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

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

Energy Policy, 2015, vol. 86, issue C, 718-728

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.

Keywords: Grid parity; Cost-competitiveness; Renewable energy technology; Bottom-up energy system model; Electric power system (search for similar items in EconPapers)
Date: 2015
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