FIT rates for wind projects
ONE of the biggest cost drivers of wind-energy projects, which has a material impact on the cost per kilowatt-hour (kWh) of energy produced, is the cost of capital. The “first come, first served” system of feed-in tariff (FIT) allocation adopted in 2013, while arguably achieving the objective set out by the Department of Energy (DOE) at the time of disqualifying the financially weaker players or “flippers” from being awarded allocations, did so at the cost of significantly increasing the cost of capital of the remaining projects. This is because with no certainty of FIT award until commercial operations, projects could not attract the cheapest form of capital (senior bank debt) to fund construction and instead were effectively equity funded.