The Shining: Solar Power, Grid Parity, and the Cost of Power

By Keith Johnson

Clean energy has a holy grail�the day when the electricity produced by solar panels and the like can compete dollar-for-dollar with electricity churned out by traditional power plants.

Brighter days are coming

That day is getting closer all the time. But as Lux Research notes today in a new report, so-called �grid parity� isn�t a done deal yet, and still depends on such fickle factors as the amount of sunlight hitting rooftops and political will to underwrite hefty subsidies for solar power.

The Lux report, �The Slow Dawn of Grid Parity,� stresses a few main points. Solar power is now measured by the cost of the electricity it produces, rather the cost of installing the stuff in the first place.

That makes a big difference for consumers, utilities, and investors, Lux says, since it makes it a lot easier to compare apples with apples. That�s because solar power (like wind) costs a lot upfront, but has free fuel�so it looks more attractive when measured by the electricity it actually produces.

That said, solar power isn�t quite there yet. Outside of a few places�such as California or Italy�solar power isn�t yet able to go toe-to-toe with traditional power sources. Even in those sunny climes, solar power�s viability depends on politics as much as geography.

That is, the whole idea of �grid parity� is elusive. That means that solar power�s goal posts�becoming cost competitive with a regular power plant�are different in every field. Some places jack up regular power prices, making solar�s arrival a little easier. Other places jack up solar subsidies, which amounts to the same. Some places do both; some do neither. There�s no such thing as subsidy-free, cost-competitive solar power.

In the case of California, that means charging more for electricity at peak hours of the day. When the sun is brightest�and demand for air-conditioning is highest and electricity prices are maxed out�some solar power is basically cost competitive. In Italy, generous government subsidies look poised to make solar power a contender. By the same token, solar power is a non-starter in overcast countries without big political support.

So what does that mean? Lux figures solar boosters should curb their enthusiasm with chants that �grid parity� is around the corner. In most cases, cost-competitive solar power is still a decade away at least, the report says.

How will solar power get there? Technology improvements keep coming, and will keep pushing down prices. At the same time, government subsidies (in most countries) keep climbing. That makes it easier for utilities to build ever-bigger solar power installations, which helps create economies of scale.

And who will the winners be? It seems there�s room for everybody. More efficient, old-fashioned polysilicon solar panels work great for residential rooftops. Large-scale utilities love the cheaper cost of thin-film solar. And newfangled solar technologies�such as solar thermal and concentrated solar�could eventually make sprawling, centralized solar power plants a reality.

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