Siting Solar PV Capacity to Maximize Environmental Benefits

The environmental benefits of solar electricity generating capacity vary across the U.S. according to solar irradiance, weather, conventional generation fleets, grid characteristics, and population. Though the 1.1 million distributed solar generation systems installed in the U.S are incentivized by local, state and federal programs, virtually none of these varies subsidies according to expected environmental benefits, which, to our knowledge, have not previously been estimated. This paper, therefore, develops a systematic and theoretically consistent measure of the spatially-differentiated environmental benefits of solar capacity across the U.S. These benefits, equal to $6,200 over the lifetime of a typical 4 kilowatt capacity system, are related to the federal and state subsidies that subsidize the typical system in excess of these benefits by $5,400. Yet, in 25% of zip codes, rooftop solar is under-subsidized by as much as $6,200. The magnitude of foregone environmental benefits due to suboptimal siting of solar capacity are estimated at as much as $1.2 billion annually. JEL: Q42, Q48, Q51, Q52