NewEnergyNews: TODAY’S STUDY: WHY SOLAR COSTS WHAT IT COSTS

NewEnergyNews

Gleanings from the web and the world, condensed for convenience, illustrated for enlightenment, arranged for impact...

The challenge: To make every day Earth Day.

YESTERDAY

  • FRIDAY WORLD HEADLINE-CLIMATE CHANGE – IT GETS WORSE
  • FRIDAY WORLD HEADLINE-WHERE AND HOW WIND IS GROWING IN THE WORLD
  • FRIDAY WORLD HEADLINE-CHINA TO LEAD SOLAR MARKET GROWTH DESPITE OBSTACLES
  • FRIDAY WORLD HEADLINE-THE ENORMOUS POTENTIAL OF WORLD GEOTHERMAL
  • THE DAY BEFORE

    THINGS-TO-THINK-ABOUT THURSDAY, August 28:

  • TTTA Thursday-PRESIDENT TO TAKE ACTION ON CLIMATE
  • TTTA Thursday-BIRDS AND ENERGY, THE BIGGER STORY
  • TTTA Thursday-NEW CA LAW STREAMLINES SOLAR PERMITTING
  • TTTA Thursday-DATA CENTER EFFICIENCIES CAN SAVE U.S. $3.8BIL/YR
  • -------------------

    GET THE DAILY HEADLINES EMAIL: CLICK HERE TO SUBMIT YOUR EMAIL ADDRESS OR SEND YOUR EMAIL ADDRESS TO: herman@NewEnergyNews.net

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    THE DAY BEFORE THE DAY BEFORE

  • THE STUDY: THE RISKIEST ENERGY IN THE WORLD
  • QUICK NEWS, August 27: VERIZON’S $40MIL SOLAR BUY; WIND PRICES HIT RECORD LOWS; NUKE INSPECTOR SAYS DIABLO CYN IS UNSAFE
  • THE DAY BEFORE THAT

  • THE STUDY: U.S. WIND RIGHT NOW
  • QUICK NEWS, August 26: CLIMATE MODELS PROVE RIGHT AGAIN; ABOUT INVESTING IN SOLAR; GM VS TESLA IN THE 200 MILE RACE

    AND THE DAY BEFORE THAT

  • THE STUDY: NEW CALMER WINDS AHEAD FOR EUROPE
  • QUICK NEWS, August 25: JULY’S U.S. ENERGY BUILD WAS ALL NEW ENERGY; CLIMATE CHANGE FOR ENERGY INVESTORS; WIND CAN GROW FASTER THAN NUCLEAR
  • THE LAST DAY UP HERE

  • Weekend Video: New Thoughts About New Energy For A New Climate
  • Weekend Video: Carbon
  • Weekend Video: Why Utilities Struggle With New Energy
  • -

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    Anne B. Butterfield of Daily Camera and Huffington Post, is a biweekly contributor to NewEnergyNews

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT)

    November 26, 2013 (Huffington Post via NewEnergyNews)

    Everywhere we turn, environmental news is filled with horrid developments and glimpses of irreversible tipping points.

    Just a handful of examples are breathtaking: Scientists have dared to pinpoint the years at which locations around the world may reach runaway heat, and in the northern hemisphere it's well in sight for our children: 2047. Survivors of Superstorm Sandy are packing up as costs of repair and insurance go out of reach, one threat that climate science has long predicted. Or we could simply talk about the plight of bees and the potential impact on food supplies. Surprising no one who explores the Pacific Ocean, sailor Ivan MacFadyen described long a journey dubbed The Ocean is Broken, in which he saw vast expanses of trash and almost no wildlife save for a whale struggling a with giant tumor on its head, evoking the tons of radioactive water coming daily from Fukushima's lamed nuclear power center. Rampaging fishing methods and ocean acidification are now reported as causing the overpopulation of jellyfish that have jammed the intakes of nuclear plants around the world. Yet the shutting down of nuclear plants is a trifling setback compared with the doom that can result in coming days at Fukushima in the delicate job to extract bent and spent fuel rods from a ruined storage tank, a project dubbed "radioactive pick up sticks."

