Define 'operating expenditure' (OPEX) and how it differs for renewables vs fossil fuel plants.

• A. OPEX are ongoing costs; renewables typically have low fuel costs and maintenance, while fossil plants incur ongoing fuel costs and variable O&M.
• B. OPEX are upfront capital costs.
• C. OPEX equals taxes.
• D. OPEX has no relevance to renewables.

Answer: (A)

OPEX covers the ongoing costs of running a plant after it’s built. For renewables, there is no fuel cost because the energy source (sun or wind) is free, so the main ongoing expenses are operations and maintenance, occasional component replacements, land lease or lease payments, insurance, and other routine costs. That tends to make their ongoing expenses relatively low and predictable once the plant is online.

Fossil-fuel plants must buy fuel constantly, so fuel costs become a major part of OPEX and can swing with fuel price and plant usage. In addition, they incur ongoing maintenance and other operating costs, which together often make the total OPEX higher and more variable than for renewables.

So, renewables usually have lower, more stable OPEX after construction, while fossil plants incur sizable ongoing fuel costs plus maintenance. The other options miss what OPEX actually means (it’s not upfront capital costs) and are incorrect in implying renewables have no OPEX or that OPEX equals taxes.