The reliability of distributed solar in critical peak demand: A capital value assessment

Generation is most valuable when demand is highest. As electricity can't yet be cheaply stored, generation and transmission infrastructure must be built to meet the highest expected demand, plus a margin of error. Reliably producing power at times of critical demand not only offsets the need to use expensive liquid fuels such as diesel or condensate, but also removes the need to build backup power stations and transmission infrastructure that would only be used for a small fraction of the year. Under the most extreme demand conditions, solar has reduced the peak demand seen by retailers and wholesale energy markets. This study compares the capital cost of critical peak availability from gas turbines to the capital cost of critical peak availability from distributed solar in the Australian National Electricity Market (NEM). When compared on this basis, 10–22% of the cost of installing the solar system can be attributed to the capital value of critical peak generation. North–west and west facing PV is worth a further 3–6% of system installation costs when compared to generally north facing PV. Finally, southern states, with longer summer days and more sunshine in the afternoon are found to benefit more from peak supply of solar PV.