Subsidized vs. Unsubsidized Solar Grid Parity
Grid Parity for solar energy basically implies that the price of solar generated electricity is equal to that of grid electricity, which could be generated through sources such as coal, oil, nuclear power etc. In India grid parity is calculated based on the per unit price that various consumer segments (residential, industrial and commercial) pay for their power needs.
However, there are two important types of grid parity – subsidized and unsubsidized.
Subsidized grid parity means that parity has been reached only after the use of subsidies, which usually includes concessions on component duties, multiple year tax breaks for project developers, loans at lower interest rates/soft loans and accelerated depreciation.
This is an important aspect of electricity prices from sources such as solar, coal, wind and natural gas. In India, for instance, solar power might be subsidized through a generation based incentive or a capital subsidy, nuclear power receives enormous subsidies with respect to research, insurance and waste disposal and coal is subsidized in mining and transportation. A more elusive “subsidy” is the kind of energy grid a country choses to build. All in all, it is difficult to really compare.
On the other hand, unsubsidized grid parity is achieved in the absence of any form of central or state government assistance to the power producer. It is this type of grid parity that the global solar PV sector needs to achieve.
Doing so will also mean that solar generated electricity has truly become competitive against other forms of electricity from the grid and will become the default choice of consumers.
To read more about grid parity of solar electricity, click here.