LEVELISED COSTS OF

ELECTRICITY (LCOE) FOR

SELECTED RENEWABLE
ENERGY TECHNOLOGIES IN
THE ASEAN MEMBER STATES II
LEVELISED COSTS OF ELECTRICITY (LCOE)
FOR SELECTED RENEWABLE ENERGY
TECHNOLOGIES IN
THE ASEAN MEMBER STATES II
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies

in the ASEAN Member States II

ISBN: 978-979-8978-46-3

Published by:
ASEAN Centre for Energy (ACE)
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

ACE Building, 6th floor

Complex Directorate General of Electricity
Jl. HR. Rasuna Said kav.7-8 Jakarta, Indonesia
Tel: (62-21) 527 8027 | Fax: (62-21) 529 6382
www.agep.aseanenergy.org
www.facebook.com/sustainableenergyforasean

February 2019

4 5

TABLE OF CONTENTS
Table of Contents...................................................................................................................................... 6
Table of Figures......................................................................................................................................... 8
List of Tables …………......………………………………………………………………………………………. 9
List of Abbreviations................................................................................................................................ 10
Foreword by the ACE.............................................................................................................................. 12
Foreword by the GIZ............................................................................................................................... 13
Acknowledgements................................................................................................................................. 14
Executive Summary................................................................................................................................ 15
Analysis........................................................................................................................................... 16
Affordability of RE in AMS.................................................................................................... 16
Important Parameters.......................................................................................................... 17
Policy Coordination.............................................................................................................. 20
Conclusion....................................................................................................................................... 20
1. Introduction........................................................................................................................................ 24
1.1 Background................................................................................................................................ 24
1.1.1 Study on LCOE in the AMS......................................................................................... 25
1.2 Continuation of LCOE in the AMS Study................................................................................... 27
2. Methodology...................................................................................................................................... 32
2.1 Selection of RE Technologies.................................................................................................... 32
2.2 Levelised Cost of Electricity....................................................................................................... 32
2.3 Learning Rates and Future Costs.............................................................................................. 35
3. Solar PV.............................................................................................................................................. 38
3.1 Solar PV Development in the ASEAN....................................................................................... 38
3.2 Solar PV Projects in the ASEAN................................................................................................ 38
3.3 Cost Details............................................................................................................................... 39
3.3.1 Installation Costs......................................................................................................... 39
3.3.2 Cost Breakdowns........................................................................................................ 40
3.3.3 Operation and Maintenance Costs (O&M).................................................................. 41
3.4 Analysis...................................................................................................................................... 42
3.4.1 Levelised Cost of Electricity........................................................................................ 42
3.4.2 Projection.................................................................................................................... 43
3.4.3 Sensitivity Analysis...................................................................................................... 44
4. Hydropower....................................................................................................................................... 48
4.1 Hydropower Development in the ASEAN.................................................................................. 48
4.2 Hydropower Projects in the AMS............................................................................................... 49
4.3 Cost Details............................................................................................................................... 49
4.3.1 Installation Costs......................................................................................................... 49
4.3.2 Cost Breakdowns........................................................................................................ 50
4.3.1 Operating and Maintenance Costs (O&M).................................................................. 51
4.4 Analysis...................................................................................................................................... 52
4.4.1 LCOE.......................................................................................................................... 52
4.4.2 Projection.................................................................................................................... 52
4.4.3 Sensitivity Analysis...................................................................................................... 53
6 7
Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II
5. Wind Power........................................................................................................................................ 58
5.1 Wind Power Development in the ASEAN.................................................................................. 58
5.2 Wind Power Projects in the AMS............................................................................................... 58
5.3 Cost Details............................................................................................................................... 59
5.3.1 Installation Costs......................................................................................................... 59
5.3.2 Cost Breakdowns........................................................................................................ 59
5.3.3 Operating and Maintenance Costs (O&M).................................................................. 60
5.4 Analysis...................................................................................................................................... 61
5.4.1 LCOE.......................................................................................................................... 61
5.4.2 Projection.................................................................................................................... 61
5.4.3 Sensitivity Analysis...................................................................................................... 62
6. Biomass............................................................................................................................................. 66
6.1 Biomass Development in the ASEAN........................................................................................ 66
6.2 Biomass Projects in the AMS..................................................................................................... 66
6.3 Cost Details............................................................................................................................... 67
6.3.1 Installation Costs......................................................................................................... 67
6.3.2 Cost Breakdowns........................................................................................................ 67
6.3.3 Operating and Maintenance Costs (O&M).................................................................. 68
6.3.4 Fuel Costs................................................................................................................... 68
6.4 Analysis...................................................................................................................................... 69
7. Geothermal........................................................................................................................................ 72
7.1 Geothermal Development in the ASEAN................................................................................... 72
7.2 Geothermal Projects in the AMS................................................................................................ 72
7.3 Cost Details............................................................................................................................... 73
7.3.1 Installation Costs......................................................................................................... 73
7.3.2 Cost Breakdowns........................................................................................................ 73
7.3.3 Operating and Maintenance Costs (O&M).................................................................. 74
7.4 Analysis...................................................................................................................................... 75
7.4.1 LCOE.......................................................................................................................... 75
7.4.2 Projection.................................................................................................................... 75
7.4.3 Sensitivity Analysis...................................................................................................... 75
8. Analysis of Policy Recommendations............................................................................................. 80
8.1 Affordability of RE in the AMS.................................................................................................... 80
8.2 Important Parameters................................................................................................................ 82
8.2.1 Discount Rates............................................................................................................ 82
8.2.2 Capital/Installation costs............................................................................................. 83
8.3 Policy Coordination.................................................................................................................... 90
9. Conclusion......................................................................................................................................... 94
References.............................................................................................................................................. 96
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

LIST OF FIGURES

Figure 1 Comparison of LCOE with Energy Generation Costs in the AMS.............................................. 16 Figure 46 LCOE Change with Different Discount Rates........................................................................... 82
Figure 2 Comparison of RE Technologies’ LCOE with the Residential Selling Price of Electricity Figure 47 Impact of Policy Mechanism in LCOE and Grid Parity for Small-scale Solar PV..................... 84
in the AMS................................................................................................................................................ 17 Figure 48 Impact of Policy Mechanism on IRR for Small-scale Solar PV................................................ 84
Figure 3 LCOE Change with Different Discount Rates............................................................................. 18 Figure 49 Impact of Policy Mechanism on LCOE and Grid Parity for Large-scale Solar PV................... 85
Figure 4 Impact of Policy Mechanism on the LCOE and Grid Parity for Small-scale Solar PV................ 19 Figure 50 Impact of Policy Mechanism on IRR for Large-scale Solar PV................................................ 86
Figure 5 Impact of Policy Mechanism on IRR for Small-scale Solar PV.................................................. 19 Figure 51 Impact of Policy Mechanism on LCOE and Grid Parity for Wind Power.................................. 87
Figure 6 Global Levelised Cost of Electricity from Utility-scale Renewable Power Generation Figure 52 Impact of Policy Mechanism on IRR for Wind Power............................................................... 88
Technologies, 2010-2017......................................................................................................................... 25 Figure 53 Impact of Policy Mechanism on LCOE and Grid Parity for Biomass........................................ 89
Figure 7 LCOE in USD/kWh of Several RE Technologies’ Projects in 2014 ........................................... 26 Figure 54 Impact of Policy Mechanism on IRR for Biomass.................................................................... 89
Figure 8 Levelised Costs and Generation Costs...................................................................................... 26
Figure 9 Solar Power Installed Capacity between 2005 and 2017........................................................... 38
Figure 10 Solar PV Installation Costs in the AMS Divided by Project Size.............................................. 40
Figure 11 Cost Breakdown for Small-scale Solar PV............................................................................... 41
Figure 12 Cost Breakdown for Large-scale Solar PV............................................................................... 41
Figure 13 O&M% for Solar PV Projects................................................................................................... 42
Figure 14 LCOE of Solar PV in the AMS with COD from 2010 to 2017................................................... 43
Figure 15 Solar PV Learning Curve Analysis and Projection in the AMS................................................. 43 LIST OF TABLES
Figure 16 Sensitivity Analysis for Solar PV.............................................................................................. 44
Figure 17 Installed Hydropower Capacity in the AMS ............................................................................. 48
Figure 18 Average Hydropower Installation Costs in the AMS................................................................. 50
Figure 19 Cost Breakdowns for Hydropower Projects in the AMS........................................................... 51 Table 1 Input Parameters for LCOE Calculations..................................................................................... 34
Figure 20 Average Hydropower O&M Costs in the AMS.......................................................................... 51 Table 2 Projects Sampled by Installed Capacity...................................................................................... 39
Figure 21 LCOE of Hydropower in AMS in COD Years from 2007 to 2017.............................................. 52 Table 3 Capacity Factors for Solar PV Plant Samples............................................................................. 39
Figure 22 Hydropower Learning Curve Analysis and Projection in the AMS............................................ 53 Table 4 Selected Hydropower Projects in the AMS.................................................................................. 49
Figure 23 Sensitivity Analysis for Non-irrigation Hydropower Plants........................................................ 53 Table 5 Capacity Factors of Hydropower Projects................................................................................... 49
Figure 24 Sensitivity Analysis for Irrigation Hydropower Plants............................................................... 54 Table 6 Capacity Factors and Number of Wind Power Projects............................................................... 58
Figure 25 Installed Wind Power Capacity in the AMS from 2005 to 2017................................................ 58 Table 7 Capacity Factors and Number of Biomass Projects.................................................................... 66
Figure 26 Average Wind Power Project Installation Costa in the AMS..................................................... 59 Table 8 Capacity Factors and Number of Geothermal Projects............................................................... 72
Figure 27 Cost Breakdowns for Wind Power Projects............................................................................. 59 Table 9 Installation Costs for Geothermal Projects in the AMS................................................................ 73
Figure 28 Average Wind Power O&M Costs in the AMS......................................................................... 60 Table 10 O&M Cost for Geothermal plants in the AMS............................................................................ 75
Figure 29 Wind Power LCOE in the AMS on COD from 2009 to 2017.................................................... 61
Figure 30 Projection of Wind Power in the AMS...................................................................................... 61
Figure 31 Sensitivity Analysis for Wind Power in the AMS....................................................................... 62
Figure 32 Installed Biomass Capacity in the AMS from 2005 to 2017..................................................... 66
Figure 33 Installation Costs for Biomass Projects.................................................................................... 67
Figure 34 Breakdown of Biomass Project Costs...................................................................................... 67
Figure 35 Average Biomass O&M CostsA in the AMS............................................................................. 68
Figure 36 Average Biomass Fuel Costs in the AMS................................................................................. 68
Figure 37 Biomass LCOE on COD from 2006 to 2017............................................................................ 69
Figure 38 Installed Capacities of Geothermal Power in the AMS from 2007 to 2017.............................. 72
Figure 39 Capacities and Capacity Factors of Geothermal Power Plants Included in This Study........... 73
Figure 40 Cost Breakdown of a Geothermal Power Plant........................................................................ 74
Figure 41 O&M Costs of Geothermal Power Plants................................................................................. 74
Figure 42 LCOE for Geothermal Power................................................................................................... 75
Figure 43 Sensitivity Analysis for Geothermal Plants in the AMS............................................................ 76
Figure 44 Comparison of LCOE with Energy Generation Costs in the AMS............................................ 80
Figure 45 Comparison of RE Technologies’ LCOE with the Residential Selling Price of Electricity
in the AMS................................................................................................................................................ 81

8 9
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

LIST OF ABBREVIATIONS

ACE ASEAN Centre for Energy

AGEP ASEAN-German Energy Programme
AMS ASEAN Member State/s
APAEC ASEAN Plan of Action for Energy Cooperation
ASEAN Association of Southeast Asian Nations
BMZ Das Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung (German
Federal Ministry of Economic Cooperation and Development)
CAPEX Capital Expenditure
CO2 Carbon Dioxide
COD Commercial Operation Date
EGAT Electricity Generating Authority of Thailand
EUR Euro
GIZ Gesellschaft für Internationale Zusammenarbeit (German International Cooperation)
GDP Gross Domestic Product
GW Gigawatt
GWh Gigawatt-hour
IRENA International Renewable Energy Agency
IRR Internal Rate of Return
JGSEE Joint Graduate School of Energy and Environment
kWh Kilowatt-hour
kWp Kilowatt-peak
LCOE Levelised Cost of Electricity
LR Learning Rate
MESTECC Ministry of Energy, Science, Technology, Environment and Climate Change
MOIT Ministry of Industry and Trade
MW Megawatt
MWp Megawatt-peak
O&M Operations and Maintenance
PLN Perusahaan Listrik Negara (State Electricity Company, Indonesia)
PV Photovoltaic
RE Renewable Energy
REMB Renewable Energy Management Bureau
RE-SSN Renewable Energy Sub-sector Network
ROE Return on Equity
TNB Tenaga Nasional Berhad
TPES Total Primary Energy Supply
USD United States Dollar
WACC Weighted Average Cost of Capital
W Watt

