What is meant by “externalized costs”?
Externalized costs are real costs that are not quantified within the levelized cost calculations presented in the internalized cost articles. These costs are directly or indirectly paid by various sectors of the economy in forms such as pollution-related health costs, grid integration costs of intermittent renewables, and a reduction in the free services rendered by the biosphere.
Externalized costs of solar power
While solar power has a low environmental impact, it is not quite as low as the $1/MWh calculated for wind power in the previous article. As shown in the review figure below, the environmental impact of PV is generally 3-10 times larger than wind, while CSP has a 2-5 times larger impact. We will therefore assume an externalized environmental cost of $3/MWh for PV and $2/MWh for CSP.
Key: AP = Acidification potential, EP = Eutrophication potential, GWP = Global warming potential, POCP = Photochemical ozone creation potential.
Despite the slightly higher environmental cost relative to wind, the integration costs (see previous article) of solar PV should be lower due to the lower current level of deployment (global solar power output is about a third of wind power output) and the fact that solar output generally matches better with demand.
Balancing costs (shown below) appear to be similar to wind at about €2/MWh.
Grid-related cost estimates for utility-scale solar are not yet available, but should should be similar to the €5/MWh estimate for wind.
At very low market penetrations, the profile costs for solar PV can actually be negative, i.e. produced solar power often displaces expensive electricity from peaker plants. Due to the concentrated nature of solar PV output, however, profile costs quickly rise with increasing penetration. The graph below shows that solar commands a price premium up to a market share of about 3%. Given that PV represents about 1% of global electricity production, it is likely that the average solar profile cost is still negative. Here, we will assume that it cancels out balancing and grid-related costs discussed above, yielding a total integration cost of $0/MWh.
The total solar PV externality should therefore amount to only $3/MWh. This number can also be used for distributed solar PV even though integration costs will be different. In particular, grid related costs may even be negative at very low market shares, although this is not applicable if the grid capacity is already built. However, profile costs will be higher because distributed PV generally does not use utility PV strategies like higher inverter loading ratios, tracking and westward orientation to increase market value. We will therefore assume that lower grid-related costs are cancelled out by higher profile costs for distributed solar. For perspective, the internalized costs of utility and distributed solar PV were estimated as $101/MWh and $214/MWh respectively.
As for CSP with thermal storage, integration costs may actually turn out to be negative. Relative to solar PV, there will not be any balancing costs (CSP with storage is dispatchable) and thermal storage should allow the plant to maintain negative profile costs at higher market shares. We will assume a total externalized cost of -$5/MWh. The internalized cost of CSP was previously estimated as $175/MWh. It should be fair to assume that the externalized costs for solar thermal heating applications like water heaters is zero.
If you have a number that differs significantly from the $3/MWh and -$5/MWh estimates for PV and CSP given above, please add it in the comments section below. Please start your comment with the keyword “DATA”, followed by a brief explanation and preferably a linked reference. Each DATA comment will be weighted by the number of “likes” when the data is ultimately processed.
Many comments are welcome. More data = greater accuracy.