Solar is an Asset, Not a Cost — Why Focus on Grid Parity? (Reader Comment)

January 13th, 2012 by Guest Contributor

Got this great comment on a post on solar and grid parity yesterday and wanted to share it with more eyes:

I’ve been thinking that focusing so much on grid parity is missing half the point of going solar (or wind, etc).

Whenever you rely on grid power, you are always incurring a COST. As long as you’re using it, money is simply flowing out of your pocket and into someone else’s.

But when you install a solar system, you are purchasing an ASSET. You are becoming your own supplier. You can even sell any excess you produce, making it a source of income.

Parity calculations only compare the cost of purchasing the panels to the cost of staying with the grid supplier, which is an important consideration, certainly. But it distracts from the fact that after the (calculated) payback period is covered, what remains is essentially free energy, for the rest of the life of the system.

In the end, focusing on parity is comparing apples to oranges. It implicitly treats the solar purchase as if it were just another cost incurred, instead of the INVESTMENT that it actually is. It also relies on massaging a few key assumptions such as projected cost of electricity and the longevity of the panels. Shift those assumed values a little and the whole outcome changes, because in the end the whole comparison is rather arbitrary.

So how about trying to remove the parity comparison from consideration entirely and measuring home solar on its own terms?

Solar panels on home via shutterstock

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Tags: grid parity, home solar

About the Author

Guest Contributor is many, many people. We publish a number of guest posts from experts in a large variety of fields. This is our contributor account for those special people. :D

Kimberlyvdavis1

YESSSSSSSS! I never see an amortized period of paying down the capital cost of a solar system when comparing $/kWh, or watt, to conventional…..
http://pulse.yahoo.com/_R4XWKTKI2GIRNTSWTJRKRB5HTU D

When they lower the cost another 50% my roof is covered with them.
Don W Mayfield

Also note that solar is nuclear without the expense and danger of a nuclear plant, since the Sun is 93,000,000 miles away.
http://www.dandelionrenewables.com/ Mikhail

Another issue with a grid parity statement is that it only has two states: renewables reached the parity or they did not. The grid parity does not necessarily show how far the solar or wind power are in the money.

Dandelion Renewables customers often ask us about an alternative measure, so called simple payback. The strength of this measure is in the simplicity, but it does not recognize the time value of the money spent on future inverter replacements, maintenance costs for wind, insurances and solar module degradation.

Solar and wind projects can be treated as investments with revenues calculated as avoided utility costs. Representing the projects from this angle allows to estimate Return On Investment (ROI). As any other project measure, the ROI is very dependent on input assumptions, such as grid price projections, project life and others. When the customer is clear about the ROI assumptions, he/she can compare the investment in the own power generation with any other alternative investments in socks, mutual funds, bonds, etc.

That is where a question about how risky is each of the investments comes into play. Unlike most investments on the market, investments in renewables and especially in solar power typically reduce your overall household portfolio risk by hedging away the risk to future commodity price swings.