10 11

FOREWORD BY ACE
ASEAN is a region of opportunities with the rapid growth of the ten ASEAN Member States (AMS) and the
continuously increasing energy demand which will reach its highest level in 2035. To meet this demand,
we must develop a variety of systems and technologies in parallel, as well as a range of strategies for
clean and sustainable generation of energy, which take environmental, social and economic impacts into
consideration. This has become a priority for the AMS, as asserted in the ASEAN Plan of Action for Energy
Cooperation 2016-2025 that sets an aspirational target of 23% renewable energy (RE) in total primary
energy supply in 2025. This target is currently standing at 12.4% as per 2016. To support the aspirational
target, in 2016 the ASEAN Centre for Energy (ACE) conducted a study on the levelised cost of electricity
(LCOE) for solar photovoltaic (PV), biomass, and hydro.
The deployment of RE in ASEAN has been continuously rising since 2008, with total additional capacity
reaching 30 GW by 2016, or roughly double the 2008 capacity. However, this growth could be enhanced
even further with more evidence supporting RE development. Subsequently, as follow-up to the LCOE
study in 2016, this study was conducted under the ASEAN-German Energy Programme (AGEP), a jointly
implemented project by ACE and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH,
on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ). As a continuation
of the first study, the objectives of this study are: 1) to analyse the LCOE trend of current RE technologies
in the AMS, 2) to obtain the most representative LCOE numbers as reliable references, 3) to understand
and provide recommendations on the impact of policy on LCOE prices, and 4) to advise on the necessary
policies for obtaining significant competitiveness between the LCOE of RE technologies and conventional
fossil fuel power plants in the AMS.
This second study includes geothermal and wind power with more project samples for each technology.
With a total 134 projects evaluated, it is expected that the study will offer a better understanding of the
LCOE for these five RE technologies in ASEAN, and further identify necessary policies to encourage fair
competition between RE and conventional fossil fuel-based power plants in the AMS.
The Levelised Cost of Electricity of Selected Renewable Technologies in the ASEAN Member States II is
part of ACE’s efforts to fulfil its function as a regional energy centre of excellence that continues to initiate
coherent, coordinated, focused and robust energy policy agendas and strategies for ASEAN. We hope that
this publication will provide stakeholders with useful information on the current costs of RE technologies in
the ASEAN.
Christopher G. Zamora
Acting Executive Director
ASEAN Centre for Energy
12
Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II
FOREWORD BY GIZ
The Association of Southeast Asian Nations (ASEAN) is one of the most dynamic and fast-growing regions
in the world. The rapid economic growth brings both great challenges and opportunities. A key challenge is
to ensure that energy can be generated and distributed from clean sources, and at affordable prices. The
ASEAN Member States (AMS) through the ASEAN Plan of Action for Energy Cooperation (APAEC) 2016-
2025 realise the potential of renewable energy (RE) and have set an aspirational target of 23% for RE as
a proportion of the total primary energy supply by the year 2025. RE could be one of the ways for the AMS
to fulfil the theme of the APAEC in achieving energy security, accessibility, affordability and sustainability
for all.
To support the APAEC 2016-2025’s goals for enhancing energy connectivity and market integration in the
ASEAN, the ASEAN-German Energy Programme (AGEP), a jointly implemented project by the ACE and
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH on behalf of the Federal Ministry
for Economic Cooperation and Development (BMZ) conducted a follow-up study to review the levelised
cost of electricity (LCOE) for solar photovoltaic (PV), hydropower, wind, biomass, and geothermal. This
study aims to determine the current LCOE of the five RE technologies mentioned above and help identify
necessary policies to encourage fair competition between RE and fossil fuel power plants in the AMS.
This study underlines the main parameters influencing the LCOE in the AMS. It also analyses the LCOE
of selected RE technologies in the AMS, and suggests the necessary policies to reach a significant
competitive level for certain RE technologies’ LCOE. The results reveal that the discount rate, capital costs,
and capacity factor variations increase or reduce the LCOE more significantly compared to other variables.
The result also indicates a downward projection of future LCOEs for solar PV, hydropower, and wind, which
require additional support from policymakers (i.e. subsidies, financing mechanisms, RE research grants),
to increase market deployment to meet their national and regional targets.
This study was developed through extensive research and considerable cooperation with the ASEAN
Renewable Energy Sub-sector Network. For that reason, we are very pleased to announce the completion of
The Levelised Cost of Electricity of Selected Renewable Technologies in the ASEAN Member States II, which
is now available for all related stakeholders. We believe that this study will be helpful in giving policymakers
an overview of the parameters that influence LCOEs in the ASEAN, so that they can take the necessary
actions to support RE development, and stakeholders can see the benefit of investing in RE technologies.
Maria-José Poddey
Principle Advisor for AGEP
GIZ
13

ACKNOWLEDGEMENTS
This study on the levelised costs of electricity (LCOE) was developed by the ASEAN Centre for Energy
(ACE) and Renewable Energy Sub-sector Network (RE-SSN), under the supervision of Mr. Christopher
G. Zamora, Ms. Maria-Jose Poddey, and Dr. Sanjayan Velautham with technical assistance from Adilla
Fathimah, Badariyah Yosiana, Rizky Fauzianto, Septia Buntara Supendi, Dr. Tharinya Supasa and
Yudiandra Yuwono. It was conducted under the ASEAN-German Energy Programme (AGEP), a jointly
implemented project by the ACE and Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ)
GmbH on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ).
A regional workshop was held 7-8 August 2018 in Bangkok, Thailand, and attended by RE-SSN’s
representatives and RE relevant stakeholders to supply and validate data, and also verify preliminary findings
and analysis prepared by the ACE and consultant from King Mongkut’s University of Technology Thonburi.
The completion of the study was made possible through the cooperation and support of the RE-SSN Focal
Points and other stakeholders from relevant ministries, institutions, and RE project developers that have
provided information. We would like to thank everyone involved, in particular those named below: RE-
SSN Focal Points and networks; Mr. Abdul Matiin Hj Muhd Kasim, Energy Department, Prime Minister’s
Office of Brunei Darussalam; Mr. Toch Sovanna and Mr. Chiphong Sarasy, Ministry of Mines and Energy
of Cambodia; Mr. Harris, Directorate General of New and Renewable Energy and Energy Conservation
of Indonesia, Mr. Chantho Milattanapheng and Mr. Phonepasong Sithideth, Ministry of Energy and Mines
of Lao PDR; Ms. Noor Afifah Abdul Razak and Mr. Asdirhimi Ab. Rasib, Ministry of Energy, Science,
Technology, Environment and Climate Change (MESTECC) of Malaysia; Dr. Win Myint, Ministry of
Electricity and Energy of Myanmar; Ms. Mylene C. Capongcol, with Ms. Marissa P. Cerezo, Renewable
Energy Management Bureau, Department of Energy of Philippines; Ms. Vanessa Koh and Ms. Cheryl
Leem, Energy Market Authority of Singapore; Mr. Wanchai Bunluesinth, Department of Alternative Energy
Development and Efficiency of Thailand; and Mr. Nguyen Ninh Hai, Ministry of Industry and Trade (MOIT)
of Vietnam, as well as the FGD participants; Mr. Bualom Saysanavong, Mr. Edward Neri, Ms. La Ngoc Lan,
Ms. Nor Azaliza Damiri, Ms. Nur Haziqah Mohd Dzaki, Ms. Jariya Budnard, Mr. Htun Naing, Mr. Chipong
Sarasy, Mr. Praptono Adhi, Ms. Phonethida Phanakhone, Mr. Alberto III Dalusung, Mr. Mohd Rahimi Mohd
Yusuf, Mr. Kevin Chan, Mr. Cherdsak Wattanavijitkul, Ms. Mya Aye, Mr. San Htwe, and Mr. Tuy Anh Nguyen.
ACE - AGEP team: Lisa Tjandra, Nanda F. Moenandar, Sandy Fajrian, Septia Buntara Supendi, Dr. Tharinya
Supasa, and Yudiandra.
ACE - Policy Research and Analytics team: Aloysius Damar Pranadi, Beni Suryadi, and Nadhilah Shani.
GIZ- AGEP team: Rizky Fauzianto
14
Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II
EXECUTIVE SUMMARY
The Association of Southeast Asian Nations (ASEAN) region is an economic zone, home to around 622
million people. It has a regional gross domestic product of USD 2.6 trillion (2014) growing at an average
annual rate of 5.3%, and the demand for energy is immense due to the economic drive in the region
resulting from rapid industrialisation. The ten ASEAN Member States (AMS) together account for 5.7% of
the world’s energy production (ACE, 2017).
Rapidly rising energy demand and fluctuating fossil fuel prices are challenges to all of the ASEAN countries
in their efforts to ensure economic growth and prosperity to their people. To overcome these challenges, the
ASEAN has implemented a new ASEAN Plan of Action for Energy Cooperation (APAEC) 2016-2025 with
the theme “Enhancing Energy Connectivity and Market Integration in the ASEAN to Achieve Energy Security,
Accessibility, Affordability and Sustainability for All”. Integral parts of the APAEC revolve around renewable
energy (RE). In 2016, the ASEAN achieved a 12.4% RE share in the total primary energy supply (TPES).
RE has an important role to play in delivering a sustainable energy future. It enhances energy security
through diversification, decreases dependence on imported fuels, and contributes to the mitigation of
climate change by reducing carbon dioxide (CO2) emissions. The ASEAN region is blessed with a huge
potential to use RE and hence the role of RE is becoming more important in developing a diversified energy
mix. However, only a small fraction of RE has been developed to date.
In recent years, many of the AMS have stepped up their efforts to develop national RE programmes,
including the setting of renewable targets, and putting regulatory frameworks and policies into place to
support the deployment of RE systems. Nevertheless, despite the growth of RE, the ASEAN TPES, or
energy mix, still relies heavily on fossil fuels, namely, oil, coal, and natural gas. The shares of fossil fuels
accounted for about 80% of the energy supply in 2017. Consequently, in order to ensure the development
of RE in the region and reach the RE target, several measures are needed. A measure that has been
deployed globally to encourage the development of RE is to compare the levelised costs of electricity
(LCOE) generated from all forms of renewable and conventional technologies.
The results of an LCOE study for the AMS conducted by the ACE in November 2016 indicated that the costs of
electricity generated from various forms of RE could potentially compete with the cost of electricity generated
from conventional fuels. Constantly updated data and more comprehensive analysis are necessary in order to
formulate a well-integrated energy strategy and policy for all stakeholders. The previous LCOE study in 2016
was extended to include wind and geothermal power, along with trend analysis and projection for all RE. The
data were obtained from 64 projects from the previous LCOE in 2016, together with that from more projects
which disseminated questionnaires to focal points in the AMS. This is all aligned with one of the APAEC strategic
action plans to enhance and implement RE in order to achieve the RE target in the TPES in 2025.
This study reviews and updates the LCOE of selected RE technologies with data from the AMS. Additionally,
it also provides a trend analysis for solar PV, wind, and hydropower technologies. The key findings are
analysed to identify necessary policies to nurture fair competition between RE and conventional fossil fuel
power plants in the AMS. The specific objectives of the study are:
• To analyse the LCOE trend for RE technologies in the AMS over the last 10 years (2007-2017),
review and update the 2016 report and project the LCOE for the next doubling of installed capacity.
• To obtain the most representative LCOE numbers to serve as reliable references
• To understand and provide recommendations on the impact of policies relating to the LCOE price.
• To advise the necessary policies geared to obtaining significant competitive levels between the
LCOE for RE technologies and conventional fossil fuel power plants in the AMS
15
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Analysis Figure 2 Comparison of RE Technologies’ LCOE with the Residential Selling Price of Electricity in the AMS
Based on the study of five selected RE technologies in the AMS, there is encouraging development, Technology
but several measures are needed to fulfil the APAEC target. In taking these further measures, important Biomass Hydropower Solar PV Wind
parameters with a major influence on RE development have been determined. Furthermore, with the 0.30 Indonesia

important parameters identified, policy measures are needed to further implement the measures. Lao PDR

0.25 Malaysia

LCOE (USD/kWh)
Affordability of RE in the AMS Myanmar
Philippines
The costs of RE technologies are constantly being compared against the costs of conventional energy 0.20
Singapore
sources to illustrate the affordability of each. At present, the use of conventional energy is still more cost-
0.16 Thailand
efficient compared to RE technologies. However, with the rapid depletion of fossil fuels and increasing

Residential selling price in AMS

0.15
Vietnam
energy demand, RE development is still highly important. Moreover, juxtaposing a technology’s cost
against its benefits is important to understand the long-term impacts of transitioning to a particular energy
0.10
source (IRENA, 2018a). % CF
0.1079
0.05 0.4000
To this end, this section focuses on comparing the costs of RE technologies’ LCOE against those for 0.05
0.6000
conventional energy. This analysis is to be utilised as a basis for policy recommendations. Based on the 0.8000
LCOE calculation for each RE technology, comparisons with the electricity generation costs and electricity’s 0.00
0.9170
2007 2017 2007 2017 2007 2017 2007 2017
residential selling price in the AMS are drawn.

In Figure 1, the LCOEs are compared to the generation costs of PLN (Indonesia), TNB (Malaysia), and
EGAT (Thailand), while in Figure 2, the LCOEs are compared to the residential selling price in the AMS. It
can be seen that only biomass and hydropower offer a more competitive cost against conventional energy
generation in the AMS, likely due to the fact that these technologies have reached a relatively mature stage
of development (Ellabban et al., 2014). However, with the cost of solar PV on a steeply declining trend, it
could be a promising option for development.
With a few years of development, solar PV could potentially compete with conventional energy sources,
especially if it was assumed that the prices of the conventional forms of energy will steadily increase.
Several factors, such as subsidies, resources scarcity, and the constant aging of existing facilities will likely
push the costs of conventional energy sources higher over time.
There are several factors which favour the development of RE technologies. New RE technology
modifications will continuously reduce the price of RE equipment while the capacity factor will continuously
expand (Sovacool, 2008). On the other hand, more precise methods for the calculation of costs could also
change the current method of comparison. At present, the LCOE does not favour a variable RE system
such as solar PV and wind (Ueckerdt et al., 2013). Until it does, financial support for RE development is
needed. In analysing methods to support RE development, important parameters are identified below
based on projections and sensitivity analyses.
Important Parameters
For the sensitivity analyses of five RE technologies, three parameters were identified as having major
influences on the LCOE of RE projects. These are: 1) discount rates; 2) capital costs; and 3) capacity factor.

