What is Foolsaurus?

It's a glossary of investing terms edited and maintained by our analysts, writers and YOU, our Foolish community.

Grid parity

Grid parity refers to renewable energy sources being the same cost as (or cheaper than) fossil fuels.

Expanded Definition

Renewable energy should have significant cost advantages over the fuel fired power plants usually used to supply the grid because renewables usually have no fuel cost. However, grid cost numbers are for large, efficient operatations and come from actual operating experience.

The cost of installing renewable energy equipment is usually known, but lack of operating experience complicates converting that number to grid equivalents. If the service is intermittant (solar/wind) how much power will be produced over a reasonable time period? What is the service life of the equipment? What maintenance will be needed, how frequently, and at what cost? What is the resale value of the equipment to a future buyer? What is the cost of capital for the life of the equipment? At the end of its service life, what is the salvage value of the equipment?

Depending on the quality of best guesses, comparisons can vary widely. In the absence of real world operating experience, the data should be considered estimates.

Related Fool Articles

Related Terms

Recent Mentions on Fool.com