Problem definition: Investments in renewable energy have surged worldwide in recent years, with over $2 trillion spent globally on clean energy. This surge was driven by growing policy support, concerns about energy security, and, most importantly, the cost competitiveness of renewable energy. However, while technological advances have ensured that the costs of wind turbines and solar panels have fallen, these lower costs have not translated into increased profits for renewable energy generation. Renewable power plants generate lower revenue than their conventional counterparts, such as coal and gas, because renewable electricity is often generated in locations and at times with low wholesale market prices. These lower profits for renewables mean that investments still fall short of meeting global clean energy targets.
Methodology/results: To increase profitability, we propose a new site selection metric for renewable power plants, Quality Adjusted Power Value (QAPV), which captures the monetary value of electricity by accounting for the time and location of renewable generation. Our analysis integrates vast amounts of data from diverse sources. We used geospatial natural resource satellite data and highly granular electricity price data to validate this metric on wind power plants installed in Texas between 2008 and 2014. We found that revenue over this seven-year period increases by a median of 21% if the plants were sited using QAPV. We discuss mechanisms for this increase and find that the increase in revenue remains positive and significant even when proposed sites are restricted to a particular district or with specific access to transmission.
Managerial implications: For renewable developers, our site selection metric can be used to identify the highest revenue-generating investment sites, and for policymakers, our results on counterfactual revenue can enable discussions around policies that streamline efficient investments in renewable energy, which we demonstrate to increase consumer welfare.