H1 2014 LEVELISED
COST OF ELECTRICITY
- PV
JENNY CHASE
4 FEBRUARY 2014
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LCOE OF PV, FEBRUARY 2014
1
PV EXPERIENCE CURVE, 1976-2013 (2013 $/W)
100
1976
Cost per
W
(2013 $)
1985
10
2003
2006
1
2012
2013
Q3
2013
2012
10,000
100,000
0.1
1
10
100
experience curve
Chinese c-Si module prices (BNEF)
First Solar thin-film module cost
Note: Prices inflation indexed to US PPI.
/ / / / LCOE OF PV, FEBRUARY 2014
1,000
1,000,000
Cumulative
historic prices (Maycock)
capacity (MW)
Thin-film experience curve
Source: Paul Maycock, First Solar, Bloomberg New Energy
Finance
2
AVERAGE EFFICIENCY OF 6” CRYSTALLINE SILICON
SOLAR CELLS, 2010-13 (%)
19.0%
18.9%
18.6%
18.5%
18.2%
18.0%
17.6%
17.5%
17.5%
17.0%
17.0%
16.5%
16.8%
16.2%
16.0%
15.5%
15.0%
0.0%
2010
2011
6" multi-Si cell
2012
2013
6" mono-Si cell
Source: Bloomberg New Energy
Finance
/ / / / LCOE OF PV, FEBRUARY 2014
3
FORECAST COSTS FOR GROUND MOUNTED PV
PROJECTS, 2010-2020 (2013 $/W)
3.42
0.19
0.43
2.64
0.53
0.18
0.41
0.32
1.95
0.50
1.61
1.58
1.55
0.21
1.35
0.15
0.32
0.27
0.12
0.15
0.32
0.27
0.13
0.14
0.31
0.26
0.12
0.75
0.71
0.72
1.44
0.14
0.30
0.25
0.11
0.65
1.37
0.13
0.29
0.24
0.10
0.60
1.31
0.13
0.28
0.24
0.10
0.56
1.25
1.21
0.13
0.28
0.23
0.10
1.16
0.12
0.27
0.23
0.09
0.52
0.49
0.12
0.27
0.23
0.09
0.47
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Module
Inverter
Balance of plant
EPC
Other
Note: Based on experience curves for each component, with estimates for historical years from developer
documents. Methodology here http://bnef.com/Insight/1954 though charts updated January 2014
Source: Bloomberg New Energy Finance
/ / / / LCOE OF PV, FEBRUARY 2014
4
LEVELISED COST OF ELECTRICITY H1 2014:
METHODOLOGY NOTES (1 OF 2)
Definition
The Bloomberg New Energy Finance definition of levelised cost of electricity (LCOE) is the long-term offtake price required to
achieve a required equity hurdle rate for the project. This report tracks the LCOEs of 24 technologies, all at utility-scale with the
exception of fuel cells. (For fuel cells, in lieu of ‘offtake price’, we consider the avoided cost of electricity.) The LCOE model is based
on a pro-forma project finance schedule which runs through the full accounting of the project, based on a set of project inputs. This
allows us to capture the impact on costs of the timing of cash flows, development and construction costs, multiple stages of
financing, interest and tax implications of long-term debt instruments and depreciation, among other drivers. The outputs of the
model include sponsor equity cash flows, allowing calculation of the internal rate of return.
LCOE ranges driven by regional variations
The LCOEs are given as a range, with a central scenario within that range. The range is composed of a number of region-specific
scenarios meant to represent key markets, with inputs corresponding to projects typical of those markets, while the central scenario
is made up of a blend of inputs from competitive projects in mature markets. For example, in the case of PV, the low scenario
corresponds to a typical Chinese project (including capex, capacity factors, and costs of debt typical in China); the high scenario
corresponds to a Japanese project (capex, capacity factor, cost of debt typical in Japan); and the central scenario reflects the LCOE
of a project with German capex, 17% capacity factor, and a Western European average cost of debt. The central scenario thus
does not reflect a project characteristic of any particular market, but rather incorporates a blend of inputs from a range of
competitive and active markets. Because we have used this methodology consistently since 2009, the central scenario can be
used to show how these costs of these technologies have evolved over time.
