“By focusing strictly on cost-competitiveness, grid parity fails to consider how dispatchability influences an energy source’s value on the grid. Moreover, renewable energy sources rely heavily on government funding to even reach cost-competitiveness. Continued subsidization of solar and wind to make them cost-competitive or accelerate their adoption is unjustified. “
As Part I of this analysis explained, grid parity for renewable energy is an empty concept because it fails to consider the functionality of renewable resources on the electric grid. Since grid operators must balance supply and demand to sustain grid stability and meet the power needs of Americans, dispatchable resources are extraordinarily valuable for electricity generation.
Resources such as coal, natural gas, nuclear, and hydropower can dispatch power on demand, but solar and wind energy are intermittent, making them undependable for electricity generation. In essence, true grid parity should also consider how an electricity source functions on the grid, not merely cost-competitiveness.
Nevertheless, renewable energy sources have not become competitive strictly based on their own merit. Instead, government assistance has been an important, even essential, component of lowering the cost of renewables enough to make them attractive in some locations. Despite receiving subsidies for decades, solar and wind remain unable to truly compete with conventional sources on the grid.
Renewable Subsidies: Nothing New
Solar and wind in power generation have existed since the 1800s and began receiving numerous subsidies from the federal government in the 1970s. Landmark pieces of legislation, including the Energy Tax Act of 1978 and Energy Policy Acts of 1992 and 2005, established financial incentives for investing in renewables. Furthermore, the federal government created agencies like the U.S. Department of Energy and government-funded research institutions like the Solar Energy Research Institute (now the National Renewable Energy Laboratory).
Nevertheless, both the solar and wind industries continue to laud government funds as critical to renewable energy growth. Subsidies are a key part of the discussion of grid parity as their impact is commonly included in analyses of renewable energy cost-competitiveness. But continually funding such endeavors will not resolve the fundamental limitations of intermittent energy sources.
Unwarranted, Ongoing Subsidies
Giving even more money to renewable technologies as a way to bring them to grid parity is misguided. As discussed in Part I, attempting to make renewables competitive through subsidization is an artificial solution that also raises overall electricity prices: subsidies and renewable mandates in Germany “have distorted electricity pricing” so that solar PV has purportedly reached grid parity despite the country’s low insolation.
In Europe, a result of this approach is overinvestment in renewable technologies in places where renewable energy is poorly situated. This “sub-optimal deployment of resources” has been costly for the European Union, which wasted $100 billion according to one report.
A 2015 study from Deloitte MarketPoint even admitted that subsidies are critical for wind and solar to reach grid parity in some parts of the U.S. over the next 10–15 years. If the tax credits for wind and solar expired, Deloitte found that the timeline for grid parity would be significantly longer in many regions.
Despite highlighting technological improvements for wind and solar, Deloitte assessed, “the projected dates for reaching grid parity without subsidies appear to be much farther out than many predictions being featured in the media today.”
Moreover, Deloitte found that even markets with very good “solar radiation potential” but low wholesale prices (e.g., Arizona and Southern Nevada) will not achieve grid parity for over two decades without subsidies, illustrating renewable energy’s reliance on government support. As long as renewables are dependent on government subsidies to be successful, doling out more money will not make them truly competitive on the grid.
Furthermore, lower prices do not necessarily allow renewables to truly rival conventional energy sources. According to an analysis from MIT Technology Review, as solar energy’s role on the grid expands, its value lessens. Continually decreasing the price of solar energy—whether through subsidization or innovation—forces solar to compete with itself on the grid because it generates power only when the sun is shining. Without a large-scale and affordable way to store energy, solar cannot dispatch electricity when it is most needed, which limits its usefulness.
By focusing strictly on cost-competitiveness, grid parity fails to consider how dispatchability influences an energy source’s value on the grid. Moreover, renewable energy sources rely heavily on government funding to even reach cost-competitiveness. Continued subsidization of solar and wind to make them cost-competitive or accelerate their adoption is unjustified.
These technologies have existed for over a century, have received government support for decades, and cannot achieve true grid parity due to their inherent limitations. In the end, grid parity remains a misnomer and an empty concept because it ignores the importance of how energy sources function on the electric grid.
 Matthew Sabas, History of Solar Power, Institute for Energy Research, February 18, 2016, http://instituteforenergyresearch.org/analysis/history-of-solar-power/.
 Rud Istvan and Planning Engineer, Solar grid parity?, Climate Etc., May 31, 2015, http://judithcurry.com/2015/05/31/solar-grid-parity/.
 Geert de Clercq, Badly located renewable power plants cost Europe $100 billion: Davos report, Reuters, January 20, 2015, http://www.reuters.com/article/us-utilities-europe-davos-idUSKBN0KT2BC20150120.
 Herman K. Trabish, The factors driving wind and solar toward grid parity, Utility Dive, December 10, 2015, http://www.utilitydive.com/news/the-factors-driving-wind-and-solar-toward-grid-parity/410304/.
 Jordan Blum, Report says wind, solar can’t compete for now without tax breaks, Houston Chronicle, November 20, 2015, http://www.houstonchronicle.com/business/energy/article/Report-says-wind-solar-can-t-compete-for-now-6647983.php.
 Deloitte MarketPoint, Journey to grid parity, 2015, p. 16, http://www2.deloitte.com/us/en/pages/energy-and-resources/articles/journey-to-grid-parity.html.
 Deloitte, p. 16.
 Even the potential for widespread, affordable energy storage, which would undeniably be an important technological development, is not a justification for subsidization. Rather, if energy storage can be effectively commercialized, then the market should determine its value. As discussed previously, subsidizing renewables has allowed RE to reach parity only because overall electricity prices have artificially increased. Doing the same to make energy storage competitive would only hinder true commercialization and adoption.
Mark Febrizio is a policy associate at the Institute for Energy Research in Washington, DC.