Grid parity – what is it?

by Conrad Roedern

We live in times of falling prices for Solar Energy equipment – some 25% reduction for modules in the last 8 months – while prices of energy supply from traditional sources are almost constantly on the rise. It lies within the nature of finite energy sources that this trend must continue as long as there is the need for energy.

“Grid parity” will be achieved at the moment when locally produced Solar electricity becomes cheaper than it can be bought from the mains supplier. Grid parity will kick off a revolution in electricity supply and it first will be reached in sun-rich countries with high electricity prices. Namibia is a candidate to reach “grid parity” within the next five years. Then it makes financially sense to produce at least part of your required electricity right at the place of consumption, i. e. on the roof of your home, workshop, office or factory. The technology used would be a Photovoltaic Solar Grid-Infeed System. Such a system operates in parallel with the existing grid connection. It virtually uses the grid as a form of battery storage; when your house requires more energy than your roof-mounted system is able to deliver you would buy in the balance from the grid. But during sunny days, your day-time consumption would come from your own system, thus avoiding energy purchases which come more costly than locally produced electricity once grid parity is achieved. Thus typical day-time energy-suckers like air conditioners, pool pumps, lunch-time cooking and refrigerators would benefit from that arrangement.

Now let us make a calculation and, based on today’s figures, assuming that larger infeed systems can be installed at N$45 for each watt of generating capacity. In Namibia, each watt will generate 2 kWh of Solar electricity per year which amounts to 40 kWh during a project period of 20 years. Then from an investment of N$45 you can harvest energy at a cost of N$1.13 per kWh. For practical reasons one has to add interest and a bit of maintenance which would bring the price to N$2.00 per kWh generated.

So I prepared a little diagram showing what will happen if – from 2009 onwards – the kWh-cost from Solar infeed-systems will fall by 10% per year while the cost of pre-paid grid power to the customer will rise by 15% per year (above inflation, as announced by the Electricity Control Board). Grid parity – the crossing point of the two lines – would happen in 3 years time from now.
Even if the percentages may change in one or the other direction – one thing is for sure:

We’re getting there! Soon!



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