25.09.2012
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Photovoltaics

Why German solar costs half as much as US solar

A new study by the Lawrence Berkeley National Laboratory investigates why solar currently costs around twice as much in sunny parts of the US than in cloudy Germany.

 - Solar costs roughly twice as much in the US as it does in Germany, but even within the United States prices vary greatly (such as between Arizona and California).
Solar costs roughly twice as much in the US as it does in Germany, but even within the United States prices vary greatly (such as between Arizona and California).
Berkeley Labs

Berkeley Lab has published a series of charts based on chief author Joachim Seel's study completed in May. The slideshow (PDF) is fortunately quite self-explanatory. The main question is posed in the title: "Why are residential PV prices in Germany so much lower than in the United States?" The focus is on customer-owned, completely installed systems smaller than 10 kilowatts; as Renewables International previously explained, third-party ownership is a common business model in the US, but is relatively unpopular in Germany, where people want to own their own systems.

The study finds that "soft" costs are the main difference, not the cost of components; in particular, Germans do not use more inexpensive modules from Asia than the US market does. While the study points out a number of potential factors it does not investigate, it nonetheless believes that sheer market size – Germany has 14 times more residential solar on a per capita basis – may account for roughly half of the price difference.

 - While the hardware costs are practically the same in the US and Germany, "soft" costs are roughly 5 1/2 times greater in the US.
While the hardware costs are practically the same in the US and Germany, "soft" costs are roughly 5 1/2 times greater in the US.
Berkeley Labs

The authors say that feed-in tariffs have brought down prices in Germany (currently at 1.70 euros per kilowatt) and that "similar forces may operate less efficiently in the US." Essentially, feed-in tariffs have been reduced each year since introduced for photovoltaics in 2004, putting pressure on "German installers to lower system prices to maintain attractive investments for their customers."

Other reasons for the higher price in the US could be summed up under the category of "red tape": longer installation processes in the US, longer permitting procedures and inspections, greater customer acquisition and marketing costs, and higher sales tax on PV in the US. Labor costs are also considerably higher in the US – but mainly because American installers need 10 times as long as Germans do (75 hours per system versus 7.5 hours).

The study also found great differences between system prices within the US, suggesting that different state policies also considerably affect prices. The authors proposed that further research be conducted into assessing "the role of FIT policies in Germany in stimulating price reductions and potential implications for US solar policy." (Craig Morris)

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1 Comment on "Why German solar costs half as much as US solar "

  1. Photomofo - 26.09.2012, 08:41 Uhr (Report comment)

    The Berkeley report falls far short. Big picture wise they fail to acknowledge the simple fact that there are many markets in Europe (Belgium, U.K., Italy, The Netherlands) and several markets in Australia (Victoria, NSW, Queensland, SA, etc.) where installations costs are significantly lower than those in the U.S. The variety of these markets contradict many of the arguments made in the Berkeley report. Perhaps most startling the Berkeley Report failed to recognize that Germany had successfully removed most of their soft costs already at a market size of around 500 MW. It is seriously aggravating to have these wonderful researchers doing everything they can to make up reasons why the US market is so inefficient when it's completely obvious that the over-generous market incentives prevent prices from falling. Lower the ITC to 20% and the prices will magically fall. them to 10% and the prices will fall further. And so on... Some of the state level benefits (Louisiana stands out in particular Craig) are absolutely off the charts as far as generosity goes.
    This isn't to say we shouldn't offer low cost financing in the US or suspend sales tax and what not. But these measure are tiny compared to the 40 to 50% offsets that many markets have. Here's a prime example.
    http://www.solarsouthwestflorida.com/how-fpl-can-improve-the-solar-rebate-program/
    If you went through the DSIRE database you'd probably have stories for weeks about how the US is throwing money around. I wouldn't mind it a tad if we saw prices falling consistently over time but unfortunately that's not really the case. More concerning is the fact that the US market has been overtaken by third party installers who would like nothing more than to maintain the current overly generous incentive structures. It's literally *daylight* robbery.

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