Is a solar PV project a capital expense?

The final annual expense is the land lease. Solar PV projects typically rent, rather than purchase, the land for the project; therefore, it is an operating expense and not a capital cost.

Can cost of capital be used to estimate power generation cost?

Results underline large country differences in cost of capital. The approach can complement but not replace other methods to estimate cost of capital. The cost of capital (CoC) is an important parameter for accurately calculating power generation cost, particularly for capital-intensive renewables such as solar PV.

Why do solar projects cost so much?

As the solar PV industry has been subject to volatile pricing, labor challenges, and being restricted to difficult land, the engineering, procurement, and construction (EPC) contractors and developers have also been bearing more contingency and overhead, further increasing a solar project’s overall cost.

What is a capital cost estimate?

CAPITAL COST ESTIMATE Table 14-1 summarizes the cost components for this case. The capital cost estimate is based on an engineering, procurement, and construction (EPC) contracting approach. In addition to EPC contract costs, the capital cost estimate in Table 14-1 covers owner’s costs.

How does CAPEX affect a solar PV project?

For the United States, we adjust CAPEX values to account for the Federal Investment Tax Credit (ITC), which indirectly reduces CAPEX of a solar PV project (Krupa and Harvey, 2017). The ITC amounted to 30% for the period 2006–2019 and was reduced to 26% for 2020–2022 (U.S. Department of Energy, 2021).

What is a solar facility's nominal capacity?

A solar facility’s nominal capacity is typically defined by either the net AC capacity of the inverters across all blocks or the maximum allowable injection capacity into the electric grid as defined by the project’s interconnection agreement.