Grid Parity of Photovoltaics in Germany - a Result of the Renewable Energy Act

Within the introduction of the Renewable Energy Act (EEG) in Germany, a unique boom of the generation of electricity in photovoltaics plants (PV) was initiated. Germany is now the leading global market for photovoltaics and will remain so in the coming years. The ongoing reductions in publicly regulated financial support for PV systems have lead to price decreases and, consequently, decreasing electricity generation costs. This paper shows how the German PV market is developing within the framework for financial support, known as EEG. It explains why the prices of PV systems decreased and how this had an impact on electricity generating costs. These are compared with the costs of generating electricity from other sources. This in turn leads to an estimation of the so-called Grid Parity point in time which depends on the factors having an influence on the Levelized Cost of Electricity (LCOE). The paper also explains how the EEG can be used to monitor the process of achieving Grid Parity and the consequences this may have for the promotion of electricity from renewable sources. The last part contains a small case study showing how experiences with the EEG in the very mature German market can be transferred to an emerging market. As an example of such a market, Indonesia has been selected. It is shown that Grid Parity is still more than a decade away, but Fuel Parity is already achieved for off-grid, stand-alone PV electricity plants when compared with diesel generators.