Economists often seem enamored of economic efficiency, honoring its merits while decrying the lost benefits of inefficient outcomes. But really ... what's the harm in a little inefficiency? Well,...
Large-Scale Green Power: An Impossible Dream?
by factors of 10 or more on an hourly basis , which makes for a significant cycling challenge for an associated conventional power plant that must be capable of dramatic changes very rapidly.
Peak and Intermediate Power: Not Economical
Consider society's need for peak and intermediate electric power, which typically occurs during the day from early morning to late afternoon. Wind availability does not often correlate with that demand, so wind is not a good match for peak power use. On the other hand, PVs produce electric power during that period, which has led many to believe that PVs may be most useful for peaking. The problem is again the unpredictable intermittence of sunlight, which means that a conventional power plant must be available to provide power-on-demand when the PVs cannot. The most attractive power plant to have "fuel saved" by photovoltaics is a natural gas combustion turbine (CT), because of its low capital cost and non-trivial fuel costs.
Comparing capital costs between a CT and PV system is not simple. This is because a CT can produce power-on-demand under a broad range of conditions while the PV system is a daylight-only power system. Furthermore, the convention is to quote PV system costs in dollars per peak kilowatt, which is not easily comparable to CT power costs.
Current CT capital costs are roughly $400/kilowatt electric . Recent PV system costs are roughly $4000/kilowatt-peak . (The convention in photovoltaics is to designate module electricity production on a peak basis, because that is the simplest, application-independent descriptor). One simple way to transform PV peak power costs to the same basis as CT costs would be to multiply by a factor of four-a factor of two corresponding to daylight being a maximum of 12 hours out of 24 hours per day and another factor of two because year-around average cloudiness in the United States is roughly 50 percent. This yields a PV system equivalent capital cost of $16,000/kilowatt. However, in a peak and intermediate load application, we are interested in power for half a day or less, which would lower the equivalent PV cost to maybe $8000/kilowatt.
But PV systems have no fuel costs and low operations and maintenance (O&M) costs, which is not the case for CTs. Accordingly, it is necessary to do more detailed calculations that include utilization (percent of a day that the system is utilized), fuel costs, O&M costs, etc., to determine overall economics. Using GRI data  and a $4.00/MMBtu gas price, CT power costs are in the six to seven cents/kWh range for 30-40 percent utilization (seven to10 hours/day).
For peaking-intermediate duty of 30-40 percent of a 24-hour day, today's PV system costs would be of the order of 30-40 cents/kWh  or roughly five times more expensive than CT power costs. So to compete with CT power requires closing a large cost gap, even if photovoltaic systems costs were dramatically reduced and natural gas prices were to soar. And even if such dramatic cost reductions were possible, photovoltaics would only be fuel saving approximately 20 percent, which is