Solar power close to hitting parity with US grid price in 2016

A new report by Deutsche Bank predicts solar power will be cheaper than grid power in 47 U.S. states in 2016. One big caveat is that's assuming the U.S. maintains its 30 percent tax credit on system costs, which is set to expire that same year, but even if the tax credit drops to 10 percent, solar should hit price parity in 36 states.

The chart below highlights the anticipated savings of solar energy in each state in 2016, assuming a tax credit of 10 percent. The blue bars represent the levelized cost of solar power, assuming a conservative 20-year lifespan for the solar panels, minus average electricity prices, to show the savings for every kWh of electricity. In most U.S. states solar power comes out very favorably versus the grid, with Alaska, Washington and Oregon being notable exceptions.



One major factor that skews the number is that solar power is hard to compare with traditional power plants because solar power output is highly variable during the day and zero at night. This means there must always be a backup or a storage system to guarantee grid stability and makes it very hard to do an apples to apples comparison.

Still, solar looks very promising for the future because unlike fossil fuels solar is a highly evolving technology with increasing efficiency and even lower prices down the road. The chart below illustrates the astronomic increase of solar power cost efficiency in the past decade or so. Currently, solar is responsible for fewer than 1 percent of global energy capacity but the International Energy Agency (IEA) predicts it could be the top source of electricity by 2050.



Source: Bloomberg