LCOE OF PV, FEBRUARY 2014 1

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H1 2014 LEVELISED
COST OF ELECTRICITY
- PV
4 FEBRUARY 2014
JENNY CHASE
LCOE OF PV, FEBRUARY 2014 2
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PV EXPERIENCE CURVE, 1976-2013 (2013 $/W)
Source: Paul Maycock, First Solar, Bloomberg New Energy
Finance Note: Prices inflation indexed to US PPI.
0.1
1
10
100
1 10 100 1,000 10,000 100,000 1,000,000
experience curve historic prices (Maycock)
Chinese c-Si module prices (BNEF) Thin-film experience curve
First Solar thin-film module cost
1976
1985
2003
2006
2012
Cost per
W
(2013 $)
1976
1985
2003
Q3
2013
2012
Cumulative
capacity (MW)
2013
LCOE OF PV, FEBRUARY 2014 3
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AVERAGE EFFICIENCY OF 6 CRYSTALLINE SILICON
SOLAR CELLS, 2010-13 (%)
Source: Bloomberg New Energy
Finance
16.2%
16.8%
17.0%
17.6%
17.5%
18.2%
18.6%
18.9%
15.0%
15.5%
16.0%
16.5%
17.0%
17.5%
18.0%
18.5%
19.0%
2010 2011 2012 2013
6" multi-Si cell 6" mono-Si cell
0.0%
LCOE OF PV, FEBRUARY 2014 4
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FORECAST COSTS FOR GROUND MOUNTED PV
PROJECTS, 2010-2020 (2013 $/W)
Source: Bloomberg New Energy Finance
Note: Based on experience curves for each component, with estimates for historical years from developer
documents. Methodology here http://bnef.com/Insight/1954 though charts updated January 2014
1.95
1.35
0.75
0.71 0.72
0.65
0.60
0.56
0.52
0.49 0.47
0.32
0.21
0.12
0.13 0.12
0.11
0.10
0.10
0.10
0.09
0.09
0.53
0.50
0.27
0.27
0.26
0.25
0.24
0.24
0.23
0.23
0.23
0.43
0.41
0.32
0.32
0.31
0.30
0.29
0.28
0.28
0.27
0.27
0.19
0.18
0.15
0.15
0.14
0.14
0.13
0.13
0.13
0.12
0.12
3.42
2.64
1.61
1.58
1.55
1.44
1.37
1.31
1.25
1.21
1.16
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Module Inverter Balance of plant EPC Other
LCOE OF PV, FEBRUARY 2014 5
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LEVELISED COST OF ELECTRICITY H1 2014:
METHODOLOGY NOTES (1 OF 2)
Definition
The Bloomberg New Energy Finance definition of levelised cost of electricity (LCOE) is the long-term offtake price required to
achieve a required equity hurdle rate for the project. This report tracks the LCOEs of 24 technologies, all at utility-scale with the
exception of fuel cells. (For fuel cells, in lieu of offtake price, we consider the avoided cost of electricity.) The LCOE model is based
on a pro-forma project finance schedule which runs through the full accounting of the project, based on a set of project inputs. This
allows us to capture the impact on costs of the timing of cash flows, development and construction costs, multiple stages of
financing, interest and tax implications of long-term debt instruments and depreciation, among other drivers. The outputs of the
model include sponsor equity cash flows, allowing calculation of the internal rate of return.

LCOE ranges driven by regional variations
The LCOEs are given as a range, with a central scenario within that range. The range is composed of a number of region-specific
scenarios meant to represent key markets, with inputs corresponding to projects typical of those markets, while the central scenario
is made up of a blend of inputs from competitive projects in mature markets. For example, in the case of PV, the low scenario
corresponds to a typical Chinese project (including capex, capacity factors, and costs of debt typical in China); the high scenario
corresponds to a Japanese project (capex, capacity factor, cost of debt typical in Japan); and the central scenario reflects the LCOE
of a project with German capex, 17% capacity factor, and a Western European average cost of debt. The central scenario thus
does not reflect a project characteristic of any particular market, but rather incorporates a blend of inputs from a range of
competitive and active markets. Because we have used this methodology consistently since 2009, the central scenario can be
used to show how these costs of these technologies have evolved over time.

