Turning grid parity upside down

Turning grid parity upside down

I spoke at a solar energy conference a couple of years ago and heard Craig Cornelius, the then acting director of the DOE’s Solar Energy Technologies Program, say “we should be at grid parity by 2015.”  What he meant was that the cost of solar per kWh should be equal to the cost of a regular kWh (from traditional generation methods) by 2015 and, once that happened, the cost barrier to buying solar for the average homeowner would evaporate and everybody would run out and buy it.

I actually followed him as the next speaker and, apologizing for myself ahead of time, contradicted his theory by sharing all the other barriers consumers often see — whether real or imagined — to making energy efficient and sustainable choices.  Those barriers still exist — consumers are driven by comfort and convenience, they get paralyzed by not knowing what the best choices are for their homes and they don’t know who to trust to get the right answers, etc.  But, conceptually, Craig was right.  The price disparity between renewable generation and traditional generation is a huge barrier.  But we may need to shift our thinking about it (and I realize this won’t be popular with those of you working at utilities.)  We may need to think less about making solar and wind cheaper  and more about making traditionally generated energy more expensive.

My hypothesis here is that if a consumer’s utility bill stays relatively the same month in and month out, adjusting for gradual rate increases/inflation, that consumer is comfortable with that bill.  He/she may complain about it, but it’s accepted as a fact of life.  So, taking on an entirely new way of receiving electricity into his her/home for the same price opens a whole new can of worms and begins to look like inconvenience — and convenience is the number one thing consumers are prioritizing right now over comfort and the environment when they have to choose (from our Eco Pulse research).

Conversely, if a consumer’s monthly utility bill quickly doubles, then triples (which is a very real possibility depending on the climate change legislation that passes) to make traditional power now the same cost as green power, it’s easier for that consumer to justify the inconvenience of the switch.  He/she now has justice on his/her side, as in, “that blankety blank utility company just keeps screwing me and they’re going to keep screwing me, so I’ll show them — I’ll put a power plant on my house!”  Righteous indignation is a powerful motivator.

Not that it’s to this extreme, but Austin Energy is experiencing this effect right now.  Environmental Leader reported earlier this week that Austin’s GreenChoice program has lost subscribers now that the cost of natural gas and oil has gone down.  Their program allows customers to lock into a 5-year or 10-year guaranteed price per kWH for renewable energy…which looked good when commodity prices were skyrocketing.  Now that things have settled down in the commodity market, so has the price for traditionally generated energy…and there’s no motivator for consumers to switch.

Bottom line:  if traditional energy gets more expensive, people will have a reason to switch to cleaner energy.  Without that, folks won’t be able to get past the inconvenience of switching.

About the Author

Suzanne Shelton

Where Suzanne sees opportunity, you can bet results will follow. Drawing on her extensive knowledge of both the advertising world and the energy and environment arena, Suzanne provides unparalleled strategic insights to our clients and to audiences around North America. Suzanne is a guest columnist in multiple publications and websites, such as GreenBiz, and she speaks at around 20 conferences a year, including Sustainable Brands, Fortune Brainstorm E and Green Build.

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