Figure 1 Comparison of LCOE with Energy Generation Costs in the AMS Discount Rates
Technology
The discount rate is one of the major parameters for the calculation of the LCOE and has a great impact
Biomass Hydropower Solar PV Wind on it. The discount rate is used to discount future values and turn them into present values. For the same
0.30 Indonesia
amount of future value, a large discount rate results in a small present value, while a small discount value
Laos PD
leads to a larger present value. The change on the LCOE with different discount rates is apparent in
Malaysia
0.25
PLN Diesel: 0.25 Figure 3. The baseline case study for solar PV was the same as for the solar PV sensitivity section. The
Myanmar
LCOE for this project was USD 0.2 /kWh. The discount rate for this project was 10%, and then varied by
Philippines
approximately 1% (X-axis). Decreasing the discount rate from 10% to 9%, a decline of 7% in the LCOE
Singapore
0.20
Thailand
can be observed. If a policy mechanism can reduce the discount rate from 10% to 6%, it can reduce the
Vietnam
LCOE from USD 0.20to 0.15/kWh. This would enhance its competitiveness vis-a-vis conventional forms of
LCOE (USD/kWh)

energy. Meanwhile, if this same project had a higher discount rate of only 2%, from 10% to 12%, it would
0.15
cause the LCOE to increase 14%, equivalent to USD 0.23/kWh.
% CF
EGAT NGPP: 0,11
0.1079
0.10 TNB Avg: 0,095; EGAT Avg: 0,094 0.4000
PLN Avg: 0,077 0.6000
0.8000
0.05 0.9170

0.00
2007 2017 2007 2017 2007 2017 2007 2017

16 17
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Figure 3 LCOE Change with Different Discount Rates Figure 4 Impact of Policy Mechanism on the LCOE and Grid Parity for Small-scale Solar PV

Change of LCOE (%)

0,180
0,167
0,160 0,157
40% 0,142 0,138
36% 0,140
0,125 0,127
28% 0,120 0,117
30% 0,110
0,093 0,097
21% 0,100
20% 0,080
14%
7% 0,060 0,050
10%
0,040
0%
0% 0,020
6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 0,000
-10% -7%

With baseline parameters

Without Import duty & taxes

Decreasing of solar rooftop

equipment cost 20% (Direct Subsidy
or technology learning curve)

Decreasing of solar rooftop

equipment cost 30% (Direct Subsidy
or technology learning curve)

Indonesia

Malaysia

Thailand

Vietnam

Lao PDR
Singapore

Philippines
-13%
-20%
-20%

-26%
-30%

Electricity Tariff

Capital/Installation costs
As observed in the sensitivity analysis for each technology, it is apparent that a shift in capital costs has
major impacts on the LCOE calculations. Capital costs directly affect the LCOE the most because the more
expensive the capital costs, the higher the LCOE will become. However, different methods for categorising
costs could lead to significant differences among the capital costs for two similar projects, thus resulting in
significant differences in the LCOE. For example, some hydropower projects included irrigation and storage Figure 5 Impact of Policy Mechanism on IRR for Small-scale Solar PV
infrastructure in the capital costs, while others factored only the hydropower generator components (Zarfl
et al., 2015). Consequently, the capital costs must be defined accurately, and it is important that cross- 22,00%
checking between projects be carried out because differences in this parameter lead to significant changes 20,85%
in the LCOE. An example of the impact of the LCOE policy mechanism and grid parity for small-scale solar
20,00%
PV is shown in Figure 4. 19,25%

As shown, the LCOE of this solar PV project had reached grid parity in Singapore and the Philippines 18,00%
(Figure 4). The import duty and taxes were exempted, as shown in Figure 5, while the LCOE was slightly 17,13%
16,58%
reduced by USD 0.004/kWh, and the internal rate of return (IRR) increased from 16.58% to 17.13%.
Meanwhile, as shown in Figure 5, a reduction in the cost of solar rooftop equipment by 20% to 30% can 16,00%
moderately reduce the LCOE and increase the IRR. The cost of the equipment can be decreased by
either direct subsidy or technology improvement (learning-curve). If the cost of the solar PV equipment
decreases, it can reach grid parity in Thailand but not yet in Indonesia, Lao PDR, Malaysia, and Vietnam. 14,00%

At the same time, the IRR will rise to between 19.25% and 20.85%.
12,00%

10,00%

With baseline
parameters

Without Import duty &

taxes

Decreasing of solar
rooftop equipment cost
20% (Direct Subsidy or
technology learning curve)

Decreasing of solar
rooftop equipment cost
30% (Direct Subsidy or
technology learning curve)
18 19
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Policy Coordination
Policy coordination should go beyond simply presenting research findings as evidence but also aim at
catering to policymakers’ requirement for knowledge. Interactive workshops and policy dialogues help test
the conclusions and recommendations against the policy reality and incorporate policymakers’ feedback
on the research findings (Davies, 2012). The outcome of the dialogues will be further handed to the AMS’
governments for implementation of the development plan.
In response, direct and indirect targeted support from governments should be deployed for the three
important parameters to assist the development of renewable energies. These can be aligned with the
APAEC strategic action plan to enhance and implement RE policy so as to achieve the 2025 RE target in
TPES. For example, subsidies and financing mechanisms (i.e., tax or land acquisition) could be created
to reduce the capital costs. Additionally, specific RE research grants could be distributed to encourage
technology production in the region and also efficiency enhancement.

Utilising the results from this study, the AMS could make targeted policy measures with respect to RE.
Conclusion More accurate regional targets or policies could also be created. The information here could help create
Compared with RE development globally, in the AMS it is currently on pace. While this study shows that an enabling environment for RE development, not only through reducing risks but also by adding extra
only biomass and hydropower are comparable with the prices of conventional energy in the AMS, solar PV incentives to all the stakeholders involved. However, with global RE development moving swiftly, analysis
and wind are also showing promise. However, several measures are needed to not only reduce the current of its compatibility with society’s development must always be continuously updated.
costs of RE, but also create an environment that could support its growth.
This study should be used as the baseline for a co-created programme between the AMS’ governments
Three important parameters of RE development have been identified through sensitivity analyses: 1) and relevant stakeholders. This will consequently ensure that the development of RE in the ASEAN is
discount rates; 2) capital costs; and 3) capacity factor. Variations in these values increased or decreased in line with stakeholders’ interests, more importantly, with the AMS’ government interests as they face
the LCOE more significantly than other variables. The projections of the future LCOE for solar PV, complicated decisions in supplying energy to their people.
hydropower, and wind showed a slight decline which could be realised only if existing financial support for
RE is maintained and improved.
C
re
di
tt
he
Ph
ilip
pi
ne
s
D
O
E

20 21
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

22 23
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

1. INTRODUCTION
Figure 6 Global Levelised Cost of Electricity from Utility-scale Renewable Power Generation Technologies,
2010-2017 (source: IRENA, 2018)

Solar Concentrating Offshore Onshore

Biomass Geothermal Hydro
photovoltaic solar power wind wind
0.4
1.1 Background
The Association of Southeast Asian Nations (ASEAN) region is an economic zone with around 622 million 0.36
people and a regional gross domestic product of USD 2.6 trillion (2014), growing at an average annual rate
0.33
of 5.3%. The demand for energy is immense due to the economic drive in the region resulting from rapid
industrialisation. The ten ASEAN Member States (AMS) together currently account for 5.7% of the world’s 0.3

2016 USD/kWh
total energy production (ACE, 2017).

Rapidly rising energy demand and fluctuating fossil fuel prices are challenges to all of the ASEAN countries
in their efforts to ensure economic growth and prosperity for their people. To overcome the challenges, the 0.22

ASEAN has implemented a new ASEAN Plan of Action for Energy Cooperation (APAEC) 2016-2025 with 0.2
Fossil fuel
the theme “Enhancing Energy Connectivity and Market Integration in ASEAN to Achieve Energy Security, cost range
0.17
Accessibility, Affordability and Sustainability for All”. Integral parts of the APAEC revolve around renewable
0.14
energy (RE). In 2016, the ASEAN achieved a 12.4% RE share in its TPES.

RE has an important role to play in delivering a sustainable energy future. It enhances energy security 0.1 0.10
0.08
through diversification, decreases dependence on imported fuels, and contributes to the mitigation of 0.07 0.07 0.07 0.06
climate change by reducing carbon dioxide (CO2) emissions. The ASEAN region is blessed with a huge 0.05 0.05
potential for the use of RE and hence it is becoming more important in a diversified energy mix. However, 0.04

only a small fraction of RE has been developed to date.

2010 2017 2010 2017 2010 2017 2010 2017 2010 2017 2010 2017 2010 2017
In recent years, many of the AMS have stepped up their efforts to develop national RE programmes by
setting RE targets and putting into place regulatory frameworks and policies to support the deployment of Capacity (MW) ≥1 100 200 ≥300
RE systems. Nevertheless, despite the growth of RE, the ASEAN TPES or energy mix, still relies heavily
on fossil fuels, namely, oil, coal and natural gas: in 2017 they accounted for about 80% of the energy
supply. Thus, in order to ensure the development of RE in the region and reach the RE target, several As research into this important subject is still very limited in the ASEAN regional context, a study of the
measures are needed. One measure that has been deployed globally to encourage the development of LCOE for RE technologies in selected AMS was conducted by ACE in 2016.
RE is to compare different technologies’ LCOE for electricity generation from renewable forms of energy
and conventional sources. 1.1.1 Study on the LCOE in the AMS
The 2016 LCOE study focused on 64 electricity generation projects, including solar PV, biomass, and
hydropower from Malaysia, Indonesia, Thailand, and Vietnam. Data were obtained from the actual projects
The results of comparing different technologies’ LCOE could be utilised as a tool for further actions, and were utilised to identify necessary policies to improve the competitiveness of RE technologies through
i.e. provide information to decision-makers for developing policies, or to other relevant stakeholders for analyses revolving around the LCOE calculations. All variables, such as foreign exchange transaction
developing business plans. Consequently, a study of the LCOE could potentially clarify the situation in the rates were based on 2014 values.
ASEAN context. Comparisons of RE technologies’ LCOE with conventional electricity production costs
and selling prices could create a baseline from which to encourage the growth of RE in the region. For This study compares the LCOE calculations for solar PV, biomass, and hydropower. The statistical
example, as shown in Figure 6, RE technologies’ LCOEs are comparable to the fossil fuel cost range and points for each technologies’ LCOE are shown and are utilised further to roughly illustrate the state of RE
several calculations point to considerably lower costs. The global trend for each technology shown in development in the AMS. The resulting calculations are shown in Figure 7.
Figure 6 can be roughly compared with the ASEAN context to assist in RE development analysis.

24 25
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Figure 7 LCOE in USD/kWh for Several RE Technologies’ Projects in 2014 (source: ACE, 2016) In addition, this study also assessed the effect of policy support mechanisms that provide incentives for
the development of RE in the AMS. These are fiscal incentives (exemptions on import duties and taxes,
0.900 solar biomass hydropower low corporate taxes, income tax holidays) and financial mechanisms (low interest rates, longer loan terms,
0.850 higher debts share, and low returns on equity). Any policy measure that positively impacts not only project
0.800 investment and operating costs, but also equity cash flow would improve the attractiveness of the project
from a financing point of view.
0.700
The 2016 study indicated that to deploy more RE installations and push RE development even further,
Levelised Cost (USD per kWh)

0.600 additional support from policymakers and relevant stakeholders is needed. To make RE even more
Mean competitive with other electricity generating technologies, and to increase market deployment to meet
0.500 the AMS’ national RE targets as well as the regional target of 23% as stipulated in the APAEC Phase
Median
I: 2016-2025, more detailed studies are needed. With RE technologies and their costs continuously
Min changing rapidly over the past fifteen years, re-designing the RE policy components, such as feed-in
0.400
tariffs or subsidies, is necessary to monitor RE LCOE cost changes, their grid parity, competitiveness with
Max
conventional electricity generation costs, etc., with updated and detailed analyses.
0.300
0.220 To continuously promote RE development and the relevant stakeholders’ understanding of RE, a follow-up to
0.200 0.190 0.125 the 2016 study was needed to serve as an impactful reference for both the private sector and policymakers.
0.130 0.092 0.085
0.100 0.088 0.045
0.057 0.044 1.2 Continuation of LCOE in the AMS Study
0.000 0.019 As a continuation of the 2016 LCOE study, a new LCOE study was developed by the ACE with technical
assistance from The Joint Graduate School of Energy and Environment (JGSEE) at King Mongkut’s
The 2016 LCOE study also compared the estimated LCOE with the average generation costs (which cover University of Technology Thonburi under close coordination with the Renewable Energy Sub-sector Network
all generation technologies) and found that hydropower in Indonesia, the Philippines, and Thailand were Focal Points of the AMS. The study was conducted under the ASEAN-German Energy Programme (AGEP),
able to compete with conventional fuel generation (the highest LCOE value was lower than the average a jointly implemented project by the ACE and Deutsche Gesellschaft für Internationale Zusammenarbeit
generation costs for these countries). For Malaysia, most but not all hydropower projects had reached grid (GIZ) GmbH on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ). Data
parity. Meanwhile, some biomass projects in Indonesia, the Philippines and Thailand had also reached grid and analysis from the first study were utilised as a baseline and this follow-up study adds more types of RE
parity (Figure 8). technologies and increases the number of RE project samples across nine AMS.

Figure 8 Levelised Costs and Generation costs
Note: The darker shade represents minimum LCOE value to the mean value, while the lighter shade
represents mean value to the maximum value (source: ACE, 2016)
2014 (in USD/kWh)
hydropower
TBN average gen cost: 0.073 (blue line)
PLN average gen cost: 0.109 (green line)
biomass PLN diesel gen cost: 0.259 (red line)
PLN gas turbine gen cost: 0.244
PLN CC gen cost: 0.113
large solar PV MERALCO average gen charge: 0.120
EGAT average sales price: 0.096
medium solar PV
This follow-up study reviews and updates the LCOE of selected RE technologies with data from the AMS.
The previous 2016 LCOE study was extended to include wind and geothermal power, along with trend
analysis and projections for all forms of RE. All 64 projects which were previously analysed in the previous
study were utilised along with more updated projects’ data from six AMS. The key findings are analysed
to create necessary policies for bringing fair competition between RE and conventional fossil fuel power
plants in the AMS. The specific objectives of the study were:
• To analyse the LCOE trend for RE technologies among the AMS over the last 10 years (2007-
2017), review and update the 2016 report and project the LCOE for the next doubling of installed
capacity.
• To obtain the most representative LCOE numbers as reliable references
• To understand and provide recommendations on the impact of policies relating to the LCOE.
• To advise on the necessary policies for obtaining significant competitiveness between the LCOE of
RE technologies and conventional fossil fuel power plants in the AMS.

small solar PV

0 0.2 0.4 0.6 0.8 1 1.2

Levelised Cost (USD/kWh)

26 27
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Enhancing the First LCOE Study

The first LCOE study examined three technologies: solar PV, biomass for power, and hydropower. It
aimed to raise awareness of the fact that the costs of RE technologies have been declining and becoming
more competitive due to technological learning and increased market deployment.