Empirical data sourcing
For the most competitive PV and onshore wind markets, we use proprietary price indexes to build bottom-up capex assumptions,
paired with region-specific data for financing, macroeconomics, and resource quality. For example, for UK onshore wind, we derive
the LCOE using the BNEF Wind Turbine Price Index for the UK, along with operations and maintenance (O&M) figures from our
Wind O&M Index. The full capex also accounts for regional permitting and land acquisition costs. For PV and onshore wind
projects in less competitive markets, and for all other technologies, we use a combination of reported project-level costs (as
captured in our Industry Intelligence database), local input from our regional analysts, and data from publicly available primary
research.
LCOE OF PV, FEBRUARY 2014 6
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LEVELISED COST OF ELECTRICITY H1 2014:
METHODOLOGY NOTES (2 OF 2)
Exclusion of subsidies
The LCOEs shown in this report represent the gross cost of building, operating and financing electricity generation technologies.
As such the analysis excludes all subsidies and incentives (eg accelerated depreciation, grants, production tax credits) but
includes conventional taxes such as corporation tax. This approach enables a direct comparison of the cost of generating
electricity from different sources. These LCOEs are therefore from the price at which a developer may wish to sell the electricity,
as the sale price would be net of any subsidies.

Lumpy nature of certain technologies
While cost evolutions can be tracked consistently for widely deployed technologies such as PV and onshore wind creating a
coherent time series this may not be the case for other less mature technologies such as solar thermal and marine. Heavy
dependency on support mechanisms and highly localised costs means that central scenarios reflecting current costs for these
projects may move erratically as the geographic centres of deployment shift over time.

Macroeconomics and universal assumptions
For each individual country scenario, we apply the markets standard corporate tax rate and an inflation rate equal to the average
of the IMFs forecasted CPI rate for that country, or the previous five years of actual inflation if a forecast is unavailable. For our
central scenario, we have necessarily made certain simplifying assumptions: a single corporate tax rate of 35% and an annual
inflation of 2%. We also assume that all projects are depreciated using a straight line approach. LCOEs are calculated assuming a
development timeline that commences today. Todays LCOE is then inflated each year to reflect that project revenues are typically
inflation-linked. This analysis is done in nominal dollars.

The use of debt
A key driver of the LCOEs for all renewable energy technologies is the cost of finance, and specifically the cost of debt finance.
The cost and availability of debt is a function of project risk and market conditions. The technology-independent portion of debt
costs is the level of the underlying interest rate from which debt costs are calculated. The specific market in which a project is
being financed can also have an effect on debt spreads through lenders perception of market-specific sovereign, policy, regulatory
or economic conditions. The higher the perceived risk, the higher the cost of debt.
LCOE OF PV, FEBRUARY 2014 7
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LEVELISED COST OF ELECTRICITY, H1 2014 ($/MWH)
Source: Bloomberg New Energy Finance
Note: LCOEs for coal and CCGTs in Europe and Australia assume a carbon price of $20/t. No carbon prices are
assumed for China and the US.
0 100 200 300 400 500
Nuclear
CHP
Coal fired
Natural gas CCGT
Small hydro
Large hydro
Biomass - anaerobic digestion
Landfill gas
Geothermal - flash plant
Wind - onshore
Municipal solid waste
Biomass - incineration
Geothermal - binary plant
PV - c-Si tracking
PV - c-Si
PV - thin film
Biomass - gasification
STEG - tower & heliostat
STEG - LFR
STEG - parabolic trough
Wind - offshore
Marine - tidal
Marine - wave
Regional scenarios H1 2014 central
844
1037
US China Europe Australia
Fossil technologies:
LCOE OF PV, FEBRUARY 2014 8
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PV LCOE
JENNY CHASE, JCHASE12@BLOOMBERG.NET