Techno-economic comparison of centralized and distributed power generation to support large-scale transport electrification in Costa Rica

Abstract

The rapid fall of photovoltaic generation and battery storage costs can pave the way for future distributed power systems. However, transitioning from centralized to distributed systems has economic implications for different power sector stakeholders: incumbent energy firms, new distributed generation investors, and consumers. Consumers can significantly increase demand by adopting electric transport, a crucial component of decarbonization. In turn, investors and firms will need to provide the capital and operating capability to supply more power, even for self-consumption. In this paper, we develop a methodology to assess the future average price of electricity for two fundamentally different systems: one based on utility-scale projects and another based on distributed generation. We also evaluate how prices affect the financial benefits of energy sector investors and transport users that result from transport electrification. We apply the methodology to Costa Rica's transport electrification objectives, a middle-income country with vast renewable generation capacity with pledges to reach net-zero emissions by 2050. We find that the future unit costs of solar and wind generation with energy storage infrastructure affect electricity prices more than other uncertainties. In turn, prices have a high correlation with transport benefits. We also find that low discount rates produce high benefits and low electricity prices.