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Competitiveness of PV in EuropeEero Vartiainen (Fortum Power & Heat Oy)Co-authors Gaëtan Masson (Becquerel Institute) and Christian Breyer(Lappeenranta University of Technology)32nd EU PVSEC, Munich, 20.6.2016
PV is truly competitive when PV LCOE is lower than the value of electricity that the prosumer is getting for the PV generation
2
• The levelised cost of electricity (LCOE) for PV is calculated with up to datecapital (CAPEX) and operational (OPEX) expenditure data with future costdevelopment based on historical learning rate (about 20%) and realisticprojections for the future global PV cumulative capacity growth
• The value of PV electricity in each market segment is based on the average retail electricity price that the prosumer can save in the electricity bill by PV generation. However, any fixed or power-related fees are deducted because they cannot be saved by self-consumption of PV.
• The ratio of self-consumption of PV genaration is taken into account and the surplus generation which is fed into the grid is valued at the wholesaleelectricity market price minus a small (10%) administrative fee
• All subsidies are excluded in the analysis of true competitiveness
PV LCOE is compared with average value of PV electricity in three market segments in each of the ten countries
3
• Residential 5 kWp system with 5-15 MWh annual electricity consumption(average consumption 10 MWh/a and maximum power load 10 kW), self-consumption ratio 25-75% (typical 50%)
• Commercial 50 kWp system with 20-500 MWh annual electricity consumption(average consumption 250 MWh/a and maximum power load 100 kW), self-consumption ratio 50-100% (typical 75%)
• Industrial 1 MWp system with 2-20 GWh annual electricity consumption(average consumption 10 GWh/a and maximum power load 2 MW), self-consumption ratio 50-100% (typical 100%)
Average turn-key PV system CAPEX prices in Europe 2015-50 (w/o taxes)
4
Source: PV LCOE in Europe 2015-2050 (Vartiainen, Masson & Breyer, 31st EU PVSEC, 2015)In 2015 real money
0
200
400
600
800
1000
1200
1400
1600
2015 2020 2025 2030 2035 2040 2045 2050
PV sy
stem
pric
e (€/kWp)
Residential 5 kWpCommercial 50 kWpIndustrial 1MWp
Average PV system OPEX prices in Europe 2015-50
5
Source: PV LCOE in Europe 2015-2050 (Vartiainen, Masson & Breyer, 31st EU PVSEC 2015)In 2015 real money
0
5
10
15
20
2015 2020 2025 2030 2035 2040 2045 2050
PV sy
stem
OPE
X (€/kWp/a)
Input data for selected European countries
6
Source for irradiation: SolarGIS 20-year average for 30⁰ south-tilted surface (Geomodel Solar, 2016);shares of fixed grid fees are indicative and are based on price listings of large utility companies;Note: fixed grid fee share is 100% in the Dutch residential sector
Irradiationfor 30⁰S
Performance Ratio
VAT forelectricity
Share of fixed grid fee
SWE Stockholm 1160 80,0 % 25 % 60 %FIN Helsinki 1160 80,0 % 24 % 30 %NED Amsterdam 1200 80,0 % 21 % 100 %/10%FRA Paris 1310 80,0 % 20 % 35 %BEL Brussels 1200 80,0 % 21 % 30 %TUR Istanbul 1680 77,5 % 18 % 0 %UK London 1160 80,0 % 5 % 10 %GER Berlin 1200 80,0 % 19 % 10 %SPA Madrid 2000 77,5 % 21 % 60 %ITA Rome 1830 77,5 % 10 % 40 %
PV LCOE is compared with the average value of PV electricity
7
Average value of PV generation Pave is defined by the equation:
Pave = SC * Pretail + (1 - SC) * Pfeed-in
where
SC = ratio of self-consumption of the PV productionPretail = variable retail electricity pricePfeed-in = wholesale or other value of the electricity fed into the grid
and where Pretail is excluding any fixed monthly or annual and power-related fees in the customer bill.
