Grid Parity

We hear a lot about "renewables" approaching the coveted "grid parity" objective.  In other words, for the cost of electricity produced by renewable means to match the cost of conventional electrical generation.

Well, we have news for you.  Solar PV (photo-voltaic) has already achieved this stage if you install it in a reasonable sunny place where electricity is not extremely cheap.

Here are our calculations for a place with 20% annual solar capacity factor (in other words, a place where the PV installation produces 20% of the rated peak energy in an annual basis) and a system cost (including installation and inverters) of $4 dollars per peak Watt** (and considering only 20 years of operation, which is quite conservative*):

One watt peak of capacity will produce in 20 years this amount of energy:

1 Watt x 24 hours x 365 days x 20 years x 20% Capacity Factor (CF) = 175 kWh

The cost of the AVERAGE PV Watt is $4 / 20% = $20 dollars. (Average PV Watt is obtained by multiplying the peak Watt by the annual Capacity Factor.

Consequently, the cost of the kWh would be $20 / 175 kWh = $0.11

TODAY the average cost of the residential kWh in the USA (which has low rates compared with the rest of the world) is around $0.10.  We can expect this cost to increase in the years ahead.

That's it!  We have achieved grid parity with solar PV without any need for subsidies or tax breaks.

So, why do the lobbyists for solar PV insist on pushing subsidies and tax breaks?  Good question.

HOWEVER, the above is not the complete story.  Solar has achieved grid parity ONLY because it piggy-backs on the conventional energy grid. 

If we make solar PV bear the full weight of its intermittency and unreliability then costs soar.  And I mean SOAR. Massive storage installations (batteries, pumped storage, hydrogen, what have you) would have to be built and even then the supply will be unreliable. Why?  Because economics will determine that only a few hours or days of storage would be implemented and, for example, cloudy winter days can last for weeks.

Additionally the construction of so much storage cannot be environmentally friendly and will add to the CO2 emissions of plain grid connected solar PV (which is already around 46 grams per kWh***).

Another important point to bear in mind is that solar PV (without massive storage) does NOT replace any current electrical capacity. In other words, the conventional grid has to supply all the power when the sun is below the horizon and most of the power when the day is cloudy. In reality, solar PV installations produce less than 20% of their rated power on an annual basis.

From the point of view of production, solar PV is a surplus, unneeded investment.

Sure, we do have to concede that solar PV is a low carbon (but not zero) energy producer.  However, how much CO2 emissions are curtailed by using intermittent solar depends on WHAT source of electricity we are replacing.  If we are replacing hydro or nuclear, then solar INCREASES emissions. Yes, if we are replacing fossil fuels, then we do REDUCE emissions.

But even then the calculations of CO2 reductions are not easy: we have to consider that when solar kicks in, other power plants need to be modulated / idled / stopped and later in the day re-started to compensate the fluctuating nature of solar.  This generates costs that are NOT included above in the "grid parity" calculations.

Conclusion: if we analyze the complete system, then solar PV costs are higher than they seem and their ability to reduce emissions are not as great.  Energy is a complex engineering / economic / environmental issue and every individual project should be carefully reviewed to analyze its pros, cons and ultimate benefit. We cannot just write a blank check to "renewable" energy.

* Sure, the output of the panels decreases smoothly with time but they should last more than 20 years.  Let's leave it this way for simplicity's sake. What is NOT considered in the calculations above is the replacement of the inverters.

** This is my cost.  Yours may be different. Peak Watt is what the system produces under optimal conditions (e.g. noon, no clouds, clean, etc.).

*** http://gnwr1.blogspot.com/2013/01/clean-energy.html

**** Yes, financing costs need to be considered.  For simplicity I'm not including them in the above calculations.