In this study, two types of RE technologies were added: geothermal and wind power. Along with improving
the data from the first study, more data were collected. These more detailed, updated data were then
used for deeper analyses. In addition, this study also provided a trend analysis for solar PV, wind, and
hydropower technologies.

These deeper analyses were made possible with more projects’ data being available and each being
equipped with its commercial operation date (COD) year. Apart from only showing the LCOE value, a
general trend could be made. Comparisons with several examples of electricity generation costs and
residential electricity prices could also be observed throughout the years. Also, with more data on project
details obtained, potential policy analyses through IRR were made.

The differences in the baseline analysis of the first (2016) and the second (2019) study are shown in the
following illustration.

Enhancing the First Study’s Analysis through Adding COD year

Technology
Biomass Hydropower Solar PV Wind
0.30
0.900 solar biomass hydropower
0.28
0.850
0.800 0.26

0.24
0.700
0.22
Levelised Cost (USD per kWh)

0.600

Residential selling price in AMS

0.20
Mean
LCOE (USD/kWh)

0.18
0.500 Median 0.16
0.16

0.400 Min
0.14
Max
0.300 0.12

0.220 0.10
0.200 0.190 0.125 0.08

0.130 0.092 0.085

0.100 0.088 0.045
0.06
0.05

0.057 0.044 0.04

0.000 0.019
0.02

0.00
2007 2017 2007 2017 2007 2017 2007 2017

Using this baseline analyses, future projections and more detailed policy recommendations were
made. While the first study created a rough estimate of how the costs of RE technologies are declining
and becoming more competitive, the second study takes up where it left off to create more enhanced
analyses. The 2019 study follows up on how to promote RE technologies further by showing a rough
illustration of how RE would continuously challenge the costs of providing electricity from conventional
energy sources in the coming years.

28 29
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

30 31

2. METHODOLOGY
2.1 Selection of RE Technologies
This study focuses on five forms of RE in the AMS: solar PV, biomass, geothermal, wind and hydropower.
These were selected based on selection criteria that were specifically developed for this study. To be relevant
and inclusive, the study strives to: 1) cover the most recent projects implemented in the AMS; 2) comprise,
as much as possible, most of the AMS; and 3) focus on emerging technologies that have potential for
regional deployment. In selecting the priority technologies, four evaluation criteria were used: 1) resource
potential; 2) government targets; 3) policy and regulatory frameworks; and 4) the total installed capacity
over the past three years. In addition, a scoring scheme was established to rank candidate RE projects.
The RE technology evaluation results ranked solar PV, biomass, geothermal, wind, and hydropower. The
selection also considered the RE sources’ availability and potential in the ASEAN.
The AMS’ Renewable Energy Focal Points—representatives from each AMS assigned to work with
ACE for regional activities on RE—were asked to identify projects that were recently implemented to be
considered in the study. Survey questionnaires designed for solar PV, biomass, geothermal, wind and
hydropower projects were disseminated to the country focal points. The information required by the survey
questionnaires covered technical, financial, fiscal and other factors.
2.2 Levelised Cost of Electricity
Different technologies for electricity generation have different cost characteristics, such as plant lifespan,
operations and maintenance (O&M) requirements, construction periods, etc. Comparing the cost
components of different technologies may not be practical or necessary, and financial personnel, and
policymakers may not possess the technical knowledge (Assmann, 2012). The levelised cost of electricity,
or LCOE, is well-known as one of the tools used to measure the competitiveness of different electricity
generation technologies. It is represented by the monetary currency of any cost’s components related to
electricity generation (capital costs, fixed and variable O&M costs, etc.) per one unit of electricity generation
(USD or any other monetary currency/kWh). As the cost components are incurred at different times and
are spread over the project’s lifespan, the LCOE is used to measure the competitiveness of different
technologies. As a continuation from the previous study (ACE 2016), this study focuses on using the LCOE
method to compare different sets of technologies.
The LCOE method has been widely used globally to estimate the power generation costs of different
technologies. For example, IRENA (2012a, 2012b) used the LCOE to estimate the power generation costs
of different technologies around the world in 2010, and Roth and Ambs (2004) assessed the LCOE of 14
electricity generation technologies.
The LCOE is a convenient tool for comparing the unit costs of different technologies over their economic
life (Khatib, 2010). It is an abstraction of reality and is used as a benchmarking or ranking tool to assess the
cost effectiveness of different energy generation technologies (Branker et al., 2011). The LCOE is equal to
the lifecycle cost divided by lifetime energy production. If the electricity prices were equal to the levelised
average lifetime costs of electricity generation by different technologies, an investor would precisely break
even on an investment project (Ouyang and Lin, 2014).
32
Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II
In calculating the LCOE, this study used the following formula:
(eq. 1)
Cn is total costs, in the year n
Qn is energy generation, in the year n
n is year
N is the project life
d is the discount rate
In executing the formula, several assumptions were needed. Below are elaborations on each of the
assumptions used for this method:
A. Discount Rate
The main factor used to convert future values into present values is the discount rate. Present values, also
known as “discounted future values”, are the present worth of future amounts of benefits and costs. The
higher discount rate results in the lower present value of the future benefits and costs.
Due to the different levels and components of RE deployment policies and the disparate energy markets
and financial market structures of the participating AMS, there is a wide divergence in interest rates and
stakeholders’ target return on equities. With this situation and for comparative purposes, this study used a
discount rate of 10% in cases where the discount rate is not specified to estimate the LCOE.
B. O&M Costs
Operation and maintenance (O&M) costs, which are major costs incurred in the operation phase of power
plants, can be divided into two main components, namely fixed O&M costs and variable O&M costs. The
fixed O&M costs are the recurring annual costs that occur regardless of the electricity units produced and
operating hours of the plant. The fixed O&M costs include wages and salaries for O&M personnel. The
variable O&M costs are the expenses required for parts and labour for equipment maintenance to bring the
facilities back to satisfactory operating condition in the event of some issue.
Both fixed and variable operations and maintenance costs vary widely among different forms of power
generation, especially for RE technologies. If it is not stated by the project, a uniform set of numbers is
used. The Fraunhofer Institute for Solar Energy Systems ISE provides a summary of the fixed and variable
O&M costs in its study, Levelised Cost of Electricity - Renewable Energy Technologies, March 2018, as
shown below. The fixed O&M costs for all three sizes of PV energy plants, small rooftop (5-15 kWp), large
rooftop (100-1,000 kWp), and utility-scale (>2 MWp) are 2.5% of CAPEX. The fixed O&M costs for onshore
wind energy plants and offshore wing energy plants are EUR 30/kW and EUR 100/kW, respectively.
There is no variable O&M cost needed for PV energy plants, while EUR 0.005/kW of fixed O&M costs are
recommended for both onshore and offshore wind energy plants.
33
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Table 1 Input Parameters for LCOE Calculations 2.3 Learning Rates and Future Costs
PV PV The most common model which is widely used in the energy literature to forecast changes in technology
rooftop rooftop PV utility-
small large scale (>2
Wind Wind
Biogas
Brown
Hard coal CCGT GT costs is the “one-factor learning curve” (or “experience curve”). This formulation is derived from empirical
onshore offshore coal
(5-15 (100-1000 MWp) observations across a variety of energy technologies that frequently indicate a log-linear relationship
kWp) kWp)
between the unit cost of the technology and its cumulative output (production) or installed capacity (Rubin
Lifetime [in
years]
25 25 25 25 25 30 40 40 30 30 et al. 2015). The future costs are estimated by using the concept of learning-by-doing which was discussed
Share of by Ferioli et al. (2009). This can be quantitatively expressed as:
80% 80% 80% 80% 70% 80% 60% 60% 60% 60%
debt
Share of
20% 20% 20% 20% 30% 20% 40% 40% 40% 40%
equity
Interest rate
3.5% 3.5% 3.5% 4.0% 5.5% 4.0% 5.5% 5.5% 5.5.% 5.5%
on debt
Return on
5.0% 6.5% 6.5% 7.0% 10.0% 8.0% 11.0% 11.0% 10.0% 10.0%
equity
WACC
nominal
3.8% 4.1% 4.1% 4.6% 6.9% 4.8% 7.7% 7.7% 7.3% 7.3% eq. 2
WACC real 1.8% 2.1% 2.1% 2.5% 4.8% 2.7% 5.6% 5.6% 5.2% 5.2% where x0 represents power cumulative installed capacity in MW in year 0.
OPEX fix 2.5% of 2.5% of 2.5% of 4.0% of xt represents cumulative installed capacity in MW in year t.
30 100 36 32 22 20
[EUR/kWh] CAPEX CAPEX CAPEX CAPEX C(xt) is a unit cost of a product, process, or technology in year t,
OPEX var
[EUR/kWh]
0 0 0 0.005 0.005 0 0.005 0.005 0.004 0.003 C(xo) is a unit cost of a product, process, or technology in year 0,
Degradation 0.0025 0.0025 0.0025 0 0 0 0 0 0 0
b is a positive learning parameter

Moreover, the fractional reduction in cost associated with a doubling of installed capacity is referred to as
the learning rate (LR) and is given by:
LR = 1 – 2b (eq.3)
2b in the above equation is the “progress ratio”

The initial cost declines by the learning rate, LR, at every doubling of production. For example, when
the learning rate (LR) equals 20%, the cost of any specific energy installation decreases by 20% as the
installed capacity is doubled.

E
C
tA
di
re
E

C
C
tA
di
re
C

34 35
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

36 37
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

3. SOLAR PV
Table 2 Projects Sampled by Installed Capacity
Installed capacity of Existing Projects
AMS
Small Medium Large
Total
< 100 kWp 100 – 1,000 kWp > 1,000 kWp
Indonesia 2 2
3.1 Solar PV Development in the ASEAN Malaysia 19 7 8 24
The solar power installed capacity in the AMS increased significantly between 2007 and 2017, from around Philippines 1 4 5
47 MW to 4,211 MW as shown in Figure 9. Thailand, the Philippines, and Malaysia are the leading countries. Singapore 1 1
The installations of solar PV in Thailand increased from 32 MW in 2007 to 2,697 MW in 2017, while those in Thailand 2 2 4
the Philippines and Malaysia increased from 1 MW and 7.0 MW to 885.3 MW and 362.2 MW, respectively. Total 21 9 16 46
However, during the same period, Myanmar and Vietnam had not yet installed any solar PV.
The country-average capacity factors, which range from 11% to 21%, of the solar PV plants included in this
Figure 9 Solar Power Installed Capacity between 2005 and 2017 (source: ACE, 2018) study are summarised in Table 3 with a few plants falling outside this range. The average capacity factor of
the small, medium, and large-scale plants was about 16%.
4211
4000 Table 3 Capacity Factors for Solar PV Plant Samples
Country Capacity Factor      
Indonesia AMS Small Medium Large Overall
3500
Malaysia Indonesia 18% 18%
Philippines Philippines 15% 18% 17%
3000 Singapore 15% 15%
Singapore
Thailand Thailand 17% 16% 16%
2500 Overall
Mean 16% 15% 16% 16%
Median 16% 15% 16% 16%
Solar PV (MW)

2000
Min 11% 13% 14% 11%
Max 19% 17% 21% 21%
1500

1000
3.3 Cost Details
47
500
3.3.1 Installation Costs
The installation costs of the solar PV power plants vary according to the capacity and type of technology.
0 The installation costs per unit capacity of the small, medium, and large-scale plants are shown in Figure
2005 2007 2009 2011 2013 2015 2017
10 for each project in five AMS. For the overall view of all the AMS, the capacity-weighted averages of
Year
the installation costs of the solar PV plants were USD 1,963, USD 1,824, and USD 2,013/kW for small,
medium, and large scale, respectively.
Along with the increases in installed capacity, the electricity generated by solar PV in the ASEAN grew in
the same proportion from 58 GWh in 2007 to 5,004 GWh in 2016. The electricity generation from solar PV
among the three leading AMS—Thailand, the Philippines, and Malaysia—increased from 39 GWh, 1 GWh,
and 8.6 GWh, respectively, in 2007 to 3,377 GWh, 1,097 GWh, and 323.4 GWh, respectively, in 2016.

3.2 Solar PV Projects in the ASEAN

This study covered 46 solar PV plants in five AMS. The projects are grouped by their installed capacities
into three groups: less than 100 kW (small), 100–1,000 kW (medium), and 1,000 kW or more (large).
Utilised as samples, there were 21 small plants and 16 large plants with the remaining 9 plants comprising
the medium-sized plants.

38 39
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Figure 10 Solar PV Installation Costs in the AMS Divided by Project Size Figure 11 Cost Breakdown for Small-scale Solar PV

Tech / Country Small-scale

Large Medium Small 100%

2,600 Financial cost during construction (USD)

90%
Administration costs (USD)
80%
Consultation, Licenses and Permits (USD)
Installation Cost (USD/kWh)

70% Grid connection (USD)

Installation and commissioning costs (USD)
2,400 60%
Import duty & taxes (USD)
50%
Transportation & Insurance (USD)
40% Equipment cost (USD)

30% Design, Engineering, Project management (USD)

2,200 Civil works (USD)
20%
Land acquisition & development (USD)
10% Exploration (USD)

2,013 0%
12 12 24 24
2,000 1,963
Installed Capacity (kWp)

1,867
In comparison, as shown in Figure 12, the top two shares of the cost breakdowns for the large-scale solar
1,800 PV were similarly the equipment costs and installation costs, which are typically more than about 70% of
the total installed costs. However, compared to the small-scale solar PV, civil works costs ranked above
the rest.

