Why Solar Panels are Cheaper in Germany
The following guest article was written by Mathias Aarre Maehlum, an Energy and Environmental engineering student from Norway. He frequently writes on the topics of solar power and other green techs. Read more of his work at his site Energy Informative.
The Lawrence Berkley National Laboratory (LBNL) has recently published a study that looks at the price differences in the solar panel industry in Germany and the U.S. By looking at pre-incentivized prices paid for customer-owned systems (third-party-owned systems were not included in the study), they were able to pinpoint the major differences between the two countries.
In the last five years, German solar panel prices have dropped by more than 50%. Some places in the U.S. are almost on par with German prices, but on average the study found a pretty significant gap:
Image source: Environmental Energy Technologies Division
The study found that the soft-costs (i.e. permitting, licensing, connecting to the grid and other business processes) of solar panel installations, which account for everything except the hardware (i.e. solar modules, inverters), were much higher in the U.S. compared to Germany. In fact, average German soft-costs were at $0.62 per watt in 2011 – $2.7 per watt lower than soft costs reported by installers in the U.S. Another way of looking at it is that German soft-costs are 20% of the prices in the U.S.
German installers are more efficient and only averages around 7.5 hours per installation. Due to lower installation costs, soft-costs in Germany are brought down at $0.62 per watt. Costs for permitting, interconnection and inspection (PII) were found to be roughly $0.20 per watt less than in the U.S.
The German solar panel market is the most developed in the world. About one third of the entire world`s photovoltaic capacity is installed in Germany. It is important to realize that what has contributed to this country`s rapid growth in the solar industry (and the rest of their renewable sector) is their feed-in tariff scheme – an intrinsic part of Germany’s Renewable Energy Sources Act (EEG) that was past in law already back in 2000.
Image source: Global Market Outlook for Photovoltaics until 2016
A solid framework of government incentives, guaranteeing a fixed price in a fixed timeframe (usually 20 years) for every kWh of clean electricity produced, is what has laid the foundation for secure investments in renewable energy. Many countries have followed Germany and implemented similar schemes to induce growth in their renewable markets. It will be interesting to see if any country will catch up with Germany a couple of years down the line.
The U.S. Department of Energy has just launched the SunShot Prize Competition, where a total of $10 million in prizes will be awarded to solar panel installers who show they consistently are able to lower soft costs to less than $1 per watt (W).
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