Empirical data sourcing
For the most competitive PV and onshore wind markets, we use proprietary price indexes to build bottom-up capex assumptions,
paired with region-specific data for financing, macroeconomics, and resource quality. For example, for UK onshore wind, we derive
the LCOE using the BNEF Wind Turbine Price Index for the UK, along with operations and maintenance (O&M) figures from our
Wind O&M Index. The full capex also accounts for regional permitting and land acquisition costs. For PV and onshore wind
projects in less competitive markets, and for all other technologies, we use a combination of reported project-level costs (as
captured in our Industry Intelligence database), local input from our regional analysts, and data from publicly available primary
research.
/ / / / LCOE OF PV, FEBRUARY 2014
5
LEVELISED COST OF ELECTRICITY H1 2014:
METHODOLOGY NOTES (2 OF 2)
Exclusion of subsidies
The LCOEs shown in this report represent the gross cost of building, operating and financing electricity generation technologies.
As such the analysis excludes all subsidies and incentives (eg accelerated depreciation, grants, production tax credits) but
includes conventional taxes such as corporation tax. This approach enables a direct comparison of the cost of generating
electricity from different sources. These LCOEs are therefore from the price at which a developer may wish to sell the electricity,
as the sale price would be net of any subsidies.
Lumpy nature of certain technologies
While cost evolutions can be tracked consistently for widely deployed technologies such as PV and onshore wind – creating a
coherent time series – this may not be the case for other less mature technologies such as solar thermal and marine. Heavy
dependency on support mechanisms and highly localised costs means that central scenarios reflecting current costs for these
projects may move erratically as the geographic centres of deployment shift over time.
Macroeconomics and universal assumptions
For each individual country scenario, we apply the market’s standard corporate tax rate and an inflation rate equal to the average
of the IMF’s forecasted CPI rate for that country, or the previous five years of actual inflation if a forecast is unavailable. For our
central scenario, we have necessarily made certain simplifying assumptions: a single corporate tax rate of 35% and an annual
inflation of 2%. We also assume that all projects are depreciated using a straight line approach. LCOEs are calculated assuming a
development timeline that commences today. Today’s LCOE is then inflated each year to reflect that project revenues are typically
inflation-linked. This analysis is done in nominal dollars.
The use of debt
A key driver of the LCOEs for all renewable energy technologies is the cost of finance, and specifically the cost of debt finance.
The cost and availability of debt is a function of project risk and market conditions. The technology-independent portion of debt
costs is the level of the underlying interest rate from which debt costs are calculated. The specific market in which a project is
being financed can also have an effect on debt spreads through lenders’ perception of market-specific sovereign, policy, regulatory
or economic conditions. The higher the perceived risk, the higher the cost of debt.
/ / / / LCOE OF PV, FEBRUARY 2014
6
LEVELISED COST OF ELECTRICITY, H1 2014 ($/MWH)
Marine - wave
Marine - tidal
Wind - offshore
STEG - parabolic trough
STEG - LFR
STEG - tower & heliostat
Biomass - gasification
PV - thin film
PV - c-Si
PV - c-Si tracking
Geothermal - binary plant
Biomass - incineration
Municipal solid waste
Wind - onshore
Geothermal - flash plant
Landfill gas
Biomass - anaerobic digestion
Large hydro
Small hydro
Natural gas CCGT
Coal fired
CHP
Nuclear
1037
844
0
100
200
300
Regional scenarios
Fossil technologies:
US
400
500
H1 2014 central
China
Europe
Australia
Note: LCOEs for coal and CCGTs in Europe and Australia assume a carbon price of $20/t. No carbon prices are
assumed for China and the US.
/ / / / LCOE OF PV, FEBRUARY 2014
Source: Bloomberg New Energy Finance
7
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The information contained in this publication is derived from carefully selected sources we believe are
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construed to be a representation of such a guarantee. Any opinions expressed reflect the current judgment of
the author of the relevant article or features, and does not necessarily reflect the opinion of Bloomberg New
Energy Finance, Bloomberg Finance L.P., Bloomberg L.P. or any of their affiliates ("Bloomberg"). The opinions
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whether or not to "buy," "sell" or "hold" an investment.
/ / / / LCOE OF PV, FEBRUARY 2014
8
PV LCOE
JENNY CHASE, [email protected]
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