    With all these horrors to ponder you wouldn't expect to hear that you should also worry about the United States running out of coal. But you would be wrong, says Leslie Glustrom, founder and research director for Clean Energy Action. Her contention is that we've passed the peak in our nation's legendary supply of coal that powers over one-third of our grid capacity. This grim news is faithfully spelled out in three reports, with the complete story told in Warning: Faulty Reporting of US Coal Reserves (pdf). (Disclosure: I serve on CEA's board and have known the author for years.)

    Glustrom's research presents a sea change in how we should understand our energy challenges, or experience grim consequences. It's not only about toxic and heat-trapping emissions anymore; it's also about having enough energy generation to run big cities and regions that now rely on coal. Glustrom worries openly about how commerce will go on in many regions in 2025 if they don't plan their energy futures right.

    2013-11-05-FigureES4_FULL.jpgclick to enlarge

    Scrutinizing data for prices on delivered coal nationwide, Glustrom's new report establishes that coal's price has risen nearly 8 percent annually for eight years, roughly doubling, due mostly to thinner, deeper coal seams plus costlier diesel transport expenses. Higher coal prices in a time of "cheap" natural gas and affordable renewables means coal companies are lamed by low or no profits, as they hold debt levels that dwarf their market value and carry very high interest rates.

    2013-11-05-Table_ES2_FULL.jpgclick to enlarge

    2013-11-05-Figure_ES2_FULL.jpg

    One leading coal company, Patriot, filed for bankruptcy last year; many others are also struggling under bankruptcy watch and not eager to upgrade equipment for the tougher mining ahead. Add to this the bizarre event this fall of a coal lease failing to sell in Wyoming's Powder River Basin, the "Fort Knox" of the nation's coal supply, with some pundits agreeing this portends a tightening of the nation's coal supply, not to mention the array of researchers cited in the report. Indeed, at the mid point of 2013, only 488 millions tons of coal were produced in the U.S.; unless a major catch up happens by year-end, 2013 may be as low in production as 1993.

    Coal may exist in large quantities geologically, but economically, it's getting out of reach, as confirmed by US Geological Survey in studies indicating that less than 20 percent of US coal formations are economically recoverable, as explored in the CEA report. To Glustrom, that number plus others translate to 10 to 20 years more of burning coal in the US. It takes capital, accessible coal with good heat content and favorable market conditions to assure that mining companies will stay in business. She has observed a classic disconnect between camps of professionals in which geologists tend to assume money is "infinite" and financial analysts tend to assume that available coal is "infinite." Both biases are faulty and together they court disaster, and "it is only by combining thoughtful estimates of available coal and available money that our country can come to a realistic estimate of the amount of US coal that can be mined at a profit." This brings us back to her main and rather simple point: "If the companies cannot make a profit by mining coal they won't be mining for long."

    No one is more emphatic than Glustrom herself that she cannot predict the future, but she presents trend lines that are robust and confirmed assertively by the editorial board at West Virginia Gazette:

    Although Clean Energy Action is a "green" nonprofit opposed to fossil fuels, this study contains many hard economic facts. As we've said before, West Virginia's leaders should lower their protests about pollution controls, and instead launch intelligent planning for the profound shift that is occurring in the Mountain State's economy.

    The report "Warning, Faulty Reporting of US Coal Reserves" and its companion reports belong in the hands of energy and climate policy makers, investors, bankers, and rate payer watchdog groups, so that states can plan for, rather than react to, a future with sea change risk factors.

    [Clean Energy Action is fundraising to support the dissemination of this report through December 11. Contribute here.]

    It bears mentioning that even China is enacting a "peak coal" mentality, with Shanghai declaring that it will completely ban coal burning in 2017 with intent to close down hundreds of coal burning boilers and industrial furnaces, or shifting them to clean energy by 2015. And Citi Research, in "The Unimaginable: Peak Coal in China," took a look at all forms of energy production in China and figured that demand for coal will flatten or peak by 2020 and those "coal exporting countries that have been counting on strong future coal demand could be most at risk." Include US coal producers in that group of exporters.

