I have always been an ardent fan of solar power, ever since that balsa wood solar powered toy boat I built in elementary school. Free, unlimited and clean power would change the world if and when it can made practical.
As I was preparing for a series of lectures on Cost-Benefit Analysis (CBA) for the City College of New York’s MPA program, I was happy to come across a CBA for increasing the use of solar power in my home State of New York. At least until I saw the bottom line: the costs of increasing the use of solar in New York to 5,000 megawatts by 2025 exceeds the benefits by $2 billion.
In spite of the net loss, and due to big uncertainties, the study concludes that the state should devise a “policy response and investment strategy that is both flexible and responsive” (to future path of technology and cost). Is this a contradiction?
The magnitude and range of this cost uncertainty ($300 million – $9 billion) is substantial, and strongly suggests the need for a policy response and investment strategy that is both flexible and responsive. –New York Solar Study, p6.
The biggest uncertainties were the actual cost of solar (they used values between $1.4 and $4.3 million per megawatt in their sensitivity analysis) and whether the federal government would continue subsidizing solar power.
I had trouble accepting this cautious conclusion. A closer read of the report suggests its reasoning is a bit foggy.
- The state has several policy objectives (page 11-2), which are not directly valued in the study. These include ecosystem benefits (i.e., a better functioning natural environment provides cleaner air, water, flood protection…); energy security and independence; economic development; a self-sustaining solar market and promoting both early technologies and environmental justice. Benefits to the region, country and world were also excluded.
- State policy aside, we know that at least some people see intrinsic value in clean energy. They are willing to pay more for green energy, just because it is green. For example, ConEdison offers a wind power option at 2.5 centers/kWh. This intrinsic value was excluded.
- The study did not attempt to value the “real” option that the state obtains by virtue of making substantial, early investments in emerging technologies like solar. The experience of not-very-sunny Germany suggests that aggressive public support can build a leading industry and accelerate development. Depending on future policy and smart grid development and other technologies, having a head start could prove to be a valuable option for New York to accelerate its clean energy and high-tech sectors.
- The sensitivity analysis in the appendix indicates enormous uncertainties which should have resulted in a conclusion that the net benefit/cost of solar is not meaningfully different from zero. A more robust analysis (using Monte Carlo and decision trees) would indicate whether there is more upside (due to options and feedback loops) than downside as the clean energy sector reaches critical mass.
I wonder about the political and organizational context in which this report was drafted and whether this could explain the odd structure and conclusions. Why were key benefits excluded? Why were no alternatives presented? Why were the results slanted negatively? Perhaps the report was the product of a committee, with typical compromises and inconsistencies.
Regardless, my humble opinion of the data presented is that New York ought to build on its leadership in clean energy with an aggressive (yes, and flexible) solar power policy.
What do you think?
Yes! Your clear analysis of the report and its conclusions was insightful. Thank you.