Grid parity happens when large scale solar can compete with, or beat wholesale pricing from coal plants, the nuclear facilities and combined cycle natural gas.

Grid Parity

Interview with Michael Gorton - Principal Solar

Filed Under - General Industry Articles - Analysis and Trends

What is the definition of Grid Parity? 

Grid parity is achieved when the output cost of solar can compete with traditional generation on the grid.  Stated another way: grid parity happens when large scale solar can compete with, or beat wholesale pricing from coal plants, the nuclear facilities and combined cycle natural gas.  

What factors make you believe grid parity will happen? 

For the last 20 years, the cost of solar has seen exponential price drops.  Every indicator suggests that this trend will continue for some time into the future.  If the rate over the last two years continues, parity will occur in 2014.

When do you expect grid parity to be achieved in the USA and what parts of the country will be first to experience it?

Locations such as like Hawaii and Puerto Rico are already at grid parity.  If we take subsidies out of the equation, the two essential factors are sunshine and the cost of electricity.  The desert southwest has the best sunshine, but also has reasonably inexpensive electricity.  I believe that we will see construction of large scale solar generation sometime after 2016.  It is important to note that solar will not likely ever produce more than 15 percent of our total grid demand, but that is roughly 15 percent more than it supplies today.

What happened that caused the price of photovoltaics to rise in 2007 – 2008?  Why won’t that happen again? 

Photovoltaic’s solar cells come from silicone, and the silicone historically has been manufactured for microchips. Microchips are small; less than a square inch silicone.  Solar panels are large and will cover square miles.  The important realization here is that we were utilizing manufacturing designed to produce square inch microchip, to produce acres of solar cells.  In the 2007 timeframe what we saw was a lot of countries subsidizing solar.  Suddenly, there was this huge demand -- not for little microchips, but for the large panels.  As a result, demand for silicon increased, which caused the price to increase.  At the same time, one of the silicon manufacturers went out of business. and one of them experienced a significant fire.  It was at that point when manufacturers started evaluating more efficient methods or producing large amounts.  I believe those improvements are part of what is driving today’s PV prices down so dramatically.

Does PV have an “Achilles heel” and if so how is it overcome? 

Yes.  The Achilles heel for PV is that you can only generate electricity when the sun is up.  Most people believe the way to resolve this issue is to develop new battery technologies.  I disagree.  In my opinion the number one solution is to further employ one of this country’s most abundant resources, which is natural gas in turbine fired generators.  Because we are predicting solar electricity will cost less than any other source, it makes sense for natural gas to essentially be the “battery backup” that turns on when the sun sets.

What happens after PV has reached grid parity? 

It keeps getting cheaper.  Let’s assume PV is able to compete with natural gas in 2017.  What happens in 2018?  I would suggest that the trend is going to continue and in 2018, solar will be less expensive than natural gas.  I think we will continue to improve the efficiency of solar well into the future.  One of the largest cell manufacturers in the world is projecting solar panels that will cost 50 cents a watt in 2014.  I think it’s feasible that we’ll get down to 5 cents a watt.  I don’t know how far out in the future that is – probably twenty years -- but it’s likely within that time period that the cost of natural gas will go up.  Solar panels are fueled by sunshine, which is free, and that price will never go up.

Can the existing industry handle the demand that could occur after parity is reached? 

Most of our power plants are 30+ years old, and as we look out into the next 10 or 20 years, we’ll be replacing a lot of them.  Solar power generation will come up and supplement, but I believe we’ll always have diversity.  If we’re smart, we’ll continue to keep our nuclear plants running, we’ll continue to keep our coal powered plants running, we’ll continue to build new natural gas and keep the existing ones running, and we’ll add things, particularly solar because it will be cheaper than anything else.

As a homeowner, should I wait for grid parity or is it better to go ahead and install a system now? 

I’m not a big fan of generation on the roof.  It certainly serves a purpose, but I have a hard time convincing myself that rooftop solar will be able to compete -- from a reliability and cost perspective-- with utility grade generation.  There is a reason we don’t all have gardens in our back yards supplying the food we need to survive.   A very similar analogy can be applied to power production.  As an engineer, I can tell you the complexities of consistent, reliable and low cost energy production are much more significant that gardening.  Of course, there is an important place for rooftop solar; I just believe that if we want consistent, reliable, cheap electricity, we will continue purchasing that from power companies.

How will grid parity affect the utility companies and will the price of electricity come down for the average homeowner in the US as a result? 

Right now, almost all of solar is being built by independent operators, not the traditional electric utilities.  I believe when we look out over the next three or four years, the power companies, the ones that have requirements for new generating facilities, will begin to embrace solar.  They’ll get into the industry and will control the industry because they know what they are doing.   I don’t think the price of electricity will come down for the average homeowner because solar power will only represent 10 – 15 percent of the total grid power.  That doesn’t have a terribly significant impact of the overall price.

 

Michael Gorton, chief executive officer and chairman of Principal Solar

A quintessential entrepreneur, mentor, and company builder, Michael Gorton has proven to be a strategic visionary, impacting the telecommunications, music, and healthcare industries. As founding CEO of Teladoc, the nation's leading telehealth company, Michael pioneered a health care model in which members had access to telephonic physicians who could review medical records, treat, and prescribe medication that today supports the new paradigm in health care reform. As a founder and leader of Principal Solar, Michael applies his business expertise, scientific education, and training to the renewable energy sector – a strong voice and proponent of solar power.

Prior to this, Michael served as a partner of the Texas Acceleration Group (TAG), an entity formed to assist startup companies. Michael and other TAG partners founded Palo Duro Records to promote unknown country artist Shelley Laine.  Within three years, Laine became the number one ranked independent artist in country music, was nominated for Best Female Artist in 2002, and put six songs on the charts.

In 1993, Michael founded Internet Global, a company that delivered the first DSL network and one of the first VOIP networks at a time when few people predicted the profound impact the Internet would have on communication and society. Prior to this, Michael worked as a project engineer at Dallas Power & Light dealing with power plants, distribution, transformer management, and integration of renewable energy into the grid. 

Fueled by his passion for education, Michael has taught college courses in math, astronomy, and physics and published two novels and dozens of articles on topics ranging from physics to healthcare. 

Michael earned his B.S. in Engineering from Texas Tech, his M.S. in Physics from the University of Texas at Dallas, and his Juris Doctorate from Texas Wesleyan University.

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