Why Grid Parity is a Big Deal

Grid parity.

It’s a term that’s becoming increasingly vogue these days in renewable power circles – especially in countries at the forefront of wind and solar energy development.

But what exactly is grid parity, and why does it matter?

Grid parity exists when the levelized cost of solar or wind energy drops to the point where it is equal to or less than the cost of electricity from the traditional power grid. In other words, it’s the tipping-point when renewables make more economic sense to use than traditional, carbon-based energy sources – rendering the cliched “green-is-good-but just-too-expensive” argument obsolete.

Fortunately, global grid parity is no longer a figment of scientists’ imagination. In fact, the day of global grid equilibrium is coming soon.

It is at this point during the grid parity discussion that critics inevitably bring up the matter of energy subsidies.

From cash rewards to tax and business credits to risk transfers from shareholders to ratepayers, all types of subsidies have been used to encourage or discourage all forms of energy including nuclear, natural gas, coal, oil, shale, biofuels, wind and solar. In the face of these subsidies, can grid parity be accurately determined?

It turns out it can – especially since these renewable subsidies are being systematically phased out, forcing solar and other clean alternatives to stand on their own to compete on price alone. And, when energy production and use are grounded in market realities – and not on subsidies, the potential for job growth, or the prospect for environmental enlightenment – long-term behavior change leading to grid parity is inherently more possible.

Grid parity also provides a relatively accurate picture of where countries are located on the renewable energy growth curve. Lloyd’s Register Technology Radar surveyed hundreds of senior managers at energy companies involved in renewables production to create a world grid parity timeline.

China will be the first to arrive at grid parity, with concentrated solar grid parity expected in 2022, followed by photovoltaic (PV) grid parity a year later.

The United States will experience parity in solar PV by 2024, followed in successive years by Europe and the Middle East (or at least in the Middle Eastern countries committing to solar).  

Call the 2020s the decade of grid parity. 

Even technical challenges once thought to inhibit renewables growth, such as an absence of storage solutions and solar cell technology advances, aren’t expected to negatively impact grid parity for long thanks to new developments in high concentration photovoltaic (HCPV) solar.

All of which makes those of us at HCPV solar leader CSDR International hopeful for the future.

Leslie Gomez