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A review of solar photovoltaic levelized cost of electricity

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Author Info

  • Branker, K.
  • Pathak, M.J.M.
  • Pearce, J.M.

Abstract

As the solar photovoltaic (PV) matures, the economic feasibility of PV projects is increasingly being evaluated using the levelized cost of electricity (LCOE) generation in order to be compared to other electricity generation technologies. Unfortunately, there is lack of clarity of reporting assumptions, justifications and degree of completeness in LCOE calculations, which produces widely varying and contradictory results. This paper reviews the methodology of properly calculating the LCOE for solar PV, correcting the misconceptions made in the assumptions found throughout the literature. Then a template is provided for better reporting of LCOE results for PV needed to influence policy mandates or make invest decisions. A numerical example is provided with variable ranges to test sensitivity, allowing for conclusions to be drawn on the most important variables. Grid parity is considered when the LCOE of solar PV is comparable with grid electrical prices of conventional technologies and is the industry target for cost-effectiveness. Given the state of the art in the technology and favourable financing terms it is clear that PV has already obtained grid parity in specific locations and as installed costs continue to decline, grid electricity prices continue to escalate, and industry experience increases, PV will become an increasingly economically advantageous source of electricity over expanding geographical regions.

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Bibliographic Info

Article provided by Elsevier in its journal Renewable and Sustainable Energy Reviews.

Volume (Year): 15 (2011)
Issue (Month): 9 ()
Pages: 4470-4482

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Handle: RePEc:eee:rensus:v:15:y:2011:i:9:p:4470-4482

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Related research

Keywords: Photovoltaic; Levelized cost; LCOE; Grid parity; Solar economics;

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Citations

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Cited by:
  1. Jägemann, Cosima & Hagspiel, Simeon & Lindenberger, Dietmar, 2013. "The Economic Inefficiency of Grid Parity: The Case of German Photovoltaics," EWI Working Papers 2013-19, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
  2. Dong, Changgui & Wiser, Ryan, 2013. "The impact of city-level permitting processes on residential photovoltaic installation prices and development times: An empirical analysis of solar systems in California cities," Energy Policy, Elsevier, vol. 63(C), pages 531-542.
  3. Ouyang, Xiaoling & Lin, Boqiang, 2014. "Levelized cost of electricity (LCOE) of renewable energies and required subsidies in China," Energy Policy, Elsevier, vol. 70(C), pages 64-73.
  4. Arnaud De La Tour & Matthieu Glachant, 2013. "How do solar photovoltaic feed-in tariffs interact with solar panel and silicon prices? An empirical study," Working Papers hal-00809449, HAL.
  5. LeBlanc, Saniya & Yee, Shannon K. & Scullin, Matthew L. & Dames, Chris & Goodson, Kenneth E., 2014. "Material and manufacturing cost considerations for thermoelectrics," Renewable and Sustainable Energy Reviews, Elsevier, vol. 32(C), pages 313-327.
  6. Alexandra Bratanova & Jacqueline Robinson & Liam Wagner, 2013. "New Technology Adoption for Russian Regional Energy Generation: Moscow Case Study," Energy Economics and Management Group Working Papers 4-2013, School of Economics, University of Queensland, Australia.
  7. Alexandra Bratanova & Jacqueline Robinson & Liam Wagner, 2012. "Energy cost modelling of new technology adoption for Russian regional power and heat generation," Energy Economics and Management Group Working Papers 9-2012, School of Economics, University of Queensland, Australia.
  8. repec:fae:wpaper:2014.05 is not listed on IDEAS
  9. Arnaud De La Tour & Matthieu Glachant & Yann Ménière, 2013. "What cost for photovoltaic modules in 2020? Lessons from experience curve models," Working Papers hal-00805668, HAL.
  10. Pathak, M.J.M. & Sanders, P.G. & Pearce, J.M., 2014. "Optimizing limited solar roof access by exergy analysis of solar thermal, photovoltaic, and hybrid photovoltaic thermal systems," Applied Energy, Elsevier, vol. 120(C), pages 115-124.
  11. Joshua M. Pearce, 2012. "Limitations of Nuclear Power as a Sustainable Energy Source," Sustainability, MDPI, Open Access Journal, vol. 4(6), pages 1173-1187, June.
  12. Sergei Manzhos & Giacomo Giorgi, 2013. "Bridging the Fields of Solar Cell and Battery Research to Develop High-Performance Anodes for Photoelectrochemical Cells and Metal Ion Batteries," Challenges, MDPI, Open Access Journal, vol. 4(1), pages 116-135, June.
  13. Alafita, T. & Pearce, J.M., 2014. "Securitization of residential solar photovoltaic assets: Costs, risks and uncertainty," Energy Policy, Elsevier, vol. 67(C), pages 488-498.
  14. Abolhosseini, Shahrouz & Heshmati, Almas & Altmann, Jörn, 2014. "A Review of Renewable Energy Supply and Energy Efficiency Technologies," IZA Discussion Papers 8145, Institute for the Study of Labor (IZA).
  15. Janosch Ondraczek & Nadejda Komendantova & Anthony Patt, 2013. "WACC the Dog: The Effect of Financing Costs on the Levelized Cost of Solar Pv Power," Working Papers FNU-201, Research unit Sustainability and Global Change, Hamburg University.
  16. Ondraczek, Janosch, 2014. "Are we there yet? Improving solar PV economics and power planning in developing countries: The case of Kenya," Renewable and Sustainable Energy Reviews, Elsevier, vol. 30(C), pages 604-615.
  17. Klaus Friesenbichler, 2013. "Innovation in the energy sector," WWWforEurope Working Papers series 31, WWWforEurope.
  18. Sergei Manzhos, 2012. "Roles of discount rate, risk premium, and device performance in estimating the cost of energy for photovoltaics," Papers 1209.1903, arXiv.org.
  19. Sergei Manzhos, 2013. "On the Choice of the Discount Rate and the Role of Financial Variables and Physical Parameters in Estimating the Levelized Cost of Energy," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 1(3), pages 54-61, July.

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