Solar Costs More in the U.S. Than in Germany, what about Australia?
A recent report from Lawrence Berkeley National Laboratory in USA shows that in 2011, residential solar system installers paid a little over $1.80 per watt for solar panels in both Germany and the United States. But in Germany the cost of installation was $1.20 per watt compared to USA where it was $4.36 per watt, more than three times as much.
Why was the question LBL were trying to answer.
The first and most obvious difference between USA and Germany was the total amount of solar power installed in each country—Germany has installed 5 times as much.
They believe Germany having breached the learning curve reduces ongoing costs. Call it Solar Intellectual Capital. However they believe the learning curve only accounts for half the difference.
Costs for permitting, connecting the systems to the grid, and having them inspected are also far higher in the USA.
The Germans spent only three cents a watt on these things, while U.S. installers spend 20 cents, in part because of larger amounts of paperwork and the permitting fees U.S. installers have to pay.
U.S. installers also spend more on labor, more in sales tax (German installers are exempt) and more for overhead (which is closely related to economies of scale).
US installers take longer to install, more hours than the Germans do to install
Residential systems in Germany are generally larger than USA so that would reduce the labor overhead component per installation.
In the US permitting and interconnection fees are higher than in Germany.
Probably a consequence of scale and permitting and interconnection fees, Germany has a lower labor cost than USA for processing the paperwork (wonder where Australia fits here?)
USA has higher business overhead costs like insurance, material storage costs.
USA lower sales volumes means fixed costs are spread over a smaller number of units and they miss profiting from economies of scale.
US installers have higher cost of capital for their own business operation.
US installers face higher transaction costs associated with arranging financing for customers (Suppose if the price is higher more people need finance, though suspect many are comfortable with finance because they view it as less out of pocket).
USA has higher marketing and advertising costs.
The report lists some more possible explanations:
Its interesting they knocked off some excuses:
There was a claim Hardware component costs are lower in Germany, they found possibly true for inverters, but uncertain for other. Belief USA has a lower share of cheaper Chinese modules was found to be untrue. Whilst US installers have higher wages for installation labor, it was viewed as not true for other labor.
Part of the difference, for example, is due to higher costs for inverters in the U.S. But the report comes short of explaining the entire price difference—about $1.30 of the price difference remains unaccounted for. The researchers speculate that some part of the difference is higher profits in USA.
“We will see a substantial improvement, even if we just replicate the practices in Germany,” – Ryan Wiser, a staff scientist at LBNL and one of the authors of the new report.
Anyone who can extend this to include comparison to Australia please let us know. Certainly it shows how a level of Government support can establish national economic advantage.
This article is from MIT TECHNOLOGY REVIEW by Kevin Bullis and published in Mashable.