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Beyond Subsidized Solar Power: The Path to Grid Parity

Since retail electricity prices are expected to increase, these “grid-parity” prices will be higher in 2013. In order to achieve a 7 year payback time in 2013 [assuming an electricity rate escalator of 6% per year] the solar system price in 2013 needs to be around $4/Watt DC in California, $2.25/Watt DC in Colorado and $7.85/Watt DC (!) in Hawaii. For a 4.5 kW residential system where an 8-year payback is considered satisfactory, the non-incentive grid parity price in 2013 will be $5.30/Watt DC in California and $1.95/Watt DC in Colorado.

The point when grid parity can be reached depends largely on the electricity rates increase and the speed of cost reduction from both the manufacturers in the upstream solar market and the system integrators in the downstream segment.

In the past four years we have seen a significant module price increase due to the shortages of silicon supply. This trend will shift in the next few years where the increase of module supply will drive down the cost of solar electric systems.

The above data points show that grid parity will be first achieved in Southern California and Hawaii.

Even with the high electricity rates in both regions, the end-customer price in California still need to decline by 44% between today and 2013.

Most industry players believe that the cost reduction potential in the upstream solar market is larger given the fact that the solar industry saw module prices of $2.80/Watt DC in 2003 – which is significantly below today’s average price of XX.

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Written By

Angiolo Laviziano guides the strategic direction and long-term vision of REC Solar. He believes that solar electricity will become part of the mainstream energy supply within the next decade, and that the USA will be the world’s largest market for solar electricity within five years. “Our goal is to make solar simple and affordable, giving as many residential and business customers as possible the opportunity to install solar,” says Laviziano. “The positive environmental impact from solar power that we all desire will be realized by making solar electricity economically attractive.” In the 1990s Laviziano worked in the financial industry in Hong Kong before joining Conergy, the largest European renewable energy system integrator. He served on Conergy's board of directors and saw the company through a strong and profitable growth process culminating in its European IPO in 2005. Laviziano received a PhD in Financial Economics from the University of Hong Kong and holds a graduate business degree, equivalent to an MBA, from Koblenz School of Corporate Management in Koblenz, Germany.


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