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What About Grid Parity?

Sep 15, 2016

Adopting renewable energy is necessary for the survival of mankind, however a vast portion of the population still do not think that clean energy is worth the effort. The sentiment that our energy bills are already high enough in Ontario permeates the media, and sends renewable energy supporters looking to financial analysts to find the statistics to prove that green energy doesn’t cost as much as some might think.

Enter grid parity. The term describes the point at which energy produced from renewable sources like wind, solar, and biogas, costs the same or less than non-renewable energy from the grid, like coal and natural gas. Grid parity depends on a number of factors, including weather and geography, and will vary between regions. It can also be calculated based on a utility’s point of view or the rate paid by consumers.

Since 2009, Ontario has been subsidizing renewable energy 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.”

Over the past decade, the cost of solar power infrastructure has decreased by over 80% in the province, and this is happening, albeit at a slower rate, with other types of renewables as well. When individuals and companies install solar, they can now expect to turn a profit much faster. In fact, according to the Canadian Solar Industry Association (CanSIA) in 2015 “within five years, without any kind of subsidy, homeowners will save enough money by generating their own power to pay for the solar equipment over its lifespan.”

Now a key thing to remember is that the renewable energy is not the only type that receives government subsidies for infrastructure and development. They all do in some form or another. No non-renewable energy source just came into being – Canada’s Candu nuclear reactors were and are funded by the Atomic Energy of Canada Ltd - a crown corporation – and construction costs were directly funded by Ontarians in the form of the Debt Retirement Charge. The fossil fuel industry enjoys lucrative tax incentives to search and produce oil, gas, and coal*. The costs associated with the effects of greenhouse gas emissions on food, water, housing, etc, and the funds required to manage nuclear waste over time should, but are, rarely taken into consideration as well.

In any case, the good news is that experts say that grid parity, which puts all energy sources on a level playing field (although often without the environmental considerations), is very close to being reached or is actually here for solar in Ontario. Hitting this hallmark means that solar in particular will be considered financially viable by the masses. In fact, according to JoAnne Butler, the Vice-President of Market and Resource Development at Ontario’s Independent System Electricity Operator, “By some accounts, as you can see on this bar graph, the price of solar in Ontario has now dropped below the key “grid parity” point, at which the price of self-generation for many consumers is lower than the retail cost of electricity from the legacy system.”

It makes both environmental and financial sense to keep investing in renewables. The effort put in by those brave renewable energy pioneers, who took the leap and put expensive solar energy systems on their homes and businesses in the 80s and 90s, should be appreciated by all of us now adopting the technology.

*electricity from coal is no longer generated in Ontario