    Our world is undergoing many sorts of change and upheaval. We in the industrialized world have spent about a century dismissing ocean trash, overfishing, pesticides, nuclear hazard, and oil and coal burning with a shrug of, "Hey it's fine, nature can manage it." Now we're surrounded by impacts of industrial-grade consumption, including depletion of critical resources and tipping points of many kinds. It is not enough to think of only ourselves and plan for strictly our own survival or convenience. The threat to animals everywhere, indeed to whole systems of the living, is the grief-filled backdrop of our times. It's "all hands on deck" at this point of human voyaging, and in our nation's capital, we certainly don't have that. Towns, states and regions need to plan fiercely and follow through. And a fine example is Boulder Colorado's recent victory to keep on track for clean energy by separating from its electric utility that makes 59 percent of its power from coal.

    Clean Energy Action is disseminating "Warning: Faulty Reporting of US Coal Reserves" for free to all manner of relevant professionals who should be concerned about long range trends which now include the supply risks of coal, and is supporting that outreach through a fundraising campaign.

    [Clean Energy Action is fundraising to support the dissemination of this report through December 11. Contribute here.]

    Author's note: Want to support my work? Please "fan" me at Huffpost Denver, here (http://www.huffingtonpost.com/anne-butterfield). Thanks.

    - -------------------

    Anne's previous NewEnergyNews columns:

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT), November 26, 2013
  • SOLAR FOR ME BUT NOT FOR THEE ~ Xcel's Push to Undermine Rooftop Solar, September 20, 2013
  • NEW BILLS AND NEW BIRDS in Colorado's recent session, May 20, 2013
  • Lies, damned lies and politicians (October 8, 2012)
  • Colorado's Elegant Solution to Fracking (April 23, 2012)
  • Shale Gas: From Geologic Bubble to Economic Bubble (March 15, 2012)
  • Taken for granted no more (February 5, 2012)
  • The Republican clown car circus (January 6, 2012)
  • Twenty-Somethings of Colorado With Skin in the Game (November 22, 2011)
  • Occupy, Xcel, and the Mother of All Cliffs (October 31, 2011)
  • Boulder Can Own Its Power With Distributed Generation (June 7, 2011)
  • The Plunging Cost of Renewables and Boulder's Energy Future (April 19, 2011)
  • Paddling Down the River Denial (January 12, 2011)
  • The Fox (News) That Jumped the Shark (December 16, 2010)
  • Click here for an archive of Butterfield columns

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    Some details about NewEnergyNews and the man behind the curtain: Herman K. Trabish, Agua Dulce, CA., Doctor with my hands, Writer with my head, Student of New Energy and Human Experience with my heart

    email: herman@NewEnergyNews.net

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    Your intrepid reporter

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    Pay a visit to the HARRY BOYKOFF page at Basketball Reference, sponsored by NewEnergyNews and Oil In Their Blood.

  • ---------------
  • Monday, February 25, 2013

    TODAY’S STUDY: WHY SOLAR COSTS WHAT IT COSTS

    Why Are Residential PV Prices in Germany So Much Lower Than in the United States? A Scoping Analysis (with Updated Data on Installation Labor Requirements)

    Joachim Seel, Galen Barbose, and Ryan Wiser, February 2013 Revision (Lawrence Berkeley National Laboratory)

    Note for the February 2013 Revision

  • The original September 2012 briefing included the results of a survey of 24 German PV installers conducted in early 2012
  • One of the more surprising results was the extraordinarily low number of installation labor hours reported by survey respondents
  • LBNL conducted a follow-up survey of 41 German installers in October 2012, focused solely on installation labor requirements
  • The results of the follow-up survey are more in line with expectations (a mean response of 39 man-hours per system for on-site installation labor, compared to 7.5 hours per system in the original survey)
  • This revised briefing includes the results of this follow-up survey, as well as a limited number of other updates (including Q3 2012 data on system pricing and market size)

