Grid parity analysis of stand-alone hybrid microgrids: A comparative study of Germany, Pakistan, South Africa and the United States

Grid parity for alternative energy resources occurs when the cost of electricity generated from the source is lower than or equal to the purchasing price of power from the electricity grid. This thesis aims to quantitatively analyze the evolution of hybrid stand-alone microgrids in the US, Germany, Pakistan and South Africa to determine grid parity for a solar PV/Diesel/Battery hybrid system. The Energy System Model (ESM) and NREL's Hybrid Optimization of Multiple Energy Resources (HOMER) software are used to simulate the microgrid operation and determine a Levelized Cost of Electricity (LCOE) figure for each location. This cost per kWh is then compared with two distinct estimates of future retail electricity prices at each location to determine grid parity points. Analysis results reveal that future estimates of LCOE for such hybrid stand-alone microgrids range within the 35-55 cents/kWh over the 25 year study period. Grid parity occurs earlier in locations with higher power prices or unreliable grids. For Pakistan grid parity is already here, while Germany hits parity between the years 2023-2029. Results for South Africa suggest a parity time range of the years 2040-2045. In the US, places with low grid prices do not hit parity during the study period. Sensitivity analysis results reveal the significant impact of financing and the cost of capital on these grid parity points, particularly in developing markets of Pakistan and South Africa. Overall, the study helps conclude that variations in energy markets may determine the fate of emerging energy technologies like microgrids. However, policy interventions have a significant impact on the final outcome, such as the grid parity in this case. Measures such as eliminating uncertainty in policies and improving financing can help these grids overcome barriers in developing economies, where they may find a greater use much earlier in time.