Grid parity began to seep into the lexicon of the solar sector a few years ago and for some it has become an obsession, a kind of holy grail. Around 19 countries have reached this grand achievement, including Germany which reached parity for solar PV in 2011/2012.
Recent research by a consultancy firm, McKinsley, has suggested that the UK will reach this stage by 2020 mainly because of the reducing cost of installation.
What is Grid Parity?
Simply put, grid parity happens when a new energy source, in this case solar, begins to cost the same or less than traditional ways of producing electricity such as coal, oil or gas. The term that is used is the ‘levelized cost of electricity’ and it’s the thing that most economists and industry experts look to when they are considering the viability of any particular technology.
Why is it Important?
The big stumbling block to any new energy production is affordability. It’s something that the renewables sceptics use to beat the sector with. Solar and wind cost more so they are never going to be a suitable replacement for fossil fuels. When grid parity is reached, however, that argument goes out the window. It becomes obsolete.
Grid parity is essentially the tipping point when a renewable cuts into the mainstream and we can no longer argue against its use. Not only that, once the economic argument becomes non-sensical, people start investing more in areas such as solar generation – in other words, those with the money start to see a profit in solar panels and you get a boost that pushes the technology further.
Grid Parity for Solar in the UK
So, the big question is how we get there. There are several factors that impact on how quickly it happens. One, unfortunately, is the level of sunshine – which is why areas like California have reached parity pretty quickly. Another is the financing available and those willing to invest in the industry. Even seeing things from a utility or home owner point of view can make a difference to the calculation.
There’s no doubt in many people’s minds that grid parity was set back a lot when the Tory government reduced subsidies through the feed in tariff and seemed to scale back their efforts to promote and encourage renewables. This goes against a 2015 study by Deutsche Bank that estimated around 80% of countries would have reached parity by this year. The UK was on track to achieve parity if it hadn’t been for the removal of subsidies, something that happened far too soon according to many in the industry.
Grid parity in the UK is now dependent on the cost of installation coming down some more over the coming years. It is starting to happen, which is the good news, especially with markets such as China delivering cheaper panels. According to law firm Stephen Scowns:
“The increasing number of Chinese solar panel manufacturers that are withdrawing from the European Union’s Minimum Import Price agreement will drive down capex costs and EPC costs here even further.”
The truth is that, despite the consistent naysayers who are against renewables no matter what, grid parity is going to be reached sooner rather than later, perhaps even by 2020 as Mckinleys have suggested. Many believe that we have reached the tipping point and there’s no going back. Indeed, a government report at the end of last year seemed to confirm that by 2020 the cost of large scale solar would be around £67 per megawatt hour which is almost the same as gas. Those businesses that have solar panels installed on their buildings are also more likely to be paying less for their electricity by 2020 despite the removal of subsidies and the feed in tariff.
Reaching grid parity as soon as possible, not just here in the UK but around the world, is important if we want to put the final nail in the coffin of fossil fuels. Even now, projects are being developed that don’t depend on subsidies. This is good news for the solar industry. Solar farms are still being built – one the latest is the 4.99MW Barnby, Bilsthorpe and Wickfield project which went online at the end of March this year.
For most people, grid parity for solar isn’t going to matter much. They’ll hardly notice. As long as they can watch their TV and boil the kettle, the battle for renewables supremacy just isn’t going to cut it.
For those who have been pushing the green agenda and fighting for a low carbon future, however, it means everything. It’s marks the moment when solar will come of age in the UK and confirms its place in our energy infrastructure. Other countries may have got their first but we won’t be that far behind.