Date Added: May 2011
This paper develops an empirical approach to estimate the equilibrium value of renewable electricity technologies, and applies it to evaluate solar energy mandates in southeastern Arizona. Solar generation and other renewables suffer from intermittency because weather varies and is only partially forecastable. Intermittency imposes costs as a planner must maintain backup capacity and allocate operating reserves in order to avoid system failure. The authors model an electricity system where a system operator optimizes the amount of generation capacity, operating reserves, and demand curtailment in the presence of variable and partially forecastable demand and renewable production.