Costs vs True Value/Benefits of Solar Power

The benefits of solar really do match the cost of solar, but many of the benefits, often important to society or rate-payers as a whole, are invisible to individuals. Government incentives to encourage solar power adoption, thus, make complete & practical sense. Truthfully, the incentives offered for solar power purchasing should be even greater. Here’s more:

solar power costs and value

cost solar power

Note: even despite the findings of the report, that solar power’s value is much greater than typically quantified, the study was still very conservative (overly conservative, I would say) about the total value solar power provides — see the last part of this article for more on that.

I wrote recently on the costs of wind power and how they compare to the costs of traditional forms of power like coal and nuclear, especially when you take externalities and other subsidies into account. I was going to wait until I wrapped up our “comprehensive wind power page” to write on this topic for solar power, but a new report out from the Institute for Local Self Reliance pushed me into the topic a little early.

The Institute for Local Self Reliance report “identifies the combined value that solar electric power plants deliver to utilities’ rate payers and society’s tax payers.” In other words, beyond the typical things we officially assign it value for, the report looks at other clear benefits it provides and tries to calculate those to come up with an overall total value.

“Benefits that are relevant to utilities and their rate payers include traditional, measures of energy and capacity. Benefits that are tangible to taxpayers include environmental, fuel price mitigation, outage risk protection, and long‐term economic growth components.”

The final conclusion, for the state of New York at least: the value of solar electric installations is 15-40 cents per kWh (for ratepayers and taxpayers).

This clearly justifies federal incentives and government incentives for solar that are in place in many places today, because, unsubsidized, the cost of solar is 20-30 cents per kWh according to the authors (or, at most, up to nearly 40 cents per kWh according some other sources). If the incentives weren’t in place, the vast majority of people would not account for these extra benefits and societal value on their own and would not pay this price for solar power. If the costs (not adequately accounting for the value) were the price of electricity from solar, it would not compete with coal or other forms of electricity yet. And it is precisely the government’s role to step in and take care of or account for things that society as a whole benefits from but would undervalue.

Check out the following chart on the author’s calculations of solar power costs and benefits, followed by a chart from a different author on levelized cost of renewable energy.

costs vs value of solar power

levelized cost of electricity
click to enlarge

Report Conservative When Assigning Value to Solar Power, Its Value is Much Greater

Now, even in the report mentioned above, I think there are some clear benefits not accounted for if you compare it to the most likely alternative coal or even to natural gas.

For one, solar energy creates more jobs, which helps the economy as a whole. On top of that, locally owned projects also boost economic benefits (something Stephen Lacy over at Climate Progress pointed out).

jobs renewable energy

Furthermore, I don’t think the health benefits were accounted for enough, as even the authors point out. Coal is used much more in other regions (and the nation as a whole) and the environmental and health costs of nuclear and hydropower aren’t even accounted for:

Given New York’s generation mix (15% coal, 29% natural gas), and ignoring the environmental costs associated with nuclear and hydropower, the environmental cost of a New York kWh is thus 2 to 6 cents per kWh. It is important to note however that the New York grid does not operate in a vacuum but operates within – and is sustained by ‐‐ a larger grid whose coal footprint is considerably larger (more than 45% coal in the US) with a corresponding cost of 5‐12 cents per kWh. In the appendix, we show that pricing one single factor – the greenhouse gas CO2 – delivers at a minimum 2 cents per solar generated PV kWh in New York and that an argument could be made to claim a much higher number. Therefore taking a range of 3‐6 cents per kWh to characterize the environmental value of each PV generated KWh is certainly a conservative range.

So, this calculation of the true value of solar power is still a conservative underestimate.

Furthermore, other factors were very conservatively valued and there are also a number of factors not even considered at all (some of which I was going to mention before seeing this paragraph and list by the authors):

It is important to stress that this result was arrived at while taking a conservative floor estimate for the determination of most benefits, and that a solid case could be made for higher numbers particularly in terms of environment, fuel hedge and business development value.  In addition, several other likely benefits were not accounted for because deemed either too indirect or too controversial.  Some of these unaccounted value adders are worth a brief qualitative mention:

  • No value was claimed beyond 30 year life cycle operation for solar systems, although the likelihood of much longer quasi‐free operation is high (Zweibel, 2010)
  • The positive impact on international tensions and the reduction of military expense to secure ever more limited sources of energy and increasing environmental disruptions was not quantified.
  • The fact dispersed solar generation creates the basis for a strategically more secure grid than the current “hub and spoke” power grid in an age of growing terrorism and global disruptions concerns was not quantified.
  • Economic growth impact was not quantified beyond tax revenue enhancement.
  • The question of government subsidies awarded to current finite energy sources (i.e.,displaceable taxpayers’ expense) was not addressed.

The value of these things is HUGE. So, if someone contends that this is an unbalanced analysis, yes, it is, but unbalanced in favor of other energy sources (not solar)!

Thoughts? Questions? Concerns?

Related Stories:

  1. Solar Power Graphs to Make You Smile
  2. Solar Power Almost as Cheap as Natural Gas in Six States
  3. Unprecedented UN Report: Renewable Energy Costs to Drop, Use to Grow Substantially by 2030, but…
  4. Historic Report: Solar Energy Costs Now Lower than Nuclear Energ
  5. GE: Solar Power Cheaper than Fossil Fuels in 5 years

Third Image via Solar Power Generation in the US: Too expensive, or a bargain?
Fourth & Fifth Images via Think Progress

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