The Germans have proposed significant revisions to their landmark renewable energy policy, the feed-in tariff, and the proposed prices should make Americans wonder why solar still costs so much on this side of the Atlantic.
After a significant step-down in March, German utilities will be buying rooftop solar on long-term contracts from projects 10 kilowatts or smaller for 19.5 euro cents per kilowatt-hour (kWh). Larger projects (over 1 megawatt) will get just 13.5 cents per kWh. That translates to installed costs of approximately $2.24 and $1.55 per Watt, respectively.
For comparison, in the U.S. in the 3rd quarter of 2011, the cost of solar was $5.20 per Watt, for systems of any size.
What would German installations costs mean for the U.S. solar market, where sunshine is anywhere from 29% (Minneapolis, MN) to 70% (Los Angeles, CA) more abundant? Americans could buy solar on long-term contract for 18.6 cents per kWh in Minneapolis, and just 15.4 cents in Los Angeles, with no other subsidies. Factor in the federal 30% solar tax credit and Minneapolitans could get solar for 14.3 cents per kWh, Los Angelenos for 11.8 cents.
At $2.24 per Watt for solar, as many as 47 million Americans would live in cities where the electricity from a rooftop solar array would be cheaper than grid electricity. By 2015, assuming no change in the cost of solar, 100 million Americans in major cities could beat grid prices with rooftop solar, based on a modest 2% per year inflation in retail electricity prices.
It seems policy is the key to cheaper solar, and Americans could learn much from their German counterparts. Look for a report from the Institute for Local Self-Reliance in the next two weeks on this issue of solar grid parity and new methods of accelerating solar development that can fundamentally change our electricity system for the better.