PV LCOE in Europe - Eero Vartiainen 1, Gaëtan Masson 2, Christian Breyer 3 31 st EU PVSEC, Hamburg, 17.9. 1 Fortum Power and Heat Oy, 2 Becquerel Institute, 3 Lappeenranta University of Technology
Motivation There is a clear lack of public unbiased reports on PV LCOE (Levelised Cost of Electricity) which have: Up to date input data Transparent methodology and assumptions, especially regarding cost of capital Proper sensitivity analysis The best study so far identified by the authors was the report by Fraunhofer ISE on behalf of Agora Energiewende (Feb ) 2
Background The work was initiated by EU PV Technology Platform and was carried out the by the PV LCOE Working Group of EUPVTP Steering Committee Report published in June and available at www.eupvplatform.org The major differences in this paper are: Extension of the time horizon from to Refinement of the perfomance ratios More thorough sensitivity analysis 3
PV LCOE definition PV LCOE here is the average generation cost, i.e., including all the costs involved in supplying PV at the point of connection to the grid: PV LCOE = n t=1 ] CCCCC + [OOOO(t)/(1 + WWWW NNN ) t n [UUUUUUUUUUU 0 1 DDDDDDDDDDD t / (1 + WWWW RRRR ) t ] t=1 where WACC Real = (1 + WACC Nom ) / (1 + Inflation) - 1 Net present value (NPV) for the investment with nominal WACC is zero when valuing the generated electricity for the real LCOE. 4 E.g., 5% equals 7.1% nominal WACC with 2% annual inflation
Aim of the study is to identify the main drivers affecting PV LCOE Input parameters studied Values (base value in bold) Market segment 5 and 50 kw p, 1 and 50 MW p Location SPA, ITA, FRA, GER, UK, SWE Real cost of capital (WACC) 2/5/8% per a for large-scale Operational expenditure 10/20/30 /kw p per a Market growth 0/10/15% CAGR - Learning rate 16/20/24% Exchange rate 1.00/1.33/1.60 USD/ Module efficiency improvement 0.2/0.4/0.6%-points per a Module degradation 0.2/0.5/0.8% per a System lifetime 25/30/35 a 5
Historical learning rate for PV modules is about 20% Every time the global cumulative PV capacity has doubled, module price has reduced by 20% 6 Source: International Technology Roadmap for Photovoltaic, 2014 results (April )
Annual market volume in the Base case is about 350 GW p in Annual PV shipments (GW p ) 800 700 600 500 400 300 200 100 0 Fast growth Base case Slow growth 2025 2035 2045 For -2019, SolarPower Europe (6/) high, medium and low scenarios are used Base scenario: according to IEA Technology roadmap for PV (2014) - (10% CAGR); 2.5% CAGR after Slow scenario: 50 GW p annually -30; 2.5% CAGR after Fast scenario: 15% CAGR -30; 2.5% CAGR after For -, replacement installations according to 2000- volumes are added 7
Cumulative market volume in the Base case ~7000 GW p by Cumulative PV shipments (GW p ) 14000 12000 10000 8000 6000 4000 2000 0 Fast growth Base case Slow growth 2025 2035 2045 8
Average PV module price in Europe most likely halved by and reduced to one third by 0,6 Average module price ( /W p ) 0,5 0,4 0,3 0,2 0,1 Slow growth Base Fast growth 0,0 2025 2035 2045 Price estimation based on the three cumulative volume scenarios and historic 20% learning curve 9
System prices in for various market segments PV system price ( /kw p ) 1600 1400 1200 1000 800 600 400 BoS Module 200 0 5 kwp 50 kwp 1 MWp 50 MWp 10
System prices for a 1 MW p system - 1,0 PV system price ( /W p ) 0,8 0,6 0,4 0,2 BoS Module 0,0 11
PV LCOE in Europe for a residential 5 kw p system (with VAT) PV LCOE ( /MWh) for 5 kw p 160 140 120 100 80 60 40 London/ Stockholm/ Helsinki Munich Toulouse Rome Malaga CAPEX with 4% CAPEX with 2% CAPEX with 0% 20 OPEX 0 12
PV LCOE in Europe for a commercial 50 kw p system (w/o VAT) PV LCOE ( /MWh) for 50 kw p 140 120 100 80 60 London/ Stockholm/ Helsinki Munich Toulouse Rome Malaga CAPEX with 6% CAPEX with 4% CAPEX with 2% 40 CAPEX with 0% 20 0 OPEX 13
PV LCOE in Europe for a 1 MW p system (w/o company taxes) PV LCOE ( /MWh) for 1 MW p 120 100 80 60 40 London/ Stockholm/ Helsinki Munich Toulouse Rome Malaga CAPEX with 8% CAPEX with 5% CAPEX with 2% 20 CAPEX with 0% 0 OPEX 14
PV LCOE in Europe for a 50 MW p system (w/o company taxes) PV LCOE ( /MWh) for 50 MW p 100 80 60 40 20 London/ Stockholm/ Helsinki Munich Toulouse Rome Malaga CAPEX with 8% CAPEX with 5% CAPEX with 2% CAPEX with 0% 0 OPEX 15
Summary of the sensitivity analysis Location (Malaga/Stockholm) Real WACC (2%/8%) OPEX (-/+50%) Market growth (fast/slow) Learning rate (24%/16%) Currency rate (1.6/1.0 /USD) Efficiency increase (0.6%/0.2%) Lifetime (35/25 years) Degradation (0.2%/0.8%) -30-20 -10 0 10 20 30 Sensitivity of LCOE (%) Comparison with a 1 MWp system in Toulouse with a 5%, base CAPEX and OPEX, 20% learning rate, 1.33 USD/ currency rate, 0.4% point annual efficiency increase, 30 years lifetime and 0.5% annual degradation 16
Conclusions: PV will be competitive by in most markets PV already competitive with retail electricity all over Europe, by it will be the least cost option almost anywhere Location and cost of capital have the biggest influence on PV LCOE Uncertainty in OPEX is more significant than in CAPEX, volume growth and learning rate have a relatively small impact It is most urgent for the policy makers to create a stable environment for investments, in order to decrease the cost of capital and thus the LCOE of PV 17
Acknowledgements To the EU PV Technology Platform and especially to the Steering Committee and Expert Pool members who contributed to the work Thank you! eero.vartiainen@fortum.com 18