Photo credit: Andreas Demmelbauer/Flickr

Solar power in California may now be as cheap as power from conventional sources—depending on how you do the math. Reports from the state’s recent Renewables Auction Mechanism, a process where solar providers put in bids to utility companies, showed that the weighted average highest cost of solar power was 8.9 cents per kilowatt hour.

Even though this doesn’t include the cost of transmission, the total cost will still be less than the average cost of residential electricity in California at 15.29 cents per kWh.

Is this true “grid parity”? There’s no universally accepted calculation to compare the cost of solar with conventional power. The price above, for example, reflects subsidies for solar power in California. Some say that subsidies shouldn’t be part of the equation, while others argue that fossil fuel power generation has received subsidies for decades. There are several other tricky aspects of grid parity math, including whether the comparison should be based on wholesale costs (and if so, which type of conventional power is most equivalent to solar) or residential electricity costs.

No matter how you calculate it, it’s clear that widespread grid parity is coming soon. The cost of solar power is falling so rapidly that a think tank recently predicted a third of Americans will reach grid parity for residential electricity prices—without subsidies—in less than a decade.


Hawaii is already there, and so is the city of San Diego, with New York City to follow shortly. Around the rest of the world, countries like Germany and Australia have also reached grid parity without subsidies.Long known as the holy grail of the solar industry, grid parity is now fully within reach. As parity spreads, it goes hand-in-hand with the spread of solar power itself: a record 1,855 MW of PV capacity was installed last year, more than doubling the amount installed in 2010.