The Economics of Solar Electricity

Posted: 11 Oct 2013

See all articles by Erin Baker

Erin Baker

University of Massachusetts at Amherst - Mechanical and Industrial Engineering Department

Meredith Fowlie

University of California, Berkeley

Derek Lemoine

University of Arizona - Department of Economics

Stanley S. Reynolds

University of Arizona - Department of Economics

Date Written: June 2013

Abstract

The benefits and costs of increasing solar electricity generation depend on the scale of the increase and on the time frame over which it occurs. Short-run analyses focus on the cost-effectiveness of incremental increases in solar capacity, holding the rest of the power system fixed. Solar’s variability adds value if its power occurs at high-demand times and displaces relatively carbon-intensive generation. Medium-run analyses consider the implications of nonincremental changes in solar capacity. The cost of each installation may fall through experience effects, but the cost of grid integration increases when solar requires ancillary services and fails to displace investment in other types of generation. Long-run analyses consider the role of solar in reaching twenty-first-century carbon targets. Solar’s contribution depends on the representation of grid integration costs, on the availability of other low-carbon technologies, and on the potential for technological advances. By surveying analyses for different time horizons, this article begins to connect and integrate a fairly disjointed literature on the economics of solar energy.

Suggested Citation

Baker, Erin and Fowlie, Meredith and Lemoine, Derek and Reynolds, Stanley S., The Economics of Solar Electricity (June 2013). Annual Review of Resource Economics, Vol. 5, Issue 1, pp. 387-426, 2013. Available at SSRN: https://ssrn.com/abstract=2339083 or http://dx.doi.org/10.1146/annurev-resource-091912-151843

Erin Baker (Contact Author)

University of Massachusetts at Amherst - Mechanical and Industrial Engineering Department ( email )

Department of Operations and Information Managemen
Amherst, MA 01003
United States

Meredith Fowlie

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Derek Lemoine

University of Arizona - Department of Economics ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

HOME PAGE: http://www.dereklemoine.com/

Stanley S. Reynolds

University of Arizona - Department of Economics ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

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