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

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  • Gu Choi, Dong
  • Yong Park, Sang
  • Park, Nyun-Bae
  • Chul Hong, Jong

Abstract

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.

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  • Gu Choi, Dong & Yong Park, Sang & Park, Nyun-Bae & Chul Hong, Jong, 2015. "Is the concept of ‘grid parity’ defined appropriately to evaluate the cost-competitiveness of renewable energy technologies?," Energy Policy, Elsevier, vol. 86(C), pages 718-728.
    • Handle: RePEc:eee:enepol:v:86:y:2015:i:c:p:718-728
    DOI: 10.1016/j.enpol.2015.08.021
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    9. Chen, Hao & Gao, Xin-Ya & Liu, Jian-Yu & Zhang, Qian & Yu, Shiwei & Kang, Jia-Ning & Yan, Rui & Wei, Yi-Ming, 2020. "The grid parity analysis of onshore wind power in China: A system cost perspective," Renewable Energy, Elsevier, vol. 148(C), pages 22-30.
    10. Currier, Kevin M. & Rassouli-Currier, Susanne, 2018. "Producer incentives in electricity markets with green quotas and tradable certificates," Utilities Policy, Elsevier, vol. 55(C), pages 59-68.
    11. Kevin M. Currier & Susanne Rassouli-Currier, 2018. "Grid Parity and Cost Reduction Incentives for “Green Producers” in Electricity Markets," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 24(1), pages 65-78, February.
    12. Zhang, M.M. & Zhang, C. & Liu, L.Y. & Zhou, D.Q., 2020. "Is it time to launch grid parity in the Chinese solar photovoltaic industry? Evidence from 335 cities," Energy Policy, Elsevier, vol. 147(C).
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    14. Qingchang Li & Seungkook Roh & Jin Won Lee, 2020. "Segmenting the South Korean Public According to Their Preferred Direction for Electricity Mix Reform," Sustainability, MDPI, vol. 12(21), pages 1-17, October.
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