# Evaluating the Effect of Financing Costs on PV Grid Parity by Applying a Probabilistic Methodology
## 4 Discussion  
In this paper, the effects of financial cost on PV grid parity are discussed. The study has been carried out using a probabilistic method (Monte Carlo), considering three cases corresponding to three PV installations of different sizes (5 kW, 50 kW and 500 kW of inverter power). First, for each case, the deterministic calculation of the LCOE is performed; obtaining the most unfavourable case for all the variables that can be used to perform a sensitivity analysis. The aim of this calculation, considering pessimistic values, is to set the minimum value for the LCOE. The first case corresponds to a PV installation of 5 kW (inverter power). The worst-case scenarios considering a 10% interest rate and a 1100 kWh/kWp yield have been calculated manually (Table 4). With these results, a bottom line can be drawn and considered a floor. In Table 6, a summary of the LCOE for each annual yield is represented. The positions where the LCOE is lower than the retail cost of energy have been highlighted, so we can say that in these conditions, grid parity is already reached. In the deterministic calculation method, it could be determined that the LCOE would reach the retail electricity cost at an interest rate of 4% (Table 5) for any module cost. Table 6 shows that a module cost 0.2 \(\epsilon\)/Wp in areas with 1200 kWh/kWp (and above) is necessary to achieve grid parity, and in areas with an annual yield of 1300 kWh/kWp (and above), grid parity could be reached with a module cost of 0.4 \(\epsilon\)/Wp. It can be concluded that for a small installation of 5 kW, grid parity will be achieved if the module cost is between 0.2 and 0.4 \(\epsilon\)/Wp at a fixed interest rate of 10% in areas from 1200 kWh/kWp and above. The second case corresponds to a PV installation of 50 kW. This case is summarised in Tables 8-10. In the deterministic calculation method, it can be determined that the LCOE would reach the retail energy cost at the interest rate of 6% for any module cost, but this can also be determined at an interest rate of 10% (Table 9) and a cost between 0.6 and 0.4 \(\epsilon\)/Wp and below. Table 10 shows that grid parity in areas with 1400 kWh/kWp (and above) is already achieved in any case. In areas with an annual yield of 1300 kWh/kWp and 1200 kWh/kWp, grid parity could be reached at any cost except with a module cost of 1 \(\epsilon\)/Wp and a fixed interest of 10%. In areas with an annual yield of 1100 kWh/kWp, grid parity is already achieved for a module cost of 0.6 \(\epsilon\)/Wp and below. Finally, it can be concluded that for the case of 0.8 \(\epsilon\)/Wp, grid parity is already achieved for an area with an annual yield of 1200 kWh/kWp and above (Table 10), which in the Spanish case means the majority of the territory. The third case corresponds to a PV installation of 500 kW. This case is summarised in Tables 12-14. With the deterministic calculation method, it can be determined that the LCOE would reach the retail energy cost at an interest rate of 8% (Table 13) for any module cost, but this can also be determined at an interest rate of 10% and a cost of 0.8 \(\epsilon\)/Wp and below. Areas with an annual yield of 1200 kWh/kWp and above have already achieved grid parity in any case. In areas with an annual yield of 1100 kWh/kWp, grid parity could be reached at any cost except with a module cost of 1 \(\epsilon\)/Wp. For a module cost of 0.6 \(\epsilon\)/Wp and below, grid parity is achieved in any case, so it can be concluded that for the current scenario, grid parity is already achieved (Table 14). Figure 18: Histogram of the IRR calculated with the Monte Carlo method for a 500 kW system. The deterministic calculation methodology allows us to reach several conclusions. In small installations, grid parity will be reached depending on the financial model and the cost of the installation. In middle-scale installations, grid parity is already achieved, except for some geographical cases with an annual yield of 1100 kWh/kWp.