Renewable power technologies: A path to meet climate goals and secure energy transition.
Exhibit 4
The evolution of Solar technology: a cutting-edge technology responsive, evolving to meet requirements of the renewable energy markets.
USD / kwh
Biomass Geothermal Hydropower Solar PV Solar Thermal Onshore Wind Offshore Wind
0,400
0,300
0,200
Maximum price: 0.140 USD / kwh
0,100
Fossil fuel power cost range
Minimum price: 0.045 USD / kwh
2010 2016 2010 2016 2010 2016 2010 2016 2010 2016 2010 2016 2010 2016
Average Price 0,056 $/ kwh 0,081 $/ kwh 0,047 $/ kwh 0,064 $/ kwh 0,035 $/ kwh 0,051 $/ kwh 0,347 $/ kwh 0,131 $/ kwh 0,301 $/ kwh 0,242 $/ kwh 0,071 $/ kwh 0,056 $/ kwh 0,133 $/ kwh 0,123 $/ kwh
Notes: Weighted Average cost of capital was set at 7.1 % for OECD and China, however for the rest of the World IRENA set the WACC at 10 %.
Source: IRENA database 2017.
Governments usually takes steps to enable access to low cost of capital with macroeconomics policies dedicated to accelerate investment in renewable technologies. Different types of macroeconomics policies will permit to gain tax incentives or guarantee improving attractiveness of renewable energy. According to the exhibit 4, we clearly underline the evolution of solar energy in the recent years with a levelized cost of energy appealing for most of the industrial actors.
On the other hand, project profitability is entirely related to the process of determining the cost of the energy system. With a low cost of energy, investment could obtain a better chance to be successful and profitable for investors due to the relationship between weighted average cost of capital and energy costs
Moreover, the levelized cost of energy also called LCOE shows a shift in the renewable energy market: solar PV has fallen by appoximately 60 % from 2010 to 2016 which underscore the attractiveness of solar PV. Hydropower and Geothermal energy stays at the top due to their low costs respectively evaluated at $ 0.051 and $ 0.064 per kwh, a small price that allow major industrial actors to stay competitive internationaly in terms of productivity and distribution of goods and services. However, we believe that solar PV can lead the renewable energy market due to the technological progress accomplished during the years. LCOE is a common indicator used to compare the average cost per kwh between different technologies but we can find it quite limited if we wish to analyze deeply project profitability regarding a future investment. That’ s why new tools appeared to be more responsive to meet investment criteria, Lazard developed a tool to include the cost of storage which helps investors seeking to diversify their investment in renewable energy. This indicator also known as LCOS( Levelized cost of storage) study analyzes the levelized costs associated with the leading energy storage technologies given a single assumed capital structure and cost of capital, also including appropriate operational and cost assumptions. More simply, this indicator takes account of a wide range of costs such as operational and capital costs to define the real aveage price of each kwh produced by the technology, even the storage costs can be included to really underline energy storage role: its impact on the energy costs and the WACC of each project.
Clean energy investment: A transition towards renewable energy to conceptualize a post-oil city.
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