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Grid - Solar parity

Household power from the grid or solar?

by : Feb 16, 2016

Grid parity is an idea which appears simple, but in fact is deceptively so. The idea is to compare the cost of consuming electricity produced traditionally via central generators and delivered via the grid, or locally via roof or ground-mounted solar panels and battery storage. In theory, if the long term cost of electricity is lower using home solar panels than from the grid then a rational consumer would cut ties with the grid. The question is how do we build the numbers to make such a decision?

Here in Ontario the cost of electricity to the consumer from the grid is rapidly increasing in price, way out of line with inflation. The energy harnessed from hydro-electric sources was relatively cheap. So for a long time, the cost of grid electricity was much lower than locally generated power, especially considering the inconvenience of maintaining a local system.

Now the price of solar panels falling. Together with improvements in the technology to support small scale solar generation and the increasing expertise in installation and maintenance of these systems it is becoming more attractive to consider solar as a source of power.

Given the rising price of electricity at the wall plug and the falling expense of local installation, intuitively we can conclude that if these two trends continue then in a fairly short time frame it will be cheaper to buy a solar installation for household needs than it will be to buy from the grid. That's an easy decision, given the numbers. So what are the numbers for an individual household?

As a consumer in a low-density service location attempting to make the price comparison, the important price to me is the average price per KWh used. I can calculate this from my bill. Total billing dollars divided by KWh consumed for my January 2016 billing comes out at 37.5 cents. January a year ago with the same calculation gives 27.5 cents. It's this kind of abrupt increase which makes a consumer think about other means of generation. So the important number for me is whether I can generate my own power, on a sustained, reliable basis, for 37.5 cents per kwh or less.

As a producer in the MicroFIT programme, I have a history of the generation capacity of my 10 KWh system. The rating indicates that my system is throttled to produce no more than 10 KWh even when the system could actually produce more. On a sunny day, the maximum output is actually measured at 9.5 KWh. Records show that in my location this system can produce at least 13,000 KWh in a year. My consumption, not including electric heat, is on average 10 KWh per day, so I will consume 3,650 KWh in a year. This is a small fraction (26%) of the total output from the MicroFIT system. The 10 KWh is used for lights, hot water, fridge, freezer, cooking, water pump and electronics.

When installed in November 2010, the cost of this ground-mount installation was $80,000. There are no batteries in the system, it is a pure grid-tie. The cost in 2016 would be somewhere in the $40,000 range, and if we add in $10,000 for battery storage that gives a round value of $50,000 invested to produce 13,000 KWh in each of 20 years of the life of the system. That's 260,000 KWh, or 20 cents per kilowatt hour.

Since the average cost of local generation at 20 cents is much less than the 37 cents I currently pay to Hydro One, the decision seems to be a simple one - immediately go to local generation and save half the cost of electricity. But there are reasons why this might not be a wise decision just yet. See the conclusion of the story here.