Impact of weighted average cost of capital, capital expenditure, and other parameters on future utility‐scale PV levelised cost of electricity

Abstract

Solar photovoltaics (PV) is already the cheapest form of electricity generation in many countries and market segments. Market prices of PV modules and systems have developed so fast that it is difficult to find reliable up to date public data on real PV capital (CAPEX) and operational expenditures (OPEX) on which to base the levelised cost of electricity (LCOE) calculations. This paper projects the future utility-scale PV LCOE until 2050 in several European countries. It uses the most recent and best available public input data for the PV LCOE calculations and future projections. Utility-scale PV LCOE in 2019 in Europe with 7% nominal weighted average cost of capital (WACC) ranges from 24 €/MWh in Malaga to 42 €/MWh in Helsinki. This is remarkable since the average electricity day-ahead market price in Finland was 47 €/MWh and in Spain 57 €/MWh in 2018. This means that PV is already cheaper than average spot market electricity all over Europe. By 2030, PV LCOE will range from 14 €/MWh in Malaga to 24 €/MWh in Helsinki with 7% nominal WACC. This range will be 9 to 15 €/MWh by 2050, making PV clearly the cheapest form of electricity generation everywhere. Sensitivity analysis shows that apart from location, WACC is the most important input parameter in the calculation of PV LCOE. Increasing nominal WACC from 2 to 10% will double the LCOE.Changes in PV CAPEX and OPEX, learning rates, or market volume growth scenarios have a relatively smaller impact on future PV LCOE.

Global Transportation Demand Development with Impacts on the Energy Demand and Greenhouse Gas Emissions in a Climate-Constrained World

“…The requirement of electricity-based synthetic fuels leads to an increase in primary energy demand of 36%, which seems to be moderate from energetic point of view and attractive from economic point of view. Renewable electricity costs further decline [95], and thereof solar PV is projected to continue the outstanding cost decline to historically unrivalled levels [162] enabling multiple power-to-X processes [163]. Meanwhile, fossil fuels are expected to increase [164,165].…”

Assessing the Techno-Economics and Environmental Attributes of Utility-Scale PV with Battery Energy Storage Systems (PVS) Compared to Conventional Gas Peakers for Providing Firm Capacity in California

“…The cost analysis takes 2018 costs and tax incentives for renewable energy systems although it does not incorporate inflation, price forecasts or discount rates and thus represents a heuristic for evaluating relative costs rather than a robust cost forecast. The PVS installed cost benchmark was obtained from recent literature published by NREL [13]. The installed and O&M costs for simple cycle natural gas plants were obtained from EIA's Annual Technology Baseline 2019 which is a decent representation of the larger US market.…”

“…Factors such as Weighted Average Cost of Capital (WACC) and inflation were intentionally avoided to reduce complexity and compare the cost of operating both power plant alternatives on a raw dollar value scale for screening purposes. It is understood that, for a more detailed financial analysis, parameters such as WACC nominal , WACC real , inflation rates and debt to equity ratios need to be added into the calculations [13].…”

The politics of renewable power in Spain

“…By 2019, the cost of PV modules and entire PV systems had plunged by 90 percent and 80 percent, respectively, in a decade. As a result, the levelized cost of electricity in parts of Spain had dropped as low as 24 e/MWh, well below the wholesale market price, and it was expected to continue to fall (Vartiainen et al 2019).…”