Which country will hit grid parity in 2021? US or China

In the last decade, much has been said about grid parity on the news, at renewable energy conferences, and by well-respected research institutes.

One of the primary reasons the concept is gaining huge attention is because it might just be the most crucial step in countering climate change.

Technically speaking, grid parity is the point when an alternative form of energy (think solar and wind) generates power at a Levelized Cost of electricity that’s equal to or less than the price of buying power from the electric grid.

As grid-based fossil-fuel electricity prices continue to rise in much of the world and solar energy costs decline, many regions are on track to reach grid parity relatively soon including world superpowers, the US and China.

In this post, we shall be examining the efforts of these countries to achieve grid parity and which is most likely to reach the goal in 2021.

An Overview of the Journey to grid parity in the US and China

During the past decade, the US has provided certain significant incentive schemes to engender renewable energy project development in a bid to reach grid parity.

Most of these initiatives are in the form of the federal Production Tax Credit (PTC) for wind, Investment Tax Credit (ITC) for solar and tradable Renewable Energy Credits or Certificates (RECs), which provide a stream of additional income to developers as part of some state-sponsored Renewable Portfolio Standards (RPS) programs.

Programs such as job credits, research and development incentives, and sales and use and/or property tax exemptions for a renewable property are also offered by many states.

Further, in both onshore wind and solar PV sectors, overnight construction costs have declined and capacity factors have improved, generally making the renewable domain more competitive.

Due in part to state-sponsored RPS programs, falling overnight construction costs, and improved utilization rates, wind generation and solar generation on an energy production basis have climbed by 24-fold and 34-fold respectively since 2001.

As a result of these developments, the costs of both wind and solar installations have plummeted, and that has led to faster adoption of renewables.

Also, investment in wind and solar has facilitated technological advancements, better supply chains, and an increase in production — all of which help lower prices.

Between 2008 and 2016, installed wind capacity in the United States almost tripled, and the cost of wind energy fell from 7 cents per kilowatt-hour to an average of 2 cents per kilowatt-hour in certain regions, according to the U.S. Department of Energy.

Overall, grid parity in the US is highly region-specific. Regions with a combination of high-capacity factors, lower overnight construction costs, and higher wholesale power prices already achieve grid parity at certain seasons and times of the day.

On the other hand, China’s solar industry has rapidly expanded from a small, rural program in the 1990s to the largest in the world, studies say. It is the largest generator of solar power and has the highest number of solar panel installations.

As of 2018, the installed capacity of solar panels in China was equivalent to more than a third of the global total, with the country accounting for half the world’s solar additions that year.

Since 2000, the Chinese government has introduced several policies supporting the PV industry – these policies alongside technological progress has helped make solar power in China less expensive.

One of such policies is the provision of government subsidies for new renewable energy projects. While this scheme had greatly accelerated the performance of the solar energy sector in the past, a new policy unveiled by the Chinese government focuses on removing such incentives. 

There has been controversy among analysts over the impact this new policy has on China’s grid parity goal. Some experts posit that this move might delay the attainment of grid parity across China in the near future, whereas others believe it is a step in the right direction.

Which country will reach grid parity by 2021?

It is difficult to determine which country will achieve grid parity before the end of 2021 as both nations are massively invested in realizing this target. However, here are what experts have to say.

A new study by Mälardalen University in Sweden claims that solar power has become cheaper than grid electricity across the majority of China, specifically in 344 states. While only 20 US states have achieved grid parity so far. Also, a US-owned business intelligence firm, Wood MacKenzie predicts that China will achieve its grid parity goals in 2021.

Conclusion

With the impacts of climate change and global warming on the rise, initiatives like grid parity which are poised to help the world transition to cheap and clean energy sources have never been more imperative. Achieving grid parity should not be left in the hands of world powers or developing countries alone. It should be a global effort, seeing that climate change is a global problem.