Intermittency and the Value of Renewable Energy

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.