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Estimating the Low-Carbon Technology Deployment Costs and INDC Targets
Abstract
This chapter investigates the cost of deployment of low-carbon technologies (LCTs) in India, Indonesia, China, Cambodia, the Philippines, Malaysia, Thailand and Vietnam to successfully achieve their Intended Nationally Determined Contribution (INDC) targets by 2030, through the deployment and upscaling of their prioritized technologies. Solar PV is found to be the top priority technology to mitigate greenhouse gas (GHG) emissions in most of the selected countries, followed by biomass and wind power technologies. Taking note of the low-carbon resource potential available, the results indicate that China, Cambodia, Indonesia and Vietnam could meet more than 80% their emission targets using one LCT. India and Thailand can meet more than 90% its emission target with a combination of its top two prioritised technologies. Other countries would require a combination of technologies apart from their prioritized technology to meet their INDC target. The costs of deployment have been considered using Net Present Value (NPV) that encompasses the following costs and revenues: capital costs, operation and maintenance costs, financing costs, grants and subsidies and revenues (sale of electricity and CER credits) at the present. For all investments, the NPV is positive indicating that they are financially viable.
... With respect to geography, half of the studies look at only a single country, and several others compare a small set of countries. Only three studies analyze five or more OECD countries (Angelopoulos et al., 2016;Voormolen et al., 2016;Wood and Ross, 2012) , and only two studies analyze five or more developing countries (Dobrotkova et al., 2018;Kumar et al., 2017). Thus, the regional overlap is limited. ...
... It is not obvious why that is the case, and applying financial marketbased analyses to solar PV projects seems an area for further research. In addition, all the available broader cross-country analyses draw on either expert estimates (Angelopoulos et al., 2016;Kumar et al., 2017;Voormolen et al., 2016;Wood and Ross, 2012) or auction result replication (Dobrotkova et al., 2018), and the use of financial market data for such purposes is pending. ...
... In addition, the estimates for onshore wind in Denmark from interviews (Angelopoulos et al., 2016) and financial market data (Partridge, 2018) are consistent. For solar PV projects, different estimates for India (Dobrotkova et al., 2018;Kumar et al., 2017;Shrimali et al., 2013) are all in the same magnitude (see Figure 4). For offshore wind projects, only ...
Many models in energy economics assess the cost of alternative power generation technologies. As an input, the models require well-calibrated assumptions for the cost of capital or discount rates to be used, especially for renewable energy for which the cost of capital differs widely across countries and technologies. In this article, we review the spectrum of estimation methods for the private cost of capital for renewable energy projects and discuss appropriate use of the methods to yield unbiased results. We then evaluate the empirical evidence from 46 countries for the period 2009–2017. We find a globally consistent rank order among technologies, with the cost of capital increasing from solar PV to onshore wind to offshore wind power. On average, the cost of capital in developing countries is significantly higher than in industrialized countries, with large heterogeneity also within the groups of industrialized or developing countries.
... With respect to geography, half of the studies look at only a single country, and several others compare a small set of countries. Only three studies analyze five or more OECD countries (Angelopoulos et al., 2016;Voormolen et al., 2016;Wood and Ross, 2012), and only two studies analyze five or more developing countries (Dobrotkova et al., 2018;Kumar et al., 2017). Thus, the regional overlap is limited. ...
... In contrast to project data elicitation, interviewees do not reveal data on specific projects they were involved in, but instead, estimate the typical cost of capital they observe in the market. Examples include Ardani et al. (2013bArdani et al. ( , 2013a, who interviewed 70 market participants in the United States; Krupa and Harvey (2017), who combine discussions with Unites States "sector participants" and archival information; Kumar et al. (Kumar et al., 2017), who communicated with a "country expert" for each market they analyzed; and some of the contributions in Wood and Ross (Wood and Ross, 2012). ...
... It is not obvious why that is the case, and applying financial market-based analyses to solar PV projects seems an area for further research. In addition, all the available broader cross-country analyses draw on either expert estimates (Angelopoulos et al., 2016;Kumar et al., 2017;Voormolen et al., 2016;Wood and Ross, 2012) or auction result replication (Dobrotkova et al., 2018), and the use of financial market data for such purposes is pending. ...
... There are studies on this subject (Szabó et al. 2010). Kumar et al. (2017) (2018) and Dobrotkova et al. (2018) used a different method for estimating the cost of capital, relying on non-financing information for projects awarded a PPA through competitor auctions. They targeted to decompose the cost structure of award-winning projects. ...
A large part of the electricity generation is from imported fossil fuels, which makes Turkey heavily dependent on fossil fuels. For this reason, Turkey aims to increase the ratio of renewable energy resources in the total installed power. Among renewable resources, Turkey's wind energy potential is very high. Although the onshore wind power installed capacity has increased significantly in the last ten years in Turkey, offshore wind energy deployment has not gained satisfactory attention even though the country is surrounded by seas on three of its sides. Therefore, the installation of Turkey's first offshore wind farm, which will be established by the Turkish government was accelerated by opening a tender in 2018. Three potential candidate regions were identified, two located in the Aegean Sea and one in the Black Sea. This paper performs a comprehensive techno-economic analysis of offshore wind farm projects in identified three regions. It was calculated that the total offshore wind power capacity at the specified sites is 3,329.4 MW. In addition, offshore regions were compared in the scope of the methods used in the economic analysis. In this context, the best results an obtained in the Saros OWF region. This study aims to contribute scientifically to the region's offshore wind energy development.
