Scientists at Switzerland's research institute ETH Zurich have investigated the financial viability of alpine PV projects and have found their levelized cost of energy (LCOE) ranges from €0.097 ($0.10)/kWh to 0.162/kWh.
Their analysis was based on 6,561 scenarios with varying investment factors such as capital expenditures, irradiation levels, financing conditions, power prices, and Swiss subsidy scheme details. It considered three PV project typologies: ground-mounted PV in high-altitude mountain terrain; wall-mounted PV on high-altitude hydro dam walls; and floating PV on high-altitude lakes.
“We study these technology archetypes under three revenue models available in Switzerland: electricity sales to captive utility customers, corporate PPAs, and direct wholesale market sales,” the academics explained in the paper “Harnessing solar power in the Alps: A study on the financial viability of mountain PV systems,” which was recently published in Applied Energy. “Our analysis captures the diversity of possible business models and identifies the most viable ones, illuminating the likely investors in Swiss mountain PV.”
The research group also explained that the project finance model used for the financial viability assessment was based on 13 structured interviews with project developers, as well as a Swiss-specific solar irradiation dataset and power price projections. It also used exploratory sequential mixed methods to conduct an initial qualitative phase of data collection, a quantitative data collection, and a final analysis from the two separate strands of data.
Through the interviews, the scientists were able to find that capex costs range between €2,231/kW and €4,182/KW for ground-mounted projects and up to €3,802/kW and €7,108/kW for wall-mounted and floating projects, respectively.
“The captive customer business model is the most profitable, leading to median project and equity internal rates of return (IRRs) of 5.8% and 8.6% for ground-mounted projects, respectively, assuming subsidies,” they emphasized. “Corporate PPA and merchant business models are less profitable, with median equity IRRs between 5.7% and 3.2% and median project IRRs of 4.6% and 4% for ground-mounted projects.”
The PPA model, by contrast, is described as difficult to utilize, due to a combination of lower capex levels, higher solar irradiation, and favorable financing conditions. “The PPA business model would require prices to reach around €0.174/kWh and €0.345/kWh in 2040 and 2050 to be profitable,” the group added.
The scientists explained that the median LCOE of alpine PV projects is comparable to that of rooftop PV in the Swiss midlands, with the cost differences increasing when comparing winter LCOE, as mountain PV plants have around two times lower generation costs.
“The prevailing business models in Switzerland favor utilities with a customer base, achieving median equity IRRs of 8.6%. Selling electricity at a €0.079/kWh 10-year PPA would guarantee profitability only with aggressive electricity price assumptions, sculpted debt repayment, and lower capex,” they further explained.
Looking forward, the research team intends to look into alpine PV costs in more detail to “understand the differences between various project designs.”
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