1,600 Figure 12 Cost Breakdown for Large-scale Solar PV

Large-scale
100%
Financial cost during construction (USD)
1,400 90%
Administration costs (USD)
80%
Indonesia Malaysia Philippines Thailand Malaysia Singapore Malaysia Thailand Consultation, Licenses and Permits (USD)
70% Grid connection (USD)
Installation and commissioning costs (USD)
60%
3.3.2 Cost Breakdowns Import duty & taxes (USD)
50%
Cost breakdowns are taken from the available project samples. As not every project had detailed cost data Transportation & Insurance (USD)
40%
available, only several small-scale and large-scale solar PV costs were used in this section. These project Equipment cost (USD)
Design, Engineering, Project management (USD)
samples are from Malaysia and the Philippines. 30%
Civil works (USD)
20%
Land acquisition & development (USD)
As shown in Figure 11, the largest share of the cost breakdowns for the small solar PV plants was the 10% Exploration (USD)
equipment costs (about 60%), followed by: 1) installation and commissioning costs (about 12%); 2) 0%
administrative costs (about 7%-8%); 3) design/engineering/project management costs; and 4) civil works 10,046.40 12,500.00 13,141.44 38,891.00

(about 4%-6%). Installed Capacity (kWp)

3.3.3 Operation and Maintenance Costs (O&M)

The O&M costs of the small-, medium-, and large-scale projects are summarised as percentages of CAPEX
in Figure 13. The O&M costs ranged from about 0.23% to 3.63%, 0.02% to 4.44%, and 0.01% to 4.95%
of CAPEX for the small-, medium-, and large-scale projects, respectively. On average, for all scales, the
O&M costs were about 1% of CAPEX and were not significantly different according to system size. The
O&M costs of some of the large PV plants in the Philippines reached up to 5%, which is quite unusual for
PV power plants.

40 41
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Figure 13 O&M% for Solar PV Projects Figure 14 LCOE of Solar PV in the AMS with COD from 2010 to 2017
Technology / Country COD
Country
Large Medium Small Indonesia
0.28
Malaysia
5.00% 4.95% Philippines
0.26
Singapore
4.50%
Thailand
4.44% 0.24
4.00%

3.50% 0.22 % CF
3.63%
0.1079

LCOE (USD/kWh)
3.00% 0.20 0.1200
% O&M

2.50% 0.1400
0.18 0.1600
2.00% 0.1800
1.55% 0.16 0.2000
1.50%
1.02% 1.14% 0.2100
0.14
1.00%

0.50% 0.12
0.43%
0.00%
0.01% 0.02% 0.10

Indonesia Malaysia Philippines Thailand Malaysia Philippines Singapore Malaysia Thailand Vietnam
2011 2012 2013 2014 2015 2016 2017 2018

3.4 Analysis
3.4.2 Projection
3.4.1 Levelised Cost of Electricity The projection can be calculated by using a one-factor learning curve methodology referred to in equations
Based on the calculations, the LCOE of solar PV plants in the AMS ranged from USD 0.099 to USD 0.2/ 2 to 4. The Y-axis represents the mean value of solar PV LCOE in USD per kWh, while the X-axis represents
kWh. The largest and smallest calculated LCOEs were both from the small-scale plants. On average, the the accumulated installed solar PV (GW) for the whole ASEAN region. Projections for solar PV in the AMS
small-, medium-, and large-scale solar PV plants had an LCOE of USD 0.187, USD 0.181, and USD 0.182/ are shown in Figure 15.
kWh, respectively. Most of the solar PV plants in the ASEAN countries were installed in the six years after
2012. While Figure 7 indicates that there was a declining trend globally, Figure 14 shows that the LCOE Figure 15 Solar PV Learning Curve Analysis and Projection in the AMS
trend of these solar PV plants in the AMS was also slightly downward, though a further qualitative analysis 0.500
should be developed to clarify the fact. Compared to the globally weighted average, the LCOE of utility-
scale solar PV decreased to USD 0.10/kWh in 2017 (IRENA, 2018b). 0.03
0.464
0.400

LCOE (USD/kWh)
0.300 0.09
0.299 1.02
0.218

0.200
0.39
0.200 1.93
0.196
0.89 3.64
0.208 0.162 10.10
0.100 0.147

0.000
0.00 2.00 4.00 6.00 8.00 10.00

ASEAN cumulative Installed Solar PV (GW)

42 43
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Using ASEAN data, the b value was –0.0941, thus the learning rate (LR) of solar PV was 6.3%. This
implies that if the installed capacity of solar PV is doubled in the AMS, the LCOE price will fall by 6.3%.
The LCOE in 2025 is computed by using equation 4 and the projected cumulated solar PV for 2025 were
obtained from the 5th ASEAN Energy Outlook (ACE, 2017). Thus, the LCOE for 2025 is projected to be
USD 0.147/kWh.

3.4.3 Sensitivity Analysis

Sensitivity analysis was conducted to assess the key parameters of a project which caused the largest
changes to the LCOE. The median value from all solar PV projects in this study’s parameters were used
for the calculations. The values were: installed capacity of around 350 kW, a capacity factor of 15%, and
an annual degradation rate of around 0.5%. The discount rate used was 10%, and the project lifetime
was assumed to be 25 years. A variation of about 50% in key parameter values such as the discount rate,
annual degradation rate, capacity factor, O&M cost, and capital cost was simulated and the LCOE results
were compared, with and without parameter variation cases.

Figure 16 Sensitivity Analysis for Solar PV

-32% 36%
discountrate

-2%
annual degradation

-33% 100%
capacity factor*

-4% 4%
O & M cost

-46% 46%
capital cost

The measured impacts are presented as percentages of change in the LCOE as shown in Figure 16.
It shows the impact of the key changes caused by the parameters to the LCOE. A 50% increase in the
discount rate resulted in a 36% increase in the LCOE, while a decrease resulted in a 32% decrease in
the LCOE. A 50% increase in O&M costs resulted in a 4% increase in the LCOE, while inversely, a 50%
decrease in O&M costs resulted in a 4% decrease in the LCOE. A 50% increase in capital costs resulted
in a 46% increase in the LCOE, while a 50% decrease in capital cost resulted in a 46% decrease in the
LCOE. The capacity factor is inversely related to the LCOE, so a 50% increase in the capacity factor
resulted in a 33% decrease in LCOE, while a 50% decrease in the capacity factor resulted in a 100%
increase in the LCOE. For annual module degradation, a 50% increase in the reference value resulted in
an increase of 2% in the LCOE.

In sum, three main important parameters for solar PV technology are: capacity factor, discount rate, and
capital costs. These three affect the LCOE more than any other parameter and thus should be the focus in
future RE development.

44 45
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

46 47
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

4.2 Hydropower Projects in the AMS

4. HYDROPOWER Detailed information about the 37 hydropower plants in six AMS was collected and analysed. Of these
plants, ten were in the Lao PDR, nine were in Thailand, eight were in Indonesia, five were in Malaysia, nine
were in Vietnam, and the other two were in Myanmar. The grouping of hydropower plants was based on
their utilisation because the cost calculations for each were slightly different. Here, the first group comprises
4.1. Hydropower Development in ASEAN plants which are used for both irrigation and power generation. Thus, the capacity factor is significantly
One of the most well-known conventional RE resources in the ASEAN is hydropower. Hydropower lower than the second group of plants which are used exclusively for power generation. Subsequently,
systems do not have any fixed fuel costs and can also be used as irrigation systems (ACE, 2017). In different LCOEs will be obtained and cannot be compared to each other directly. The projects sample used
2006, Indonesia, the Philippines, Thailand, and Vietnam accounted for about 92% of the total installed for this study is shown in Table 4.
hydropower generation in the AMS. Vietnam accounted for 27% of the total capacity (the highest) while
Indonesia, the Philippines, and Thailand each accounted for slightly below 20%. Table 4 Selected Hydropower Projects in the AMS
Irrigation Non-Irrigation Total
From 2007 to 2017, the installed capacities in Malaysia and Vietnam rose as shown in Figure 17. Cambodia, Indonesia - 8 8
the Lao PDR, and Myanmar increased their installed capacities more than five times due to significant Lao PDR 10 - 10
increases in their energy demand (ACE, 2017). Therefore, the total installed hydropower capacity in the Malaysia - 5 5
AMS significantly rose from 19,839 MW to 46,661 MW between 2006 and 2017. Myanmar - 2 2
Thailand 9 - 9
Figure 17 Installed Hydropower Capacity in the AMS (source: ACE, 2018) Vietnam 3 - 3
Total 22 15 37
45K
Country
Brunei Darussalam The capacity factors of the hydropower projects are summarised in Table 5. The average capacity factor
40K Cambodia
of all the countries was 52% and the median was 40%. The maximum capacity factor was 86% while
Indonesia
the minimum was 27%. Only Indonesia (with the highest average capacity factor at 86%), Malaysia, and
35K Lao PDR
Malaysia
Myanmar had average capacity factors higher than the overall average, whereas the other countries had
Myanmar lower average capacity factors. The Philippines had the lowest average capacity factor at 27%.
30K
Philippines
Table 5 Capacity Factors of Hydropower Projects
Hydropower (MW)

Thailand
25K
Vietnam Capacity Factor      
AMS Mean (%) Median (%) Min (%) Max (%)
20K
Indonesia 68 65 50 86

15K
Lao PDR 41 40 37 59
Malaysia 76 75 71 80

10K Myanmar 72 74 62 81
Philippines 39 42 27 47

5K Thailand 46 40 40 80
Vietnam 39 38 36 44
0K Overall 52 40 27 86
2005 2007 2009 2011 2013 2015 2017
Year

Along with the installed capacity, the development of energy generation from hydropower in the AMS
also accelerated. In 2016, the amount of energy generated increased from 61,563 GWh to 144,533 GWh
mainly in Vietnam, the Lao PDR, and Myanmar. The rate of increase more than doubled that of the installed
hydropower capacity pattern from 2007 to 2017. Technological improvements were the most probable
cause because the global efficiency of hydropower was also constantly increasing (Zarfl et al., 2015).
However, the hydropower generation in Indonesia, the Philippines, and Thailand remained constant or
slightly decreased.
4.3 Cost Details
4.3.1. Installation Costs
Hydropower plants require large amounts of initial investment. These are mostly turned into installation
costs (Zarfi et al., 2015). Of the samples used in this study, the installation costs generally consist of
equipment costs, transformer costs, and interconnecting costs.
The installation costs of the hydropower projects are given in Figure 14. They were calculated as installation
costs per installed capacity for each project in the AMS. As shown in Figure 18, the average hydropower
installation costs of all the countries were about USD 1,793/kW. Only Malaysia had average hydropower
installation costs above the ASEAN average value based on the collected project data. The cheapest and
most expensive installation costs are listed for Thailand and Indonesia at USD 511 and 3,193/kW, respectively.

48 49
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Figure 18 Average Hydropower Installation Costs in the AMS Figure 19 Cost Breakdowns for Hydropower Projects in the AMS
Tech / AMS 100% 2.29%
6.09% 15.29% Temporary/Auxiliary Work
90%
Irrigation Non-Irrigation
80% 6.05%
Other Development Costs

70% 16.56%
43.61% Consulting fee
3000 60%
9.87%
Access/Service Roads Cost
50%
17.52%
40% Transmission Interconnection Cost

30%
2500 Switchyard and Transformers
45.82%
20%
34.71%
Equipment Cost, Transportation to
10% project site, Balance of Plant

0%
Installation Cost (USD)

2000 6 18
1,926
Installed Capacity (MW)
1,659
4.3.3 Operating and Maintenance Costs (O&M)
1500 The O&M costs for hydropower plants are summarised in Figure 20. The average O&M costs for all of the
countries was 1.69% of CAPEX for the plants used for irrigation and 2.15% for the non-irrigation plants.
One project in Vietnam had the lowest O&M percentage (0.94%), whereas another project in Indonesia
had the highest O&M percentage (4.08%). These numbers are within the range of global O&M percentage
1000 average of 1-4% CAPEX or 1-6% CAPEX if upgrades and refurbishment are included (IRENA, 2012a).

Figure 20 Average Hydropower O&M Costs in the AMS

Tech / AMS
500
Irrigation Non-Irrigation

4.0%

0
Lao PDR Thailand Vietnam Indonesia Malaysia Myanmar
3.5%

The slight difference in the average cost between irrigation and non-irrigation hydropower plants is to be
expected. As opposed to the irrigation hydropower plants, the non-irrigation ones are commonly located in 3.0%
more remote locations. Thus, the cost components were higher despite having a bigger energy generation
output (Paish, 2002). However, the cost of these projects is on the lower spectrum of the global average
range of USD 1,050 to 8,000/kW (IRENA, 2012a). It is possible that these project costs exclude the storage 2.5%
costs, which are calculated in the IRENA’s global average.

O&M (% CAPEX)
2.2%
4.3.2 Cost Breakdowns 2.0%

From the whole sample, the cost breakdowns for only two hydropower projects, in Lao PDR and the Philippines,
1.7%
are analysed for this section (see Figure 19). The largest share was equipment costs/transportation to the
project site/balance of the plant (about 35%-45%), followed by switchyard and transformer costs (about 20%- 1.5%

45%), and other costs (transmission interconnection costs, consulting fees, etc.).

