Levelised Cost of Electricity

Abstract

This project is intended to provide information on the full lifecycle cost of a range of utility-scale electricity generation technologies to help DFID support developing countries in determining the most sustainable and affordable energy pathways for growth, improve energy access, highlight where and how government/donor support may be appropriately deployed to support more diverse generation, and to give private sector investors visibility of potential future opportunities. Bloomberg New Energy Finance has therefore examined levelised costs of electricity (LCOE) for major generation technologies across DFID’s 28 priority countries. This report summarises the detailed country level LCOE estimates derived by BNEF; they have been created based on a set of real-world data and assumptions that reflect project costs by technology at a single point in time. The analysis should help identify areas where country governments and donors may (or may not) need to focus interventions designed to foster greater private investment in electricity generation and ongoing economic growth. Recognising the limitations of data availability for many of the countries considered, the report infers a number of possible high-level policy conclusions for donor organisations, national governments and the private sector: Countries should seek a mix of generation to increase electricity independence and security of supply. Despite dramatic reductions in the costs of wind and solar technology, support is still needed to improve renewables competitiveness in many markets. Financing, operation and capital costs can be reduced through ongoing deployment and building local experience. In particular: –Finance costs can be reduced by educating local banks and investors to overcome perceived technology risk and build confidence. Partnerships may be effective. –Capital costs can be reduced by supporting continued development of supply chains for new technologies. –Make use of reverse auctions or other competitive tendering to ensure efficient price discovery and market development. Government and the private sector should be helped to realise the potential of small hydro, where resources are available. Government or donor finance should not be necessary for gas-fired power generation in most countries, but there may be scope for donor finance where electricity supply is significantly constrained (although the fundamental barriers to investment should be considered)