Grid parity monitor
PV self-consumption is an attractive alternative for residential consumers in major markets
CREARA has released a new issue of its Grid Parity Monitor (GPM) Series, the third issue of the residential segment. This issue focuses exclusively on the residential sector (3 kW PV systems) in 12 countries spread in 5 different continents. Two new markets in Asia (Japan and Israel) are included in this latest GPM release, in addition to the 10 countries analyzed in previous issues: Australia, Brazil, Chile, France, Germany, Israel, Italy, Japan, Mexico, Spain, U.K. and California in the U.S.
The latest issue of the GPM analyzes the cost-competitiveness of photovoltaic technology with retail electricity prices in the residential segment and assesses local regulations for self-consumption in each country. The methodology to evaluate grid parity proximity includes some simplifying assumptions worth highlighting.
On the one hand, it is assumed that the residential electricity consumer achieves a good match between electricity consumption and PV generation, enabling 100% on-site (instantaneous) self-consumption. In this sense, it should be noted that, for this type of consumer (i.e. residential), in most cases self-consumption ratios above 50% can only be attained either with net-metering (or equivalent) schemes or with storage solutions.
On the other hand, the reader should bear in mind that through self-consumption the prosumer could be able to not only save on the variable costs of electricity (plus taxes) but also save on capacity costs or other cost elements (e.g. in tiered based rates). However, the GPM only accounts for the savings related to the variable cost of the utility electricity replaced by PV.
According to the study, in the first semester of 2014, the cost of PV generation as expressed by the LCOE (Levelized Cost of Electricity) in the residential segment decreased in all of the cities analyzed: from a 28% annual decline in Australia to 5% in France, mainly as a result of the decreasing trend of installation costs.
Despite the general improvement of PV economics, most LatAm countries (Chile and Brazil) have been facing electricity price reductions. This fact, added to the relatively high system prices in Brazil, negatively impacts grid parity proximity. In contrast, most European countries have reached grid parity, with France and UK as the only exceptions of the analyzed ones.
As already was explained in previous GPM issues, the regulatory support is vital for the development of the market. In countries such as Germany and Brazil, policies encourage self-consumption. On the other side of the spectrum, poor regulation can hinder the self-consumption market, as is the case of Spain, where the latest policy proposal includes a fee on on-site self-consumption.
The matrix below shows the positioning of each country in terms of grid parity proximity and regulatory support:
In countries such as Mexico, Italy, Australia and Germany, which have reached grid parity and with proper regulation, PV systems for self-consumption represent a viable, cost-effective, and sustainable power generation alternative. In addition, in some locations such as California, the development of third party financing of residential PV systems is driving the market as it enables consumers with financing needs to enter the PV self-consumption market.
Author: María Jesús Báez, Creara
The GPM is a series of studies about PV competitiveness with retail electricity prices in several sectors and countries. The GPM is an independent analysis, which is updated regularly, uses a rigorous and transparent methodology and it is available free of charge at: http://www.leonardo-energy.org/photovoltaic-grid-parity-monitor
Contact: gpm( at )creara.es
In January 2014, Creara and Eclareon (Spain) merged their business to form Creara Energy Experts (from now on CREARA) and consolidate their leadership in sustainable energy services.