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Market-Based Valuation of Ecosystem Services for Competitive Large-Scale Solar Power Generation

Michael Lepech and David Freyberg, Civil and Environmental Engineering; John Weyant, Management Science and Engineering; Stefan Reichelstein, Graduate School of Business

Solar power generators must present a viable business model to investors and creditors centered on a competitive wholesale price for power. This is often handicapped by high depreciation charges associated with new capital-intensive solar generation equipment, and by restricted ability to secure loans due to the investment's potentially risky nature. This project developed a market-based valuation of the preservation, use, or enhancement of the land used for utility-scale solar power plants, thereby enabling solar firms to capitalize their projects.

In accordance with Generally Accepted Accounting Principles, by including the value of the ecosystems surrounding the Hyperlight Energy generation facility in Brawley, CA, the capital asset value of the entire leased facility was raised by more than 25%. This is a potentially significant increase in the capital asset value of the solar production facility. However, the effect of this result on firm decision making has yet to be investigated.

Using life cycle assessment, the techno-ecological links between development of low-impact, large-scale solar generation facilities and the preservation of natural ecosystems can be quantified. All previous work to quantify ecosystem services using biogeochemical models valued a single service. Using a coupled biogeochemical model, this research showed that the coupling of natural ecosystem services results in an amplification of overall value. For the first time, a coupled ecosystem service was compared to a coupled industrial process. The average lifecycle cost of total phosphorus and nitrogen removed was determined from a survey of eight wastewater treatment facilities, which analyzed the expansion, upgrade, and/or retrofit of their nutrient removal.

Publications and media:

Project-based decision-making for sustainable solar generation projects using ecosystem service valuationProceedings of the 2014 Engineering Project Organization Conference (2014): 1-14.

"The prospects for cost competitive solar PV power" Energy Policy 55 (2013): 117-127.

"Ecosystem services as a new valuation methodology for private market land owners: Case study in land use scenarios in agriculture" 8th Conference on Sustainable Development of Energy, Water, and Environment Systems (2013).

 

Awarded 2011 as part of the TomKat's Large-Scale Solar project.

Funded by the TomKat Center with support from the Precourt Institute for Energy.