    Motivation, Scope, and Limitations

  • The installed price of residential PV is significantly lower in Germany than in the U.S., due primarily to differences in “soft” costs – But relatively little is known about how/why soft cost components differ
  • In order to better characterize the nature of these differences, LBNL: – Fielded two surveys of German PV installers, adapted from NREL’s survey of U.S. installers, to collect data on residential PV soft costs – Comprehensively reviewed public and private consultant data relevant to the cost structure of residential PV in Germany
  • Focus is the pre-incentive price paid for customer-owned systems – Residential PV in Germany is almost entirely customer-owned; substantial third-party ownership in U.S. but pricing sometimes impacted by appraised values
  • Analysis here is intended to be a “first cut” and serves to highlight specific areas where further research could reveal additional insights – Survey focus was on quantifying differences in specific business process costs – Additional research needed to confirm and characterize differences in more detail, as well as to link observed differences to underlying market drivers

  • Germany’s 2011 Additions ~4x Greater, and Cumulative Additions More than 5x Greater, than United States

    *Annual Residential Installations in Germany 2.5x Greater (9.4x Greater on per Capita Basis) than in the United States

    * Cumulative Residential Installations in Germany 3.6x Greater (14x on per Capita Basis) than in United States

    Varied Data Sources Are Available for U.S. and German PV System Pricing

  • LBNL Tracking the Sun (TTS): Installed prices for ~70% of PV capacity installed in the U.S. from 1998-2011
  • NREL Cost Modeling Team: Quarterly bottom-up installed price benchmarks based on interviews with installers and modeling
  • EuPD: Project-level price quotes collected through quarterly survey of German installers (since 2008); used for BSW price reports
  • Photon, other consultants: Installed price benchmarks based on interviews with installers or other market research
  • Miscellaneous: Schaeffer et al., 2004, “Learning from the Sun”; Haas, 2004, “Progress in Markets for Grid-Connected PV Systems in the Built Environment”; Credit Agency for Reconstruction (KfW); IEA National PVPS reports; Langen 2010

    * Residential PV System Prices Have Often Been Higher in the U.S. Than in Germany

    * Installed Price Gap Was $2.8/W in Q4 2011 and Differential Continued Through 2012

    * Installed Prices in the U.S. Are Also Much More Varied Than in Germany

    Learning Curve Analyses of BoS Costs

    Question: To what extent are lower BoS costs in Germany potentially due to larger overall market scale and associated learning-induced cost reductions?

  • Traditional PV learning curve analyses often focus on PV modules and relate global module production to module prices
  • Some business process costs (e.g., installation labor, customer acquisition) may also be subject to local learning effects
  • We compare the relative impact of local BoS learning in the U.S. and Germany based on implied non-module costs for less than 10 kW PV systems and cumulative national PV capacity installed
  • BoS progress ratios may help predict future U.S. price reductions that accompany larger market scale

    Differences in Market Size Alone May Explain Roughly Half of the Price Gap

  • Total non-module costs in 2011 were ~$2.8/W higher in the U.S. than in Germany
  • But, at the same cumulative capacity that the U.S. had installed at the end of 2011 (4 GW), non-module costs for residential PV in Germany were only $1.3/W less than in the U.S.
  • One might (crudely) infer that the remaining $1.5/W of the total gap in 2011 non-module costs may be due simply to the larger base of German experience

    Soft-Cost Learning for less than 10 kW Systems Occurs More Slowly in the U.S. and Is Less Effective

  • The development of non-module costs is less correlated with market growth in the US than in Germany (52% vs. 9% explained by other factors)
  • The learning rate for non-module costs (proxy for soft costs) is lower in the US than in Germany (7% vs. 15%)

    Regular FiT Adjustments Pressure German Installers to Reduce Prices

  • BNEF (2012) indicates the presence of value-based pricing in both the US and Germany
  • Following this hypothesis, the iterative reduction of the FiT presses German installers to lower system prices to maintain attractive investments for their customers
  • Similar forces may operate less efficiently in the U.S., yielding higher “valuebased” prices, even for customer-owned systems

