If solar power costs decline to “grid parity” or the same cost as generated electricity costs at the grid, it will take over a significant portion of the utility industry.  That has been the goal for 20 years.  It’s a great idea.  Because eventually homeowners can generate their own electricity, become independent of the utility and reduce their operating costs.

Or so the story goes.

We’ve been trying to reach grid parity for some time.  Without much success.  And not because we aren’t trying.  Billions of dollars of government subsidies, R&D funding and private investment are being poured into the pursuit.

Energy independence!  Both as a Nation and as individuals.  It would be great to be able to say, personally, we don’t have pay any utility bills.

The first great fallacy is that either solar power and wind power can cause energy independence for the US.  This is because the energy we depend on is not electricity, it is Middle East Oil for gasoline.  We are dependent because of our cars and the choice to not make our own gasoline, even though we can at lower cost than importing it.

But on top of that, almost none of the electricity generated in the US uses Oil.  It’s all coal, natural gas, or nuclear.  So the idea that the US will reduce it’s foreign oil imports by generating electricity with solar power or wind power, is completely ridiculous.  There is no connection between the two.

There is a theoretical energy equivalency that can be expressed.  But there is no real connection.  So people who make this claim are intentionally misleading anyone who listens.

How are we doing with respect to the cost of electricity generated by solar power?  It’s been an interesting couple of years.  The industry experienced a brief shortage of raw silicon which kept prices fairly high.  More recently there was a precipitous drop in panel prices.

Opinions vary as to the cause of this drop, but with the massive increase in manufacturing capacity worldwide, I would guess that the price drop is strictly a matter of oversupply.

Economies of Scale will fix the problem according to some.  After all, look how well we’ve done with computers, hard drives and flat screens. Flat screens that were $10,000 to $50,000 a decade ago are now affordable to the point where the CRT has become obsolete.

Since the biggest component cost of the solar panel is silicon wafer, we should expect similar results in the solar market.  The stampede to build more solar panel manufacturing plants resulted in oversupply.

Now the race continues to drive costs down.  Panels that were selling for $3.50/Watt a year ago are down to $2./Watt and prices are expected to continue to fall. And some manufacturers will not be able to keep up with falling prices using older technology.

But are we getting to grid parity?  Is Solar power cheap enough to compete with utility power?  Nope. Because even at today’s bargain pricing, a 225 Watt panel will only produce 900 kilowatt hours in a year at maximum efficiency.  At market cost for electricity, $.05/kW, it’s only $45 worth a year.  And it currently costs about $1125 pay for the panel, installation and balance of system components.  That means it will be around 25 years, the end of the useful life of the system, before it breaks even.  Yes, in California where consumers pay $.23/kW the payback is better, but it’s still very expensive to convert to solar.

We have got to do better than that.  And we will.  The technology is coming along.  But economies of scale by themselves can’t quite get us there.