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Astonishingly Low Distributed Solar PV Prices from German Solar Policy

| Written by John Farrell | 9 Comments | Updated on Apr 21, 2011 The content that follows was originally published on the Institute for Local Self-Reliance website at http://ilsr.org/astonishingly-low-distributed-solar-pv-prices-german-solar-policy/

Most renewable energy advocates are familiar with feed-in tariffs, also known as CLEAN Contracts.  They offer standard, long-term contracts for renewable electricity with prices sufficient to allow producers to get a reasonable return on investment (in Germany, it’s 6 to 8 percent). And research has shown that they tend to drive prices down more effectively than other renewable energy policies by reducing developer risk in exchange for lower rates of return.

Germany offers proof, to the tune of an average installed price for distributed solar of just $4.11 per Watt. The following chart illustrates the dramatic fall in installed costs for 100 kilowatt and smaller PV systems in Germany, from 2006 to 2009.  The final price, 2834 Euro per kW, is equivalent to $4.11 per Watt (using today’s exchange rate of 1 Euro to $1.45).

Did I mention this is the AVERAGE price? For comparison, here’s the average price for solar PV systems under 10 kW installed in the U.S. in 2009, by state.  Chart is from page 19 of the brilliant report, Tracking the Sun III: The Installed Cost of Photovoltaics in the U.S. from 1998-2009 (large pdf).

Since California and New Jersey comprise most of the U.S. market, the equivalent national average installed cost for 2009 was probably close to $8.00 per Watt.  Data from the same report shows that 10 to 100 kW systems were about $0.30 per Watt cheaper, leaving U.S. solar PV only slightly less than twice as expensive as German solar PV of similar size.

Did I also mention that the German policy driving solar costs down only costs German ratepayers the equivalent of a loaf of bread per month?  In the U.S., the federal renewable energy incentives cost $4 billion in 2007, or about $3.17 per household per month (or about the same price as an Italian baguette).

wunderbar!

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About John Farrell

John Farrell directs the Energy Self-Reliant States and Communities program at the Institute for Local Self-Reliance and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. More

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  • Taha

    very nice illustration , thanks :)

  • Anonymous

    I live in Germany.

    The government doesn’t pay for the solar panels. But it guarantees a fixed price when you sell the energy to the market, e.g. ~40Cent/kWh. The difference to the “normal” price of ~20Cent/kWh is payed by every energy consumer. Because the big energy suppliers are forced to buy the solar energy at the high price of ~40Cent/kWh they add it to the “normal” price.

    This means i could save ~3Cent/kWh if all solar in germany would be gone.

    Please verify this information before using it. This is just my personal impression which i got over the years.

  • John Farrell

    Neither the U.S. nor the German price include sales tax or VAT. One theory for the German market is that the margins for installers can be much lower, given the volume, and that the permitting and interconnection process is extremely streamlined compared to the balkanized U.S. electricity market.

  • http://www.shoppershub.co.uk Steve

    Germany is doing it much better than most European countries, but we could have a model to get our costs reduced.

  • MGThouati

    John – I am curious as to how you explain the discrepancy between the two?

    Given higher labor costs and VAT/social taxation in Germany, along with less perfect markets, you would expect the opposite. In fact, all electronic products are more expensive in German stores, and any kind of labor-based service in Germany is also more expensive (outside of health arena). So why a reverse relationship for PV installed cost? 2x is a big difference.

  • http://www.carbonwarroom.com Jigar Shah

    Solar City, SunRun, Sungevity, 1BOG, and others are all sub-$4.50/Wdc installed in the US. In order to “full ultilize” the federal subsidy they are artificially increasing the prices to US Bank to $8/Wdc even though US Bank isn’t paying $4.50/Wdc. People paying cash are at $4.50/Wdc. Not sure how to fix this info gap.

  • Bob Wallace

    Could you update this post so that any subsidies/taxes are clearly specified?

    And you might want to add in the Open Neighborhood price of $4.78/kWh installed – $4.78 before any subsidies. And their claim to be able to install for $4.22/kWh if volume increases.

    Germany is clearly doing it better, but we have a model for getting our costs down.

  • John Farrell

    Bob,

    Neither the German nor the American prices include any subsidies that I’m aware of. The German costs do not include the value added tax (VAT), but most American states do not charge sales tax on solar PV. I know the two are not entirely comparable, but the prices are reasonably good matches.

  • Bob Wallace

    I wanted to forward this article to someone who was questioning the cost of PV, but upon reading and re-reading it I couldn’t determine if these were prices with or without subsidies.

    This data provides a strong statement about how affordable PV is becoming. But I can assure you that were this posted on many ‘clean energy’ sites the first comments would come from people claiming that the German costs were lower because the government was paying for a lot of the cost.