    Hypotheses Explored for Why German and U.S. Residential PV Prices Differ

  • General: – Residential systems are larger in Germanyà yes – US installers develop projects more slowly à yes (semi-addressed) – US installers have higher profit margins, after recovering all overhead expenses à uncertain (semi-addressed)
  • Component costs: – Hardware component costs are lower in Germany à possibly true for inverters, but uncertain (semi-addressed) – US has a lower share of cheaper Chinese modules à no
  • Customer acquisition: – US installers have higher customer acquisition costs à yes – US installers have lower customer success rates à yes – US installers have higher marketing and advertising costs à yes
  • Installation labor: – US installers need longer for the installation process à yes – US installers have higher wages à yes for installation labor, no for other labor (semiaddressed)
  • Permitting, Interconnection and Inspection Costs – US installers have higher labor hour requirements for PII à yes – US has higher permitting and interconnection fees à yes
  • Taxes – The US charges higher sales taxes on PV systems than Germany à yes

    Additional Hypotheses Not Explored Here

  • Overhead costs – US has higher business overhead costs (e.g. insurance costs, material storage costs) – German installers have higher sales volume per year, spreading fixed costs over larger denominator and profiting from economies of scale, allowing for volume discounts – US installers have higher cost of capital for their own business operations – US installers face higher transaction costs associated with arranging financing for customers – US has a longer supply chain for PV modules and other hardware
  • Profit margins – US has a lower degree of competition among installers, maintaining higher profit margins – Value based pricing allows for higher prices in the US, given better irradiation, high retail rates in some regions, and more generous subsidies
  • Regulatory issues – US requires each panel and rack component to be grounded to the DC switchbox leading to higher material costs and installation labor hours – Germany has less onerous requirements for roof mounting structures
  • Installation timing – US systems are installed more steadily throughout the year, whereas German installations were traditionally concentrated at the end of the year when prices are lower, leading to lower annual average prices
  • Exchange rate dynamics are more beneficial for German system costs

    A Small Body of Literature Explores the German-U.S. PV Price Gap

  • Few have sought to explain the underlying reasons behind the German-U.S. PV price gap or to quantify differences in specific soft costs – Photon 2011a, Photon 2011b, BNEF 2012, Langen 2010, Podlowski 2008, Goodrich et al. 2012
  • Possible reasons for the price gap that have been postulated: – “Value-based pricing” in the U.S. (e.g., associated with more generous subsidies and/or less competition among installers) – Preference for premium products in the U.S. – Lower customer-acquisition costs in Germany due to simpler/more certain value proposition (FiT), critical mass of demand, and economies of scale – Lower installation labor costs in Germany due to greater experience and economies of scale – Lower permitting costs in Germany due to fewer requirements and greater standardization – Less onerous electrical requirements and interconnection processes in Germany
  • Our analysis complements that literature by: – Deriving estimates for specific business process costs via two surveys of German residential installers – Using large samples of system prices to compare price developments and distributions – Estimating the impact of differences in project development times on reported prices – Analyzing residential module market composition
  • Complements NREL cost modeling team’s in-depth interviews with installers

    Overview of Initial Survey Approach

  • German survey focuses on standard DOE soft cost categories:
  • Customer acquisition
  • Permitting, interconnection, inspection
  • Installation labor
  • Adapted from NREL survey of U.S. installers to allow comparisons
  • Average labor hours per system for PII and installation
  • Total annual expenditures on customer acquisition…

    Follow-Up Survey on German Installation Labor Hours

  • LBNL conducted a second survey of German installers in October 2012, focused solely on installation labor requirements
  • The survey asked 7 questions about German residential PV installations completed during the preceding 12 months.
  • Survey was fielded online (between October 9th and November 5th 2012) in German in collaboration with www.photovoltaikstudie.de...

