Grid Parity

Grid parity is the point at which the cost of generating electricity from solar panels equals or is less than the cost of purchasing electricity from the traditional power grid. When solar reaches grid parity in a given market, it becomes economically competitive with fossil-fuel-generated power without the need for subsidies.

Solar energy has already reached grid parity in most of the United States. The levelized cost of solar electricity (LCOE) — which factors in installation costs, maintenance, panel degradation, and financing over the system’s lifetime — has dropped below $0.05 per kWh in many regions. Compare that to the average residential electricity rate of around $0.16/kWh, and solar is significantly cheaper than grid power in most markets. This means that for the majority of American homeowners, solar panels will save money over their lifetime even without incentives like the federal tax credit. Grid parity is a milestone that has been a major driver of solar adoption worldwide. As panel prices continue to fall and electricity rates continue to rise, the economic advantage of solar only grows stronger.