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Suppose 10 million new solar panels will be installed in some country this year, and there are two options:

A: the solar panels go onto the roofs of 1 million individual houses

B: the solar panels go into 1 thousand large solar farms

With option A, there is a great deal of expense dispatching workers to all the houses, doing all the electrical hookups at each house, advertising to the individual buyers, etc. Then many of the panels will be installed at sub-optimal angles, be partially blocked by trees, go in cloudy locations, etc.

With option B, it is presumably much cheaper and faster to install and maintain the solar panels. It does require some extra land; does option A have any other economic advantages besides that? (Of course, there may be advantages such as people signalling their support of solar power by displaying the panels, but I'd like to focus on direct economic advantages.)

  • "some extra land" is far more complicated than that. Most people don't like to live near a solar farm; they're ugly. They require permits and assessments and new roads and all kinds of infrastructure. They get opposed. Panels on the roof are far simpler politically. – Kate Gregory May 9 '18 at 16:16
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Option A is distributed generation solar photovoltaics (DGPV)

That is, solar power systems installed at energy consumer's sites (typically on a rooftop). The power produced is primarily used locally, with excess power sold back to the grid in some cases.

Advantages

  • Depending on location and regulations, DPGV can provide back-up power when grid power is not available
  • Financing and approval of DGPV projects can be simpler and easier for public institutions
  • On-site renewables are worth more than off-site when seeking LEED status
  • DGPV systems can be installed on rooftops which may not be useful for anything else
  • DGPV systems can be combined with thermal hot water systems, further reducing a building's total energy costs
  • DGPV systems can be combined with green roofs to improve their performance, increase utilization of the space, and decrease the building cooling load
  • For a given amount of solar power being added to the grid, DGPV systems (emphasizing "D" for distributed) are less likely to create a need for greater transmission and distribution capacity than centralized utility-scale systems

Disadvantages

  • As mentioned, small sites (particularly rooftops) have limited flexibility when trying to install an optimized solar system
  • Operating and maintenance costs increase proportionally as system size decreases
  • Localities with a high ratio of DGPV are prone to grid instability (voltage spikes/troughs and/or shifts away from the default 50/60Hz), particularly on days with fast-moving, spotty cloud cover. Costs to utilities (often passed on to end-users) to avoid these problems are higher with distributed installations than larger, centralized systems.

Option B is utility-scale solar

That is, large-scale solar power systems installed and operated by a utility for the purpose of putting power on the grid to sell to power consumers.

Advantages

  • As mentioned, economies of scale result in greatly reduced cost per watt of installed solar systems
  • Within a given utility service territory, solar plants can be installed strategically to meet growing demand or relieve transmission congestion
  • Larger solar installations can be paired more cost-effectively with storage or gas-fired peaking power units to offset destabilizing effects and reduce levelized power costs

Disadvantages

  • Most installations take up space that could have been used for something else
  • Larger capital projects take longer and require more stringent, time-consuming approvals processes

The upshot

For a fixed amount of capital, in 9 out of 10 cases it's likely that the economies-of-scale advantage for utility-scale systems will outweigh all other considerations. But since DGPV doesn't really compete with utility-scale solar, both types of systems can happily co-exist.

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