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RENEWABLE POWER GENERATION COSTS 2019 For utility-scale solar PV, the IRENA Auction and PPA Database suggests that the global weighted- average price for solar PV will fall to USD 0.045/kWh in 2020 and USD 0.039/kWh in 2021, which is a 42% reduction in electricity cost implied in 2021 compared to the 2019 global weighted-average LCOE. This is for a total of 37 GW of capacity in the database expected to be commissioned in 2020, while 18 GW has currently been procured that is expected to be online in 2021. Of the projects in the Auction and PPA database that are expected to be commissioned in 2021, four-fifths will have an award price that is lower than the cheapest fossil fuel-fired power generation option. Indeed, with the right regulatory and institutional frameworks in place, well-designed contract terms and appropriate risk sharing, the recent record low auction prices for solar PV in Dubai, Ethiopia, Mexico, Peru, Chile, Abu Dhabi and Saudi Arabia and elsewhere have shown that an LCOE of USD 0.03/kWh is possible in a wide variety of national contexts. Expectations are that values as low as USD 0.02/kWh are potentially feasible in the coming years. Such very low values are possible when all the factors driving the cost of electricity reach their lowest or best values. These factors include installed and O&M costs being low, the solar resource being excellent and low financing costs. What is remarkable for solar PV is that very competitive total installed costs for this technology are now possible around the world, even in markets with little previous deployment experience with solar PV. This is because international project developers are now bringing their experience in project development to new markets, partnering with local stakeholders to take advantage of low – and falling – equipment costs, while also tapping into international finance markets to secure low-cost financing for their solar PV projects. They are thus able to deliver very low-cost electricity to consumers. The low-cost of finance has, indeed, been an important driver of the very low-cost solar PV seen in recent years. It is also likely to be one of the reasons why the Auction and PPA data started to diverge from the global weighted-average value in the LCOE database after 2015.10 There is also the possibility that that there is a growing divergence in the O&M and economic lifetime assumptions in the LCOE calculations from what is becoming the norm in the PV market. However, the most significant area where assumptions could be diverging sufficiently to induce the current gap is in the weighted average cost of capital (WACC). There is significant anecdotal evidence that WACC expectations have fallen significantly for solar PV in recent years, as the extremely low-risk nature of developing solar PV projects is increasingly being correctly priced into cost-of-capital rates for both debt and equity. This issue will be examined in more detail later in this chapter. For CSP and offshore wind, deployment is thinner and the annual global weighted-average more volatile in both the LCOE and Auction and PPA databases. The global market for CSP revived somewhat in 2018 and 2019, as a variety of projects around the world have come online, from Morocco to South Africa and China. Yet, new capacity additions remain relatively low, at between 500 MW and 650 MW per year. The Chinese market shows potential to scale, but very aggressive timelines for the first batch of pilot projects have proved challenging and, in hindsight, perhaps overly ambitious. With special dispensation for some projects to be completed later than originally envisioned, however, the CSP industry is gaining valuable experience. There is, therefore, the potential for increased Chinese deployment and investment in supply chains to be a future game-changer for the industry. There are only a handful of CSP projects in the IRENA Auction and PPA database to be commissioned in 2020 and 2021, but with a price of electricity of around USD 0.075/kWh, this represents a reduction of 59% compared to the global weighted-average project LCOE in 2019. For offshore wind, the years 2018 and 2019 marked the revelation in auction and tender results of a step change in pricing. Subsidy-free bids in the Netherlands and Germany highlighted the fact that in the right conditions, offshore wind can compete in the wholesale electricity market. 26 10 This divergence is more pronounced in this edition of IRENA’s cost update as a result of the revisions made to the database over the past year, including adding additional auction and PPA results and more detail on the contract conditions that have allowed an increased number of “corrected” auction values that more closely align with LCOE values.PDF Image | RENEWABLE POWER GENERATION COSTS IN 2019
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