Pricing solar Grid parity

swanson s law states every doubling of cumulative production of panels, there has been 20 percent reduction in cost of panels.

grid parity commonly used in field of solar power, , when referring solar photovoltaics (pv). pv systems not use fuel , largely maintenance-free, levelized cost of electricity (lcoe) dominated entirely capital cost of system. assumption discount rate similar inflation rate of grid power, levelized cost can calculated dividing original capital cost total amount of electricity produced on system s lifetime.

as lcoe of solar pv dominated capital costs, , capital costs panels, wholesale prices of pv modules main consideration when tracking grid parity. 2015 study shows price/kwh dropping 10% per year since 1980, , predicts solar contribute 20% of total electricity consumption 2030, whereas international energy agency predicts 16% 2050.

the price of electricity these sources dropped 25 times between 1990 , 2010. rate of price reduction accelerated between late-2009 , mid-2011 due oversupply; wholesale cost of solar modules dropped approximately 70%. these pressures have demanded efficiencies throughout construction chain, total installed cost has been lowered. adjusting inflation, cost $96 per watt solar module in mid-1970s. process improvements , large boost in production have brought figure down 99 percent, 68¢ per watt in february 2016, according data bloomberg new energy finance. downward move in pricing continues. palo alto california signed wholesale purchase agreement in 2016 secured solar power 3.7 cents per kilowatt-hour. , in sunny dubai large-scale solar generated electricity sold in 2016 $0.0299 per kwh -- competitive form of fossil-based electricity — , cheaper most.

the average retail price of solar cells monitored solarbuzz group fell $3.50/watt $2.43/watt on course of 2011, , decline prices below $2.00/watt seems inevitable. solarbuzz tracks retail prices, includes large mark-up on wholesale prices, , systems commonly installed firms buying @ wholesale price. reason, total installation costs commonly similar retail price of panels alone. recent total-systems installation costs around $2500/kwp in germany or $3,250 in uk. of 2011, capital cost of pv has fallen below of nuclear power , set fall further.

all remains calculate lcoe expected production. modules warranted 25 years , suffer minor degradation during time, needed predict generation local insolation. according pvwatts one-kilowatt system in matsumoto, nagano produce 1187 kilowatt-hour (kwh) of electricity year. on 25-year lifetime, system produce 29,675 kwh (not accounting small effects of system degradation, 0.25% year). if system costs $5,000 install ($5 per watt), conservative compared worldwide prices, lcoe = 5,000/29,675 ~= 17 cents per kwh. lower average japanese residential rate of ~19.5 cents, means that, in simple case skips necessary time value of money calculation, pv has reached grid parity residential users in japan.