Air Pollution and Solar Photovoltaic Power Generation: Evidence from South Korea

Solar energy, with its declining costs and enhanced efficiency, is a viable alternative to traditional fossil fuels. However, its effectiveness is compromised by atmospheric and meteorological conditions, particularly air pollution, which reduces solar radiation and panel efficiency. This study estimates the impact of air pollution on solar photovoltaic (PV) power generation in South Korea, a rapidly industrializing nation with high levels of air pollution and a growing focus on renewable energy. Using hourly power generation data from 2006 to 2013 and addressing potential endogeneity of PM10 with an instrumental variable approach, we find that a 10 mg/m³ increase in PM10 reduces solar power generation by 2.17 MWh, resulting in an estimated annual economic loss of approximately USD 2.2 million during the study period. These findings highlight the urgent need to mitigate air pollution to enhance solar power efficiency and maximize the social benefits of renewable energy.