A1 Journal article (refereed), original research

Reply to ‘Bias in energy system models with uniform cost of capital assumption’

Open Access publication

Publication Details
Authors: Bogdanov Dmitrii, Child Michael, Breyer Christian
Publisher: Nature Publishing Group: Nature Communications / Nature Publishing Group
Publication year: 2019
Language: English
Related Journal or Series Information: Nature Communications
Volume number: 10
ISSN: 2041-1723
JUFO-Level of this publication: 3
Open Access: Open Access publication


The commentary ‘Bias in energy system models with
uniform cost of capital assumption’1 highlights the impact of the
Cost of Capital (CoC) on the levelized cost of electricity (LCOE), and questions
the choice of a uniform weighted average cost of capital (WACC) for all regions
of the world. Since it is well known that CoC has significant impact on LCOE, having
an accurate assumption is important for energy systems modelling. The
commentary raises the relevant point that a uniform assumption could result in
both underestimation and overestimation of the cost of renewable energy in
different regions of the world. However, we consider it the best choice
available for the transition period 2015 to 2050, as it was implemented in our
study2. In addition, it is consistent with values published in
leading scientific journals and international reports. To this end, we offer
further explanation of the assumption used and discuss how modelling can be
improved. The most relevant aspect of energy system scenario development is
ignored in the commentary: modelling needs more accurate methods to project WACC/CoC
for future periods up to 2050 and 2100 for all countries globally.

Last updated on 2020-20-03 at 10:03