Sunday, January 6, 2008

Getting to Grid Parity

Renewable Energy World magazine has an excellent piece on the prospects of the US solar industry reaching price parity with current sources of grid electricity (i.e. coal, natural gas and nuclear). I highly recommend everyone reading the full article, but I’d like to highlight a few points of enlightenment that struck a chord with me:

1. We need not solely rely on falling prices of PV; the rising prices of fossil/nuclear-based grid electricity can help us get to the promise land. The prices of coal, natural gas and uranium are going nowhere but up.

Source: US DOE, via REW
As the cost of PV electricity decreases, PV market penetration increases. But rising conventional grid electricity prices can also accelerate PV market penetration.

2. Real-time pricing of electricity, coupled with smart electricity meters to allow consumers to appreciate how peak period electricity (which is typically in midday, where air-conditioning use is greatest, and which coincides with peak PV production as the sun shines at its most) is in fact more expensive than PV generated electricity. Such smart metering devices are in fact already in the market. See, e.g., products byItron (Nasdaq: ITRI).

3. Developing renewable energy sources in a way that allows them to be predictable sources of electricity production, and enable utilities to integrate such renewable sources into their planning. Up to now, the stigma about renewable energy sources such as wind and PV is that they are intermittent and unreliable, and hence utilities plan their electricity production and distribution system assuming there is no wind or PV power on the system. Apart from achieving an critical mass of renewable power (i.e. the sheer quantity of renewable sources can allow planners to make conservative estimates of reliably available renewable power at any one time), the development of appropriate energy storage systems for PV and wind power systems will play an integral role in turning such renewable energy into predictable and reliable sources of power.

4. The price parity of PV must be assessed on a location-specific basis. Many variable affect the competitiveness of PV energy vis-à-vis conventional grid prices, such as the local price of electricity (which ranges from 6.15 cents/kWh in Idaho to 18.84 cents/kWh in Connecticut), degree of insolation (i.e. amount of sunshine), presence of regulatory incentives such as tax credits and renewable energy portfolio standards and net-metering, and availability of PV installers among other factors. Thus, it is simply disingenuous to assume that the answer to the question of whether PV electricity is competitive with coal or natural gas electricity. It all depends on where (and when). Indeed, in many states either with high electricity prices (typically the northeastern state) or high insolation (the southwester states), and especially at peak load periods on hot summer days, PV electricity is in fact clearly price cheaper than conventional grid energy.


Steven said...

Thanks for the informative report on Solar PV and its continuous progress toward grid parity.
1. I have done a little research of my own and it seems that grid parity is not yet attainable. Can you detail the economics behind the peak electricity from traditional sources is more expensive than solar PV?
2. Besides, do you have the details on the overall total cost of electricity (non-peak and peak). Because industry experts still seem to say that Solar PV is at 0.25 to 0.30 cents per KWh. That is still quite a way to go to 0.05 to 0.15 of traditional energy incl. transmission!
3. Can you possibly post the link to the article you are referring to the link you provided does not lead to a certain article.
Thank you

the ecopreneur said...

thanks for your comments and pointing out to me the faulty link. This has been fixed and I encourage you to read the article as I believe it directly answers your questions.

But I quote a particularly germane paragraph here:

"Price parity is difficult to quantify in the US because it varies from state to state. Average prices of grid power range from a high of 18.84 cents/kWh in Connecticut to 6.15 cents /kWh in Idaho, according to the EIA. Prices on the margin can be considerably higher. For example, in California many residential customers pay on peak rates between 30 cents - 40 cents/kWh. Solar prices also vary state-to-state, influenced by local weather patterns and state policies governing interconnection, net metering, incentives, portfolio standards, availability of PV installers and other factors."

Hope this helps!

kimberly said...

Solar energy is the best natural resource that we have this time even more that fuel is too expensive. In fact i want to approach costa rica investment opportunities and look all the alternative this country can have because it climate. We must to find the way to save our planet and to use solar energy could be the first step.

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Christian said...

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