Photo: Wikimedia Commons
Solar power seems like a such a great idea. It’s green and there’s plenty of it.But there’s one gigantic problem: grid parity.
Grid parity is when a source of power becomes cost competitive with other sources.
And solar is a long way from grid parity.
“Today, you’d need to charge $375 per megawatt hour to justify investment in new solar equipment—nearly four times the average US retail price of electricity,” writes Catherine Wood of AllianceBernstein. “That’s why solar energy requires steep subsidies.”
Wood discusses some of the cheaper existing forms of energy:
Other power-generating technologies require a much lower price of electricity to attract new investments—from $95 per megawatt hour for new-built nuclear power generators to $130 for new-built wind power generators. Investments in gas-powered and coal-powered generating plants require a price between these two, even if you factor in paying $50 per metric ton to offset the carbon emissions and gas prices more than double their current level.
Wood also notes that the figures she mentions above leave out two gigantic costs:
And these calculations don’t include the cost of backup power or energy storage to supply power when the sun isn’t shining. A backup power system or battery would add roughly 25% to the electricity price required to justify new investment in solar power.
Finally, these calculations ignore the cost of the real estate upon which a solar panel sits, because most smaller scale installations are on a rooftop that would otherwise go unused. For utility-scale installations, however, ignoring real estate costs is not fair. The cost basis for what will be the largest utility-scale solar power installation in Japan more than doubles if you take into account the value of the real estate that the solar panels will occupy.
Obviously any new technology requires investments of both money and time before it has a chance to become economically feasible.
Unfortunately, the biggest players in the solar industry continue to delay their expectations for grid parity, which further raises douts about the viability of solar. Here’s a chart of grid parity projections from AllianceBernstein: