CAPEX and OPEX, What particularity for renewable energy projects ?

CAPEX and OPEX, What a peculiarity for the projects In recent years, the renewable energy sector has undergone profound changes in terms of technological innovations, project financing and the structuring of public support mechanisms.

Many parameters are taken into account in the calculation of the production cost of energy sectors and sometimes differ according to the studies and institutions. However, we can divide these costs into 3 main categories:

✔ The investment cost “Capex” (Capital Expenditure): which represents the cost of acquiring the land and building the energy production unit;

✔ “Opex” operational costs (Operating Expenses): these include the expenses for the upkeep and maintenance of the production unit;

✔ the cost of inputs: when it comes to wind or sun, it is zero unlike conventional power stations (gas, nuclear, coal, etc.).

The particularity of wind or solar projects is that the CAPEX (initial investment) is very large compared to the OPEX (maintenance, taxes, administration, rents, etc.). Indeed, most of the costs come from the infrastructure itself rather than from its operation. By way of comparison, fossil-fueled power stations must fuel themselves in order to operate, whereas for renewable energies (RE) the resource is generally free (royalties on hydraulic power are often required in the case of hydropower and (supply of biomass is also an expense).

The profitability of an RE project is therefore strongly influenced by the cost of capital which will finance the CAPEX, while that of a conventional power station will be more sensitive to the volatility of the price of fuel.

Often, the development of a renewable production project is marked by the establishment of a project company (“Special Purpose Vehicle”, SPV), created especially to finance, build and operate the project.