Graphical abstract
... This is mainly due to the confidential nature of financing structures behind renewable projects, with underlying financial detail usually not disclosed and difficult to verify 17,18 . Only lately have some studies tried to elicit the WACC for renewable energy projects at country level [19][20][21][22][23][24][25][26] . Overall, these studies found a notably higher WACC in developing economies than in developed ones, but with substantial variation 9,19,[27][28][29] . ...
Finance is vital for the green energy transition, but access to low cost finance is uneven as the cost of capital differs substantially between regions. This study shows how modelled decarbonisation pathways for developing economies are disproportionately impacted by different weighted average cost of capital (WACC) assumptions. For example, representing regionally-specific WACC values indicates 35% lower green electricity production in Africa for a cost-optimal 2°C pathway than when regional considerations are ignored. Moreover, policy interventions lowering WACC values for low-carbon and high-carbon technologies by 2050 would allow Africa to reach net-zero emissions approximately 10 years earlier than when the cost of capital reduction is not considered. A climate investment trap arises for developing economies when climate-related investments remain chronically insufficient. Current finance frameworks present barriers to these finance flows and radical changes are needed so that capital is more equitably distributed.
Finance is vital for the green energy transition, but the access to low cost finance is uneven as the cost of capital differs substantially between regions. This study shows how modelled decarbonisation pathways of developing economies are disproportionately impacted by assumptions around their cost of capital (WACC). For example, representing regionally specific WACC values indicates 35% lower green electricity production in Africa for a cost-optimal 2°C pathway. Moreover, results show that early convergence of WACC values for green and brown technologies in 2050 would allow Africa to reach net-zero emissions approximately 10 years earlier than when convergence is not considered. A “climate investment trap” arises for developing economies when climate-related investments remain chronically insufficient. Elements of sustainable finance frameworks currently present barriers to these finance flows and radical changes are needed so that capital is better allocated to the regions that most need it.
Placing the ASEAN and East Asian economies onto a low-carbon development pathway requires an unprecedented shift in investments. The private sector will have to play a central role in financing this transformation and achieve the Paris Agreement targets. This chapter reviews the state of low-carbon investment in the region and provides a critical analyses of private-public financial initiatives and the mechanisms, being practiced across the developing Asia. In practice, private financing of low-carbon energy projects is not easy due to various risks, projections of revenues as well as evolving regulatory changes under the ambit of economic integration process. Four interrelated regional solutions: a low-carbon transition fund, financial performance warranty program, regional best regulations and high quality infrastructure program are proposed as means to accelerate low-carbon finance. This chapter also discusses in detail the implementation outlook and challenges in achieving the objectives of the transition fund and other associated solutions. It recommends close coordination across the economic, energy and environment ministries that involve promoting sound investment policy principles, including non-discrimination, investor protection, contract enforcements and transparency for the activation of the fund.
Solar energy is one of the cleanest energy resources that does not compromise or add to the global warming. The benefits of properly using solar energy are plentiful. It does not cost anything except for the initial installation of the equipment. Malaysia has an abundance of renewable energy resources such as solar, biomass and wind energy etc. Solar energy has a great potential for electricity generation; however more incentives have to be formulated to boost its economical feasibility. It is estimated that the maximum demand of electricity will be at 23,099 MW in 2020, which is nearly twice the current demand. It is estimated that the potential of solar photovoltaic (PV) in Malaysia is 6,500 MW. In 2008, the total installed grid-connected PV systems were 775.73 kW and off-grid PV systems are estimated to be 8 MW. This paper discusses the different solar energy policies implemented on the Malaysia country. The main purpose of this paper is to suggest sufficient methods and policies to provide safe and cost effective provision of quality energy to the population. Moreover, this paper examines the environmental sustainability and diversification of solar energy resource.
Integrating variable energy resources, notably solar and wind, requires better understanding of where, when and how much of variable resources are available. China’s ambitious solar energy development goal will be greatly facilitated by the resources assessment at higher spatial and temporal resolution. We utilized 10-year hourly solar irradiation data from 2001 to 2010 from 200 representative locations to develop provincial solar availability profiles. We found that China has a potential stationary solar capacity from 4700 GW to 39300 GW, distributed solar about 200 GW, and the annual solar output could reach 6900 TWh to 70100 TWh. Resources are most concentrated in northwest provinces, topped by Inner Mongolia, Xinjiang and Gansu. The challenge of solar development in China is integration rather than resources. The spatial and temporal variation of the solar resource show an efficient, robust, and inter-connected national grid and sound energy planning would be necessary to facilitate the integration of these vastly available but variable solar resources.
The Lao People's Democratic Republic, a least developed land-locked country in Southeast Asia, was able to quadruple its electrification rate from 16% in 1995 to 63% in 2009. This has been achieved due to a series of projects undertaken by the government in conjunction with multilateral aid organizations. This study examines one such project undertaken recently by the Lao government and the World Bank called the Rural Electrification Project Phase I (REP I). Based on field research and research interviews conducted in Laos, the focus of this study is to understand this project's design and implementation, key success factors, and shortcomings. The authors derive lessons for both developing countries and those giving energy aid (such as multilateral financial institutions and development agencies) by laying out the dilemmas the project faced and emphasizing how key challenges were overcome. The study concludes by arguing that geographic and socio-economic data should be collected before electrification programs proceed, that programs must focus on the commercial viability of electricity suppliers, that fee-for-service models hold great promise, and that outsourcing can improve the efficiency and efficacy of electrification efforts.Research Highlights► Laos has quadrupled its electrification rate from 16% in 1995 to 63% in 2009. ► The experience with Laos shows that geographic and socio-economic data should be collected before electrification programs proceed. ► It also shows that programs must focus on the commercial viability of electricity suppliers and that fee-for-service models hold great promise.
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