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Box 2. Main hypotheses for the financial simulations
from Private production or public project ownership to scale up the construction of photovoltaic power
• The following table presents a summary of the main hypotheses on which the comparative exercises are based.23 The first and second comparisons find respectively maximum and minimum production cost differentials between the two development models (PPO and IPP).
Main hypotheses for the comparative exercises
23 Details on the hypotheses for both scenarios and detailed results are presented in the report which served as the basis for this paper. In particular, the benchmark technical costs and timeframes were based on market costs and timeframes. Note that a grid connection cost was also included in CAPEX for both set-ups and that this cost is included in the €845/kWp value given in the table, which also includes the design-build costs.
24 Weighted Average Cost of Capital (WACC). Note that this indicator is merely an imperfect reflection of the differences in financing conditions, since the financial cost profiles for the PPO and IPP scenarios vary a great deal over time (as can clearly be seen in Figure 4).
Private production or public project ownership to scale up the construction of photovoltaic power plants in Africa? From an exclusive approach to seeking the best combination
• The comparative scenarios take the hypothesis that EPC costs are 10% higher in the PPO option. The standard IPP option includes a 20% additional cost compared with the optimized IPP option, since projects based on less prepared competitive tenders or direct negotiations generally present a higher development risk profile, which developers usually factor into the development costs and the proposed IRR.
• Note that the timeframe differences are valued at the cost of the alternative energy that needs to be generated during the additional period.
