Solar Parity Drawing Near

Many Regions in the US are reaching a tipping point in terms of the economics of solar photovoltaics
Solar Parity Drawing Near - Articles

Updated: August 8, 2017

Solar Parity Drawing Near

Average US Cost to Produce Solar PV Power, based on NREL Data

"The age of sustainable, reliable and cost competitive renewable electricity has come."

Does this sound like an exaggerated claim? Well, read on. In most states that allow net metering of renewable energy systems, the cost of installing and owning a grid connected Solar Photo Voltaic (PV) system is very close if not at "parity". That means that the cost of buying electricity from the utility is equal to the investment of installing and operating the Solar PV system over the period of time until the system investment is recovered. Once the investment has been paid off through avoided purchases from the utility and the sale of renewable energy credits the PV system owner has free electricity since the fuel (sunlight) to operate the system is plentiful and free of charge! The graph accompanying this article shows that the average cost of PV-Generated Electricity is now below 8 cents per kwh. Since quite a few regions in the country pay at least that amount for grid-sourced power, the potential exists for PV to be the lower cost option for many.

What is Likely to Happen?

A question often asked is, if we experience a big increase in customers supplying their own electricity from roof-top or backyard solar arrays, who is going to pay to keep the wired distribution system up and running for those who choose not to or can't become a "customer generator"? As the number of "full load" retail customers decline, under existing rate structures, the burden of keeping the lights on for everyone else will fall on an ever-smaller pool of customers.

Rates Structure to Change

One method of ensuring that all customers pay the cost of the burden they place on the transmission and distribution system is to change the rate design. One of the concerns that revamped rate structures should address is protection for ratepayers with marginal ability to pay. What will likely result from a rate redefining exercise are rates that are not based just on the number of kilowatt-hours used, but rather rates that vary by the hour. This capability has only recently become a possibility as smart meter technology adoption has begun.

Rise of Defection

Other technological advances will very likely continue changing the playing field. The next advance will likely be electricity storage or the "utility in a box". Equipment has been available for a number of years that allows homes and businesses to operate off grid. However, they were expensive, cumbersome, and unreliable. Advanced battery technology has become more commonplace and have vastly improved while at the same time dropped in cost.

What are My Options?

Electric utility ratepayers have the benefit of low generation costs because of the glut of available natural gas that is producing low cost electricity in a flat economy. This is the time to plan for the future by soliciting bids to install some renewable energy generation capacity (probably Solar PV) to cover some portion of your future electricity needs. Another option is to look at ways to dramatically reduce your energy use, and control costs in that manner.

Authors

Agri-Energy Economic Development

More by Edward Johnstonbaugh