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International Renewable Energy Agency

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International Renewable Energy Agency ( international-renewable-energy-agency )

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CSP plants are just beginning to be deployed at scale. Parabolic trough plants without thermal energy storage have capital costs as low as USD 4 600/kW in OECD countries and may be as low as USD 3 500/kW for projects in developing countries. However, these plants have low capacity factors of between 0.2 and 0.3. Adding six hours of thermal energy storage increases capital costs to between USD 7 100 to USD 9 800/kW, but allows capacity factors to be doubled. Solar tower plants can cost between USD 6 300 and USD 10 500/kW when energy storage is between 6 and 15 hours. These plants can achieve capacity factors of 0.40 to as high as 0.80. Globally, the least‐cost generating opportunities for biomass are in developing countries, where large quantities of agricultural and forestry residues remain unexploited. These low‐cost feedstocks, when combined with simple combustion technologies that can cost between USD 660 and USD 1 860/kW,16 can provide very competitive electricity for own‐use and/ or grid supply. In OECD countries, capital costs tend to be higher. The total installed costs of stoker boilers are between USD 1 880 and USD 4 260/kW, while those of circulating fluidised‐bed boilers are between USD 2 170 and USD 4 500/kW. Anaerobic digester power systems have capital costs between USD 2 570 and USD 6 100/kW. Gasification technologies, including 16 Many of these technologies often don’t meet stringent emissions regulations for local pollutants, which may limit opportunities for their use in the future. fixed‐bed and fluidised‐bed solutions, had total installed capital costs of between USD 2 140 and USD 5 700/kW. Co‐firing biomass at low‐levels in existing thermal plants typically requires additional investments of USD 400 to USD 600/kW. The cost of installing combined heat and power (CHP) plants is significantly higher than for the electricity‐only configuration. Average investment costs for large hydropower plants with storage typically range from as low as USD 1 050/kW to as high as USD 4 215/kW. The upper end of this range represents projects that are difficult, far from existing infrastructure and/or include multi‐use dams. The range of installed costs for small hydropower projects is wider and can be between USD 1 300 and USD 5 000/kW, although in developing countries costs can be as low as USD 500 to USD 600/kW at excellent sites. Adding additional capacity at existing hydropower schemes, or at existing dams that do not yet have a hydropower plant, is generally significantly cheaper than new greenfield plants, and can cost as little as USD 500/kW. The cost of developing geothermal electricity projects has risen with other engineering costs, particularly due to increased costs of procuring drilling rigs. Average costs for condensing flash power plants are estimated to be around USD 2 000 to USD 4 000/kW, and for binary cycle plants are in the range USD 2 400 to USD 5 900/kW (Bromley et al., 2010). However, where adjacent resources or untapped potential in an already operating field are being developed, costs can be lower. Box 2.2 THE IMPORTANCE OF THE COST OF CAPITAL The analysis in this report assumes an average cost of capital for a project of 10%. However, the cost of debt and the required return on equity, as well as the ratio of debt‐ to‐equity varies between individual project and country. This can have a significant impact on the average cost of capital and the LCOE of renewable power projects. The key factor that determines the cost of capital is risk. A project with greater risk (e.g. of non‐payment of electricity sales, currency risk, inflation risk, etc.) will require a higher rate of return. Capital can come in the form of equity and loans, while the project may be structured in a variety of ways. Equity is more expensive than secured loans because it carries more risk in the eventuality the project underperforms or goes bankrupt. Governments and private sector companies can develop projects. Governments can generally borrow at a lower rate because the risk is generally, but not always, considered to be lower. However projects developed by governments tend to be more expensive Renewable Power Generation Costs in 2012: An Overview 19

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