Grid Parity: Does it Really Matter?
Grid parity. It is the solar industry’s favorite expression/discussiontopic/holy grail. You hear it at every conference, in many pressreleases, and from well-respected research institutes. We at GTM Research have even been guilty of using it ourselves. But grid parity shouldn’t be the focus of the industry — and ourexpectations of that day when it arrives should be much more tempered,for four reasons. First, grid parity isn’t a single thing. Second, itwon’t come at a single time. Third, we often won’t know when we’vereached it. Finally, the initial impact of grid parity on demand isoverestimated.
1) Grid parity isn’t a monolithic concept
Let’s start with the definition. At its core, grid parity is the pointat which the cost of solar power matches that of grid electricity. There is, however, some nuance to be considered here:
Wholesale vs. Retail Parity. There is a meaningfuldifference between competing with retail electricity prices (which arehigher) and wholesale prices (which are lower).
· Wholesale grid parity. The comparison here is even trickier.You can compare the cost of solar power against average wholesaleprices, but solar is really a mid-peak resource. You can compare against average peak prices, but solar isn’t entirely a peak resource. You cancompare against an alternative fuel (natural gas makes the most sense),but you should really account for the fact that fossil fuels aredispatchable (i.e., can be turned on/off on command), and solar is not.
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