# Evaluating the Effect of Financing Costs on PV Grid Parity by Applying a Probabilistic Methodology
## 3 Results
### 5 kW Case Study
#### 3.1.1 Levelised Cost of Energy (LCOE)--Calculation Method Analysis for 5 kW and 1100 kWh/kWp Cases  
Introducing all the previous parameters and fixing the regulated tariff at 17.4 \(\upcels\)/kWh including taxes and with a fixed interest rate of 10% produces the following results (Table 4), considering an energy production of 6600 kWh/yr, OM annual costs of 114.9 \(\upcels\) and a lifetime for the installation of 25 years. The recovery factor value results as 0.1102.  
With the results obtained for the LCOE, it can be concluded that Spain would reach grid parity under conditions where the PV modules cost below 0.2 \(\upcels\)/Wp. However, the IRR calculated at 25 years with a standard loan of 10% reaches positive values at 0.2 \(\upcels\)/Wp. This is because inflation affects the retail electricity cost and changes the LCOE along with time, from beyond to above.  
Figure 4 illustrates a clear presentation of the point at which the retail costs and generation costs reach an equilibrium. As we can see, a considerable deviation affects the grid parity forecast.  
\begin{table}
\begin{tabular}{c c c c} \hline \hline
**PV Module Cost (\(\upcels\)/Wp)** & **System Cost (\(\upcels\))** & **LCOE (\(\upcels\)/kWh)** & **IRR (\%)** \\ \hline
1 & 15,464 & 0.2756 & \(-\)4.811 \\
0.8 & 14,012 & 0.2514 & \(-\)3.83 \\
0.6 & 12,560 & 0.2271 & \(-\)2.68 \\
0.4 & 11,108 & 0.2029 & \(-\)1.31 \\
0.2 & 9656 & 0.1787 & 0.40 \\ \hline \hline \end{tabular}
\end{table}
Table 4: Comparison of levelised cost of energy (LCOE) and internal rate of return (IRR) based on a recovery factor at 10% interest, for the 5 kW case.  
This case was analysed by introducing a sensibility analysis based on different interest rates to determine which loan terms and conditions allow the system to achieve the retail electricity cost target for grid parity for a different module cost (\(\xi\)/Wp), as shown in Table 5. The positions where the LCOE is lower than the retail cost of energy have been highlighted.  
Figure 5 shows a graphical representation of the Table 5 results against the retail cost of electricity.  
Figure 4: Analysis of the levelised cost of energy (LCOE) against the retail electricity cost at a fixed interest rate of 10% (5000 W inverter, deterministic method).  
Figure 5: Analysis of the LCOE against the retail electricity cost at various interest rates (5000 W inverter, deterministic method).  
\begin{table}
\begin{tabular}{c c c c c c c} \hline \hline \multirow{2}{*}{**PV Module**} & \multirow{2}{*}{**System**} & \multicolumn{5}{c}{**LCOE (\(\xi\)/kWh)**} \\ \cline{3-8}  & & **Cost (\(\xi\))** & **Interest** & \multirow{2}{*}{**12**} & **10** & **8** & **6** & **4** \\ \cline{3-8}  & & **Rate (\%):** & & & & & & \\ \hline
1.0 & 15,464 & & 0.3161 & 0.2755 & 0.2369 & 0.2007 & **0.1674** \\
0.8 & 14,012 & & 0.2881 & 0.2513 & 0.2163 & 0.1835 & **0.1533** \\
0.6 & 12,560 & & 0.2600 & 0.2270 & 0.1957 & **0.1663** & **0.1392** \\
0.4 & 11,108 & & 0.2320 & 0.2028 & 0.1751 & **0.1491** & **0.1251** \\
0.2 & 9656 & & 0.2039 & 0.1786 & **0.1545** & **0.1318** & **0.1110** \\ \hline \hline \end{tabular}
\end{table}
Table 5: LCOE over a range of interest rates (5000 W inverter, deterministic method).