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Grid Parity. Explanation in detail

28.03.2018 — 0

The rapid decline in prices for the equipment production and solar power plants maintenance provides this Green Industry a leading place in the renewable energy market and huge prospects for use. Solar energy is the cheapest and most effective way of generating electricity for many countries. In this article, we will talk about Grid Parity and what countries have already managed to achieve it.

Confusion in terminology

Due to insufficient study and lack of scientific presentations, the Parity term is not always identically interpreted. Latter the “Grid Parity” meant a certain comparison of RES with classical types of generation. The term’s essence identified the status of green energy, the improvement of which (the low cost of a RES energy unit compared to coal, gas, nuclear or other) was called Parity.

However, grid electricity can be generated by several types of sources at once, and the tariff includes other parameters in addition to the energy cost. So:

Grid Parity is the case when a consumer using own generation on renewable energy sources could achieve a cost of kilowatt/hour (called LCOE) equal to or lower than the tariff cost from the Grid per kilowatt/hour.

A clear distinction. When does Parity occur?

The European technological and innovative platform for photovoltaics (ETIP PV) has carefully made calculations to show what Grid Parity is, and which countries in Europe have already achieved it. All of important nuances were taken into account.

First of all, the company noted that the consumer’s full self-provision by solar energy is an extremely complex process, since daily generation is variable. Therefore, excessive energy sold to the network at a wholesale price was considered. For real Grid Parity calculations, the data were used without taking the use of power storage. The RES use subsidies and special national tariffs were also not taken into account, for the sake of clear result.

The calculation of the Real Grid Parity was made this way:

  • The cost of consumed electricity is added****to the cost of** electricity sold to the Grid** at a wholesale price.
  • The received value (PV electricity Value) is compared with the cost of electricity generation using solar panels (LCOE). If Value is equal to or greater than the cost of production, then solar generation competitor to Grid consumption. Grid Parity has occurred.

The average PV Electricity Value calculation

Levelised cost of Electricity calculation

Very encouraging results:

Source: etip-pv.eu

Thus, we see that Grid Parity has already been achieved in most European countries. The main decisive factor in the solar energy competitiveness is the rate cost for the investment by capital (WACC). According to the researchers, only tax and legal changes can increase financial expenses.