The holy grail of all renewable is to reach grid parity – the point at which buying green power is no more expensive (or even cheaper) than buying power from, say, a coal burning plant. And it seems that one solar power plant in a desert in Nevada – built by First Solar – has reached that momentous mark. At least according to one analyst named Mark Bachman.
What do I mean, “according to one analyst”? Well it all boils down to how you do your math and how you define “grid parity”. Traditionally, people (by which I mean investors) have defined it in terms of cost per watt, and it was also generally thought that if solar power plants could be built at a cost of $1 per watt or less, they would achieve grid parity. Thus, if First Solar had been able to build a 10 megawatt plant for 10 megadollars (that’s 10 million for any of you non-geeks out there), they would have achieved grid parity a la traditional definition.
The aforementioned analyst, however, chose to define grid parity as cost per kilowatt hour. Unlike a watt, which is a unit of power (energy per unit time), a kilowatt hour is a unit of energy itself. The question, then, is how much does it cost First Solar to deliver a kilowatt hour of electricity to a customer, and how much does it cost a coal plant to deliver that same kilowatt hour? The answer, said the analyst, is 7.5 cents/kwh for solar and 9 cents/kwh for coal.
However, there are some important considerations to keep in mind.
First of all, let’s think about what we just did by changing the definition of grid parity. Instead of asking how much it costs to build a power plant, we’re asking how much it costs to sell electricity. Since the cost of electricity includes the cost of fuel, using the cost of electricity rather than the cost of building plant as your index allows the advantages of solar (free fuel) to weigh in.
Which is totally legitimate. I mean, the whole reason people like us like solar is because the fuel is free (and virtually limitless)! But it begs the question – is First Solar really the only place that has achieved this new definition of grid parity, or are there others?
Also, Bachman made some more math assumptions. For example, he only considered the costs of the solar panels themselves, even though the installers also had to pay for frames and other mounting equipment. Also, to figure out the cost of the panels, he used the average cost of panels across First Solar’s various factories, rather than what it actually cost First Solar to build these panels. And, if we are to return to the original definition of grid parity for a moment, it cost First Solar $3.17 per watt – not quite the $1/watt we were waiting for.
[One other weird point – according to Greentech Media, the power plant we’re talking about is Sempra’s 12.6 MW plant in the Nevada desert. However, Sempra’s own press release says it is a 10 MW plant, which is more in accordance with what First Solar was reporting earlier this year. Unclear where the 12.6 came from…]
So it seems that whether or not you believe First Solar has reached grid parity depends on whether you agree with Mark Bachman’s definition of grid parity – which is certainly plausible. You may disagree with him, but even if this isn’t the figure you’ve been waiting for it is hard to shake the feeling that the number – whatever number you are waiting for – is just around the bend.
Via Greentech Media
written by Patrick Dugan, December 23, 2008
written by Scott Baker, December 23, 2008
written by Nick, December 24, 2008
written by jjsummers, January 08, 2009
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