Assessing the Effectiveness of Project Finance Structures in Mitigating Risk in Renewable Energy Projects

Abstract

This paper investigates the effectiveness of Special Purpose Vehicle (SPV)-based project finance structures in mitigating risk in renewable energy projects, specifically focusing on large-scale solar and wind infrastructure. Using three global case studies and over 10,000 Monte Carlo simulation scenarios, we analyze project financial robustness using Debt-Service Coverage Ratio (DSCR) and Internal Rate of Return (IRR) under tariff, load factor, and cost volatility. Results suggest SPV structures reduce sponsor risk significantly but must be complemented with sound contract design and credit enhancement tools. The paper proposes improvements to financing models for emerging market renewables.