Grid Parity

Grid parity is the point at which the cost of generating electricity from solar panels equals the cost of purchasing electricity from the utility grid. When solar achieves grid parity, it makes economic sense to install solar without any subsidies or incentives — the technology pays for itself purely on the basis of displacing grid electricity at current retail rates.

Grid parity depends on location because both solar costs and utility rates vary geographically. Regions with high electricity rates and good solar resource reached grid parity first — Hawaii, California, and parts of the Northeast achieved residential grid parity in the mid-2010s. As panel prices have continued to fall and utility rates have continued to rise, grid parity has expanded to most US markets.

At the utility scale, solar reached grid parity with new fossil fuel generation worldwide by the early 2020s. Unsubsidized utility-scale solar is now the cheapest source of new electricity generation in most of the world, according to analyses by Lazard, BloombergNEF, and the International Energy Agency.

Beyond simple grid parity, many markets have reached what some analysts call "deep grid parity" — where solar with battery storage is cheaper than grid electricity, even accounting for the cost of storing solar energy for evening use. This milestone further strengthens the economic case for solar-plus-storage systems.

Grid parity is a moving target. As utility rates continue to climb at 2-3% annually while solar costs continue to decline, the economic advantage of solar over grid electricity widens each year. Systems installed today will be even further below grid parity in five years than they are at installation, compounding the return on investment over time.