Solar’s value to consumers double its initial cost

Solar power in New Jersey and Pennsylvania delivers value to the electric grid well above its cost. The Mid‐Atlantic Solar Energy Industries Association (MSEIA) and the Pennsylvania Solar Energy Industries Association (PASEIA) recently released a study that analyzed utility cost data, especially related to solar generation at peak hours of power demand.

The study was done by consulting firm Clean Power Research.

Each state has a solar carve-out within its renewable portfolio standard. In Pennsylvania the carve-out is on a sliding scale that currently is about .05% and will top out a .5% in 2021. New Jersey revised its solar carve-out significantly upward, with a standard of 4.1% by 2028.

Utilities pay a premium for solar power in the form of Solar Renewable Energy Certificates, or SRECs, and pass this premium cost on to ratepayers. The study found that solar power delivers a total levelized value ranging from $256 to $318 per MWh (25.6 cents to 31.8 cents per kWh). However, this includes a premium value in the range of $150 to $200 per MWh (15 cents to 20 cents per kWh), above the value of the solar electricity generated. The SRECs in New Jersey currently cost about $60/MWh (6 cents per KWh), and in Pennsylvania they cost about $20/MWh (2 cents per KWH).

“This indicates that electric ratepayers in the region are getting more than a two‐to‐one return on their investment in solar energy,” said Dennis Wilson, President of MSEIA, “Although the current SREC prices are unsustainably low, our analysis indicates that SRECs can increase in price, deliver net benefits and still support strong solar growth. Solar power has proven it can deliver value that exceeds its cost by 50% to over 100%. This net positive benefit will only increase as solar technology continues to drop in cost.”

The study involved six utilities in Pennsylvania and New Jersey, which in 2011 had a combined peak load of about 47 GW. Potential solar fleet capacity was set at 15%, which represented a moderate log-term penetration level of 8 GW of solar.

The utilities varied in their generation mix, which was reflected in different environmental cost assumptions.

New Jersey is the nation’s second‐largest solar market with 900 MW of solar capacity, and is the first state to generate more than 1% of its annual electricity from solar energy. Its annual solar share is now approaching one and a half percent, with contributions during peak demand periods several times higher.

Pennsylvania has recently fallen to eighth place in installed capacity. Increasing the state’s near‐term solar commitment would put Pennsylvania solar growth back on track. According to Richard Perez, one of the authors of the study, “This report broke new ground in that it incorporated a wealth of utility power cost data, enabling detailed analysis of economic drivers such as the ‘merit order effect’, according to which power can have different values depending on when it is generated.

Research concluded that by offsetting the need for conventional power, distributed solar power delivers measurable benefits, including:

  • Lower conventional electricity market prices due to reduced peak demand;
  • Valuable price hedge from using a free, renewable fuel rather than variably‐priced fossil fuels;
  • Avoided costs of new transmission and distribution infrastructure to manage electricity delivery from centralized power plants;
  • Reduced need to build, operate and maintain natural gas generating plants;
  • Reduced outages due to a more reliable, distributed electric power system;
  • Reduced future costs of mitigating the environmental impacts of coal, natural gas, nuclear, and other generation;
  • Enhanced tax revenues associated with local job creation, which is higher for solar than conventional power generation.