Low Carbon Urban Infrastructure Investment in Asian Cities

RENEWABLE ENERGY INVESTMENT RISK ANALYSIS FOR LOW-CARBON CITY... 11

Table 2.2 Renewable energy business risks and measures

Potential

investors

Major risk items Potential risks

Construction
of facilities

Investor: Private

company

Land risk Land ownership changes/

contract termination/restoration

expenses of expiry, etc.

Environmental impact

assessment risk

Respond to resident complaints
regarding landscape issues and
noise/radio interference caused
by transmission and distribution
equipment/effects on the
ecosystem
Grid connector risk Additional cost burdens and
delayed completion due to line
interconnection or system
connection failures/cost overruns
Completion delay risk
Financing risk Insufficient funds and temporary
budget overruns due to incorrect
projections of project costs
Operation and
maintenance

Investor: Private

company

Loan: Bank,

lease company

Technology and

equipment performance

risk

Deterioration or failure of power

generation equipment/repair

cost changes

Operational risk Pause or decline in power

generation levels associated with

operational, maintenance, and

management defects

Electricity generation

capacity and cash

shortage risk

Cash flow fluctuations in
accordance with output declines
due to a rise in panel surface
temperature, dust and sunshine
duration in solar PV due to
changes in wind direction and
wind speed via wind power
generation
Interest rate risk Borrowing rate increase
Output control risk Electricity company output
controls or limits
Force majeureInvestor: Private
company, private
equity, pension
fund, insurance
company,
investors
Loan: bank,
leasing company

Disaster risk Accidental equipment damage

(typhoon, lightning, etc.) or

equipment damage due to natural

disasters (fire, etc.)

Source: Terabayashi and Ando ( 2013 ) and MOEJ (2014b)