1.0%

0.5%

0.0%
Lao PDR Thailand Vietnam Indonesia Malaysia Myanmar

50 51
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

4.4. Analysis Figure 22 Hydropower Learning Curve Analysis and Projection in the AMS
0.090 28.76
4.4.1 LCOE 0.080
20.51
0.071
0.080

LCOE (USD/kWh)
The levelised costs of hydropower plants are portrayed in Figure 21. The average of the overall LCOE 0.070
32.87 39.92
was USD 0.06/kWh while the median was USD 0.05/kWh. The maximum and minimum were USD 0.38 0.060
19.40 0.055 0.054
44.00
0.064 68.97
and USD 0.01/kWh, respectively. According to IRENA (2012), the LCOE for hydropower plants is generally 0.052
0.046
0.050
low though the value is very site-specific as different projects calculate the capital costs differently. Some 37.52
0.040 0.052
projects take supporting infrastructure into consideration, while several others calculate only the electricity
0.030
generation components. It is also shown that the LCOE of selected projects in the AMS resemble the global
range of USD 0.02 to 0.27/kWh (IRENA, 2012a), proof that hydropower technology development in the 0.020

AMS is not lagging behind global development. 0.010

0.000
Figure 21 LCOE of Hydropower in AMS in COD Years from 2007 to 2017 19.00 29.00 39.00 49.00 59.00 69.00

COD
ASEAN cumulated Hydropower (GW)
0,075 AMS

0,070
Lao PDR
Malaysia
4.4.3 Sensitivity Analysis
Myanmar
The median value of hydropower was used to conduct the sensitivity analysis. The analyses were divided
0,065 Thailand into two results, one for the non-irrigation hydropower plants and one for irrigation hydropower plants.
Vietnam
0,060
% CF
For the non-irrigation plants, the key parameters to the LCOE were installed capacity, installation costs,
0.3600 O&M costs, capacity factor and discount rate. For the non-irrigation type, it was assumed that the installed
0,055
0.5000 capacity was 73 MW, the O&M costs were 1.8%, the capacity factor was 76%, the installed costs were
0,050
0.6000 USD 2,055/kW, the annual degradation rate was 0.5%, the discount rate was 10%, and the project lifetime
USD/kWh

0.7000
was 30 years. The results are shown in Figure 23.
0.8085
0,045

Figure 23 Sensitivity Analysis for Non-irrigation Hydropower Plants

0,040

0,035 -34% 40%

discount rate
0,030

2%
0,025
annual degradation

0,020
-23% 43%
capacity factor*
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
-7,0% 7%

O&M cost
4.4.2 Projection
-43% 43%
Using the ASEAN data, the learning rate (LR) of hydropower was calculated at 16.11% and the b value was
calculated at - 0.25355. This implies that if the accumulated installed hydropower was doubled in the AMS, capital cost

the LCOE would decline by 16.11%. The projected cumulated hydropower for 2025 was obtained from the
5th ASEAN Energy Outlook (ACE, 2017). The LCOE for 2025 is projected to be USD 0.046/kWh. Details
of the projection are shown in Figure 22. 0

As shown above, the capital costs, capacity factor, and discount rate had larger impacts on the LCOE
among the five parameters. A 50% increase in capital costs resulted in a 43% increase in the LCOE. The
same increase in O&M costs resulted in a 7% increase in the LCOE, while a 50% increase in the discount
rate generated a 40% in the LCOE. As the capacity factor was already 76%, it could increase by 30% as
a maximum value for the non-irrigation type. Otherwise, the capacity factor would be over 100%. If the
capacity factor increases by 30%, the LCOE would decline by 33%.

52 53
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

The median value for the all the irrigation type of hydropower plants was 58 MW in installed capacity. It
was assumed that the discount rate was 6%, the capacity factor was 40%, the annual degradation rate was
0.5%, the capital costs were USD 1,756/kW, and the project lifetime was 30 years.

Figure 24 Sensitivity Analysis for Irrigation Hydropower Plants

-33% 39%
discount rate

2%
annual degradation

-33% 100%
capacity factor*

-7,9% 8%
O&M cost

-42% 42%
capital cost

Figure 24 indicates that the capital costs, capacity factor and discount rate had larger impacts on the LCOE
among the five parameters, similar to the non-irrigation type of plants. A 50% increase in capital costs
resulted in a 42% increase in the LCOE. The same increase in O&M costs resulted in an 8% increase in
the LCOE, while a 50% increase in the discount rate generated a 39% decline in the LCOE. If the capacity
factor increased by 50%, the LCOE declined by 33%.

In sum, the three main parameters for hydropower technology are; capacity factor, discount rate, and
capital costs. These three affect the LCOE more than any other parameter and should therefore be the
focus in future development.

54 55
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

56 57
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

5.3 Cost Details

5. WIND POWER
5.3.1 Installation Costs
There are two main cost items for wind power plants, installation costs, and operating and maintenance
costs. The distribution of the installation costs (USD/kW) of all the selected wind power projects is illustrated
5.1 Wind Power Development in ASEAN in Figure 26. Thailand’s projects had the highest and lowest installation costs of USD 2,708 /kW and USD
According to the 5th ASEAN Energy Outlook (ACE, 2017), the Philippines, Thailand, and Vietnam have the 1,518 kW, respectively. The average installation costs for all the selected projects were USD 2,321/kW.
AMS’ largest wind power capacity. At the end of 2017, the installed capacities in these three countries were
430 MW, 427 MW, and 159 MW, respectively. With a large capacity of 218 MW added to its existing fleet, Figure 26 Average Wind Power Project Installation Costs in the AMS
Thailand became the ASEAN country with the most wind power capacity. At the end of 2017, the cumulative
Country
capacities in Thailand, the Philippines, and Vietnam were 648 MW, 427 MW, and 197 MW, respectively.
2800
However, other AMS such as Indonesia are currently developing their own wind power plants. Indonesia is
currently finalising a 75-MW wind power plant in Sulawesi. It will become the largest single wind power plant 2,708
2600
in the ASEAN (ACE, 2017). The growth of wind power installed capacity in the AMS is portrayed in Figure 25.

2400

Installation Cost (USD/kW)

Figure 25 Installed Wind Power Capacity in the AMS from 2005 to 2017 (ACE,2017) 2,321

2200
1200
2000
Country
1000 Philippines 1800
Thailand
Vietnam 1600 1,518
800
Wind (MW)

1400
Philippines Thailand Vietnam
600

5.3.2 Cost Breakdowns

The cost breakdowns for the wind power projects were taken from two project samples in the Philippines
400
and Thailand. For the selected small wind power projects (30 MW), the two largest shares of the cost
breakdown were equipment costs (74.50%) and balance of plant costs (16.25%). The three next largest
shares were: 1) equipment costs (64.45%); 2) transportation/land costs (17.29%); and 3) grid connection
200
system costs (14.78%) (see Figure 27).

Figure 27 Cost Breakdowns for Wind Power Projects

0
2005 2007 2009 2011 2013 2015 2017 100%
2.18%
14.78%
Year 90% Miscellaneous
16.25%
3.46%
5.2 Wind Power Projects in the AMS 80%
4.64%
17.29%
Access/Service Roads Cost
This study analysed eight wind power projects: the Philippines (3), Thailand (4), and Vietnam (1) (see Table 8). 70%
Grid connection system
The average capacity factor for the sample project was 22.14%. Along with solar PV, as a variable (the energy 60%
production fluctuates throughout time) RE technology, wind is expected to have a capacity factor of around 30%. Balance of plant cost
50%

40%
Table 6 Capacity Factors and Number of Wind Power Projects 74.50% 64.45% Transportation and land cost
Capacity Factor (%) and Number of Projects 30%
Equipment cost
Country Mean Min. Max. No. of Projects 20%
Philippines 27.11% 25.53% 28.30% 3
10%
Thailand 19.49% 17.98% 21.00% 4
Vietnam 20.00% 20.00% 20.00% 1 0%
30 80
Overall 22.14% 17.98% 28.30% 8
Installed Capacity (MW)

58 59
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

5.3.3 Operating and Maintenance Costs (O&M) 5.4 Analysis

The distribution of the O&M costs is summarised in Figure 28. On average, the O&M costs were 1.03% of
the installation costs. Compared to the other technologies, the O&M costs for wind power were relatively 5.4.1 LCOE
cheaper as there are no fuel costs. For wind power, the LCOE does not accurately represent the value of wind power because it does not
consider the variability and integration costs. However, the LCOE is still useful for observing the trends in
Figure 28 Average Wind Power O&M Costs (%CAPEX) in the AMS wind power development. As shown in Figure 30, the wind power LCOE in the AMS was moving slightly
AMS upwards. However, the small number of projects may make this an inaccurate conclusion.
2.00%
Figure 29 Wind Power LCOE in the AMS on COD from 2009 to 2017
1.80% COD

0.18
Thailand
1.60%
Philippines
0.16
Vietnam
1.40%

0.14 % CF
1.20% 0.1798
O&M (%Capex)

1.03% 0.12 0.2000

LCOE (USD/kWh)
1.00% 0.2200
0.10 0.2400
0.80% 0.2600
0.08 0.2830

0.60%
0.06

0.40%
0.04

0.20%
0.02

0.00%
Philippines Thailand Vietnam 0.00
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

5.4.2 Projection
The projected LCOE for wind power in 2025 were estimated using equations 2. The b value was -0.2821.
Thus, the learning rate (LR) of wind power was 17.7%. This implies that doubling the accumulated installed
capacity of wind power plants in the AMS will reduce the LCOE cost by 17.7%.

Figure 30 Projection of Wind Power in the AMS

0.200
0.662
0.169 1.256

Mean value of LCOE (USD/kWh)

0.141
0.150

1.031 5.5498
0.100 0.147 0.093

0.050

0.000
0.600 1.600 2.600 3.600 4.600 5.600
C
re
di
tt
he

ASEAN cumulated wind power (GW)

Ph
ilip
pi
ne
s
D

The LCOEs in 2025 were computed using equation 2. The projected cumulated wind power installed
O
E

capacity for 2025 were obtained from the 5th ASEAN Energy Outlook (AEO5, 2017). Thus, the LCOEs for
2025 are projected to be USD 0.093/kWh.

60 61
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

5.4.3 Sensitivity Analysis

The sensitivity analysis of wind power is shown in Figure 31. The median value of eight wind power plants
was 36 MW in installed capacity, the discount rate was 10%, the capacity factor was 22.14%, the annual
degradation rate was 0.5%, the capital costs were USD 2,175/kW, the project lifetime was 25 years, and
the LCOE was USD 0.15/kWh.

Figure 31 Sensitivity Analysis for Wind Power in the AMS

-31% 34%
discount rate

2%
annual degradation

-33% 100%
capacity factor*

-6,1% 6%
O&M cost

-44% 44%
capital cost

Among five parameters, capital costs, capacity factor and discount rate were the key parameters impacting
the LCOE of wind power plants. The most impactful option to decrease the LCOE of wind power plants was
to reduce capital costs. A 50% decrease in capital costs resulted in a 44% increase in the LCOE to become
USD0.08/kWh. In the meantime, if the capacity factor increased by 50%, the LCOE declined by 33% to
become USD 0.1/kWh. Another option was to decrease the discount rate by 50%, from 10% to 5% which
could reduce the LCOE by 31%.

62 63
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

64 65
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

6.3 Cost Details

6. BIOMASS
6.3.1 Installation Costs
The cost components, including installation costs are generally the same for all sizes of biomass power
plants, but not in the same proportions for plants of different sizes and locations. The distribution of the
6.1 Biomass Development in the ASEAN installation costs (USD/kWh) for the 19 biomass power projects is given in Figure 33. On average, the
The installed capacity of biomass plants in the AMS was around 3,303 MW in 2007 and almost doubled to installation costs of the biomass projects were USD 2,149/kW.
6,560 MW in 2017. Thailand and Indonesia were leading in the total installations. In 2017, the capacities
in the two countries were 3,349 MW and 1,732 MW, respectively, together constituting 77% of the total Figure 33 Installation Costs for Biomass Projects
installed capacity in the AMS (see Figure 32). Country

3200
Figure 32 Installed Biomass Capacity in the AMS from 2005 to 2017 (source: ACE,2017)
3000 3,080

Country 2800
5K
Brunei Darussalam
Cambodia 2600

Indonesia

Installation cost (USD/kW)

2400
4K Lao PDR
Malaysia 2200 2,149

Philippines
2000
3K Singapore
Biomass (MW)

Thailand 1800

Vietnam
1600
2K
1400

1,357

1K Malaysia Philippines Thailand

6.3.2 Cost Breakdowns

0K The cost breakdowns of biomass power plants presented in Figure 34 indicate that the major cost portions
2005 2007 2009 2011 2013 2015 2017 of the installation costs are common to all plant sizes, namely, equipment costs and fuel costs. These four
Year selected project samples were drawn from Malaysia, the Philippines, and Thailand.

Figure 34 Breakdown of Biomass Project Costs

Electricity generation from solid biomass in the AMS increased from 9,491 GWh in 2007 to 27,264 GWh
100%
in 2016. It is worth noting that it grew substantially from 12,366 GWh in 2010 to 20,355 GWh in 2011 as a Financial cost during construction
90%
result of the dramatic change in the overall capacity factor. Administration costs
80%
Consultation, Licenses and Permits
6.2 Biomass Projects in the AMS 70% Grid connection
This study examined 19 biomass power projects: Malaysia (5), the Philippines (5), and Thailand (9), as Installation and commissioning costs
60%
summarised in Table 7. Import duty & taxes
50%
Transport & Insurance
Table 7 Capacity Factors and Number of Biomass Projects 40% Equipment cost
Capacity Factor (%) and Number of Projects Design, Engineering, Project management
30%
Country Mean Min. Max. No. of Projects Civil works
20%
Malaysia 86.32% 25.53% 91.70% 5 Land acquisition & development
Philippines 79.00% 70.00% 88.00% 5 10%

Thailand 70.00% 33.50% 87.00% 9 0%

Overall 76.61% 33.50% 91.70% 19 8.3 12 1 5
Installed Capacity (MW)

66 67
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

6.3.3 Operating and Maintenance Costs (O&M)
The two main components of a biomass project’s annual costs are: O&M costs and fuel costs. The
distribution of the O&M costs is summarised in Figure 35 in terms of percentage of biomass installation
costs. On average, the O&M costs were 5.26% of the biomass installation costs while the median was
5.32%. The minimum value was 3.12% in Thailand and the maximum value was 7.96% in Malaysia.
Figure 35 Average Biomass O&M Costs (%CAPEX) in the AMS
Country
The average fuel cost in each AMS was USD 10.3 million/ton in Malaysia, USD 24.15 million/ton in the
Philippines, and USD 18.5 million/ton in Thailand. However, it is important to note that the fuel costs
depend on the types of biomass used and its abundance in each country. The overall average fuel cost of
all the participating plants was USD 17.8 million/ton. Feedstock availability was the main factor accounting
for the differences among the average costs in the AMS. Thus, a broad range of LCOE values occurred
if several biomass plants were compared to each other. Hence, a deeper quantitative analysis or a more
specified categorisation are required before accurate comparisons are made.

