The cost of photovoltaics: Re-evaluating grid parity for PV systems in China

Abstract

The price of photovoltaics (PV) has been steadily decreasing over the last decade, and many reports suggest that PV has become considerably cheaper than conventional electricity sources. In this paper, we critically evaluate the PV grid parity and use China as a case study. China is an interesting case study due to the wealth of data combined with the recent decrease in financial subsidies. Electricity costs are commonly compared in the literature using levelized costs of electricity (LCOE). However traditional LCOE analyses neglect important cost factors that are specific to PV, in particular the cost of grid integration. Here, we demonstrate that system LCOE calculation more accurately estimates the grid parity of PV. We find that the integration costs account for 15% of the total system costs, which cannot be neglected with the higher penetration of PV in the electricity system. Further, provincial grid parity indexes are greater than 1, indicating that the grid parity from a system LCOE perspective has not yet been achieved. The learning rate of Chinese PV is still relatively small, and we estimate that grid parity for PV in China will be achieved between 2020 and 2032, depending on the region. These findings shed new light on assessing grid parity of PV systems by considering relevant local parameters and thereby offer an assessment method framework and prediction modeling for assessing grid parity of PV installations.