Solar Grid Parity: The Great $1 Myth 15 comments
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By Shyam Mehta
Grid parity. The phrase is impossible to escape. It's become the buzzword, the catchall phrase where PV is concerned. In solar-world, it is the equivalent of the Rapture or the Second Coming: The moment everyone is waiting for with bated breath, an historical inflection point past which solar will no longer require the crutches of subsidies and incentives to be competitive, when the "infinite" addressable market for solar will finally open up, and demand for photovoltaics will tear down the floodgates.
We are told that although solar has made considerable strides in its march towards this Mecca, we are not quite there yet. The magic number for modules, say they, is $1; at a buck a watt. At that point it will finally be cheaper to produce subsidy-free electricity from a module than buy it from the grid. Once you're convinced of this conventional wisdom, it's hard to see PV being cost-competitive right now or any time in the next few years. Roughly speaking, current module prices range from $2.50 to $4.00/W, so a $1/W module would take quite some doing.
At the risk of being at the receiving end of many a derisive "d'oh" from informed citizens for my perceived Captain Obviousness, there are so many problems with this train of thought that it's hard to know where to start. The notion that a single, round number will drive solar cost-competitiveness the world over is a considerably misleading, blatant one-size-fits-all oversimplification at its finest; moreover, the anointed choice for that number, in the event one must be named – $1/W – is just plain wrong. For those in the business to perpetuate either of these myths is neither intelligent nor responsible. The answer to the question "At what module price grid parity?" must necessarily be, surprise, surprise: It depends.
But doesn't it always depend? Of course it does. With all things in life there's a distribution, and policy makers, investors and readers don't have time to understand distributions, so you have to give them a representative number, a platonic ideal, a possibly fictitious average (and the nicer and rounder the number the better – what's more perfect than $1 in that regard?). While an average is certainly a useful representative of a distribution with a narrow spread/standard deviation, it's damn near worthless at telling you anything about a distribution with a wide spread. To steal an oft-quoted line from an old colleague, if I have one hand in boiling hot water and the other in ice, on average I feel fine. And solar most definitely is one of these widespread distributions – so it doesn't just depend, it really depends.
How does it depend exactly? This isn't rocket science, but it does beg some further explanation. Let's assume you're talking about residential or commercial-scale, distributed solar electricity here (as opposed to utility-scale solar, which is centralized). The metric for the "grid" that you're seeking parity with is then retail electricity rates, and you want to compare this to what's called the LCOE, or levelized cost of energy, for solar – essentially the present value of all the "cost flows" generated over the life of the PV system, divided by the total electrical energy generated by the system. Let's look at just a few prime movers of the grid parity equation:
- Retail Rates. Depending on which grid you want to be at parity with, your target cost could be anywhere between 5 cents per kilowatt-hour (for China and India) to a whopping 25c/kwh (Italy); in the U.S. alone, retail rates can vary by a factor of up to 5 times. For major demand centers with high retail electricity such as Italy, Spain, Holland, Great Britain and California, $1/W is about twice as low as you'd have to go.
- Insolation. Incident solar radiation is directly proportional to how much bang you get for your solar buck, and Arizona, California, Spain and Sicily are roughly twice as fortunate as say, Germany in this regard. Again, variation across the U.S. alone is significant. As the images in slide one and two below suggest, with so much variation, averages really don't tell the story that well. In high insolation regions, $1/W is simply not representative.
- Financing. Financing costs constitute a significant portion of the LCOE – and loan terms, the cost of credit and leveraging ratios can make a telling difference to the bottom line. If you don't believe me, check out NREL's analysis on slide three below (also located here).
I could go on forever, but I think I've ranted on at sufficient length to communicate my message. Grid parity is not a singular event – PV's competiveness with the grid varies wildly based on the region in question, meaning that individual regional markets will open up over the next several years based on local parameters. The idea that module prices need to come down to $1/W for solar to be competitive is misplaced at best, and to a great degree, just plain wrong – it dangerously erases the important fact that even at current prices, PV is at or near parity with the grid in a number of markets. The revolution, kids, isn't coming. The revolution is now.
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This article has 15 comments:
www.q-cells.com/medien...
It is cool to have PV on your roof. One may not be willing to invest 100K, but would one invest 20K. Many would.
> jack
On Dec 10 06:31 AM klemenv wrote:
> Also, you may include 'cool' effect.
> It is cool to have PV on your roof. One may not be willing to invest
> 100K, but would one invest 20K. Many would.
If you set it too high, utility does not buy your power so in effect you are off grid until the sun goes down (new storage battery technology may fix that soon). If you set it too low, they will buy all that you can spare because you are generating power below long run marginal cost for them. Any price in between is a function on how much you want to invest in your PV system. If you have 5 acres you could easily generate 5MgW in peak. Now you are a power company. Enjoy!
With that, other renewables and electric cars, there would be enough jobs to turn this economy around !
Or am I wrong ? (I'm not an investor)
Good article, but I'm tired of hearing that nonsense when....
.
The subsidies for solar and wind are miniscule when compared with the subsidies for oil, coal, gas and nuclear.
I'm not sure I understand your point
You said
"This kinda goes against the desert solar thermal thing too. If we are to disband from fossils, we need a source of clean baseload power (the other 80%). As someone mentioned, when PV begins its market invasion, fossils will have to come back down (again). Unless people can mass produce mirrors and steam generators for cheap, I don't see how we will ever get off of oil."
Solar thermal with heat storage is the baseload you are talking about. It's even better than base load because it revs up during the day and peaks in the afternoon, all perfectly in sinc with the energy demand cycle. And it continues to provide power into the night. All night if necessary. Steady power from the mass of heat that is stored. It is not intermittent energy.
Why can't people mass produce steam generators and mirrors for cheap?
They use the same generators that any other power plant uses that makes steam. They can plug into the exact same power block. What's so hard about making mirrors?
The parts for solar thermal plants are being mass produced already. And more factories to do this are being built right now.
Ausra and Schott are doing this for example. A division of United Technology, Hamilton Sunstrand's Rockedyne division has developed advanced molten salt storage and handling system for heat storage. They have also started their own solar thermal company- Solar Reserve.
Electricity from solar thermal will be under 10cents/kWh within 5 years. It will get cheaper after that, as economy of scale is realized, dropping to 5-8cents/kWh
Here's a great article on solar thermal
www.salon.com/news/fea...
and another here:
climateprogress.org/20.../
Solar thermal has energy storage built in. And it's cheap energy storage. It costs 20-100 times more to store electricity than to store heat.
I'm tired of hearing this nonsense. It isnt true. You have it backwards.
On a per KWH basis, solar and wind have had huge subsidies and more forced govt action behind it, such as renewal energy mandates, billions in research, tax credits galore, etc. You are neglecting the fact that these fossil fuel and other energy producers pay huge amounts in taxes, on so many levels from corp. income taxes to property taxes on plants to taxes at the gas pump, because people actually USE these energy sources to a large extent.