8%
6.4 Analysis
7.96% The levelised costs of the 19 biomass projects were calculated from the three main components: installation
costs, O&M costs, and fuel costs. These costs are summarised in Figure 37. While the project samples
used diverse forms of feedstock, the LCOE values were quite similar.
7%

Figure 37 Biomass LCOE in COD from 2006 to 2017

O&M (%Capex)

6%
COD

5% 0.18
Malaysia
5%
Philippines
0.16
Thailand
4% 0.14
% CF
0.3350
0.12
0.6000
3%
3.12% 0.8000
0.10

USD/kWh
Malaysia Philippines Thailand 0.9170

0.08

6.3.4 Fuel Costs

The second major component of the costs was the fuel costs, which are illustrated in Figure 36. The fuel costs 0.06

varied widely among the different AMS as different feedstocks were used in the various biomass plants.
0.04

Figure 36 Average Biomass Fuel Costs in the AMS

0.02
Country

0.00
30 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

29.80

25
Avg. Fuel Cost (Mil. USD/ton)

20
17.81

15

10

5
6.41

0
Malaysia Philippines Thailand

68 69
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

70 71
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

7. GEOTHERMAL
Figure 39 Capacities and Capacity Factors of Geothermal Power Plants Included in This Study

120 95 95 95 95 95 100

90
100
76 80
7.1 Geothermal Development in the ASEAN 70

Installed capacity (MW)

Only three AMS have geothermal power plants: Indonesia, the Philippines, and Thailand. In 2017, the total 80

% Capacity Factor
60
installed geothermal capacity was is 3,877.7 MW. This was shared almost equally between Indonesia and
the Philippines, with 1,949.5 MW and 1,927.9 MW, respectively. Thailand had a small 0.3 MW portion. 60 50
110
40
Figure 38 Installed Capacities of Geothermal Power in the AMS from 2007 to 2017 40
30
4,000 3,877.70 55 50 20
20
3,559.40
3,500 3,354.40 20 20 10
3,319.40
3,142.30 3,155.30 3,184.30 3,211.80 10
3,010.30 3,059.30 0 0
2,938.30
3,000
Installed capacity (MW)

Installed capacity % Capacity Factor

2,500

2,000
7.3 Cost Details
1,500 Like most power plants, the major cost components can be divided into installation costs and operating
and maintenance costs.
1,000

500 7.3.1 Installation Costs

The installation costs of the geothermal plants included in this study were gathered and presented together
0 with the cost breakdowns of a selected geothermal power plant. The installation costs of the geothermal
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
power plants are shown in Table 9. These costs were calculated as the installation costs per unit of installed
Year capacity for each project. The distribution of the cost per unit of capacity ranged widely from USD 1,411/kW
to USD 12,075/kW. In fact, most of the costs were more than USD 6,000/kW, except the cost of a power
Indonesia Phillippines
plant, which was as low as USD 1,411/kW. This could be the reason why the reported total costs excluded
the construction costs of the steam station. Instead, the steam was considered as a supply from a separate
The electricity generated by the geothermal power plants in the AMS gradually increased from 17,238 plant, and the price of steam was included in the LCOE calculation.
GWh in 2007 to 21,727 GWh in 2016. The generated electricity slightly dropped from 19,668 GWh in 2012
to 19,020 GWh in 2013, then increased again from 2014 to 2016. Table 9 Installation Costs for Geothermal Plants in the AMS
Installation Cost  
AMS Mean Median Min Max
7.2 Geothermal Projects in the AMS Indonesia 8,593 8,023 6,251 12,075
Four of the AMS’ geothermal power plants are in Indonesia and two are in the Philippines. Philippines 2,497 2,497 1,411 3,583
Overall 6,561 6,668 1,411 12,075
Table 8 Capacity Factors and Number of Geothermal Projects
Capacity Factor (%) and Number of Projects
No. of Projects Mean Min. Max. No. of Projects 7.3.2 Cost Breakdowns
Indonesia 95.00% 95.00% 95.00% 4 Cost details were available for only one project (see Figure 40). The largest component, more than 75% of
Philippines 85.38% 76.00% 95.00% 2 the total cost of a geothermal power plant, was equipment costs, civil works, design, engineering, and project
Overall 91.79% 76.00% 95.00% 6 management. Almost 10% of the total installation costs were financial costs during construction because
the construction of a geothermal power plant generally requires a longer time. Of the total initial investment,
6.7% was required for exploration, as well as land acquisition and development. Transportation, insurance,
The plant capacity ranges from 10 MW to 110 MW, as shown in Figure 39. Most of the plants operated at installation and commissioning costs, and grid connection accounted for 4.5%, while the remaining 3.8%
a high capacity factor of 95%. There was only one plant that provided electricity at a 76% capacity factor. of the total costs was for administration.

72 73
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Figure 40 Cost Breakdown of a Geothermal Power Plant Table 10 O&M Cost for Geothermal plants in the AMS
Data for Figure 41: O&M Cost (% of CAPEX)
100%
9.44% Financial cost during Country Mean Median Min Max
90% construction Indonesia 3.67% 3.67% 3.67% 3.67%
3.81%
4.58% Philippines 10.20% 10.20% 3.72% 16.67%
80% Overall 5.84% 3.67% 3.67% 16.67%
Administration cost
70%

60%
7.4 Analysis
Transportation & Insurance,
50% Installation and commissioning
75.46%
costs, Grid connection, etc. 7.4.1 LCOE
40% The calculated levelised costs of the geothermal power plants in the AMS are given in Figure 42. The
LCOE ranged from USD 0.09/kWh to USD 0.21/kWh. Most of the LCOEs of the geothermal plants with
Equipment Cost, Civil works,
30% Design, Engineering, Project capacities of 50 MW and above were about USD 0.10/kWh. The smaller geothermal power plants had
Management higher LCOEs of USD 0.15/kWh and USD 0.21/kWh.
20%

Exploration, Land acquisition

Figure 42 LCOE for Geothermal Power
10%
& development
6.70% Indonesia
0% Philippines
50
0.25
Installed Capacity (MW)

0.20

7.3.3 Operating and Maintenance Costs (O&M)

LCOE (USD/kW)
The O&M costs of geothermal power plants are summarised in Figure 41. The average O&M costs for all 0.15
the plants was 5.84% of CAPEX. These are in the same range as the O&M costs for geothermal power
plants as reported by the Department of Energy, USA (USDOE, 2016). There is a data point of USD 0.01/
0.10
kWh that is much lower than the others. This is probably because the O&M costs of the steam station had
been excluded from the reported figure.
0.05
Figure 41 O&M Costs of Geothermal Power Plants
Indonesia
0.00
Philippines
0 20 40 60 80 100 120
18%

16%
Installed capacity (MW)
14%
O&M Cost (%CAPEX)

12%
7.4.2 Projection
10%
Due to the small number (6) of projects used as the sample for this study, it is not possible to formulate an
8% accurate model to predict the LCOE of geothermal projects.

6%
7.4.3 Sensitivity Analysis
4% Sensitivity analysis was conducted to determine the key parameters affecting the LCOE. The median
values from all the geothermal projects in this study were used for the calculations: installed capacity of
2%
44 MW, capacity factor of around 92%, annual degradation rate of around 0.5%, and O&M costs of 4% of
0% CAPEX. The discount rate was set at 10%, and the project lifetime was assumed to be 30 years. A variation
0 20 40 60 80 100 120 of about 50% was used for the discount rate, annual degradation, capacity factor, O&M costs, and capital
costs, and the LCOE results were compared, with and without parameter variation cases. The impacts
Installed capacity (MW) measured are presented in Figure 43 as the percentages of change in the LCOE.

74 75
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Figure 43 Sensitivity Analysis for Geothermal Plants in the AMS

-27% 30%
discount rate

2%
annual degradation

0% 100%
capacity factor*

-13,7% 14%
O&M cost

-36% 36%
capital cost

Figure 43 shows the impact of the key changes caused by the parameters to the LCOE of geothermal
plants. A 50% increase in the discount rate resulted in a 30% increase in the LCOE, while a 50% decrease
resulted in a 27% decrease in the LCOE. A 50% increase in the O&M costs resulted in a 14% increase in
the LCOE, while a 50% decrease in O&M costs resulted in a 13.7% decrease in the LCOE. A 50% increase
in capital costs resulted in a 36% increase in the LCOE, while a 50% decrease in capital costs resulted in a
36% decrease in the LCOE. As the capacity factor is inversely related to the LCOE, a 50% decrease in the
capacity factor resulted in a 100% increase in the LCOE. For annual module degradation, a 50% increase
in the reference value resulted in an increase of 2% in the LCOE.

Credit ASEC
76 77
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

78 79
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

8. ANALYSIS OF POLICY RECOMMENDATIONS

Figure 45 Comparison of RE Technologies’ LCOE with the Residential Selling Price of Electricity in the AMS
Technology
Biomass Hydropower Solar PV Wind
0.30 Indonesia
Lao PDR

Based on the study of five selected RE technologies in the AMS, it can be seen that there has been 0.25 Malaysia

LCOE (USD/kWh)
Myanmar
encouraging development. However, several measures are needed to fulfil the APAEC target. In formulating
Philippines
these measures, important parameters that have a major influence on RE development have been 0.20
Singapore
determined. To identify the important parameters, policy measures are needed to further implement them.
0.16 Thailand
To elaborate on these two points, this section focuses on: 1) analysing the affordability of RE in the AMS;

Residential selling price in AMS

0.15
Vietnam
2) identifying important parameters and related policy measures; and 3) examining policy approaches to
encourage the implementation.
0.10
% CF
8.1 Affordability of RE in the AMS 0.1079
0.05 0.4000
At present, conventional energy sources are still more cost-efficient than RE technologies. However, with 0.05
0.6000
the rapid depletion of fossil fuels and increasing energy demand, the development of RE is still highly 0.8000
important. Moreover, it is important to juxtapose a technology’s costs against its benefits in order to 0.00
0.9170
2007 2017 2007 2017 2007 2017 2007 2017
understand the long-term impacts of transitioning to a particular energy source (IRENA, 2018a).

Thus, this section focuses on comparing the LCOE of RE technologies and conventional technologies. This
analysis is to be used as a basis for policy recommendations. Based on the LCOE calculations for each RE In Figure 44, the LCOEs are compared to the generation costs of PLN (Indonesia), TNB (Malaysia), and
technology, comparisons between the electricity generation costs and electricity’s residential selling price EGAT (Thailand). In Figure 45 the LCOEs are compared to the residential selling price in the AMS: USD
in the AMS (Infrastructure Asia, 2018) are drawn in Figure 44 and Figure 45. 0.1/kWh for Indonesia, USD 0.05 /kWh for Lao PDR, USD 0.09/kWh for Malaysia and Vietnam, USD 0.12/
kWh for Thailand and USD 0.15/kWh for the Philippines. Only biomass and hydropower plants offer more
Figure 44 Comparison of LCOE with Energy Generation Costs in the AMS competitive costs against conventional energy generation in the AMS. This is likely due to the fact that these
technologies have reached a relatively mature stage of development (Ellabban et al., 2014). However, as
Technology the costs of solar PV are steeply declining, solar PV could be a promising option for development. Given
Biomass Hydropower Solar PV Wind
0.30 Indonesia a few years of development, it could potentially compete with conventional energy sources. Moreover,
Laos PD it could be realistically assumed that the price of conventional energy sources will continue to increase.
Malaysia Several factors, such as subsidies, resource scarcity, and the constant aging of the existing facilities will
PLN Diesel: 0.25
0.25 Myanmar push up the costs of conventional energy over time.
Philippines
Singapore There are several points to be considered in favour of RE technologies. The continual technological
0.20
Thailand developments will surely decrease the price of RE technologies while the capacity factor will constantly
Vietnam increase (Sovacool, 2008). On the other hand, more precise calculation of the costs could also change the
LCOE (USD/kWh)

current comparison methods. As it stands, the current LCOE does not favour variable RE systems such as
0.15
solar PV and wind (Ueckerdt et al., 2013). Hence, constant financial support is needed for RE projects. In
% CF
EGAT NGPP: 0,11 analysing various methods to support RE development, important parameters are identified based on this
0.1079
0.10 TNB Avg: 0,095; EGAT Avg: 0,094 0.4000
study’s projections and sensitivity analyses.
PLN Avg: 0,077 0.6000
0.8000
0.05 0.9170

0.00
2007 2017 2007 2017 2007 2017 2007 2017

80 81
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

8.2 Important Parameters 8.2.2 Capital/Installation costs

With respect to the sensitivity analysis of the five RE technologies, three parameters were identified as having
major impacts on the LCOE for RE projects: 1) discount rates; 2) capital costs; and 3) capacity factor.
8.2.1 Discount Rates
The discount rate is one of the major parameters for LCOE calculation and has a great impact on the
LCOE. For the same amount of future value, a large discount rate results in a small present value, while a
small discount value leads to a larger present value. Thus, it is obvious that by obtaining different discount
rates for an energy project, the competitive LCOE will be different. Discount rates are subjective due to
factors contributing to the rates, such as inflation, interest rate, exchange rate and others, all of which vary
over time. The LCOE calculations generally employ only one discount rate and are assumed to be constant
throughout the project’s lifespan.
The changes in the LCOE with different discount rates are shown in Figure 46. The baseline case study
is solar PV, i.e., the same as for the solar PV sensitivity section. The LCOE for this project was USD 0.20/
kWh. Its discount rate was 10%. It was varied more and less by 1% (X-axis). When the discount rate
was reduced from 10% to 9%, a 7% decline in the LCOE can be observed. If the policy mechanism can
help reduce the discount rate from 10% to 6%, the LCOE can fall from USD 0.20 to 0.15 /kWh. This can
enhance its competitiveness relative to conventional generation. Meanwhile, if this same project raises its
discount rate by only 2%, from 10% to 12%, the LCOE will increase by 14%, which is USD 0.23/kWh.
As observed in the sensitivity analysis for each technology, a shift in capital costs is highly impactful on
the LCOE calculations. Capital costs affect the LCOE directly: the higher the capital costs, the higher
the LCOE will be. However, different methods of categorising costs could lead to significant differences
between the capital costs of two similar projects, thus resulting in a significant difference in the LCOE.
For example, some hydropower projects included irrigation and storage infrastructure in the capital costs,
while others consider only the hydropower generator components (Zarfl et al., 2015). Consequently, capital
costs should be defined accurately and cross-checking between projects is important as differences in this
parameter lead to significant changes in the LCOE.
The sensitivity analysis for five RE technologies showed that reductions in the capital costs can significantly
decrease the LCOE for all technologies. The policy mechanisms influencing capital cost changes are
examined as follows:
A. Baseline Solar PV project
Two solar PV case studies were selected from the small-scale (under 100 kWp of installed capacity)
category and the large-scale (over 1000 kWp of installed capacity) category based on the cost breakdown
availability. The key variables for these case studies were taken from the projects utilised for the samples.
a) A small-scale solar PV

