Valuing large‐scale solar photovoltaics in future electricity generation portfolios and its implications for energy and climate policies

Abstract

This study examines the potential role of large-scale photovoltaics (PV) generation in addressing the economic, energy security and environmental challenges facing the electricity industry. A Monte-Carlo-based generation portfolio modelling tool is employed to examine the value and impacts of different PV penetrations in future electricity generation portfolios under future uncertainty and multiple industry objectives of minimising expected future costs, cost uncertainty and CO2 emissions. The Australian National Electricity Market (NEM) facing highly uncertain future fossil-fuel prices, carbon price, plant capital costs and electricity demand was used as a case study. Hourly PV generations across diverse locations were simulated for different penetration levels. Modelling results show that, with relatively modest carbon prices, increased PV penetration leads to not only reductions in cost uncertainties and greenhouse gas emissions, but also the overall industry generation costs. This would greatly enhance the value and thus encourage investment in large-scale solar PV, even when the transmission cost estimates were included. The value of PV generation in future generation portfolios is also influenced by the mix of generation technologies. The findings from this study can assist in energy and climate policy decision making in the electricity industry, particularly with regard to large-scale PV generation and carbon pricing.