Solar PV approaching grid parity

Grid parity refers to a point in time when the cost of generating electric power from PV energy is equal to the price of purchasing power from the grid and this appears to be getting closer every month. Beyond this important point, PV power becomes, in principle, a viable technology for widespread development without subsidy support. This is expected to trigger an accelerated shift in PV adoption.

Today, we are already at – or have passed through – grid parity at several locations in the world. This includes Hawaii and other tropical island nations in the Caribbean and South Pacific where PV competes with electricity from expensive oil imports. Grid parity has also been achieved in parts of Spain where there is plenty of sunshine and relatively high electricity cost.

Estimates also suggest that by 2013 parts of Italy, Brazil, Chile and Australia will also reach the threshold. Thereafter, the Philippines, California, Japan and others will follow during the period from 2014 to 2016. This accelerated drive towards grid parity is timely because, in many key markets, incentives are declining or disappearing.  This trend will continue, especially in Europe.

Many coal, gas and nuclear plants are already fully-amortized and produce low-cost, highly-competitive electric power. Also, PV has been most successful in competing within the ‘peak-power’ segment. However, this is changing within locations where PV provides a substantial portion of the energy on sunny days (such as southern Germany). When PV becomes a mainstream energy source, it then competes with less expensive sources rather than ‘peak-only’ power plants. In many countries, this segment is primarily serviced by natural gas, coal and other fossil fuel powered plants.

The adoption of hydraulic fracking – especially within the US – has caused natural gas production to increase dramatically. This has resulted in prices declining to historic lows, rivaling coal prices. This cheap gas represents serious competition to PV within the US and other areas. Declining fossil fuel prices are also compounded by large subsidies that were four times greater than the total revenues of the global PV industry during 2011.

In addition, the grid infrastructure is not optimised for distributed generation – one of PV’s key advantages. Most grids were typically designed to pipe electricity (mainly coal) from power plants to the industrial and population centers. This legacy infrastructure may cause challenges for PV power in being able to access the grid. Infrastructure changes to take advantage of distributed generation will take time to implement, and will likely require significant investments.

Also, the intermittent nature of PV energy becomes a challenge as PV contributes more to the overall energy mix. This could be addressed with energy storage or buffering in the future. However, these technologies are still expensive today at the scale necessary to ensure grid stability, if PV were to provide the majority of power generated.

 

 

Image 01 - Mount Komekura Photovoltaic power plan. Sakaori.

Image 02 - A liquefied natural gas storage facility in Massachusetts, USA. Fletcher6