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The Moving Target of Grid Parity

NEW YORK ( TheStreet) -- Since I last wrote about solar power a few weeks ago , grid parity has become the industry's buzzword du jour.

Grid parity means that when you add all the costs of a panel and divide by the energy output over its useful life it equals the cost of buying electricity from your local power grid over that time.

We can't know what grid energy will cost 10 years from now, so we extrapolate from current figures. Sometimes we add an inflation component. And we can't be sure a panel will deliver the same output over time, either. We make assumptions on both sides.

Still, grid parity matters for policymakers, which means it matters for companies like First Solar (FSLR - Get Report) and JA Solar (JASO - Get Report), which make and sell panels. Grid parity defines solar competing without subsidy. The claim of grid parity defines a sustainable market.

A Deutsche Bank analysis, quoted here by PV Magazine, indicates grid parity will happen across Europe next year, and that it has already been reached in India. This means higher sales and stable pricing across the industry.

Some 100 Gwatts worth of solar power has now been installed worldwide, and demand for 2013 should top 30 Gwatts, according to SustainableBusiness. That's still a fraction of U.S. demand, which a Google analysis sees at 13 billion kilowatt/hours each month.

It should be smooth sailing for solar, but it's not. There are huge differences in photovoltaic module costs between China and everyone else, as much as 50%, writes GreenTechMedia. This means a trade war seems imminent, according to EuropeanVoice.

Nuclear and fossil fuel advocates have also responded to solar success by piling on pressure against the industry in state legislatures. Grant Smith of the Civil Society Institute has an op-ed, seen here at the Augusta Free Press, charging the American Legislative Exchange Council or ALEC, a business lobbyist, with lying about solar and wind costs to maintain construction work in progress and support for new nuclear and coal plants.

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