NDLI: Market value of solar power: Is photovoltaics cost-competitive?

Content Provider	IET Digital Library
Author	Hirth, Lion
Abstract	This paper reviews the economics of solar power as a source of grid-connected electricity generation. It is widely acknowledged that costs of solar power have declined, but there is disagreement how its economic value should be calculated. ‘Grid parity’, comparing generation costs to the retail price, is an often used yet flawed metric for economic assessment, as it ignores grid fees, levies, and taxes. It also fails to account for the fact that electricity is more valuable at some points in time and at some locations than that at others. A better yardstick than the retail price is solar power's ‘market value’. This paper explains why, and provides empirical estimates of the solar market value from a literature review, German spot market analysis, and the numerical electricity market model EMMA. At low penetration rates (<2–5%) solar power's market value turns out to be higher than the average wholesale electricity price – mainly, because the sun tends to shine when electricity demand is high. With increasing penetration, the market value declines – the solar premium turns into a solar penalty. In Germany, the value of solar power has fallen from 133% of the average electricity price to 98% as solar penetration increased from zero to 4.7%. This value drop is steeper than wind power's value drop, because solar generation is more concentrated in time. As a consequence, large-scale solar deployment without subsidies will be more difficult to accomplish than many observers have anticipated.
Starting Page	37
Ending Page	45
Page Count	9
ISSN	17521416
Volume Number	9
e-ISSN	17521424
Issue Number	Issue 1, Jan (2015)
Alternate Webpage(s)	https://digital-library.theiet.org/content/journals/iet-rpg/9/1
Alternate Webpage(s)	https://digital-library.theiet.org/content/journals/10.1049/iet-rpg.2014.0101
Journal	IET Renewable Power Generation
Publisher Date	2014-12-10
Access Restriction	Open
Rights Holder	© The Institution of Engineering and Technology
Subject Keyword	Average Electricity Price Average Wholesale Electricity Price Economic Assessment Economic Value Electricity Demand EMMA Generation Cost German Spot Markets Germany Grid Fees Grid Levies Grid Parity Grid Taxes Grid-connected Electricity Generation Large-scale Solar Deployment Market Value Numerical Electricity Market Model Penetration Rates Photovoltaic Power System Power Generation Economics Power Grid Power Market Power System Economics Power System Managemen Power System Operation Pricing Retail Price Solar Penalty Solar Penetration Solar Power Cost Solar Power Economics Solar Power Stations Solar Premium Wind Power Value Drop
Content Type	Text
Resource Type	Article
Subject	Renewable Energy, Sustainability and the Environment

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1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
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3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
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