Grid Parity Calculator Formula
Understand the math behind the grid parity calculator. Each variable explained with a worked example.
Formulas Used
Savings per kWh
savings_per_kwh = grid_price - renewable_lcoeAnnual Savings
annual_savings = (grid_price - renewable_lcoe) * annual_usage_kwhParity Ratio (Grid / LCOE)
parity_ratio = grid_price / renewable_lcoeVariables
| Variable | Description | Default |
|---|---|---|
renewable_lcoe | Renewable LCOE(USD/kWh) | 0.1 |
grid_price | Grid Electricity Price(USD/kWh) | 0.15 |
annual_usage_kwh | Annual Electricity Usage(kWh) | 10000 |
How It Works
What Is Grid Parity?
Grid parity occurs when the cost of renewable energy equals or falls below the retail price of grid electricity. Beyond grid parity, renewables save money compared to buying from the utility.
Formula
Savings per kWh = Grid Price - Renewable LCOE
Annual Savings = Savings per kWh x Annual Usage
If the savings per kWh is positive, the renewable source has achieved grid parity. The parity ratio shows how much cheaper (or more expensive) the renewable source is relative to grid power.
Worked Example
Solar LCOE of $0.10/kWh vs grid price of $0.15/kWh for a home using 10,000 kWh/year.
- 01Savings per kWh = $0.15 - $0.10 = $0.05
- 02Annual savings = $0.05 x 10,000 = $500/year
- 03Parity ratio = 0.15 / 0.10 = 1.50 (grid is 50% more expensive)
Frequently Asked Questions
Has solar reached grid parity?
In most US states, residential solar has reached or surpassed grid parity, especially in areas with high electricity rates and good solar resources.
Does grid parity include storage costs?
Basic grid parity compares LCOE to grid price without storage. For full off-grid parity, battery costs must be added to the renewable LCOE.
What about net metering?
Net metering credits exported solar energy at or near retail rates, which can make solar even more favorable than the simple LCOE comparison suggests.
Ready to run the numbers?
Open Grid Parity Calculator