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Economic Loss in Czech Photovoltaic Power Plants

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Abstract

This text provides a financial survey of a small sample of Czech photovoltaic (PV) plants. To evaluate the extent of market losses, we calculate the shadow market price of solar electricity. From the profit and loss accounts of the PV plants and the shadow market price we estimate the total economic loss generated by PV electricity sector in the Czech Republic. The presented microeconomic approach has two main advantages: Firstly, we work with real observed data, which offsets the drawback of a limited sample. Secondly, the profit accounting calculation enables sensitivity analysis with respect to key variables of the plants. We show that every million invested in PV plants would generate an annual loss of 11%. Given the estimated solar assets of CZK 127.4 billion (EUR 560 million) as of December 2010, this translates in at least CZK 14 billion lost in the Czech solar sector in 2011. About 42% of this loss is due to high technology costs and corresponds to pure dead weight loss, while the remaining 58% constitute the redistributive profit component of subsidies. Finally, we calculate that unless electricity prices increase or technology costs decrease approximately tenfold, PV plants will remain loss making.

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Bibliographic Info

Paper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 2012/18.

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Length: 16pages
Date of creation: Jul 2012
Date of revision: Jul 2012
Handle: RePEc:fau:wpaper:wp2012_18

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Keywords: energy subsidies; photovoltaic; renewables;

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  1. Dusonchet, Luigi & Telaretti, Enrico, 2010. "Economic analysis of different supporting policies for the production of electrical energy by solar photovoltaics in western European Union countries," Energy Policy, Elsevier, vol. 38(7), pages 3297-3308, July.
  2. Kavina, Pavel & Jirásek, Jakub & Sivek, Martin, 2009. "Some issues related to the energy sources in the Czech Republic," Energy Policy, Elsevier, vol. 37(6), pages 2139-2142, June.
  3. Dusonchet, Luigi & Telaretti, Enrico, 2010. "Economic analysis of different supporting policies for the production of electrical energy by solar photovoltaics in eastern European Union countries," Energy Policy, Elsevier, vol. 38(8), pages 4011-4020, August.
  4. Timilsina, Govinda R. & Kurdgelashvili, Lado & Narbel, Patrick A., 2011. "A review of solar energy : markets, economics and policies," Policy Research Working Paper Series 5845, The World Bank.
  5. Jehlickova, Bohumira & Morris, Richard, 2007. "Effectiveness of policy instruments for supporting the use of waste wood as a renewable energy resource in the Czech Republic," Energy Policy, Elsevier, vol. 35(1), pages 577-585, January.
  6. Ratti, Ronald A. & Seol, Youn & Yoon, Kyung Hwan, 2011. "Relative energy price and investment by European firms," Energy Economics, Elsevier, vol. 33(5), pages 721-731, September.
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