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Solar Grid Parity Is Here

By Travis Hoium - Updated Apr 6, 2017 at 5:10PM

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A recent study shows that we've finally reached grid parity for solar power.

It's a moment solar investors, boosters, and tree huggers everywhere have been waiting for. But it doesn't come with a Champagne toast or a ribbon cut by a giant scissors. Instead the all-important grid parity for solar power has greeted us with falling stock prices, bankruptcies, and more than a few skeptical looks. But don't let those fool you -- solar is becoming a major factor in energy.

According to a recent study done by Queen's University and Michigan Technological University, we've passed grid parity in many locations. The study also says that quality improvements and more time in the field mean that models should more aggressively account for degradation and predicted cash flows. Until now, models have been fairly conservative on these two counts.

What that may end up doing is lowering borrowing costs for installing solar to better align with traditional energy sources.

Times are changing
The bigger game changer from a financing perspective may have come earlier this week when Warren Buffett made a big bet on solar. Banks haven't exactly opened their wallets at dirt cheap rates, but if they lower borrowing costs, the levelized cost of energy comes down. Maybe Buffett and meeting grid parity will convince them to do that.

What it means for investors
Progress toward grid parity has come at a fast rate as prices for solar modules decrease and costs for modules, borrowing, and balance of system costs fall along with them. If we have indeed reached grid parity, a nearly endless supply of demand should open up for the industry. Residential solar will be cost-effective for homeowners, and utilities will see solar as a low-cost source of energy. Industry leaders SunPower (Nasdaq: SPWR) and First Solar (Nasdaq: FSLR) look to be winners, along with top-tier Chinese manufacturers Trina Solar (NYSE: TSL), Yingli Green Energy (NYSE: YGE), and Suntech Power (NYSE: STP).

But this doesn't mean that demand will pick up immediately. Grid parity is still a squishy concept, and the energy industry isn't quick to change the way it does business. But I'll take progress toward the ultimate goal of solar being the lowest-cost source of energy and a growing part of our energy future.

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Stocks Mentioned

First Solar, Inc. Stock Quote
First Solar, Inc.
FSLR
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SunPower Corporation
SPWR
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