The true cost associated with the variability of solar is relatively minor when compared to the major costs of installation, according to a new study.
The new study, Intermittency and the Value of Renewable Energy, authored by researchers from the University of Arizona’s Eller College of Management and published in the Journal of Political Economy tackles the true costs associated with the variability inherent in solar energy, i.e., the unpredictability of when the sun will and won’t shine, and finds that it is nowhere near as costly or impactful as some people have been led to believe. In fact, when compared against the installation costs of solar, the authors state that “the cost impact of unpredictability is relatively small.”
Authors Gautam Gowrisankaran and Stanley Reynolds, working with UA-PhD Mario Samano, now of the HEC Montreal Business School, investigated the true cost, or “social cost” of solar, quantifying the direct costs in addition to the costs from effects without any specific market cost. The researchers concluded that the true costs of solar energy differ from direct costs (those with specific market prices) based on two separate factors — first, that potential cost increases due to the fact that solar electricity is only produced when the sun is shining; and that the potential cost then decreases due to solar energy’s ability to reduce carbon dioxide emissions.
The study is based on 2011-12 industry data and local data from 58 sites in the Tucson area. If solar energy based on that data was scaled up to generate 20% of required electricity at 2011 prices, the researchers found that additional true costs would amount to $138.40 per MWh — exceeding the additional direct costs of $114.90 per MWh, which in turn reflects the cost disadvantage of energy generation from solar panels in comparison to fossil fuel generation. Thus, the fact that solar energy must rely on the sun to be able to generate electricity, and can not therefore generate on demand, adds $23.50 to the true cost of solar.
Not good news for solar so far.
However, two things mitigate the bad news somewhat.
First, the study found that the unpredictability of solar energy only accounted for $6.10 of solar’s additional true costs. Further, integrating battery storage into the equation would decrease the true cost of solar energy by $46 per MWh, now that solar energy can be stored and then used on demand. This shows that it is actually the cost of purchasing and installing solar panels which accounts for the burden of solar’s high true costs.
The second factor in solar’s favor is the impact its true cost has over fossil fuel generation when carbon dioxide emissions are taken into account. Currently, the authors note that the cost of installing solar has been rapidly dropping since the data was collected, at which point it was around $4.41 per-watt. Over the last two years, we’ve actually seen the cost of solar drop so low in some areas as to be below the $2 mark, while in other areas it’s sitting at below $3 or around $3.21 in Texas.
This is good news, as the authors of the study believe that when solar installation costs reach $1.52 per watt, the cost of solar works its way close to, or below neutral, when taking into account the costs of carbon dioxide emissions.
The study can be accessed here (PDF).
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