Figure 46 LCOE Change with Different Discount Rates

Technical Parameters Cost and Financing Parameters
40%
36%
Installed capacity: 24 kWp CAPEX: USD 1,680/MW
28%
30% Capacity factor: 17.2% Discount rate: 10%
21%
20% Annual production degradation: 0.7% Baseline IRR: 16.58%
14%
7% Construction period: 1 year LCOE: USD 0.142/kWh
10%
Project useful life: 25 years Solar Feed-in Tariff: 0.21 USD/ kWh
0%
0%
6% 7% 8% 9% 10% 11% 12% 13% 14% 15%
-7% Policy support mechanisms: 1) exemption of import duties and taxes; and 2) a decrease in solar rooftop
-10%
equipment costs by 20% and 30% (direct subsidy or technology learning curve).
-13%
-20%
-20% The LCOE of this solar PV project had already reached grid parity in Singapore and the Philippines as
-26%
the sampled cost was already lower than the electricity cost (Figure 47). With the import duty and taxes
-30% exempted, as shown in Figure 48, the LCOE was slightly reduced by USD 0.004/kWh, and the IRR
increased from 16.58% to 17.13%. Meanwhile, reductions in the cost of solar rooftop equipment by 20%
and 30% can moderately reduce the LCOE and increase the IRR. The cost of equipment can be decreased
by either direct subsidy or technology improvement (learning-curve). If the cost of the solar PV equipment
decreases by 20% and 30%, grid parity can be reached in Thailand, but not yet in Indonesia, Malaysia,
Vietnam and Lao PDR. Meanwhile the IRR will rise to 19.25% and 20.85%, respectively.

82 83
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Figure 47 Impact of Policy Mechanism in LCOE and Grid Parity for Small-scale Solar PV b) Large-scale Solar PV
0.180 Technical Parameters Cost and Financing Parameters
0.167
0.160 0.157
0.142 0.138 Installed capacity: 13 MWp CAPEX: USD 1,620/MW
0.140
0.125 0.127
0.120 0.117 Capacity factor: 16.6% Discount rate: 4.13%
0.110
0.093 0.097
0.100
Annual production degradation: 1% Baseline IRR: 10%
0.080
Construction period: 1 year LCOE: USD 0.134/kWh
0.060 0.050
0.040 Project useful life: 25 years Solar Feed-in Tariff: USD 0.19/ kWh
0.020
This project had the import duty and taxes exempted. Therefore, the policy support mechanism can be
0.000
suggested as follows:
With baseline parameters

Without Import duty & taxes

Decreasing of solar rooftop

equipment cost 20% (Direct Subsidy
or technology learning curve)

Decreasing of solar rooftop

equipment cost 30% (Direct Subsidy
or technology learning curve)

Indonesia

Malaysia

Thailand

Singapore

Philippines

Vietnam

Lao PDR
Policy support mechanism: 1) a 30% and 50% reduction in land acquisition and development; and 2) a
decrease in solar rooftop equipment costs by 20% and 30% (direct subsidy or technology learning curve).
Details of the impacts are provided in Figure 49 and Figure 50.

Electricity Tariff Figure 49 Impact of Policy Mechanism on LCOE and Grid Parity for Large-scale Solar PV

0.167
0.180
0.156
0.160
0.134 0.132 0.131
0.140 0.124 0.127
0.118
0.120 0.110
0.097
Figure 48 Impact of Policy Mechanism on IRR for Small-scale Solar PV 0.093
0.100

22.00% 0.080

20.85% 0.060 0.050

0.040
20.00%
19.25% 0.020

0.000
18.00%

With baseline parameters

Decreasing of solar rooftop

equipment cost 20% (Direct Subsidy
or techonology learning curve)

Decreasing of solar rooftop

equipment cost 30% (Direct Subsidy
or techonology learning curve)
Land acquisition & development
mechnism (-30% reduction)

Land acquisition & development

mechnism (-50% reduction)

Indonesia

Malaysia

Thailand

Vietnam

Lao PDR
Singapore

Philippines
16.58% 17.13%

16.00%

14.00% Electricity Tariff

12.00%

10.00%
The LCOE of this large-scale solar PV project had also already reached grid parity in Singapore and the
With baseline
parameters

Without Import duty &

taxes

Decreasing of solar
rooftop equipment cost
20% (Direct Subsidy or
technology learning curve)

Decreasing of solar
rooftop equipment cost
30% (Direct Subsidy or
technology learning curve)

Philippines because the sampled cost was already lower than the cost of electricity. By using land subsidies
or partial subsidies from the government, the LCOE will not yet reach grid parity in Thailand whilst the IRR
will increase by less than 1%. Reducing the cost of the solar PV equipment by 20% to 30% can moderately
reduce the LCOE and increase the IRR. If the solar PV equipment decreases by a certain percentage,
either by direct subsidy or technological improvement (learning curve), the LCOE of this project can reach
grid parity in Thailand but not yet in Indonesia, Lao PDR, Malaysia, and Vietnam. Meanwhile the IRR will
rise by around 2-3%.

84 85
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Figure 50 Impact of Policy Mechanism on IRR for Large-scale Solar PV Figure 51 Impact of Policy Mechanism on LCOE and Grid Parity for Wind Power
14.00% 0.180
0.167
0.159
13.35% 0.160 0.156
0.146
0.140
13.00% 0.140 0.131
0.127
0.120

LCOE (USD/kWh)
12.12% 0.110

12.00% 0.100 0.093

0.097

0.080

11.00% 0.060
10.62% 0.050
10.40%
10.09% 0.040

10.00% 0.020

With baseline parameters

Decreasing of equipment cost

by 20% (Direct Subsidy or

Lao PDR
techonology learning curve)

Decreasing of solar rooftop

equipment cost 30% (Direct Subsidy
or techonology learning curve)

Transportation and land

cost (-50% reduction)

Indonesia

Malaysia

Thailand

Singapore

Philippines

Vietnam
9.00%

8.00%
With baseline parameters

Land acquisition & development

mechnism (- 30% reduction)

Land acquisition & development

mechnism (- 50% reduction)

Decreasing of solar power

equipment cost (deduct
equipment cost by 20%
through either direct subsidy or
technologylearning curve)

Decreasing of solar power

equipment cost (deduct
equipment cost by 20%
through either direct subsidy or
technologylearning curve)
Electricity Tariff

The LCOE of this 80-kW wind power project had already reached grid parity in Singapore as the sampled
cost was already lower than the electricity cost. A reduction in the costs of this wind power equipment by 20%
B. Wind power project and 30% can moderately reduce the LCOE and increase the IRR. If the cost of the wind power equipment
Key variables were taken from one of the wind projects used in this study. decreases by a certain percentage, the LCOE of this project can reach grid parity in the Philippines but
not yet in Indonesia, Lao PDR, Malaysia, Thailand, and Vietnam. Meanwhile the IRR will rise by about
Technical Parameters Cost and Financing Parameters
2-3.5%. In addition, if the transportation and land acquisition is subsidised or is partially supported by the
government, the LCOE will decrease slightly, but still not yet reach grid parity in most of the AMS. At the
Installed capacity: 80 kW CAPEX: USD 2,700/MW
same time, the IRR will increase slightly by around 1%.
Capacity factor: 20% Discount rate: 10%

Annual production degradation: 1% Baseline IRR: 12.25%

Construction period: 1 year LCOE: USD 0.16/kWh

Project useful life: 25 years Wind Feed-in Tariff: 0.19 USD/ kWh

This project had the import duties and taxes exempted. The major capital costs were equipment and
transportation and land cost. Therefore, the policy support mechanisms are as follows:

Policy support mechanisms: 1) a 50% reduction in transportation and land acquisition; and 2) decreasing
of wind power equipment costs by 20% and 30% (direct subsidy or technology learning curve). Details of
the impacts are elaborated on in Figure 51 and Figure 52.

86 87
 Levelised Costs of Electricity (LCOE) for Selected Renewable Energy Technologies in the ASEAN Member States II

Figure 52 Impact of Policy Mechanism on IRR for Wind Power Figure 53 Impact of Policy Mechanism on LCOE and Grid Parity for Biomass

17.00% 0.180
0.167
16.00% 15.66% 0.160 0.156

15.00% 0.140
14.37%
0.127
14.00% 13.62% 0.119
0.120 0.118
0.115
0.109 0.110
13.00%
12.25% 0.100 0.097
0.093

LCOE (USD/kWh)
12.00%
0.080
11.00%
0.060
10.00% 0.050

0.040
9.00%

8.00% 0.020
With baseline parameters

Decreasing of equipment
cost 20% (Direct Subsidy or
techonology learning curve)

Decreasing of
equipmentcost30% (Direct
Subsidy or techonology
learning curve)

Transportation and land cost

(-50% reduction)
0.000

With baseline parameters

Without Import duty & taxes

Decreasing of equipment cost 20%

(Direct Subsidy or techonology
learning curve)

Fuel price decreases 20%

Indonesia

Malaysia

Thailand

Singapore

Philippines

Vietnam

Lao PDR
C. Biomass project
Key variables from one of the biomass projects examined in this study is used as an example.

Technical Parameters Cost and Financing Parameters

Figure 54 Impact of Policy Mechanism on IRR for Biomass
Installed capacity: 5 MW CAPEX: USD 2,700/MW 18.50%
17,91%
18.00% 17,69%
Capacity factor: 79% Discount rate: 7%
17.50%
Annual production degradation: 0.3% Feedstock: 70 tons per year
17.00%
Construction period: 1 year Price: USD 20 per ton 16.50%
15,90%
Project useful life: 25 years 16.00%
15,21%
15.50%
Baseline IRR: 12.25%
15.00%
LCOE: USD 0.16/kWh
14.50%

Wind Feed-in Tariff: USD 0.19 USD/ kWh 14.00%

13.50%
Policy support mechanism: 1) exemption from import duties and taxes; 2) decrease in solar rooftop

Without Import duty & taxes

With baseline parameters

Decreasing of equipment
cost 20% (Direct Subsidy or
techonology learning curve)

Fuel price decreases 20%

equipment cost by 20% (direct subsidy or technology learning curve); and 3) fuel price reduction by 20%.
The LCOE of this 5-MW biomass project had already reached grid parity in Singapore, the Philippines,
and Thailand as the sampled cost was already lower than the electricity cost. Reducing the costs of the
biomass equipment by 20% and exempting the import duties and taxes will moderately reduce the LCOE.
If the fuel price decreases by 20%, the LCOE of this project can reach grid parity in Indonesia, but not in
Lao PDR, Malaysia, and Vietnam. Meanwhile the IRR will rise less than 1% if the duty and taxes policy is
implemented. If the reductions in the costs of equipment and fuel are carried out, the IRR will increase by
around 2.5-3%. Details of the impact of policy mechanisms are elaborated in Figure 53.

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8.3 Policy Coordination

One of the most important instruments used as the baseline of policy analysis is the assembly and
presentation of evidence. The coordination should go beyond simply presenting research findings as
evidence but also aim at catering to policymakers’ knowledge needs. It comes in the form of an interactive
workshop that puts knowledge co-creation at the centre of the activities. Moreover, policy dialogue aims
at testing the conclusions and recommendations against the policy reality and incorporating policymakers’
feedback on the research findings (Davies, 2012). The outcome of the dialogue will be further handed to
the AMS’ governments for implementation of the development plan.

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9. CONCLUSION

Relative to the global RE development, RE development in the

AMS is currently on pace. This study reveals that the costs of
electricity generated from biomass and hydropower in the AMS are
comparable with the costs of electricity generated from conventional
energy sources, but that solar PV and wind are showing promise.
However, several measures are needed to not only reduce the
current RE costs but also create an environment that can support
the growth of RE.

Three important parameters of RE development are identified

through sensitivity analysis: 1) discount rates; 2) capital costs; and
3) capacity factor. Variations in these values raised or reduced
the LCOE more significantly compared to the other variables.
The projections of future LCOE for solar PV, hydropower, and
wind power show a slight decline which can be realised only if the
existing financial support for RE is maintained and improved.

Targeted support from governments should be deployed for the

three important parameters to assist the development of RE. These
can be aligned with the APAEC strategic action plan to enhance
and implement RE policy in order to achieve the RE target in the
TPES by 2025. For example, subsidies and financing mechanisms
(i.e. taxes or land acquisition) could be created to reduce the
capital costs. Additionally, specific RE research grants could be
distributed to encourage technology production in the region as
well as efficiency growth.

Using these results, the AMS governments could refer to this

study when making targeted policy measures for RE and creating
more accurate regional targets and policies. This research could
foster an enabling environment for RE development, not only
through reducing risk but also by adding extra incentives to all the
stakeholders involved. Nonetheless, with global RE development
moving swiftly, its compatibility with society’s development should
always be constantly updated.

In conclusion, this study should be used as the baseline for a co-

created programme between AMS’ governments and relevant
stakeholders. This will ensure that the development of RE in the
ASEAN is in line with stakeholders’ interests, and more importantly,
with AMS governments’ interests as they are holding the important
role of policymakers.

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