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I noticed that good Romano costs 1/3 as much as good Parmesan.

I know that Romano is aged much less than Parmesan is and that accounts for the difference in cost. However, the flavors of the two are very similar to me.

In what situations would it be important to use only Parmesan instead of substituting cheaper Romano cheese?

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On the other hand of the spectrum; when not to use well-aged parmesan over romano / less aged parmesan. I once made a risotto with very heavy, delicious parmesan, but it came out terribly wrong since the savoriness (?) was extremely overwhelming. So more flavor / aged is not always better :) –  Max Jan 11 '12 at 6:11
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It's a different flavor. Romano is sharper, more grassy; parmesan is nuttier and sweeter. I actually prefer romano where I have a lot of other strong flavors. If there's other sharp flavors in a dish, such as olives, chili pepper, or capers (e.g., puttanesca), I'll go with romano which seems to stand up better to the robust flavors. For something with a more subtle flavor such as a ragu bolognese, butter or cream-based sauces, risotto, etc. I feel that a good parmeggiano reggiano can stand up to the other flavors in the dish without overwhelming them.

If cost is your main concern, I've had some parms from Argentina that are actually pretty good. Reggiano is definitely better, but depending on what you're using it for, it might be an option. I wouldn't use it in something like a risotto or fettuchine alfredo where it plays a key role in the dish, but if you're just grating it on top it will work fine. An in-between option is Grana Padano, which is advertised as a "budget" substitute for reggiano. In my experience, it's pretty good, but where I live it's only a little cheaper.

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IMHO, Pecorino Romano tastes very different from Parmesan. It is a lot saltier. Parmesan's flavor is also more subtle and the notes duller.

However, having said that I'm having a hard time thinking about when it is not ok to substitute Romano for Parmesan. It is an interesting question, but I don't think it has a definitive answer. I think it comes down to a matter of taste.

Maybe one situation is if the dish is already salted, you may just want to use Parmesan so that you're essentially adding the Parmesan flavor without adding saltiness.

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