22.10.2012
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Photovoltaics

Grid parity still the goal?

A growing number of voices in the PV sector now realize that grid parity will not automatically mean sustained growth for photovoltaics. Nonetheless, the general consensus continues to be that we need to move beyond feed-in tariffs. But the analysis does not match the facts.

A growing number of voices in the PV sector now realize that grid parity will not automatically mean sustained growth for photovoltaics. Nonetheless, the general consensus continues to be that we need to move beyond feed-in tariffs.

Two weeks ago, US PV consultant Paula Mints once again claimed that feed-in tariffs are the reason why the PV sector is suffering so much – specifically "the belief that the feed-in tariffs incentive model would continue expanding from region to region." But she also believes that grid parity – a promise "made by the solar industry and all of its participants" that solar would become cheaper than other sources of electricity – is an “unhealthy goal.”

Basically, the argument goes, solar firms want to do without "incentives" (read: feed-in tariffs), so they have been focusing on price parity with retail electricity from your wall socket. In doing so, they have been willing to sell at below cost to reach that goal as quickly as possible. Now, they are generally all in the red or already bankrupt.

Faulty analysis

Yet, solar firms are not voluntarily selling below cost; Western PV manufacturers have no choice but to react to Chinese firms, which are apparently selling below cost themselves – but the latter enjoy tremendous protectionism from their government, a fact that Mints does not mention (the word "China" does not occur in her article). In other words, Western PV manufacturers are not selling below cost because they are chasing after grid parity, but because, if they don't do it, all the business will go to the Chinese.

 - As AT Kearney explained at PV-SEC the main challenge going forward for PV is not parity with grid prices, but the impact on wholesale power prices.
As AT Kearney explained at PV-SEC the main challenge going forward for PV is not parity with grid prices, but the impact on wholesale power prices.
AT Kearney

Mints' claim that "all participants" in the PV sector have long touted grid parity as a goal is completely wrong. Renewables International opened its doors over two years ago with a series of articles against the concept (see Grid parity – who cares?). While she has always been skeptical of the term "grid parity," Mints used to call for an incentive-less future, though she has backed off from that goal since I pointed out that there is no end in sight to subsidies for the conventional sectors PV competes with.

Indeed, though she speaks of feed-in tariffs as a thing of the past ("in 2009, at the height of the feed-in tariffs era"), FITs are not just for solar, and they are more common today than ever before. Even the IEA – not a proponent of feed-in tariffs – admits (PDF), “Nearly all countries now offer or are about to implement feed-in tariffs of some description for PV electricity.”

Need to move beyond FITs?

That quote comes from a presentation given by an IEA representative at the 27th PV-SEC in September, where the keynote address was "What is a fair price for PV electricity?" and a number of presentations focused on the “post-FIT” era. None of the presentations explains why feed-in tariffs for solar should disappear when they fall below the retail rate even though the ones for small biomass and wind have long been below the retail rate.

 - Even PV sector organizations -- here. EPIA -- seem to assume that the "FIT era" will soon be over. It could prove to be a self-fulfilling prophesy.
Even PV sector organizations -- here. EPIA -- seem to assume that the "FIT era" will soon be over. It could prove to be a self-fulfilling prophesy.
EPIA

There are, however, reasons to adjust feed-in tariffs, but they are related to the share of renewable power, not the price. As a representative of AT Kearney explained at PV-SEC, the main challenges for the future are things like capacity markets and power storage, and he concludes: “PV players need to give up the FIT mindset and become an active problem solver and solution provider in the energy market.” But he warns against switching to PPAs, which would in fact, he argues, only lead power providers to pick the least expensive source, which is still onshore wind in most locations – and will continue to be for the foreseeable future.

In other words, once you have reached a level of penetration as high as in Germany, where installed PV capacity is now around half of peak summer power demand, you may need market instruments to help focus new installations on specific geographical regions where the grid can easily withstand more solar – and on installations that tend to produce power when it is needed.

But no one under is anywhere close to having such problems with PV, aside from Germany. Measured in terms of peak summer demand, Germany has twice as much solar as Italy, four times as much as Spain – and 100 times as much as the US. (Craig Morris)

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