Changes in the Economic Value of Photovoltaic Generation at High Penetration Levels: A Pilot Case Study of California

We estimate the long-run economic value of photovoltaic (PV) generation with increasing penetration using a unique investment and dispatch model that captures long-run investment decisions while also incorporating detailed operational constraints and hourly time resolution over a full year. High time resolution and operational constraints can be important to estimate the economic value of variable generation resources like PV, as is the use of a modeling framework that accommodates new investment decisions. The model is herein applied to a case study that is loosely based on California in 2030. The marginal economic value of PV is decomposed into the capacity value, energy value, day-ahead forecast error cost, and ancillary services. The value of PV is found to exceed the value of a flat block of power by US$ 19/MWh at low penetration, largely due to the high capacity value of PV at low penetration. The value of PV is found to drop considerably (by more than US$ 60/MWh) as the penetration increases toward 30% on an energy basis, first primarily due to a steep drop in the capacity value followed by a decrease in the energy value. Day-ahead forecast error and ancillary service costs, although not insignificant, do not change as dramatically with increasing penetration. In the near term, efforts to mitigate changes in the value of PV with increasing penetration may be most effective if focused on maintaining the capacity value of PV.