Wednesday, 27 October, 2021
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Battling Climate Change Through Grid Parity

Zahin Syed

Battling Climate Change Through Grid Parity

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All around the world, climate-driven disasters are claiming record breaking casualties. Global efforts continue to battle climate change and to do so world leaders have promised to reach net carbon emissions to zero by 2030. Furthermore, the recent climate-driven flash floods in China and Germany have stressed policymakers to deal with climate related problems with a lot more urgency. Grid parity plays an imperative and key role to help address the problem of climate and promises to help restore balance in the ecosystem.

So, what exactly is grid parity?The term grid parity is a well-known term in the renewable energy field, and researchers have been working on grid parity for more than a decade. However, this term is not quite popular among commoners. The word 'parity' refers to the state or condition of being equal. Hence, we achieve grid parity when our use of renewable energies – like solar energy – is cheaper than, or equal to, the price of using power from conventional sources such as natural gas, coal, and oil (i.e., fossil fuels). Yes, you read it correctly, equal to or cheaper than conventional sources. Isn't that great? In other words, grid parity is when renewable technology can produce electricity at the same cost or cheaper than grid power's retail rate.

Therefore, if we manage to achieve grid parity, more investments will flow into renewable energy projects and technologies, starting a virtuous cycle making clean energy more affordable and accessible. Furthermore, achieving grid parity will curb the use of fossil fuels and significantly decline carbon emissions in regions where there is grid parity.

Nevertheless, how can we achieve grid parity? To understand that, we first need to know the meaning of the Levelized cost of electricity. Levelized cost of electricity (LCOE) is a measurement used to assess and compare alternative energy production methods. The LCOE of an energy-generating asset can be considered the average total cost of building and operating the asset per unit of total electricity generated over an assumed lifetime. Thus, grid parity compares the LCOE of power generated from renewable energy sources and power generated from utility/non-renewable energy sources. Suppose the Levelized cost of power generated from renewable energy is at or below the Levelized cost of power generated from non-renewable energy sources. In that case, the system is at or below grid parity.

Day by day, the cost of renewable energy is falling precipitously. The Levelized Cost of energy generated by large-scale solar plants is around USD 0.068/kWh, compared to USD 0.378 ten years ago, and the price fell 13.1% between 2018 and last year alone, according to figures released by the International Renewable Energy Agency. The cost of wind energy is not far behind, dropping 65.5 per cent in the U.S. since 2009. Falling costs of green energy indicate that achieving grid parity is not a far-fetched argument.

However, grid parity depends on various factors. Firstly, electricity rates differ from location to location. A technology that produces power at a given rate could be above grid parity in some places and below grid parity in others. For example, in the United States, Solar P.V. has reached grid parity in California because California's utility rates are very high. The case of California cannot be applied or generalized to suit every other state in the U.S. Secondly; grid parity depends on whether it's calculated for a utility or a retail consumer's point of view. At both levels, grid parity can differ. Sometimes the retail utility-based energy rates for consumers are almost double that of the Levelized cost of energy for the utility. So it is possible that Solar P.V. is at grid parity for the end consumer and not for the utility. Thirdly, the costs considered while calculating the cost components taken while considering grid parity are crucial. Moreover, these are varying parameters. For example, the installation costs and permit costs for certain technologies can widely differ from place to place.

Bangladesh has also realized the potential dangers of climate-driven disasters.Keeping this in mind,The Government of Bangladesh has aimed to boost clean power generation to twenty percent by 2030.The dream Rooppur Nuclear Power Plant Project is one of many examples that the Government of Bangladesh has taken to generate clean and sustainable energy to help achieve grid parity. Other projects undertaken in Bangladesh for example, by Infrastructure Development Company Limited (IDCL) are also helping the country to achieve grid parity. Over 50 lakh solar systems have been installed under the IDCL.This magnanimous feat has helped Bangladesh top a global list of renewable energy-using countries by installing the highest number of solar home systems (SHSs) and is also a pioneer of this project. However, a lot more similar projects need to be undertaken to generate more clean energy and achieve grid parity. Nevertheless, slowly but surely the transition from fossil fuel dependency to clean energy is underway in Bangladesh.

Natural disasters are claiming record breaking casualties all around the world and climate change is the main culprit. To deal with this problem, achieving grid parity is the answer. At its core, grid parity is the point where the Levelized costs of renewable energy have become less than or equal to the Levelized costs of energy generated from fossil fuels. With plummeting renewable energy costs, new flows of investment into green energy and accelerated technology growth, the world is inching closer to achieve grid parity.

 

The writer is a Lecturer in the Department of Economics at American International University-Bangladesh