Intertemporal optimization under uncertainty (ECON854_SOLEM)

• Semester 8
• Duration :  Within one semester  
• Type: Mandatory

• Student workload:  Lecture (CM): 12 hours + hours of self-study

• Applicability: SOLEM course only 

• Module examination:  1 written exam (100%) 

• Teaching and learning method : seminar, case studies,  discussion,  Presentation

Major intended learning outcomes:

• Targeted Skills 
• Understand the ecosystem in which renewable energy (RE) stakeholders operate 
• Understand the role of finance 
• Understand the role of project financing 
• Understand the risk matrix of a project 
• Understand the financial flows of an RE project 
• Be able to build a simple model, understand other models, and grasp the impact of parameters 
• Master the DSCR, EIRR, and PIRR 

Admission to 2nd semester

Students will discover, after an introductory session on climate, Net Zero, and transformations in the electricity sector as well as developments in the solar sector, project financing through the creation of a financial model starting from a blank Excel sheet. 

Here is the course outline: 

1. Climate, net zero, electricity sector, and renewable energy (RE) sector 

1. 1. Climate and Net Zero scenario 
   2. The role of RE 
   3. Transformations in the electricity sector 

2. Project financing: explanation of the main principles (1/2) 

1. 1. Project development 
   2. Non-recourse financing 
   3. Legal structuring 
   4. Cash Waterfall 

3. Project financing: explanation of the main principles (2/2)

1. 1. Steps for setting up financing 
   2. The impact of project financing on development 
   3. Various regulations governing RE 
   4. Risk matrix 

4. Model construction (1/3) 

1. 1. Model description 
   2. Revenue modeling 

5. Model construction (2/4) 

1. 1. Expense modeling 
   2. Depreciation modeling 

6. Model construction (3/4)

1. 1. Debt modeling (senior debt and shareholder loan) 
   2. Understanding the role of shareholder loans 

7. Model construction (4/4)

1. 1. Tax modeling 
   2. Dividends 
   3. Cash balance 
   4. Ratios: DSCR, PIRR, EIRR 
   5. Understanding leverage 

8. Simulations using the model and description of key financial principles

1. 1. Sensitivity of all parameters 

Exam 

• The material on financial issues is custom-built by the professor 
• On Climate, Net Zero, renewable markets: IPCC, IRENA, BNEF, RTE, IEA