New research from Switzerland shows that capex costs for PV projects in the Alps in Switzerland currently 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.
Scientists from Swiss research institute ETH Zurich have investigated the financial viability of PV projects in the Alps and found that the levelized energy cost (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 expenditure, irradiation levels, financing conditions, energy prices and details of the Swiss subsidy scheme. Three PV project typologies were considered: ground-mounted PV in high-altitude mountainous terrain; wall-mounted PV on high-height hydro-pile walls; and floating PV on high-altitude lakes.
“We study these technology archetypes using three revenue models available in Switzerland: electricity sales to fixed utility customers, corporate PPAs and direct sales to the wholesale market,” the academics explain in the paper.Harnessing solar energy 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, highlighting the likely investors in Swiss mountain PV.”
The research group also explained that the project financing model used to assess financial viability was based on 13 structured interviews with project developers, as well as a Swiss-specific data set on solar radiation and energy price projections. Exploratory sequential mixed methods were also used to conduct an initial qualitative phase of data collection, a quantitative data collection and a final analysis of the two separate data streams.
Through the interviews, the scientists were able to determine that investment 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 a median internal rate of return (IRR) for projects and equity of 5.8% and 8.6% for land-based projects, respectively, assuming subsidies,” they pointed out. “Corporate PPA and commercial 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 land projects.”
In contrast, the PPA model is described as difficult to use, due to a combination of lower capital investments, higher solar radiation and favorable financing terms. “The PPA business model would require prices to be around €0.174/kWh and €0.345/kWh in 2040 and 2050 to be profitable,” the group added.
The scientists explained that the average LCOE of PV projects in the Alps is comparable to that of rooftop PV projects in the Swiss interior, with cost differences becoming greater when comparing winter LCOE as PV installations in the mountains have approximately two times lower generation costs.
“The prevailing business models in Switzerland favor utilities with a customer base, achieving average equity IRRs of 8.6%. Selling electricity at a PPA of €0.079/kWh over ten years would only guarantee profitability with aggressive electricity price assumptions, careful debt servicing and lower capital investment,” they further explained.
Looking ahead, the research team plans to investigate PV costs in the Alps in more detail to “understand the differences between different project designs.”
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