Example of PV electricity value for a residential prosumer in Finland
8
Source: Eurostat 2015 average prices for annual 5-15 MWh consumptionNote: Value of surplus electricity fed into the grid is average spot market price in 2015 – 10%
0
20
40
60
80
100
120
100% 75% 50% 25% 0%
Value of electric
ity (€
/MWh)
Self‐consumption ratio of PV production
Average value of PV electricity
Residential electricity retail prices in Europe (excluding fixed fees)
9
Source: Eurostat 2015 average prices for annual 5-15 MWh consumptionNote: Self-consumption tax deducted from Eurostat energy price in Spain
0
50
100
150
200
250
SWE FIN NED FRA BEL TUR UK GER SPA ITA
Retail electricity
pric
e (€/M
Wh)
Taxes and fees
Grid cost
Energy
Commercial electricity retail prices in Europe (excluding fixed fees)
10
Source: Eurostat 2014 average prices for annual 20-500 MWh consumptionNotes: Self-consumption tax deducted from Eurostat energy price in Spain and Italy;
40% of EEG fee deducted from taxes and fees in Germany
0
20
40
60
80
100
120
140
160
180
SWE FIN NED FRA BEL TUR UK GER SPA ITA
Retail electricity
pric
e (€/M
Wh) Taxes and fees
Grid cost
Energy
Industrial electricity retail prices in Europe (excluding fixed fees)
11
Source: Eurostat 2014 average prices for annual 2 000-20 000 MWh consumptionNotes: Self-consumption tax deducted from Eurostat energy price in Spain and Italy; 40% of EEG feededucted in Germany and electricity tax in Finland from taxes and fees
0
20
40
60
80
100
120
140
160
SWE FIN NED FRA BEL TUR UK GER SPA ITA
Retail electricity
pric
e (€/M
Wh) Taxes and fees
Grid cost
Energy
Average spot market electricity price in Europe 2015
12
Note: Value of surplus PV electricity fed in to the grid is assumed to be average spot market price – 10%;Surplus PV value for residential and commercial prosumers in Spain is 0
0
10
20
30
40
50
SWE FIN NED FRA BEL TUR UK GER SPA ITA
Spot m
arket p
rice (€/M
Wh)
Residential PV LCOE vs electricity value in Finland
13
Source for retail prices: Eurostat 2015 averages for 5-15 MWh annual consumption, fixed components excluded;All prices in 2015 real money
0
20
40
60
80
100
120
140
160
180
2015 2020 2025 2030 2035 2040 2045 2050
PV LCO
E & electric
ity value
(€/M
Wh)
Additional CAPEX with6% nominal WACC
Additional CAPEX with4% nominal WACC
Additional CAPEX with2% nominal WACC
CAPEX with 0%nominal WACC
OPEX
Electricity value with75% self‐consumption
Electricity value with50% self‐consumption
Electricity value with25% self‐consumption
Residential PV LCOE vs retail electricity price in the UK
14
0
20
40
60
80
100
120
140
160
180
2015 2020 2025 2030 2035 2040 2045 2050
PV LCO
E & electric
ity value
(€/M
Wh)
Additional CAPEX with6% nominal WACC
Additional CAPEX with4% nominal WACC
Additional CAPEX with2% nominal WACC
CAPEX with 0%nominal WACC
OPEX
Electricity value with75% self‐consumption
Electricity value with50% self‐consumption
Electricity value with25% self‐consumption
Residential PV LCOE vs electricity value in Italy
15
Source for retail prices: Eurostat 2015 averages for 5-15 MWh annual consumption, fixed components excluded;All prices in 2015 real money
0
20
40
60
80
100
120
140
160
180
200
220
240
2015 2020 2025 2030 2035 2040 2045 2050
PV LCO
E & electric
ity value
(€/M
Wh)
Additional CAPEX with6% nominal WACC
Additional CAPEX with4% nominal WACC
Additional CAPEX with2% nominal WACC
CAPEX with 0%nominal WACC
OPEX
Electricity value with75% self‐consumption
Electricity value with50% self‐consumption
Electricity value with25% self‐consumption
Commercial PV LCOE vs electricity value in Finland
16
Source for retail prices: Eurostat 2014 averages for 20-250 MWh annual consumption, fixed components excluded;All prices in 2015 real money
0
20
40
60
80
100
120
140
160
2015 2020 2025 2030 2035 2040 2045 2050
PV LCO
E & electric
ity value
(€/M
Wh)
Additional CAPEX with10% nominal WACC
Additional CAPEX with7% nominal WACC
Additional CAPEX with4% nominal WACC
CAPEX with 2% nominalWACC
OPEX
Electricity value with100% self‐consumption
Electricity value with75% self‐consumption
Electricity value with50% self‐consumption
Commercial PV LCOE vs electricity value in the UK
17
Source for retail prices: Eurostat 2014 averages for 20-250 MWh annual consumption, fixed components excluded;All prices in 2015 real money
0
20
40
60
80
100
120
140
160
2015 2020 2025 2030 2035 2040 2045 2050
PV LCO
E & electric
ity value
(€/M
Wh)
Additional CAPEX with10% nominal WACC
Additional CAPEX with7% nominal WACC
Additional CAPEX with4% nominal WACC
CAPEX with 2% nominalWACC
OPEX
Electricity value with100% self‐consumption
Electricity value with75% self‐consumption
Electricity value with50% self‐consumption
Industrial PV LCOE vs electricity value in Finland
18
Source for retail prices: Eurostat 2014 averages for 2-20 GWh annual consumption, fixed components excluded;All prices in 2015 real money; electricity tax deducted from the retail price
0
20
40
60
80
100
120
140
2015 2020 2025 2030 2035 2040 2045 2050
