Minimising Clean Tech and Renewable Energy Investment Risks

1. Achieving net-zero carbon targets requires developing renewable energy infrastructure and clean technology, supported by affordable finance and recognised in the UN’s Sustainable Development Goals 7 and 9.
2. Renewable energy and clean-tech projects face investment challenges due to their risk profiles, necessitating independent techno-economic due diligence to assure investors of expected returns.
3. WRM’s 130-point checklist for due diligence covers host site, technology assessment, mass balance, supply chain, feedstocks and outputs, off-takes and connections, construction and commissioning, operations and maintenance, health, safety, environmental, and quality, and financial alignment to minimise investment risks.

Our society’s ability to meet net-zero carbon targets relies on developing renewable energy infrastructure and clean technology processes that support the circular economy. This requirement is recognised in the UN’s Sustainable Development Goal 7 (affordable and clean energy) and Goal 9 (industry, innovation, and infrastructure), which outline the necessary infrastructures and technologies. Promoting and ensuring access to affordable finance is crucial for any infrastructure project.

Projects delivering the technologies envisioned by these goals often present a risk profile that creates financial investment challenges. Investors and fund managers need confidence that each project can deliver expected returns, and independent techno-economic due diligence is one approach to gaining this confidence. Project developers and technology proponents also play a role in providing assurance that projects are fully considered and de-risked as much as possible. This can be achieved through an independent assurance review before approaching funders for investment.

The risks associated with renewable energy and clean-tech projects usually fall into two categories, each with specific sub-categories:

1. Technology Performance: The ability of the technology to achieve expected levels of operation and outputs, reflected in financial performance.
2. Contextual Suitability: The ability of a technology to achieve its potential in a given situation, considering factors such as location, feedstocks, and operator competence.

130-Point Checklist

Throughout our twenty years of providing technical due diligence support to investors, WRM has developed a 130-point checklist for a robust assessment:

• Host Site: Includes commercial arrangements, permissions, consents, ground risks, and technical factors that could constrain operations.
• Technology Assessment: Evaluates the robustness and track record of the technology in similar applications, scrutinizes supply offerings, and examines process operating parameters and tolerances.
• Mass Balance: A foundation for any renewable energy and clean-tech project, checking assumptions, apportionment, and alignment to financial models.
• Supply Chain: Focuses on the structure through which the solution is provided, the capabilities and experience of the supplier and their extended supply chain, and guarantees or warranties offered.
• Feedstocks and Outputs: Confirms assumptions on inputs, whether contractual (e.g., biomass and anaerobic digestion) or natural capital inputs (wind and solar), and examines product grades and standards.
• Off-Takes and Connections: Assesses the deliverability of required connections and supply chain structures for output removal.
• Construction and Commissioning: Tests the deliverability and comprehensiveness of a project programme, including responsibility for CDM requirements, and establishes robust arrangements for commissioning, testing, and handover.
• Operations and Maintenance: Ensures operational requirements are clear and reflected in cost estimates, and that there is a sufficient maintenance budget for future capital expenditure on lifecycle replacements.
• Health, Safety, Environmental, and Quality: Ensures the project can operate in accordance with legislative requirements and management system standards common in energy and industrial sectors.
• Financial: Aligns all technical assumptions from the preceding due diligence points to support the investment model.

By addressing these areas, we can minimise clean tech and renewable energy investment risks, ensuring projects are viable and attractive to investors.

WRM supports investment decisions by providing robust due diligence assessments and reports, ensuring that projects are thoroughly evaluated. If your organisation requires a technical or financial due diligence assessment, please contact our team today for a free no obligation consultation.

Key Terms: Renewable Energy, Clean Tech Investments, Net Zero Carbon Targets, Sustainable Development Goals, Techno-Economic Due Diligence, Investment Risks, Project Developers, Financial Performance, Due Diligence Assessment.