Grid Parity Analysis of Solar Photovoltaic Systems in Taiwan

In 2007, Mckinsey published a report, indicating that most countries will have reached grid parity by 2020 due to high Silicon material prices, high module cost, and low efficiency. But in reality, the development of the solar industry had been faster than expected in 2007. Due to the financial crisis and Spain’s collapse, the price of silicon material was declining; new applied material and higher efficiency both contributed to a lower unit of cost.

Today, solar power is not an energy solution but a financial tool. The fact that grid parity has been reached is important because people will volunteer to install PV systems without any subsidy. In twenty to thirty years, people can use electricity generated by PV systems instead of paying for it to save the electricity cost. Over this time period, we believe the solar market will grow at a potential rate.

In Taiwan, the government mainly uses IRR and payback period method to evaluate the value of installation. However, both methods can not indicate when the grid parity year is. The paper analyzes two aspects - factors that decrease the unit cost of solar power and factors that increase the end user electricity price. The factors that decrease the cost of solar power include material and module price, efficiency improvement and module lifetime. The factors that increase electricity price are subsidizing the power cost generated by renewable energy. The cost may be raised due to the shortage of resources in the future. The research period is from 2011 to 2030, and the factors are extrapolated from the expectation and estimated. Two situations -subsidy and without subsidy - are separately considered when the grid parity is reached in Taiwan.