WACC the dog: The effect of financing costs on the levelized cost of solar PV power

Ondraczek J, Komendantova N, & Patt A (2015). WACC the dog: The effect of financing costs on the levelized cost of solar PV power. Renewable Energy 75: 888-898. DOI:10.1016/j.renene.2014.10.053.

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Abstract

The adoption of solar photovoltaic (PV) technologies has expanded rapidly in recent years, leading to suggestions that this growth, which occurred mostly in high-latitude countries with often low levels of sunshine, may have come at an unnecessarily high price. However, the factors influencing the cost of solar PV, and the subsidies required to sustain its uptake, include more than just the level of sunshine. While cross-country differences in technology costs are hard to ascertain, it is possible to account for the cost of capital on a country-by-country basis. In this paper, we therefore map the cost of solar PV globally, accounting for differences in both the solar resource and the financing cost in order to calculate the levelized cost of electricity (LCOE) from solar PV systems in 143 countries. In contrast to the work of other researchers who typically treat financing costs as uniform across countries, our results suggest that the LCOE of solar PV systems in northern countries may in fact be lower than in equatorial countries, and high latitude countries may thus not have been an unwise location to subsidize the adoption of solar PV technologies in the past. Our results further suggest that efforts to expand PV installation in equatorial developing countries may benefit greatly from policies designed to make low cost finance more widely available, which underlines on-going efforts to "de-risk" low carbon investments.

Item Type: Article
Uncontrolled Keywords: Solar photovoltaic power; Levelized cost of electricity; Cost of capital; Financing cost; Global LCOE model; Grid parity analysis
Research Programs: Risk, Policy and Vulnerability (RPV)
Risk & Resilience (RISK)
Bibliographic Reference: Renewable Energy; 75:888-898 (March 2015) (Published online 18 November 2014)
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:53
Last Modified: 14 Sep 2016 07:20
URI: http://pure.iiasa.ac.at/11553

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