WACC the Dog: The Effect of Financing Costs on the Levelized Cost of Solar PV Power

Ondraczek J, Komendantova N, & Patt A (2013). WACC the Dog: The Effect of Financing Costs on the Levelized Cost of Solar PV Power. Working Paper FNU-201, Centre for Marine and Atmospheric Science, University of Hamburg, Germany (May 2013)

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Abstract

The photovoltaic (PV) power industry has grown rapidly in recent years, and associated with that growh has been a decline in costs. There are indications that PV has already reached cost-parity with power off the grid in some markets and projections that it will attain such grid parity in many more markets over the coming decade. Analysts have suggested that the growth in PV has come at an unnecessariy high price, with unnecessarily high subsidies. However, the factors influencing the cost of PV, and the subsidies required to sustain its construction, include more than just the strength of the sun. While differences in costs of such factors as initial capital spending, operation and maintenance, and decommissioning are hard to ascertain, it is possible to account for the cost of capital, on a counry-by-country basis. In this paper, we therefore map the cost of solar PV globally, accountng for both the quality of the solar resource and the cost of capital in order to differentiate levelized cost of electricity (LCOE) from PV. Our results suggest that northern countries may not be an unwise location to subsidize PV construction, and further suggest that efforts to expand PV installation in developing countries may benefit greatly from policies designed to make low cost finance more widely avaiable.

Item Type: Other
Uncontrolled Keywords: Solar photovoltaic; Levelized cost of electricity; Cost of capital; Global model
Research Programs: Risk, Policy and Vulnerability (RPV)
Risk & Resilience (RISK)
Bibliographic Reference: Working Paper FNU-201, Centre for Marine and Atmospheric Science, University of Hamburg, Germany (May 2013)
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:49
Last Modified: 04 Apr 2016 10:15
URI: http://pure.iiasa.ac.at/10654

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