    Raw Sample Characterization

  • Most respondents in both surveys are small volume installers – Most installed <50 systems per 12-month period – Median installations/yr = 25 for 2011, 26 for 2012
  • Average system sizes are a bit smaller in 2012 German survey – Average of 6 kW per system (compared to 8 kW in German 2011 survey) – Less variation in average system size

    * Total Soft BoS Costs + Profit Represent Roughly $0.62/W or 20% of System Price

    * Survey Responses Are Generally Consistent with Estimates Reported Elsewhere

    * Soft Costs for Residential PV in Germany Are ~$2.7/W Lower Than in the U.S. -- Total soft costs for residential PV in Germany, including margin, are just 19% of the implied soft costs for U.S. residential PV ($0.62/W vs. $3.34/W)

    * Labor Rates Are Higher in Germany Than in the U.S. for Some Functions, but Lower for Others

    Residential Customer Acquisition Costs Average $0.07/W in Germany

  • Most respondents reported customer acquisition costs <$0.15/W; several small volume installers reported somewhat higher costs
  • On average, customer acquisition labor includes 3 hrs/system for sales representative and 2 hrs/system for design engineer

    Customer Acquisition Costs in Germany Are $0.6/W Less Than in the U.S.

  • Mean bid success rate is slightly lower in the US (30% in US vs. 40% in Germany)
  • German installers leverage partnerships with equipment manufacturers
  • Langen (2010) points to simpler and more certain value proposition in Germany (i.e., FiT), installer learning, and critical mass for word of mouth

    PII Costs Are Negligible for Residential PV in Germany

  • Total PII costs of $0.03/W on average
  • Fewer than 10 hours of labor required for all PII activities, and no fee – Average labor requirement of 5 hrs (confirmed by PV legal survey, lowest for all European countries) – Permit requests and incentive application are done online; usually no permit inspection required
  • Grid upgrade costs for German residential PV systems are paid by Grid Operator (SEPA 2012)

    PII Costs Account for Roughly $0.2/W of the German-U.S. PV Price Gap Differences due to both PII labor costs and permit fee

  • PII labor costs are $0.12/W lower in Germany
  • Remainder of gap ($0.09/W) is associated with permit fee (assuming an average of $430 per system in the U.S.)
  • Langen (2010) estimates PII costs for the US at $.80/W, and Germany at $.10/W
  • PV Grid (2012) reports 2.5h for interconnection, 1.5h for interconnection permits and .7h for other legal-administrative processes in Germany
  • SunRun (2011) estimate of $.50/W in the U.S. includes sales & marketing costs & variations in building requirements

    Installation Labor Costs in Germany Average $0.23/W

  • German follow-up survey shows higher labor hours than original survey, more in line with expectations: – Mean installation labor = 39 man-hours/system (vs. 7.5 hours in original survey) – Responses generally ranged from 25-50 hours/system – Respondents to original survey likely misinterpreted the question (i.e., confusion between hours-on-site vs. man-hours)
  • No obvious economies of scale with respect to installer annual sales volume

    German Installations Are Faster and Cheaper than in the United States

  • Updated survey results show a sizable gap between the United States and Germany in installation times (36h)
  • Installers in Germany rely even more on (cheaper) nonelectrician installation labor than in the US (77% vs. 65%)

    Differences in Installation Labor Partly Stem from Different Mounting Practices

  • Large majority of German installers either never or rarely install systems requiring roof-penetration
  • Roof penetration is much more common in the United States, due to differences in roofing materials and higher wind speeds in some regions
  • Follow-up survey also asked about the usage of roof-to-inverter conduits for wiring and about the location of grounding for German residential PV – But no clear trend that might explain differences in labor requirements compared to U.S. systems

    Nationwide Sales Tax Exemptions in Germany Further Reduce Soft Costs

  • Survey respondents confirmed that German residential PV systems are effectively exempt from revenue taxes/ sales taxes/ value added taxes – Regular tax rate of 19% can be exempted either via “Kleinunternehmer” or “Vorsteuererstattungs” clause 35
  • In the United States, 23 states assess sales tax on residential PV systems, usually 4-8% of system prices, as do many local governments
  • Given the spatial distribution of PV systems, and accounting for sales tax exemptions in some states, state and local sales taxes added $0.21/W to the median price of US residential PV in 2011

    * PII, Customer Acquisition, and Installation Labor Total Just $0.33/W for Residential PV in Germany - For residential PV in Germany, PII, customer acquisition, and installation labor are estimated to represent 53% of all non-hardware costs and 11% of the total system price.

