TODAY’S STUDY: BIG SOLAR GETS COMPETITIVE
PV Grid Parity Monitor; Utility-scale 1st issue
David Pérez, Carolina Fondo, Laura Gutiérrez, July 2014 (Eclareon)
This is the fourth issue of the Grid Parity Monitor and the first one to be exclusively focused on the utility-scale segment (50 MWp PV plants with a single-axis tracking system). This report analyzes PV competitiveness in wholesale energy markets and provides an outline of the electricity regulation in six different countries (Chile, Italy, Mexico, Morocco, Turkey and USA (Texas)).
The previous GPM reports were centered on residential and commercial customers operating under a net metering scheme. It is worth mentioning that the approach of this GPM issue differs considerably from past GPM’s methodologies: while for residential and commercial clients the LCOE is calculated to analyse so-called grid parity proximity, the utility-scale issue focuses the analysis on generation parity. In so doing, the report determines a theoretical tariff which fulfils profitability requirements for investors. This required tariff is compared to local wholesale prices in order to determine if generation parity exists in the country.
The required tariff is calculated based on the economics of the PV plant under a project finance scheme, since this is currently the most common form of financing. Other financing possibilities that could significantly improve generation parity results have not been analysed in this report1.
The results of the GPM analysis (summarized in the Figure below) show that only Chile is in a full generation parity situation, although Morocco, Italy and Mexico are or have been close recently.
The following conclusions on the utility-scale segment (50 MWp plants) can be drawn from the Figure above:
• In Chile, high electricity prices and irradiation levels provide a generous generation parity, which presents a wide enough margin to protect against potential falls in market prices.
• Generation parity in Italy has worsened in the last semester, mainly due to a sharp decrease in wholesale prices. However, the volatility of the Italian market advises to monitor this country recurrently.
• Mexico is undergoing a major regulatory reform that is liberalizing generation activities and will presumably impact wholesale prices. As the Mexican required tariff presents reasonably attractive values, this market will be revised in further GPM issues.
• Moroccan required tariffs are very close to achieve full generation parity. The increase in electricity prices foreseen for the next 4 years will boost the attractiveness of this country for utility-scale PV generation.
• High capital costs (both for equity and debt) and high CPI rates hinder generation parity in Turkey. Nevertheless, electricity is relativeley expensive and shows an ascending trend.
• Although Texas shows the lowest required tariff of this GPM analysis, wholesale market rates are not attractive enough to allow for generation parity.
The fact that generation parity has not been reached in a country does not imply that utility-scale PV plants will not be built. Other reasons may trigger such an investment, for example:
• A RPS (Renewable Portfolio Standard) system is in place
• A FiT exists
• A convenient PPA scheme has been granted to the investor
Given the great interest within the solar industry for this particular PV segment and the proliferation of specific solar auctions in different countries worldwide, the next issue of the GPM for utility-scale plants (to be released in 2015) will monitor the current trends in utility-scale generation globally. New countries (Central America and MENA) and different financing schemes (corporate bonds) for PV installations will be included in the 2015 issue.