Are we there yet? Improving solar PV economics and power planning in developing countries: The case of Kenya
AbstractDespite the rapid decline in the cost of solar photovoltaic (PV) systems in the past five years, even recent academic research suggests that the cost of generating PV electricity remains too high for PV to make a meaningful contribution to the generation of grid electricity in developing countries. This assessment is reflected in the views of policymakers throughout Africa, who often consider PV as a technology suited only to remote locations and small-scale applications. This paper therefore analyzes whether, in contrast to conventional wisdom, PV is already competitive with other generation technologies. Analytically, the paper is based on a levelized cost of electricity (LCOE) model to calculate the cost of PV electricity in Kenya, which serves as a case study. Based on actual technology costs and Kenya’s solar resource, the LCOE from PV is estimated at USD 0.21/kWh for the year 2011, with scenario results ranging from USD 0.17-0.30/kWh. This suggests that the LCOE of grid-connected PV systems may already be below that of the most expensive conventional power plants, i.e. medium-speed diesel generators and gas turbines, which account for a large share of Kenya’s current power mix. This finding implies that researchers and policymakers may be mistaken in perceiving solar PV as a costly niche technology, rather than a feasible option for the expansion of power generation in developing countries.
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Bibliographic InfoPaper provided by Research unit Sustainability and Global Change, Hamburg University in its series Working Papers with number FNU-200.
Length: 28 pages
Date of creation: 18 Apr 2013
Date of revision:
solar photovoltaic electricity; on-grid electricity supply; levelized cost of electricity; developing countries; Africa;
Find related papers by JEL classification:
- C29 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Other
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
- Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-AFR-2013-09-13 (Africa)
- NEP-ALL-2013-09-13 (All new papers)
- NEP-ENE-2013-09-13 (Energy Economics)
- NEP-REG-2013-09-13 (Regulation)
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