What is Grid Parity

An introduction to the concept of grid parity in renewable energy generation

One of the key goals of the renewable energy industry is to achieve grid parity - the point at which electricity can be generated at the same cost (or less) than by burning fossil fuels. Without it being cheaper in the short and long term to use renewable energy governments and industry will continue to lack the motivation to invest in renewable power. It is likely that the first renewable energy source to achieve grid parity will be solar power (1).

Subsidised Solar Power

Many countries, and in particular Germany, offer very generous feed in tariffs - the rate solar generators (including small domestic installations) are paid per kWh unit of electricity generated. In Germany this state subsidy results in producers being paid 0.45 Euro per unit generated - as much as 5 to 6 times the wholesale cost of electricity! Huge capital grants are also available to help with the initial costs of setting up a solar generating system.

In addition to motivating people to install PV solar panels on their homes and offices, these subsidies have an additional benefit. By bringing solar power generation into the mainstream, and hugely increasing the volume of sales of solar panels, solar panel manufacturing (2) processes have been improved, new solar technology has developed very quickly, and prices have fallen.

Grid Parity for Solar Power

The consensus is that grid parity for PV solar panels (3) will be achieved when they can be manufactured for less than US$1 per Watt of peak power.

For domestic PV solar installations at least, it is likely that a further US$1 per Watt will be incurred in installation, cables, mountings, power inverters (4), and so on.

US solar panel manufacturer First Solar (5) hope to achieve grid parity as soon as 2012, after which a huge boom in the number of solar installations is likely to occur. Rather than using pure silicon and achieving 16-20% efficiency, First Solar make 10-11% efficient thin film cadmium telluride (CdTe) based solar panels. These take up up to twice the space of more efficient panels, but can be manufactured more cheaply per Watt of peak power output. They are supplied with a 25 year warranty and will still put out 90% of rated power after 10 years, and 80% after 25 years.

NEW December 2008 Update: Analysts have claimed that First Solar have reached the grid parity milestone with the 10MW Sempra First Solar power plant in San Diego priced at just 7.5 cents per kilowatt hour (without subsidies) - below the cost of coal generated electricity in USA (which feeds into the grid at around 9 cents per kWh). However, it is worth noting that the 7.5 cents/kWh covers only the cost of the solar panels themselves, not the installation, mounting equipment, infrastructure, and so on, and that the cost of First Solar to make the panels was actually $3.17 per Watt. Therefore, it is safe to say that we are not quite there yet, but moving in the right direction.

Web Link References

(1) http://www.reuk.co.uk/solar.htm
(2) http://www.reuk.co.uk/How-are-Solar-Panels-Made.htm
(3) http://www.reuk.co.uk/How-Do-PV-Solar-Panels-Work.htm
(4) http://www.reuk.co.uk/Power-Inverters.htm
(5) http://www.firstsolar.com/