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International Renewable Energy Agency

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

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Transport cost Import levies Operation & Maintenance Cost of finance Resource quality Capacity factor Life span Project development Site preparation Grid connection Working capital Auxiliary equipment Non-commercial cost LCOE: Levelized cost of electricity (Discounted lifetime cost divided by discounted lifetime generation) Factory gate Equipment On site Equipment Project cost LCOE FIGURE A1.1: RENEWABLE POWER GENERATION COST INDICATORS AND BOUNDARIES It is important to include clear definitions of the technology categories, where this is relevant, to ensure that cost comparisons are robust and provide useful insights (e.g. off‐grid PV vs. utility‐scale PV). Similarly, it is important to differentiate between the functionality and/or qualities of the renewable power generation technologies being investigated (e.g. concentrating solar power with and without thermal energy storage). It is important to ensure that system boundaries for costs are clearly set and that the available data are directly comparable. Other issues can also be important, such as cost allocation rules for combined heat and power plants, and grid connection costs. The data used for the comparisons in this paper come from a variety of sources, such as business journals, industry associations, consultancies, governments, auctions and tenders. Every effort has been made to ensure that these data are directly comparable and are for the same system boundaries. Where this is not the case, the data have been corrected to a common basis using the best available data or assumptions. It is planned that this data will be complemented by detailed surveys of real world project data in forthcoming work by IRENA. An important point is that, although this paper tries to examine costs, strictly speaking, the data available are actually prices, and not even true market average prices, but price indicators. The difference between costs and prices is determined by the amount above, or below, the normal profit that would be seen in a competitive market. The rapid growth of renewables markets from a small base means that the market for renewable power generation technologies is rarely well‐balanced. As a result, prices can rise significantly above costs in the short term if supply is not expanding as fast as demand, while in times of excess supply, losses can occur and prices may be below production costs. This makes analysing the cost of renewable power generation technologies challenging and every effort has been made to indicate whether current equipment costs are above or below their long‐term trend. The cost of equipment at the factory gate is often available from market surveys or from other sources. A key difficulty is often reconciling different data sources to identify why data for the same period differ. For example, the balance of capital costs in total project costs tends to vary even more widely than power generation equipment costs, as it is often based on significant local content, which depends on the cost structure of where the project is being developed. Total installed costs can therefore vary significantly by project, country and region depending on a wide range of factors. Renewable Power Generation Costs in 2012: An Overview 81

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