The effect of PV generation's hourly variations on Israel's solar investment

Limited by sunniness and conversion efficiency, one installed MW of photovoltaic (PV) capacity can only produce ω_t MWh of electricity in daytime hour t, where ω_t = positive fraction that we call PV's hourly effective capacity (HEC). Based on a sample of commercially operating PV plants in Israel, HEC rises throughout the 08:00–11:00 period, peaks in the 11:00–14:00 period and then declines in the 14:00–18:00 period. Further, HEC values in spring and summer exceed those in autumn and winter, thus motivating our research question: do HEC variations by hour and season adversely affect the plans for and assessment of PV investment in Israel? An affirmative answer would cause concerns regarding Israel's announced policy of relying on increasing market penetration of PV generation transitionally supported by merchant natural-gas-fired generation (NG) to achieve a low-carbon electricity future. Hence, we propose a two-stage model of Israel's forthcoming Cournot wholesale electricity market with independent power producers (IPPs) operating PV and NG power plants. By comparing the model's solutions under alternative HEC scenarios, we find that the level of detail in modelling the HEC variations by hour and season does not materially affect the optimal PV and NG investments, thus lending support to the use of relatively simple models with only two daily non-seasonal HEC values to assess Israel's announced policy of deep decarbonization. Our methodology is general and real-world relevant because it can be readily adapted for applications in other regions with ample sunshine and wholesale electricity market competition (e.g., California, Texas and Australia).