Why Wind Is Not Coal: On the Economics of Electricity

摘要: The economics of electricity is shaped by its physics. A well know example the non-storability that causes price to fluctuate widely. More generally, physical constraints cause be a heterogeneous good along three dimensions - time, space, and lead-time. Consequently, different generation technologies, such as coal wind power, produce economic goods have marginal value. Welfare maximization or competitiveness analyses ignore heterogeneity deliver biased estimates. This paper provides an analytical welfare-economic framework accounts for unbiased assessments power generators. offers rigorous interpretation commonly used cost indicators ‘levelized costs’ ‘grid parity’. Heterogeneity relevant all generators, but especially variable renewables solar power. We propose definition ‘variability’, derive opportunity costs variability, link concept ‘integration cost’ literature. literature review shows variability can reduce value 20-50%. Thus it crucial analysis physics electricity.