competitiveness of pv systems in europe

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


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


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


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



CAPEX with 0%nominal WACC

OPEX

Electricity value with75% 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)





OPEX




Residential PV LCOE vs electricity value in Italy

15


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)





OPEX




Commercial PV LCOE vs electricity value in Finland

16


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)




CAPEX with 2% nominalWACC

OPEX




Commercial PV LCOE vs electricity value in the UK

17


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)





OPEX




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)





OPEX




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)





OPEX




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.

competitiveness of pv systems in europe

Documents