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This paper addresses what we call the investment question: under what plausible circumstances, if any, can variable renewable energy (VRE, and solar photovoltaic (PV) in particular) be a good investment? Although VRE has been growing rapidly world-wide, it is generally subsidized. Under what cost and market conditions can solar PV flourish without subsidy? We employ solar insolation and market price data from the U.S. and from Germany to gain insight into the investment question. We find that unsubsidized solar PV is or may soon be a justifiable investment, but that market arrangements may play a crucial role in determining success. We end by sketching a proposal that amounts to a reformed capacity market that would afford participation of solar PV.
The general conclusion of climate change studies is the necessity of eliminating net CO2 emissions in general and from the electric power systems in particular by 2050. The share of renewable energy is increasing worldwide, but due to the intermittent nature of wind and solar power, a lack of system flexibility is already hampering the further integration of renewable energy in some countries. In this study, we analyze if and how combinations of carbon pricing and power-to-gas (PtG) generation in the form of green power-to-hydrogen followed by methanation (which we refer to as PtG throughout) using captured CO2 emissions can provide transitions to deep decarbonization of energy systems. To this end, we focus on the economics of deep decarbonization of the European electricity system with the help of an energy system model. In different scenario analyses, we find that a CO2 price of 160 €/t (by 2050) is on its own not sufficient to decarbonize the electricity sector, but that a CO2 price path of 125 (by 2040) up to 160 €/t (by 2050), combined with PtG technologies, can lead to an economically feasible decarbonization of the European electricity system by 2050. These results are robust to higher than anticipated PtG costs.