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

Janosch Ondraczek (), Nadejda Komendantova and Anthony Patt

No FNU-201, Working Papers from Research unit Sustainability and Global Change, Hamburg University

Abstract: The photovoltaic (PV) power industry has grown rapidly in recent years, and associated with that growth 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 unnecessarily 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 country-by-country basis. In this paper, we therefore map the cost of solar PV globally, accounting for both the quality of the solar resource and the cost of capital in order to differentiate levelized costs 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 available.

Keywords: solar photovoltaic; levelized cost of electricity; cost of capital; global model (search for similar items in EconPapers)
JEL-codes: C29 Q42 Q48 (search for similar items in EconPapers)
Pages: 7 pages
Date: 2013-05-30
New Economics Papers: this item is included in nep-ene and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: WACC the dog: The effect of financing costs on the levelized cost of solar PV power (2015)
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