PV LCO
E & electric
ity value
(€/M
Wh)
Additional CAPEX with10% nominal WACC
Additional CAPEX with7% nominal WACC
Additional CAPEX with4% nominal WACC
CAPEX with 2% nominalWACC
OPEX
Electricity value with100% self‐consumption
Electricity value with75% self‐consumption
Electricity value with50% self‐consumption
Industrial PV LCOE vs electricity value in the UK
19
Source for retail prices: Eurostat 2014 averages for 2-20 GWh annual consumption, fixed components excluded;All prices in 2015 real money
0
20
40
60
80
100
120
140
2015 2020 2025 2030 2035 2040 2045 2050
PV LCO
E & electric
ity value
(€/M
Wh)
Additional CAPEX with10% nominal WACC
Additional CAPEX with7% nominal WACC
Additional CAPEX with4% nominal WACC
CAPEX with 2% nominalWACC
OPEX
Electricity value with100% self‐consumption
Electricity value with75% self‐consumption
Electricity value with50% self‐consumption
Summary of when true PV competitiveness is reachedwith 50% self-consumption in residential segment
20
Residential Nominal WACC
5 kWp 0 % 2 % 4 % 6 %Stockholm 2020 2025 2032 2040Helsinki 2019 2024 2030 2038Amsterdam Parity Parity 2019 2023Paris Parity 2016 2021 2026Brussels Parity Parity 2018 2022Istanbul Parity Parity 2017 2021London Parity Parity Parity 2018Berlin Parity Parity Parity ParityMadrid Parity Parity 2018 2022Rome Parity Parity Parity Parity
Summary of when true competitiveness is reachedwith 75% self-consumption in commercial segment
21
Commercial Nominal WACC
50 kWp 2 % 4 % 7 % 10 %Stockholm 2016 2020 2027 2034Helsinki 2016 2019 2026 2033Amsterdam Parity 2016 2022 2028Paris Parity Parity 2019 2025Brussels Parity Parity 2017 2023Istanbul Parity Parity 2018 2024London Parity Parity Parity 2020Berlin Parity Parity Parity 2019Madrid Parity Parity Parity 2016Rome Parity Parity Parity Parity
Summary of when true competitiveness is reachedwith 100% self-consumption in industrial segment
22
Industrial Nominal WACC
1 MWp 2 % 4 % 7 % 10 %Stockholm 2022 2026 2033 2043Helsinki 2018 2021 2027 2035Amsterdam Parity Parity 2018 2023Paris Parity Parity 2018 2023Brussels Parity Parity 2016 2021Istanbul Parity Parity Parity 2019London Parity Parity Parity 2016Berlin Parity Parity Parity 2017Madrid Parity Parity Parity ParityRome Parity Parity Parity Parity
Sensitivity of true competitiveness on various parameters in Finland with residential 5 kWp PV system and 50% self-consumption
23
The effect of the various parameters is calculated for the residential case in Finland with 50% self-consumption, 2015 average retail electricity price, 26 €/MWh value of surplus electricity, 30% fixed share of grid cost, 2% nominal WACC, 2% annual inflation, 30 years PV system lifetime, Helsinki average irradiation, 80% initialperformance ratio, 0.5% average annual degradation, 20% learning rate, and base case CAPEX and OPEX scenario. This would lead to true competitiveness in the year 2024.
‐8 ‐4 0 4 8 12 16
Learning rate 25/15%Degradation 0/1% p.a.Fixed grid share 0/60%
Lifetime +/‐5aPR +/‐10% points
OPEX ‐/+50%CAPEX ‐/+20%
Irradiation +/‐15%Retail price +/‐20%
Feed‐in 50/0 €/MWhNominal WACC 0/4%
Self‐consumption 75/25%
Sensitivity of true competitiveness (years)
Sensitivity of true competitiveness on various parameters in Finland with 50 kWp commercial PV and 75% self-consumption
24
The effect of the various parameters is calculated for the commercial case in Finland with 75% self-consumption, 2014 average retail electricity price, 26 €/MWh value of surplus electricity, 30% fixed share of gridcost, 7% nominal WACC, 2% annual inflation, 30 years PV system lifetime, Helsinki average irradiation, 80% initial performance ratio, 0.5% average annual degradation, 20% learning rate, and base case CAPEX and OPEX scenario. This would lead to true competitiveness in the year 2026.
‐8 ‐6 ‐4 ‐2 0 2 4 6 8
Learning rate 25/15%Degradation 0/1% p.a.Fixed grid share 0/60%
Lifetime +/‐5aPR +/‐10% points
OPEX ‐/+50%CAPEX ‐/+20%
Irradiation +/‐15%Retail price +/‐20%
Feed‐in 50/0 €/MWhNominal WACC 5/10%
Self‐consumption 100/50%
Grid parity sensitivity (years)
PV is already competitive in most countries and market segments
25
• Competitiveness will follow even in Finland and Sweden (moderate irradiationand low electricity prices) within 10 years as PV LCOE declines
• PV self-consumption ratio is the most important factor in the absence of feed-in tariffs for the surplus electricity since the wholesale price is very low. Battery storage will improve the competitiveness in the future.
• Increasing fixed grid costs do not dramatically affect PV competitiveness as the share of grid costs is relatively low, typically 20% or less of the total retailelectricity price
• Biggest threat to PV competitiveness are the various legal, tax and regulatory changes which decrease investor confidence and increasethe financial cost
AcknowledgementsThe study has been carried out under the framework of the EU PV Technology and Innovation Platform (ETIP PV) Steering Committee.