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The Social Profitability of Photovoltaics in Germany
J. López Prol, K.W. Steininger
Economic Analysis, Sustainable, Photovoltaic (PV)
PV Economics, Markets and Policies
Subtopic: PV-Related Policies, Strategies and Societal Issues
Event: 33rd European Photovoltaic Solar Energy Conference and Exhibition
Session: 7EO.3.2
2827 - 2836
ISBN: 3-936338-47-7
Paper DOI: 10.4229/EUPVSEC20172017-7EO.3.2
0,00 EUR
Document(s): paper


While Germany has led the market in photovoltaic (PV) implementation throughout the last decade, there has been increasing criticism of PV support policies due to their high cost. Although declining, the levelized cost of electricity (LCOE) from PV is still above the German wholesale electricity price. However, using LCOE as an evaluation yardstick falls short in at least two respects: it neither takes into account integration costs rising with PV penetration (i.e. undervaluing its actual cost), nor avoided externalities of replacing conventional for renewable generation (social cost overvaluation). We thus calculate the social profitability of PV in Germany by including not only private costs and benefits, but also integration costs and avoided externalities, using the internal rate of return and the profitability index as indicators. Our results show that when these factors are considered, PV investments - up to a penetration level of at least 15% - have a social profitability above 10% at the lower bound of the social cost of carbon (150 €/tCO2), and one that is at least positive up to that penetration level if the social cost of carbon were only 50 €/tCO2. Results also show the level of private profitability if all externalities were internalized, and assert that subsidies are justified in order to align private and social profitability. The proposed method could be used as a complementary indicator to private profitability by public institutions, development banks and companies with social responsibility values.