The idea of grid parity is driven by two clear trends: the growing cost of electricity and the shrinking cost of solar power.
In 2013, the average Ontarian is paying 15.8 cents for each KWh of electricity they consume. A portion of this is the retail cost of electricity. Another portion is for transmission and infrastructure. Some of it is service fees and some of it is taxes. The price of electricity has been steadily rising, driven by pressures like fuel costs, the cost of grid upgrades, and increased demand. Electricity prices in Ontario have risen by 25% since 2006. The Ontario Energy Board predicts that the price of electricity will increase by another 50% by 2018.
At the same time, the cost of solar power is decreasing. This has been driven largely by the plummeting cost of solar PV modules. Module prices have dropped by 50% since 2009 and are expected to drop by another 30% over the next three years. Combine this with innovations in installation and maintenance, and further factor in the increasing efficiency of modules, and it is inevitable that the downward slope of solar cost will cross the upward slope of electricity prices in the near future. This point is called “grid parity.”
Different jurisdictions will reach grid parity at different times, driven by local electricity rates, labour costs, and sun hours. In Ontario, we anticipate grid parity in 2017, around when total electricity costs hit 20 cents per KWh.
The vital thing about grid parity is that it marks the point at which solar subsidies are no longer needed. Once solar power providers can produce power at less than the market price, the industry is self-sustaining. The purpose of today’s subsidies is to bridge that gap, growing the industry and supporting technological innovations, so that Ontario will be best positioned to take advantage of the massive benefits of solar power once grid parity is reached.