Impact of Financing Instruments and Strategies on the Wind Power Production Costs: A Case of Lithuania

• Main Authors: Bobinaite V., Konstantinaviciute I.
• Format: Article
• Language: English
• Published: Sciendo 2018-04-01
• Series: Latvian Journal of Physics and Technical Sciences
• Subjects: case study; financing instrument; financing strategy; leve-lized cost of energy; lithuania; wind power
• Online Access: https://doi.org/10.2478/lpts-2018-0009

The paper aims at demonstrating the relevance of financing instruments, their terms and financing strategies in relation to the cost of wind power production and the ability of wind power plant (PP) to participate in the electricity market in Lithuania. The extended approach to the Levelized Cost of Energy (LCOE) is applied. The feature of the extended approach lies in considering the lifetime cost and revenue received from the support measures. The research results have substantiated the relevance of financing instruments, their terms and strategies in relation to their impact on the LCOE and competitiveness of wind PP. It has been found that financing of wind PP through the traditional financing instruments (simple shares and bank loans) makes use of venture capital and bonds coming even in the absence of any support. It has been estimated that strategies consisting of different proportions of hard and soft loans, bonds, own and venture capital result in the average LCOE of 5.1–5.7 EURct/kWh (2000 kW), when the expected electricity selling price is 5.4 EURct/kWh. The financing strategies with higher shares of equity could impact by around 6 % higher LCOE compared to the strategies encompassing higher shares of debt. However, seeking to motivate venture capitalists, bond holders or other new financiers entering the wind power sector, support measures (feed-in tariff or investment subsidy) are relevant in case of 250 kW wind PP. It has been estimated that under the unsupported financing strategies, the average LCOE of 250 kW wind PP will be 7.8–8.8 EURct/kWh, but it will reduce by around 50 % if feed-in tariff or 50 % investment subsidy is applied.