Intermittency and the Value of Renewable Energy

58 Pages Posted: 31 May 2011 Last revised: 22 Mar 2015

See all articles by Gautam Gowrisankaran

Gautam Gowrisankaran

University of Arizona - Eller College of Management; National Bureau of Economic Research (NBER)

Stanley S. Reynolds

University of Arizona - Department of Economics

Mario Samano

HEC Montreal

Date Written: May 2011

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

Gowrisankaran, Gautam and Reynolds, Stanley S. and Samano, Mario, Intermittency and the Value of Renewable Energy (May 2011). NBER Working Paper No. w17086. Available at SSRN: https://ssrn.com/abstract=1854188

Gautam Gowrisankaran (Contact Author)

University of Arizona - Eller College of Management ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

HOME PAGE: http://econ.arizona.edu/faculty/gowrisankaran.asp

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Stanley S. Reynolds

University of Arizona - Department of Economics ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

Mario Samano

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H2X 2L3
Canada

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