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Intermittency and the Value of Renewable Energy

Author

Listed:
  • Gautam Gowrisankaran
  • Stanley S. Reynolds
  • Mario Samano

Abstract

A key problem with solar energy is intermittency: solar generators only produce when the sun is shining. This adds to social costs and also requires electricity system operators to reoptimize key decisions with large-scale renewables. We develop a method to quantify the economic value of large-scale renewable energy. We estimate the model for southeastern Arizona. Not accounting for offset CO2, we find social costs of $138.4/MWh for 20% solar generation, of which unforecastable intermittency accounts for $6.1 and intermittency overall for $46. With solar installation costs of $1.52/W and CO2 social costs of $39/ton, 20% solar would be welfare neutral.

Suggested Citation

  • Gautam Gowrisankaran & Stanley S. Reynolds & Mario Samano, 2011. "Intermittency and the Value of Renewable Energy," NBER Working Papers 17086, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:17086
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    Cited by:

    1. Severin Borenstein, 2012. "The Private and Public Economics of Renewable Electricity Generation," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 67-92, Winter.
    2. Fell, Harrison & Linn, Joshua, 2013. "Renewable electricity policies, heterogeneity, and cost effectiveness," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 688-707.
    3. repec:wsi:ccexxx:v:03:y:2012:i:04:n:s2010007812500194 is not listed on IDEAS
    4. Hirth, Lion & Ueckerdt, Falko & Edenhofer, Ottmar, 2015. "Integration costs revisited – An economic framework for wind and solar variability," Renewable Energy, Elsevier, vol. 74(C), pages 925-939.
    5. Hirth, Lion, 2013. "The market value of variable renewables," Energy Economics, Elsevier, vol. 38(C), pages 218-236.
    6. Djanibekov, Utkur & Finger, Robert & Guta, Dawit Diriba & Varun, Gaur & Mirzabaev, Alisher, 2016. "A generic model for analyzing nexus issues of households’ bioenergy use," Discussion Papers 230416, University of Bonn, Center for Development Research (ZEF).
    7. Průša, Jan & Klimešová, Andrea & Janda, Karel, 2013. "Consumer loss in Czech photovoltaic power plants in 2010–2011," Energy Policy, Elsevier, vol. 63(C), pages 747-755.
    8. Narbel, Patrick A., 2014. "Rethinking how to support intermittent renewables," Energy, Elsevier, vol. 77(C), pages 414-421.
    9. Hirth, Lion & Ziegenhagen, Inka, 2015. "Balancing power and variable renewables: Three links," Renewable and Sustainable Energy Reviews, Elsevier, vol. 50(C), pages 1035-1051.
    10. Cerdá, Emilio & del Río, Pablo, 2015. "Different interpretations of the cost-effectiveness of renewable electricity support: Some analytical results," Energy, Elsevier, vol. 90(P1), pages 286-298.
    11. Bunn, Derek & Yusupov, Tim, 2015. "The progressive inefficiency of replacing renewable obligation certificates with contracts-for-differences in the UK electricity market," Energy Policy, Elsevier, vol. 82(C), pages 298-309.
    12. Detert, Neal & Kotani, Koji, 2013. "Real options approach to renewable energy investments in Mongolia," Energy Policy, Elsevier, vol. 56(C), pages 136-150.
    13. Lion Hirth, Falko Ueckerdt, and Ottmar Edenhofer, 2016. "Why Wind Is Not Coal: On the Economics of Electricity Generation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    14. Inzunza, Andrés & Moreno, Rodrigo & Bernales, Alejandro & Rudnick, Hugh, 2016. "CVaR constrained planning of renewable generation with consideration of system inertial response, reserve services and demand participation," Energy Economics, Elsevier, vol. 59(C), pages 104-117.

    More about this item

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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