U.S. Solar Systems More Costly than Germany’s Due to Installation Costs
The Lawrence Berkeley National Laboratory, managed by the University of California and a member of the national laboratory system supported by the U.S. Department of Energy, have issued a report on their analysis of the costs of residential solar power systems in the U.S. compared to the lower costs in Germany.
U.S. Soft Costs Increase the Cost of Solar Systems
The costs of the panels themselves are comparable in both countries. However, it is the costs involved with installation that create the price gap between the two countries’ solar markets. Referred to as “soft cost”, these costs include mostly paperwork: legal filings, permitting, and other non-system costs. Germany’s soft costs, on average, add up to only 19% of those of the U.S.
The costs of solar panels and their installations in Germany have been lower than the U.S.’s costs since the early 2000s, as the country pushed the acceleration of renewable energy in order to control pollution and reduce energy dependence on fossil fuels. By the end of 2011, the difference in installed price between the two countries was roughly $2.8 per watt, a 45% difference between Germany’s $3.42 per watt and the U.S.’s $6.21 per watt.
Economies of Scale Don’t Make Up for the Difference
Of course, Germany has installed about five times the amount of solar systems than the U.S., so it is natural that economies of scale would lower costs. However, the Lawrence Berkeley National Laboratory controlled for this in their study, and concluded that a $1.30 per watt differential still exists and is attributed to soft costs. Unlike in Germany, soft costs have not decreased significantly as more systems are installed, leading U.S. customers to pay significantly more for essentially the same thing.
U.S. solar systems take longer to develop and install, and higher costs are associated with marketing and advertisement, system design, customer acquisition, permitting fees, labor, sales tax, and of course, higher company overheads and profits. In Germany, these costs are significantly lower. Furthermore, the country does not imply a sales tax on systems, and offers feed-in tariffs, which are designed to fast-track investment in renewable energy systems and technologies. To encourage energy demand management, additional tariffs are offered for electricity that is immediately consumed on site rather than being supplied to the local electricity grid.
Germany’s incentives for solar installations have clearly created a healthy residential market in which costs continue to lower and capacity continues to rise. While the U.S. has implemented incentives over the past decade or so, these incentives are sporadic, change constantly, and tend to favor suppliers and installers rather directly benefiting the consumer. Furthermore, U.S. debates and standoffs in the political arena have created an apprehensive market in which consumers are hesitant to invest in such technologies for fear that there will be little to no return on investment.
A growing trend in the U.S. is third-party solar financing, which accounts for much of new solar system installations in the U.S. This market, however, is less than a decade old and it has yet to be seen if this type of financing will actually help to lower costs overall.
Nevertheless, Germany is pushing for renewable energy to a far greater extent than the U.S., and the lower costs of solar systems is a direct reflection of this.