenditure (OpEx)

Include costs like maintenance, staffing, and grid connection fees.

4. Model Revenue Streams

Estimate revenues from:

• Selling electricity (fixed or variable tariffs).

• Incentives like feed-in tariffs or tax credits.

5. Account for Financing

Blend debt and equity financing to meet project funding needs, considering interest rates, loan tenure, and equity return expectations.

6. Simulate Performance and Risks

Incorporate variability in generation (e.g., weather patterns), market prices, and policy changes.

Creative Example: A Hybrid Renewable Energy Project

Project Overview

• Location: Arizona

• Capacity: 

  • Solar: 50 MW

  • Wind: 30 MW

  • Battery Storage: 10 MW

• Project Life: 20 years

Capital Expenditure (CapEx)

Energy Source	Capacity (MW)	Cost/MW ($M)	Total Cost ($M)
Solar	50	0.9	45
Wind	30	1.2	36
Battery Storage	10	0.8	8
Total CapEx			89

Operational Expenditure (OpEx)

Cost Category	Annual Cost ($M)
Solar Maintenance	1.0
Wind Maintenance	0.8
Battery Maintenance	0.4
Staff and Overheads	0.5
Total Annual OpEx	2.7

Revenue Projections

Source	Output (GWh/Year)	Tariff ($/kWh)	Annual Revenue ($M)
Solar	120	0.08	9.6
Wind	100	0.07	7.0
Battery	20	0.10	2.0
Total			18.6

Financing

Source	Amount ($M)	Interest/Return Rate (%)	Tenure (Years)	Annual Cost ($M)
Debt	60	5.0	15	4.8
Equity	29	12.0	-	3.5
Total	89			8.3

Profitability Analysis

Metric	Value ($M)
Annual Revenue	18.6
Annual OpEx	2.7
Financing Cost	8.3
Net Annual Profit	7.6
Payback Period (Years)	~11.7
Internal Rate of Return (IRR)	14.5%

Conclusion

Blending energy sources in project finance provide operational flexibility, resilience to weather variability, and diversified revenue streams. The financial model for such projects must reflect the synergies and trade-offs among energy types while ensuring attractive returns for stakeholders.

This approach is not just financially viable but also aligns with global sustainability goals, paving the way for a greener, more reliable energy future.