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The Coming Solar Value Cliff

September 4, 2018
By Jordan McGillis

Solar power is reaching a point at which additional solar production begins to actively harm the grid’s reliability and economics.

"Media headlines touting the falling costs of solar power do not tell the full story. While the manufacturing and installation costs of solar are in fact falling, solar’s value to the electricity grid is also in decline. Solar power is reaching a steep drop-off point beyond which additional solar production contributes no additional capacity to the grid, and indeed begins to actively harm the grid’s reliability and economics. This paper dubs the phenomenon the solar value cliff."

  • At low penetration levels, solar production can in fact reduce stress on the electrical grid, however, that does not hold true as penetration levels increase. 
  •  Peak solar generation occurs early in the afternoon, while peak electricity demand typically occurs during early evening. This mismatch presents a scenario called the “duck curve,” in which operators are forced to rapidly scale up other generation sources as solar generation ceases in order to seamlessly meet peak demand.
  •  By requiring operators to maintain backup capacity to address this duck curve, solar generation amounts to an imposed cost. •
  • When solar PV exceeds a 6-percent market share, the capacity value of additional solar PV falls to zero. 
  • The federal Investment Tax Credit (ITC), as well as state and local incentives, should be phased out as solar power’s value to the grid diminishes as it approaches the capacity value cliff.
  •  In the absence of effective storage capability, any subsidies, mandates or incentives for solar penetration above a 5-percent threshold are actively harmful to the reliability and economics of the power grid. 
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