Understanding the Cost of Capital

Financial backers of my renewable energy project would generally want to know how much return on their investment I can make them.  I would first show them relevant historical data on energy potential at my chosen site location. Then, I would explain any tax credits and incentives that help speed up the initial payback period. I would also explain why the investment is better than the average “T-Bond” using NPV, WACC, ROE and other accounting formulas. I would explain the effects current geopolitical events have on energy markets i.e. shale boom, ISIS, Russian Natural Gas. I would research and explain all recent and proposed legislation that might affect demand for my renewable project. I would explain the triple bottom line theory of People, Planet, Profit and how they (the investors) could see similar monetary results investing elsewhere, but investment in my project would guarantee “environmental return”.

http://energy.gov/public-services/funding-financing

One thought on “Understanding the Cost of Capital

  1. I like your strategy of explaining outside geopolitical forces and how they effect the energy market. It’s definitely a key part to understanding the market and how prices react, so an investor would like to know that you have a good grasp. Likewise, explaining the connection between People, Planet, and Profit can help if you’re talking to an investor who cares about corporate social responsibility.

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