| Work Detail |
Researchers have analyzed the viability of floating PV in terms of net present value, internal rate of return, and LCOE. They included 25 European countries in their work, including Germany, the United Kingdom, Spain, and Italy.
A group of scientists from Italy and Spain has analyzed the impact of changing economic conditions on the viability of floating PV (FPV) projects in 25 European countries. Namely, they have focused on the net present value (NPV), internal rate of return (IRR), and the levelized cost of electricity (LCOE) of floating PV installations across the European region. While NPV tells how much profit an investment might make, IRR shows the expected return rate, and LCOE calculates the average cost to produce electricity over a projects lifetime.
“The present work contributes to the development and deployment of FPV by investigating, on an unprecedented scale, the correlations between the economic viability of FPV and economic variables,” said the academics. “The results of this analysis can inform institutions and prospective owners/investors about the economic profitability and cost competitiveness of FPV, considering possible variations in key techno-economic factors.”
The study considered six economic parameters: day ahead average electricity price for 2010-2021; average nominal lending interest rate in 2010-2020; average inflation in 2010-2021; nominal equity IRR in 1900-2010; current corporate tax rates; and the weighted average cost of capital (WACC). Conducting a sensitivity analysis, each parameter declined or grew by 0-50%, in jumps of 10%, in relation to the current reference measurements.
The countries that were analyzed were Albania, Austria, Belgium, Bulgaria, Croatia, Czech Republic, France, Germany, Greece, Hungary, Italy, Lithuania, Netherlands, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Switzerland, Turkey, Ukraine, and the United Kingdom. In all countries, the installation was considered to be of a south-facing tilt monofacial FPV system with a tilt angle of 10 degrees.
The group found that, across all of the countries, capital expenditure (Capex) and WACC have the most significant impact on LCOE. On the other hand, operation and maintenance expenditure (Omex), inflation, and income tax rates have a lower impact.
“Consequently, in countries where FPV is not yet cost competitive, strategic interventions targeting Capex and WACC are recommended,” the scientists said. “Support mechanisms could consist of grants or direct capital subsidies aimed at decreasing the Capex, for example. Alternatively, low-interest and long-term loans could be put in place to decrease the WACC. Additionally, mechanisms such as income tax credits can be used, even if these alone are expected to have a lower impact on the FPV economics compared to the previous ones.”
Further, the results showed that tax rate, inflation rate, and Omex have a limited impact on the NPV, while Capex and electricity prices have a more dominant influence. “A 1% variation in Capex could lead to an average increase in NPV of almost €10 ($11.13)/kW. This is particularly significant, as substantial decreases in installation costs can be expected in the future, as the FPV market grows and the economy of scale kicks in,” the researchers noted.
As for IRR, it was found that Capex, electricity price, and energy yield significantly affect it, while Omex, inflation, and income tax have less influence. “This means that, in countries where FPV is not profitable, support mechanisms such as Feed-in Premiums (FiP), where FPV energy producers receive a remuneration above the market electricity price, could be established,” suggested the academics. “Similar support mechanisms can be applied to increase the NPV of FPV, as this is predominantly influenced by Capex, electricity price, energy yield, and WACC.”
Their findings were presented in “Impact of variable economic conditions on the cost of energy and the economic viability of floating photovoltaics,” published in Heliyon. The research was conducted by academics from Italy’s Sapienza University of Rome and Spain’s University of Jaén. |
