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Solar Power and Grid Parity

Despite all the doom and gloom around energy, I’m optimistic. One of the key reasons is the concept of grid parity, and the speed at which solar is reaching this all-important milestone.

Grid parity (or socket parity) occurs when an alternative energy source can generate electricity at a levelized cost that is less than or equal to the price of purchasing power from the electricity grid. Reaching grid parity is considered to be an important point in the development of new sources of power. It is the point at which an alternative energy source becomes a contender for widespread development without subsidies or government support. The term is most commonly used when discussing renewable energy sources, notably solar power and wind power. It is widely believed that a wholesale shift in generation to these forms of energy will take place when they reach grid parity. Wikipedia

Solar power has already crossed grid in the state of Hawaii. Homes and companies in the state can already reduce their electric bills with solar panel even without any subsidies. Of course, Hawaii is a sun-drenched island state which relies on imported oil for 83% of it’s electricity—reaching grid parity in states where coal is cheap and ubiquitous will take longer, but it’s coming soon. Depending on where you live, solar will reach grid parity within the next 3-10 years. (Sooner in states like California and Arizona, longer in states like Washington.) Solar grid parity is a near inevitable result of the combination of rising oil prices and falling solar prices…

In the US, solar PV technology is expected to reach grid parity for some PV projects in 2014, and by 2017 most regions in the country are expected to reach grid parity in alignment with average electricity prices in the residential sector. China is also due to witness similar developments, with grid parity for solar expected to reach in most regions by 2015-2016. AltEnergyMag

When you reach the point of grid parity, the free market kicks in. Government subsidies are no longer needed to spur innovation in and adoption of solar technology because the market itself creates natural demand for solar energy. Of course, it won’t happen all at once— it will be a gradual process. Regional differences in the cost of traditional energy sources, amount of sunlight, etc. will all result in highly variable demand across the nation and globe, but it’s a continual slope that over a decade or two will result in dramatic reductions in the consumption of coal (our primary energy source in the U.S.) and even gasoline (as people migrate to hybrid and electric vehicles, which over time are powered more by solar power instead of coal.) People with grid-tied photovoltaic panels on their roofs will reach parity in parts of California in early 2013, driven mainly by the cost of energy here.

PV efficiency is going up while the cost is going down. Prices and demand for tranditional energy sources are going up. The point of convergence is inevitable.

Solar Grid Parity Chart

Granted, it will be a while before large, “utility-scale” projects with their huge capital and real estate intensive implementations and longer transmission distances (not to mention wholesale instead of retail cost) reach grid parity, but again, it will happen. It’s inevitable. At that point, we can start building massive solar farms in uninhabited parts of Nevada and Arizona, for example. At that point, the utility industry— driven by their own profit motive rather than an altruistic desire for renewable clean energy or the persuit of governement subisides and tax breaks— will move away from traditional sources of energy, and we’ll achieve energy independence and reduce polution. Oh, and costs will go down. Everybody wins.

I fail to see the downside here… of course, that’s because I don’t work for an oil or coal comapany.

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