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

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

Date: 20 Sep 2012 | posted in: Energy, Energy Self Reliant States | 5 Facebooktwitterredditmail

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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John Farrell
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John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power.