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Solar Grid Parity – Are You in the Zone?

November 10, 2011

According to recent scientific and economic reports, Solar (a.k.a. Photovoltaic, or “light-electricity”) power is nearing a point at which it is equal or less in cost than power supplied by the world’s electric grids.  Surprised?

Someday soon, your utility bill for power from coal-fired power plant operators could be higher than the cost of solar power, and your pocketbook will say: “Go solar”.  Or, your utility will just handle it for you.  Or both.  Depending on where you live, that tipping point has already come to pass. For others of us it remains impractical, and geothermal looks more viable.  What’s it like where you live?   Find out in this article.

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At a recent meeting of the North Shore Technology Council, Dr. Paul Sullivan, Ph.D., a Vice President at Varian Semiconductor Equipment Associates, presented some compelling evidence that solar grid parity is imminent for more and more world regions.   Here are some highlights of his well-researched, thoroughly informative talk.

The Practicalities of Solar

What factors make Solar attractive? What drawbacks prevent its widespread adoption? Solar power is attractive because of factors like:

  • Lifetime value – current PV installations have surpassed their expected useful life of 30 years
  • Passive – once installed, solar requires minimal costly human intervention
  • Modular – solar power systems can be built to suit a broad variety of situations
  • Fuel-efficient – solar requires no fossil fuel or water to operate
  • Environmentally low-impact – except for the solar cell chips that use expensive silicon
  • Low noise – no machinery means no noise pollution
  • Mechanically efficient – this improves on solar’s innate low efficiency and makes it viable
  • No emissions – solar power generation is essentially pollution-free

Solar is not without challenges, though, which chiefly include:

  • Light dependency – the amount of sunlight that reaches the PV installation, affected by latitude, weather, climate, geography, topography, vegetation, etc.
  • Storage – off-grid and night-time power require some sort of power storage
  • Startup cost – subsidies are necessary these days to make payoff a near term reality; they exist in the form of cheap loans, tax breaks, and feed-in tariffs (FITs)
  • Space & site – a large surface is needed to produce useful power; site factors like angles and shading also affect efficiency.  Large solar farms are more efficient than rooftop installations
  • Conversion loss – converting Solar from Direct Current (DC) to AC to make it useful for everyday consumption is a key cause of solar power leakage, loss and inefficiency

Entering the Grid Parity Zone

All the pro and con factors described above, fed into calculations, indicate that certain world regions are already in the Grid Parity “zone”, where the cost of Solar power is cheaper than electric grid power, in places like California, Hawaii, Spain and Japan.  Wikipedia defines Grid Parity as the generated cost of power using lowest-cost alternatives versus the currently dominant electic power grid.   In these strict financial terms, those world regions have arrived at Grid Parity.

Three Big Financial Factors

Currently, the initial startup cost of residential solar power installation is dauntingly high for most private citizens.   In recent years, disposable income has hovered at around the $10,000 USD mark.  It would be tough to convince any family to forgo vacation, entertainment, leisure and other expenses and sink it all into solar panels – no matter how sensible it may be in the long term.   A fortunate ray of hope on the affordability front is that as PV becomes more efficient and cost-effective, certain economies of scale kick in and accelerate its affordability.   The three largest looming factors are:

Solar Cell Efficiency.   The efficiency of the performance of each individual solar cell is the single biggest factor; it affects the rest of the value chain.   Advancements in solar cell R&D continue to improve the efficiency factor.

Thinner Wafers – the “chips” upon which solar cells are implanted are made of expensive Silicon.   Reducing silicon consumption reduces chip cost.

Experience Curve – increasing production results in economies of scale.   As a rule, each doubling of cumulative sold PV power installations reduces prices by over 20%.

What Next?

From a global perspective, there is no true market driven dynamic for the solar power industry.   Fragmentation is the norm, driven by subsidies and the whims of politics.   A viable solar power industry with true grid parity requires solar cells whose cost per megawatt hour eclipses traditional energy sources.  Thanks to recent technology and economic developments, we are nearing a point in the current decade where solar power is becoming a more universally practical and affordable power generation alternative.

Welcome to the zone of Universal Grid Parity.   Don’t you just love a sunny day?

Additional resources

Buongiorno, solar parity! (SmarterPlanet)

Group Purchasing Gets Solar to Grid Parity in Los Angeles  (ThinkProgress)

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2 Comments leave one →
  1. Gunther Beck permalink
    November 18, 2011 10:42 am

    We are already in a situation similar to rent-or-buy in housing. If you can afford the investment you will be better off with PV in many regions even without subsidies and grants. In financial terms it means to purchase the electricity today (by buying the PV installation) instead of paying monthly bills. As the saying goes: the sun does not send you bills.
    It also means that the wealthier people can save money over the part that cannot afford the investment.
    Be sure there are many industries that are interested that this does not get too public.
    But next time you spend 30.000 USD or EUR on a new car, think about investing into something that will create something (electricity) instead of costing you more to operate (car).

    • Ed permalink*
      November 18, 2011 11:45 am

      @Gunther: elegant math! ~Ed

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