This glossary provides definitions and explanations for key terms used in the GIA Feasibility App. The GIA Feasibility App is a tool designed to assess the financial viability of energy projects, with a focus on solar installations.
The terms are categorised into Inputs and Outputs, reflecting how they are used within the app to analyse project feasibility and performance.
GIA Feasibility App
Inputs
Tariff: The contracted price per unit of energy (typically expressed in $/kWh or $/MWh) that the project will receive for the electricity it generates and sells. In some markets, this may be a fixed rate, while in others it could be variable or tied to market prices. In the GIA Feasibility App, users can toggle the Tariff up and down to assess its impact on project financials.
Construction Cost: The total capital expenditure (CAPEX) required to build the energy project. This includes direct costs (materials, labor, equipment) and indirect costs (engineering, procurement, construction management). Often expressed in $/MW of installed capacity.
Development Costs: Pre-construction expenses incurred during the project’s planning and design phase. These typically include:
- Feasibility studies and resource assessments
- Environmental and social impact assessments (ESIA)
- Permitting and licensing fees
- Legal and financial advisory fees
- Land acquisition or leasing costs
Connection Costs: Capital expenses related to grid interconnection, including:
- Transmission or distribution line construction
- Metering systems
- Grid compliance studies and equipment
Capacity (MW or MWp): The nameplate capacity of the project, representing the maximum power output under ideal conditions. For solar projects, capacity is often expressed in MWp (Megawatt-peak), which represents the peak power output under standard test conditions. The actual energy production is affected by the capacity factor. In the context of solar energy:
- MW refers to the AC rating of the inverters
- MWp refers to the DC rating of the solar panels, representing the peak power output under ideal conditions
Outputs
IRR (Internal Rate of Return): The discount rate that makes the net present value (NPV) of all cash flows equal to zero. IRR represents the annualised effective compounded return rate that an investor can expect to earn on an investment. A higher IRR indicates a more attractive investment, as it suggests a higher return on the invested capital.
DSCR (Debt Service Coverage Ratio): A metric measuring the project’s ability to cover its debt obligations. Expressed as:
DSCR = Cash Available for Debt Service / Debt Service
Where:
- Cash Available for Debt Service = EBITDA – Taxes – Changes in Working Capital
- Debt Service = Principal Repayment + Interest Payment
Minimum DSCR: The lowest DSCR acceptable to lenders, typically 1.2x to 1.3x. This provides a buffer against cash flow volatility.
Maximum DSCR: The highest DSCR lenders expect, often 1.5x to 2.0x. Exceeding this may indicate the project is under-leveraged.
Turnover: Total revenue generated by the project, calculated as:
Turnover = Energy Produced (kWh) × Tariff ($/kWh)
Note: In the app, turnover is equivalent to revenue for energy projects.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A measure of operational performance, calculated as:
EBITDA = Revenue – Operating Expenses (excluding interest, taxes, depreciation, and amortization)
Cashflow: Typically refers to free cash flow (FCF), representing the cash available to debt and equity investors.
Debt Outstanding: The remaining principal balance of the project’s loans. Typically follows an amortisation schedule defined in the loan agreement.
Photovoltaic Output (PVOut) – Average Hourly Profiles: A time series of expected electricity generation from a PV system, presented as:
- Average hourly values over a 24-hour day
- Monthly averages for each month of the year (i.e. Jan, Feb, etc.)
In the GIA Feasibility App, these profiles are assumed for ground-mounted solar installations. The profiles are influenced by factors such as:
- Solar irradiance at the site
- Panel efficiency and orientation
- Temperature effects
- System losses
Often expressed in kWh/kWp, representing energy output per unit of installed capacity.
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