    * Summary of Soft Cost Differences for Residential PV in the U.S. and Germany

    * Summary of Soft Cost Differences for Residential PV in the U.S. and Germany

    Secondary Analyses… Longer U.S. Project Development Time Contributes to Apparent Price Gap… German Residential Systems Are Generally Larger Than U.S. Systems… If the Size Distribution of U.S. Residential Systems Were the Same as in Germany, Median Prices Would Be $0.15/W Lower… Installer Purchase Prices for Chinese Modules Are Lower than for Non-Chinese Modules in Germany… The Price Gap Is Not Due to Differences in Chinese Module Market Share…

    Summary of Findings from Survey of German Installers

  • Total non-hardware costs for residential PV in Germany are ~$2.70/W lower than in the U.S.
  • Customer acquisition costs average just $0.07/W in Germany, or roughly $0.62/W lower than in the U.S.
  • Installation labor requirements reportedly average 39 hours for German systems, leading to $0.36/W lower costs than in the U.S.
  • PII processes require 5 hours of labor, on average, in Germany, with no permitting fee, resulting in PII costs roughly $0.21/W lower than in the U.S.
  • German residential systems are exempt from sales/value-added tax, while U.S. systems are subject to an average sales tax of roughly $0.21/W (accounting for sales tax exemptions in many U.S. states)
  • The remaining gap in soft costs between Germany in the U.S. (~$1.32/W) is associated with overhead, profit, and other residual soft costs not captured in the categories above

    Summary of Findings from Secondary Analysis

  • Shorter project development times in Germany contribute to apparent price gap (e.g., ~$0.2/W effect for Q4 2011 installations)
  • Residential PV systems are larger in Germany (partly due to differences in policy design), benefitting from economies of scale ($0.15/W effect)
  • Not additive to the differences in soft costs presented previously, but rather helps to explain those differences (e.g. larger system sizes in Germany are partly why marketing costs, on a per Watt basis, are lower)
  • Market share of Chinese modules is similar for customer-owned residential systems in Germany and U.S., and thus does not contribute to price gap

    Possible Market Drivers for Soft Cost Differential between Germany and U.S.

  • Greater market-wide deployment and longevity in Germany allow for cost reductions based on installer experience
  • Lower market fragmentation (one contiguous market and regulatory framework) and higher population density in Germany allow for lower overhead, transport, and supply chain costs. – In the US, at least 50 markets exist – many more when considering local permitting-inspection-interconnection rules.
  • Larger and more concentrated markets in Germany (as well as cultural differences with the US) facilitate bandwagon effects and customer acquisition by word of mouth, leading to lower customer acquisition costs
  • Less onerous permitting-inspection-interconnection processes (e.g. online registration, no permitting fee or inspection by county officials) and installation practices (e.g. easier grounding, roof penetration) in Germany
  • Simpler, more certain and more lasting value proposition in Germany allow for both lower customer acquisition + overhead costs, and larger average system sizes – FiT guaranteed for 20 years in Germany vs. varying value of net metering + state incentives + federal tax incentives in the US
  • Regular declining FiT and high competition among installers yield pressure for price reductions and lower margins in Germany, while larger incentives, opportunities for higher value-based pricing, and less installer competition allow for higher prices and margins in US

    Policy Implications

    Reducing residential PV prices in the United States may require policies that enable:

  • A large and durable market size
  • A concentrated market->minimize fragmentation
  • A simple, transparent, certain incentive structure/value proposition
  • Simple interconnection, permitting, and inspection requirements
  • Regular incentive declines to drive & follow cost reduction…

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