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Why Are Residential PV Prices in Germany So Much Lower Than in the United States?

| Written by John Farrell | 5 Comments | Updated on Sep 20, 2012 The content that follows was originally published on the Institute for Local Self-Reliance website at http://ilsr.org/residential-pv-prices-germany-united-states/

Earlier this week, Lawrence Berkeley Labs released a marvelous comparison of residential PV costs in Germany and the United States, finally putting some detail to an enormous gulf in costs (nearly $3.00 per Watt).  The following chart (from page 35 of the presentation) shows the cost difference broken down into 9 categories, with ILSR’s addition of mouseover explanations.

As the chart shows, cost differences have nothing to do with hardware, but are all about installation labor and soft costs.  Mouse over the graphic below to see LBNL’s explanation of the various soft cost differences.

Interactive Map by iMapBuilder

Because of significantly lower labor and soft costs, 80% of the installed cost of German PV installations are driven by hardware, a likely contributor to their significant price decreases (module costs have been falling at remarkable rates, whereas labor costs are rather sticky).

LBNL researchers provide a few other useful tidbits:

  • German residential solar prices have been persistently lower than in the U.S. since 2005, about the time their solar feed-in tariff (CLEAN program) really took off.  Speaking of their feed-in tariff, the persistent price reductions have contributed to rapidly falling prices.
  • German solar PV costs are more consistent; ~90% of systems are priced within $1/W of the average.  In the U.S., the 90% interval covers a range from $4 per Watt to nearly $9 per Watt.
  • The learning curve of a larger market can explain half the soft cost differences, but U.S. soft cost reductions have lagged behind what the market size would suggest.

There’s an entire page of the presentation devoted to “hypotheses not explored here,” ranging from overhead costs, costs of capital and financing, regulatory barriers, etc.  But what’s clear is that good German policy has led to a much more efficient and cost-effective residential PV market.  Let’s hope we can learn from it.

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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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  • http://richmignogna.blogspot.com Rich Mignogna

    John,

    While the LBNL study was very interesting, your post highlights the dangers of taking one chart of a 50-page presentation out of context. Note that the single largest contribution to the difference is installer profit. In your notes on the above chart, you attribute this to greater competition in the German market. But, if you read page 16 of the presentation, you find that the impact of competition is one of the “additional hypotheses not explored” in this study. Another is whether “value based pricing,” higher subsidies, and better irradiation in the US account for part or all of that difference. The point is it is very difficult to make such comparisons across national boundaries and, in this case, completely different electric systems and regulatory schemes. There is a difference, yes, but it is far from clear that what is done in Germany can or should be emulated here.

    A study I conducted on PV installed system costs in Colorado when I was at the Colorado PUC showed a wide disparity in prices being charged by installers. We could not delve deeply into the differences (I suspect because people were afraid of the answer) but Colorado’s rich incentives I am certain had a lot to do with it.

  • http://www.winonarenewableenergy.com Tim Gulden

    Being a Solar PV Dealer myself (with virtually no overhead), I have seen this latest German chart. I can guarantee you that you will never find skilled US craftsmen that will install a system for the labor cost the German’s are showing. I have researched hundreds of German installs and for their price they do not include professional installation in their turn-key (Gross) costs. Their systems are based on owner supplied non-skilled installation labor with the skilled labor cost going to an electrician who makes the final grid connection. Other costs they do not include are annual insurance, Value Added Tax (VAT of 19%), meter cabinet (meter socket), and extra Electrician supplies. Running my costs through a spreadsheet setup to their cost structure reveals we are a small percentage (17%) higher. Please seek those who can offer an apples to apples comparison, as accurate information is key to our societies’ advancement. Thanks

  • http://www.winonarenewableenergy.com Tim Gulden

    OOPs…forgot German installers have to setup scaffolding and they do not use safety harnesses. See a german install at http://www.youtube.com/watch?NR=1&feature=endscreen&v=M-kv-yk7HGE. The 3rd guy is spending part of his time installing the electrical. Now there is no way they are installing this complete system in 2.5 hours (7.5 person hours divided by 3 people) from setting up the scaffolding, installing all the material, wiring up the system, to turning on the inverter! Also, I do not think their wiring techniques would meet our AHJ Electrical inspection or the installation would meet OSHA’s. Somehow there is information that is not making it to the US.

  • http://www.winonarenewableenergy.com Tim Gulden

    Here is actual German installation times: http://www.youtube.com/watch?feature=endscreen&v=y5zJwz_EG9A&NR=1. This German install consists of 18 modules (3.24kW) installed in 32 person hours (2 people times 2 days times 8 hours each day) . Our company installs 20 modules in the same 32 hours so it looks like the installation time is very close between the two countries. This is a far cry from 7.5 person hours being reported lately. It’s now obvious that there is a huge error in the transferring of information or someone is trying to scare potential customers into not buying solar PV by making them think the US dealers are ripping them off.