Exact figures of how much economic value solar power has saved the world overall are complicated to pin down, but we can examine the factors that make up this number and gain a clearer picture. It’s not one easily quantifiable number, but rather a realization of many economic benefits all around the world over time.
Here’s a look at some of the important ways that solar power can save people money, as well as the difficulties of calculating the total.
End-User Can and Will Save on Electricity Bill
This is the saving most easily seen and understood. When people, businesses, and institutions install solar panels, they make their own electricity. Money that otherwise would have gone for electricity from traditional sources (fossil fuels, nuclear) is retained.
Factors Leading to this Savings:
- Electricity costs in a region: At high electricity prices, there can be more potential savings from solar.
- The size and efficiency of the solar array: The bigger and more efficient a solar system, the more power it can produce – and the more it can save you.
- Net metering policies: Net metering allows solar owners to sell to the grid the excess electricity they don’t use, which provides even more savings and, in some instances, a profit.
- Self-consumption figures: How much power generated from the solar panels is used in the property as opposed to being exported to the grid.
Challenge in measurement:
Adding up this savings across millions of individual installations at a global scale that occurs over generations is a really hard thing to do. There is no centralized collection of data for an individual person’s electric bill versus solar production on a global or even national scale.
Savings for Utilities Not Charging for Fuel
As more renewable energy like solar is added to the grid, utilities must buy less fuel (coal, natural gas, oil) to produce electricity. This is a big cost savings for the utilities—savings that the companies can potentially pass along in part to consumers, though it doesn’t always work out that way.
Reasons Impacting this Saving:
- Cost of fossil fuels: When fuel prices are volatile, the avoided cost of fuel will also be volatile.
- Solar on grid: The more solar that goes on the grid, the more fuel regulation is reduced.
- Fossil fuel power plant efficiency: Lower efficiency plants deliver less power for the fuel consumed, so savings from avoiding running them is greater.
Difficulty in Quantifying:
The fuel procurement costs of utilities are complicated and driven by many factors other than solar. Extracting specific solar-induced savings also involves complex modeling and analytics.
Diminished Requirement for New Fossil Fuel Power Stations
The more solar power capacity that comes online, the less you need to build new, costly fossil fuel power plants. This avoids significant capital and operational expenditures for such plants.
Variables Affecting Such Savings:
- Cost of constructing new fossil fuel plants: This value can fluctuate widely with technology and location.
- Growth in electricity demand: The requirement for new capacity is driven by anticipated future growth in electricity consumption.
- Another option is to look at the lifespan duration of the avoided plant: The “stays-in-the-ground” savings take place over the multi-decade life of a power plant.
Challenge in quantifying:
This is a “counterfactual” — it’s hard to prove conclusively how many fossil fuel plants would have been constructed if solar hadn’t been available. Economic modelling and forecasting is required.
Savings from Avoided Environmental and Health Costs
Fossil fuel combustion releases pollutants that cause smog and acid rain and also contributes to problems rising from poor air quality, including climate change and other health complications. These have large economic impacts in terms of health care costs, lost work, and environmental clean-up.
Demographics Driving this Savings:
- Cost of medical care associated with air pollution: This constitutes a significant financial burden in much of the world.
- The economic costs of climate change: This refers to the cost of things like extreme weather, sea level rise, and agricultural disruptions.
- Cost of environmental cleanup: It is expensive to clean up pollution caused by extracting and burning fossil fuels.
Challenge to quantify:
Assigning direct environmental and health costs to the use of fossil fuels, then quantifying how much of a saving comes from avoiding those costs by replacing the use of fossil fuels with solar is extremely difficult. It includes epidemiological analysis, climate modeling, and non-market valuation of economic goods.
Lower Costs of Transmission and Distribution
Distributed solar generation (on rooftops) can relieve the necessity of electricity to travel long distances from central power plants. This could result in savings on transmission system upgrades and reduced energy losses during transmission.
Factors that Contribute to this Saving:
- Where solar installations are located: Distributed generation affects distribution costs a lot more than utility-scale in uncongested parts of the grid.
- Grid efficiency: Old or inefficient grids suffer from greater transmission loss.
Challenge in quantifying:
Separating out the specific impact that solar has on transmission costs involves detailed study of how the grid is operated and what has been invested in.
Electricity Markets
In a few electricity markets where the surplus of cheap solar power drives down wholesale electricity prices, all consumers, regardless of whether or not they have solar panels, enjoy some of the benefits of lower prices.
Contributing Factors to this Saving:
- Electrical market structures: Competitive markets will tend to observe more solar price suppression.
- Level and timing of solar generation: The impact of solar is largest during daylight peaks, when prices are often highest.
Difficulty of quantifying:
This impact is complicated and can be hard to untangle from other factors that affect electricity prices.
Challenges in Estimating a Worldwide Saving
- No Centralized Data: There isn’t a centralized database of all the solar installations, electricity bill savings, and avoided costs around the globe.
- Different Methodologies: Methods, assumptions, and inputs vary from study to study and organization to organization in calculating the economic value of solar.
- The Market is Dynamic: Solar costs, fossil fuel prices, and government policies all constantly evolve, which makes for a very poor answer at any one time.
- Attribution Difficulties: It’s also hard to separate the actual, realized savings that are directly linked to solar power from other forces at play in the energy space.
- Long-run benefits: Central to actual social discount rates is the idea that many of the most important savings, especially those for climate change, occur over extremely long horizons and so are hard to tabulate in today’s dollars.
How The Numbers Are Calculated (And Why They Are Different)
Despite the difficulties, both researchers and organizations try to calculate the economic value of solar power. Such estimates are usually founded on:
- Modelling: Using economic and energy models to estimate the effect of solar deployment on electricity markets, fuel use, and investment in infrastructure.
- Cases: Economic studies of solar in particular places or countries.
- Surveys: Collecting information from solar owners about how much they save on their electricity bill.
- Lifecycle Cost Analysis: Total price to generate electricity using solar when compared to fossil fuels over product lifetime (including energy and environmental costs).
Such estimates are divergent due to variations in assumptions and data. A number of studies are about direct bill savings, whereas other studies consider wider societal benefits such as avoided healthcare costs.
Summary
It’s maybe a bit too audacious to put one exact figure on exactly how much it has saved the world (though the number undoubtedly is very, very high), but it is very clear that the economic benefits of solar power have been massive. Solar-generated electricity saves consumers money and benefits even those who do not use solar power—businesses, utilities, and society overall—by lowering the costs of electricity, fuel (in the case of solar thermal systems), infrastructure investments, and environmental and health costs that would otherwise be incurred.
The total savings are clearly in the hundreds of billions if not trillions of dollars internationally over the past several decades. As solar technology advances and deployment increases, these savings will become even larger in the future. Future research and better data gathering will no doubt yield more nuanced estimates, but the basic conclusion holds: Solar power delivers meaningful economic savings and is a critical cog in a more sustainable and cost-effective electricity future.