Total Cost Electricity Pricing of Photovoltaics

Previous analysis of photovoltaic (PV) life cycles has documented significant environmental benefits from replacing conventional grid electricity with PV systems. However, environmental attributes are traditionally considered economic externalities and not factored into the levelized cost of electricity (LCOE). In contrast, total cost electricity pricing uses environmental and performance adders to account for externalities. Rather than imposing costs on existing electricity generation sources, adders are used for evaluating new generation sources on the basis of total cost, equal to the private cost (LCOE) plus the environmental and performance adder. Though utilities are not actually charged the adder, they can be required to rank technology options based on total cost, thus allowing environmental and other societal attributes to be part of the decision-making process. The total cost of ground-mount cadmium telluride (CdTe) PV systems ranges from $73-151/MWh, with a midrange value of $112/MWh ($0.11/kWh). The total cost of rooftop multi-crystalline silicon (multi-c-Si) PV systems ranges from $78-241/MWh, with a midrange value of $137/MWh ($0.14/kWh). These values are competitive with conventional combined cycle and combustion turbine natural gas ($71-213/MWh) and conventional coal ($105-257/MWh). Mid-range environmental costs are $1, $2, $26, and $50 for CdTe PV, multi-c-Si PV, natural gas, and coal, respectively. Although electricity is typically considered a commodity, total cost pricing indicates that solar PV electricity provides additional benefits with regards to impacts on climate, air quality, and water resources that are valued at $2449/MWh ($0.02-0.05/kWh) relative to conventional gas and coal electricity. In addition to external costs of conventional generation, there are opportunity costs for the utilities’ rate payers and society’s tax payers of foregone value from not using renewable energy. There are opportunity costs related to energy infrastructure that range from $64-507/MWh ($0.06-0.51/kWh) still excluding the tax payers’ cost for the missing insurance cost of nuclear power plants valued at $190-5385/MWh ($0.19-5.39/kWh) for the case of Germany. There are also opportunity costs related to non-energetic uses for fossil fuels that are approximately $0.21/kWh for the case of Germany. As market subsidies for renewable energy decline, total cost methodology provides an alternative framework for recognizing the societal benefits of clean energy when choosing between technology options.