Regulatory and Financial Incentives for Scaling Up Concentrating Solar Power in Developing Countries

De-risking investment into concentrated solar power in North Africa: Impacts on the costs of electricity generation

“…This is mainly because only few CSP projects are already in the operational stage and even less projects make their data available to the public. Due to the limited availability of data, we have to rely on debt and equity interest rate estimates for CSP projects in the MENA region in the existing literature (Kulichenko and Wirth, 2011) to establish reference financing costs, or WACC, representing the current risk environment for CSP projects in the North African region 9 . Applying the WACC approach presented in the previous section, the resulting financing costs for a reference CSP project in North Africa amount to 10.2%, compared to a Euro area WACC of 4.1% (Table 2).…”

“…Applying the WACC approach presented in the previous section, the resulting financing costs for a reference CSP project in North Africa amount to 10.2%, compared to a Euro area WACC of 4.1% (Table 2). Source: * Kulichenko and Wirth (2011);**Dimson et al (2011) andECB (2014) underwritten by an institution. The German feed-in scheme, for example, mitigates regulatory and political risks for RES investors and revenue risks (consisting of price and volume risks; Mitchell et al, 2006) are effectively underwritten by the German electricity consumer, eventually reducing overall investment risks substantially.…”

“…The German feed-in scheme, for example, mitigates regulatory and political risks for RES investors and revenue risks (consisting of price and volume risks; Mitchell et al, 2006) are effectively underwritten by the German electricity consumer, eventually reducing overall investment risks substantially. 9 Kulichenko and Wirth (2011) base their assumptions regarding prevailing financing costs on information provided by developers, financial assumptions made for a World Bank internal analysis for an IBRD co-financed CSP development in the MENA region, and informed assumptions by World Bank staff.…”

“…The financing cost gap between the North African region and the Euro area, as well as the relative contribution of different risk categories to this gap, as identified by Komendantova et al (2012), are depicted in Figure 1. Kulichenko and Wirth (2011);Dimson et al (2011);ECB (2014); Risk assessment and categories: Komendantova et al (2012) For the present analysis of financing costs in the North African region we rely on the risk assessment carried out by Komendantova et al (2011 and, which focuses explicitly on CSP investments in the North African region. By carrying out stakeholder workshops, structured and unstructured expert interviews and case studies, Komendantova et al (2012) identify nine risk categories: regulatory, political, revenue, technical, financial, force majeure, construction, operating, and environmental.…”

“…The LCOE from CSP solar tower plants in the North African countries, based on the WACC presented in Table 2, representing reference financing costs in the region (Kulichenko and Wirth, 2011), are depicted in Fig. 2.…”