Improving Solar PV Economics And Power Planning In Developing ...

Are We There Yet? Improving Solar PVEconomics And Power Planning InTitelmasterformat durch Klicken bearbeitenDeveloping Countries: The Case Of KenyaIEW - Paris, 19 June 2013Janosch OndraczekUniversity of HamburgResearch Unit Sustainability and Global Change

Outline:1. Introduction & motivationTitelmasterformat durch Klicken bearbeiten2. Background3. Method & data4. Results5. Conclusions

1. Introduction & motivation• The “African Energy Challenge”:- 69% of Africans lack access to electricity grid [WEO 2011]- rapid increase in electricity demand forecast- investment required over 10-year period: US$160-215 billion[Rosnes/Vennemo 2012]- severe constraints in capital, skills & governance [Collier/Venables 2012]• No role for solar photovoltaic:- hydropower, wind and geothermal energy already exploited- solar PV considered uneconomical beyond off-grid applications But recent drop in solar PV costs merits closer investigation!

2. Background• Solar PV globally gaining in importance, but exactfuture role uncertain:- “Potential deployment scenarios range widely - from a marginalrole of direct solar energy in 2050 to one of the major sources ofenergy supply.” [Edenhofer et al. 2011, p. 390; also: Johansson et al. 2012]• Insignificant contribution of solar PV in Africa today,likely to be limited in future too:- installed capacity in 2009: 0 GW / 2035: 16-34 GW [WEO 2011]- PV assumed to remain limited to off-grid electrification in ruralAfrica due to its high cost [Deichmann et al. 2011; Collier/Venables 2012;Rosnes/Vennemo 2012]

2. BackgroundSolar electricity generation cost estimates ($ct/kWh):140120100806040200World Africa Kenya×× ×××[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11]Sources: [1] IEA/NEA, 2010; [2] IPCC, 2011; [3] WEO, 2011; [4] GEA, 2012; [5] Bazilian et al., 2013; [6] Deichmann etal., 2011; [7] Collier/Venables, 2012; [8] IRENA, 2012; [9] EPIA, 2011; [10] Schmidt et al., 2012; [11] ECA/Ramboll, 2012

2. Background• Huge solar energy resource in Kenya:- ‘Sunbelt’ country with vast solar resource: potential of up to640k TWh (solar heat and electricity) [Theuri/Hamlin 2008]- ca. 16 MW currently installed (largely off-grid)[ECA/Ramboll 2012; Ondraczek 2013]Natural gasCoal25,00020,00015,000Hydro imports• No solar PV in energy planning:- solar energy limited tooff-grid PV and SWH[LCPDP 2011]WindGeothermalNuclear10,0005,00002010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031DieselHydro

3. Method & dataMethod & data – overview:(1) Levelized cost of electricity model(2) “Base case” calculation(3) Scenario analysis(4) Identification of upper/lower bounds(5) Results comparison & interpretation

3. Method & dataLevelized cost of electricity (LCOE) model:LLLLLLLL = PP eeeeeeee = ∑ TTtt=0 ( II tt + OO tt + DD tt ) ⁄ (1 + rr) tt∑TTSS tt=0 (1 − dd) tt ⁄ (1 + rr) tttt=0where:LCOE = levelized cost of electricityper unit in period tP elec = minimum electricity pricerequired to break evenT = economic life of projectt = year tI t = initial investmentO t = operation and maintenancecostsD t = decommissioning costsr = discount rateS t=0 = rated energy output in periodt=0d = annual module degradationfactor

3. Method & dataInput parameters and values (“base case”):Input parameter Value Unit Source(s)Plant lifetime (T) 25 years [1-3]Installed capacity 10,000 kWp own assumptionInvestment cost (I t ) 2,566 US$/kWp [4]Operating cost (O t ) 1.5 percent [2-3,5]Scrap value (D t ) 10.0 percent own assumptionReal discount rate (r) 8.0 percent [6]Location Mombasa n/a own assumptionGlobal horizontal irradiation 5.43 kWh/m²/day [7]DC to AC derate factor 76.9 percent [7]System output (S t=0 ) 1,374 kWh/kWp [7]Degradation factor (d) 0.5 percent [2]Sources: [1] IEA/NEA, 2010; [2] Peters et al., 2011; [3] Schmidt et al., 2012; [4] Hille et al., 2011; [5] Bazilian et al., 2013;[6] LCPDP 2011; [7] PVWatts

4. ResultsKenya solar LCOE estimates ($ct 2011 /kWh):• Base case: $ct 21.0/kWh(base year: 2011)• Scenario analysis:- discount rate: 16.5-28.4- investment cost: 18.9-30.0- largest sensitivity for location,investment cost, discount rateDiscount rateInvestment costLocationPlant lifetimeOperating costDegradation factorScrap value• “Extremes”: 10.5-47.7 $ct/kWhBase case10 15 20 25 30

4. ResultsSolar electricity generation cost estimates ($ct/kWh):60504030201017,5×Kenya27.1 27.5× ×0[1] [2] [3] [4]Sources: [1] EPIA, 2011; [2] Schmidt et al., 2012; [3] ECA/Ramboll, 2012; [4] Ondraczek, 2013

5. Conclusions• Economics of solar PV may be better than assumed:- solar PV LCOE lower than reported even in recent literature- detailed investigations rather than back-of-the-envelope needed• But the technology remains expensive:- estimated LCOE remains above cost of base power- solar PV is a “peak shaver”, not a base load technology- solar PV may already be competitive with peak loadtechnologies

5. ConclusionsMerit order of power projects in Kenya ($ct 2010 /kWh):3530Base powerPeak power30.22520151056.5 6.99.1 9.3 10.2 11.1 11.3 12.7 15.1 21.0 21.70Sources: LCPDP, 2011; Ondraczek, 2013

Further reading“Are We There Yet? ImprovingSolar PV Economics AndPower Planning In DevelopingCountries: The Case Of Kenya”Janosch OndraczekFNU Working Paper 200,available online atwww.fnu.zmaw.de

Janosch OndraczekUniversity of HamburgResearch Unit Sustainability and Global ChangeTitelmasterformat durch Klicken bearbeitenGrindelberg 5, 20144 Hamburg, GermanyPhone: +49-40-42838-2053Fax: +49-40-42838-7009E-Mail: janosch.ondraczek@zmaw.deInternet: http://www.fnu.zmaw.de