There’s understandably a lot debate about how to get the price of solar – continuing to fall, by the way – competitive with conventional sources of electricity. But one place you would think there would be agreement is in how to calculate the price. And on that, confusion seems to reign — with the possible result that solar is actually cheaper than commonly estimated.

In examining solar’s price relative to other forms of energy, experts generally use solar’s “levelized cost of energy” (LCOE), a metric that reveals how much it costs to generate one kilowatt-hour of electricity, including the cost of installation, maintenance, financing, incentives and the amount of power a system can produce in a given geographical location.  A recent study conducted by researchers at Queen’s University in Kingston, Ontario, however, finds that methodologies for determining LCOE differ from study to study; and that this lack of consensus could have policy implications.

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The paper reviews the methodology for properly calculating the LCOE for solar PV, and corrects some of the mistakes that the authors found in other studies. For example, some studies are too conservative in estimating the falling price of PV modules. Others assume that solar panel production decrease by 1 percent each year, even though many top-of-the-line modules only degrade between 0.1 and 0.2 percent annually.

The authors publish a template for properly calculating LCOE, which is available for free download as an online calculator. Using this template, the authors found that the cost of solar electricity has already reached grid parity in some Californian markets and in Hawaii.

The paper, “A Review of Solar Photovoltaic Levelized Cost of Electricity” [PDF], was authored by Dr. Joshua Pearce, Queen’s University Adjunct Professor of Mechanical and Materials Engineering, and co-authored by graduates students Kadra Branker and Michael Pathak. The paper was published in the December edition of the peer-reviewed journal, Renewable and Sustainable Energy Reviews.

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