Is the concept of ‘grid parity’ defined appropriately to evaluate the cost-competitiveness of renewable energy technologies?

• Published in: Energy policy Vol. 86; pp. 718 - 728
• Main Authors: Gu Choi, Dong, Yong Park, Sang, Park, Nyun-Bae, Chul Hong, Jong
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier Ltd 01.11.2015; Elsevier Science Ltd
• Subjects: Bottom-up energy system model; Case studies; Clean technology; Competition; Competitiveness; Cost; Cost-competitiveness; Electric power; Electric power generation; Electric power system; Electric power systems; Electricity; Electricity distribution; Electricity generation; Electricity pricing; Energy; Energy policy; Energy sector; Energy technology; Grid parity; Harmonization; Koreans; Methodology; Natural gas; Parity; Photovoltaics; Power generation; Prices; Renewable energy; Renewable energy technology; Renewable resources; South Korea; Studies; Technology; Wind; Wind energy; Wind power; Wind power generation; South Korea; Renewable energy technology; Cost-competitiveness; Electric power system; Grid parity; Bottom-up energy system model
• ISSN: 0301-4215; 1873-6777
• DOI: 10.1016/j.enpol.2015.08.021

The concept of ‘grid parity’ has emerged as a key indicator of the competitiveness of renewable electricity generation technologies. In this study, we firstly summarize the definition of the current levelized cost of electricity (LCOE) based methodology for the concept and address its limitation in not taking into account the systematic changes in an electric power system. Secondly, we introduce a bottom-up energy system model based methodology to overcome the limitation. Lastly, we apply the methodology to a case study, the grid parity analysis of solar photovoltaic and onshore wind technologies in the Korean electric power system, to highlight the differences between the results obtained using both methodologies. The results of the study show three implications. First, even if the LCOE of onshore wind is already lower than that of natural gas technologies and the average price of grid electricity, the LCOE is required to be much lower to achieve cost-competitiveness in the electric power system. Second, different technologies might be required to have different LCOE levels to be cost-competitive in the same power system. Third, a policy or plan for the deployment of renewable energy technologies must be harmonized with other policies and plans within the same system. •A crucial limitation of the current LCOE based method used for analyzing the grid parity•A bottom up energy system model based method to overcome the limitation•Current method can overestimate the cost-competitiveness of renewable technologies•Different technologies might be required to have different grid parity points•A policy for renewable energy technologies must be harmonized with other policies