Grid parity
The point at which electricity from a new source, usually solar or wind, costs the same as or less than power bought from the grid.
Grid parity is reached when the levelised cost of a distributed or utility-scale renewable source equals the price of the alternative supply. Two benchmarks are used:
- Socket (retail) parity: rooftop PV LCOE equals the retail tariff a household or business would otherwise pay, including network charges and taxes.
- Wholesale (generation) parity: utility-scale LCOE equals the wholesale price or the cost of new conventional generation.
Socket parity for residential PV arrived in Germany around 2012, when LCOE fell to roughly 0.15 to 0.20 EUR/kWh against retail prices near 0.26 EUR/kWh (Fraunhofer ISE). Southern Europe, Australia, Hawaii and California reached it earlier. Utility-scale solar and onshore wind are now the cheapest new bulk generation in most markets: IRENA reports that 91% of new renewable capacity commissioned in 2024 had lower costs than the cheapest new fossil alternative.
Parity does not mean full economic equivalence. It ignores timing (solar's capture price), integration costs, and the fact that self-generated kWh only save money at retail value if consumed on site under net billing. Analysts therefore increasingly talk of "storage parity" for PV plus batteries, or value parity, rather than simple cost parity.
Related terms
All terms →- LCOE (Levelized Cost of Electricity)
The constant price per MWh that recovers all lifetime costs of a power plant, discounted to present value, divided by its discounted lifetime output.
- Net metering
A billing arrangement in which electricity exported by a small generator, usually rooftop solar, offsets imports at the retail rate over a billing period.
- Self-consumption
The share of on-site generation, typically rooftop solar, that is used directly by the producer rather than exported to the grid.
- Learning rate (Swanson's law)
The percentage cost reduction of a technology for every doubling of cumulative production; for solar modules, Swanson’s law puts it near 20%.
- Feed-in tariff
A policy that guarantees renewable generators a fixed price per kWh exported, usually for 15 to 20 years, independent of market prices.
- Payback period
The time needed for the cumulative savings or revenues of an investment to equal its initial cost.