Clean Power

Published on June 25th, 2012 | by John Farrell

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Who Has the Most Cost-Effective Solar CLEAN (Feed-in Tariff) Program?

June 25th, 2012 by John Farrell 

 
In a new report on U.S. CLEAN (Clean Local Energy Accessible Now) programs, I provide a comparison of solar CLEAN Contract (feed-in tariff) rates across the United States.

Comparing published rates is not particularly helpful, however, because contract lengths vary (from 15 to 25 years) and the solar resource also varies widely. For international comparisons (e.g. Germany), it’s also necessary to account for the currency exchange rate and the federal tax incentives that are routinely factored into U.S. solar CLEAN prices.

Here’s a look at the methodology for normalizing the CLEAN rates for comparison, and two maps illustrating those prices. The maps illustrate how Germany’s mature solar market means Germans pay much less for solar than those in U.S. CLEAN programs, especially when accounting for the federal taxpayer subsidy of local CLEAN programs.

First, below are the published solar CLEAN prices for all U.S. programs that support residential solar, including Germany’s program.  Contract prices are paid per kilowatt-hour (kWh) for the specified contract term.

Residential Solar CLEAN Rates (Germany and U.S.)

The first step is to convert all prices to U.S. dollars. I use an exchange rate of 1.3 USD to euros.

Residential Solar CLEAN Rates (Germany and U.S.; USD)

The next step is to normalize all contracts to 20 years. So, we adjust prices down on shorter contracts and up on longer contracts to get an equivalent 20-year price (in net present value).

Residential Solar CLEAN Rates (Germany and U.S.; USD, normalized to 20 years)

Next, we account for the variability in sunshine, normalizing to the solar insolation in Gainesville, FL (5.3 average annual kWh per sq. meter per day). Jurisdictions with weak sunshine relative to Gainesville will have their prices drop (because they can pay much less per kWh) and places with better sunshine will have their prices increase. Germany sees the greatest adjustment, because the solar resource quality there (in Munich) is just 3.28, compared to 5.3 in Gainesville.

Residential Solar CLEAN Rates (Germany and U.S.; USD, normalized to 20 years, Gainesville insolation)

At this point, we’ve removed all of the disparities between U.S. solar CLEAN programs and can see that some programs (e.g. Hawaii) pay 40% more for solar than the lowest cost U.S. CLEAN (Consumers Energy).

Residential Solar CLEAN Rates (Germany and U.S.; USD, normalized to 20 years, Gainesville insolation)

But participants in the U.S. programs are likely, if not expected, to take advantage of the 30% federal tax credit for installing solar. In Germany, on the other hand, there are no other financial incentives. So, an accurate comparison to Germany would inflate U.S. solar prices by 30%. This apples-to-apples comparison shows that the Germans are paying 50% less for residential solar than comparable U.S. programs.

Residential Solar CLEAN Rates (Germany and U.S.; USD, normalized to 20 years, Gainesville insolation, no federal tax credit)

The implications of this are remarkable. Solar PV modules and arrays are sold on a world market, so hardware is unlikely to account for the price difference. Rather, the maturity of the German market has significantly reduced the installation and balance of system costs for small-scale solar.

That’s actually a very hopeful sign for the U.S., as these jurisdictions are using CLEAN Contracts to accelerate the growth of their solar market and capture those same cost savings. Our report provides more detail on these U.S. CLEAN programs, including some lessons learned that may help them mimic the success of Germany’s solar feed-in tariff.

This post originally appeared on ILSR’s Energy Self-Reliant States blog.

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Tags: clean, clean contracts, cost, Electricity, Germany, price, state, tax credits, tax incentives, US

About the Author

John Farrell directs the Democratic Energy program at ILSR and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. His seminal paper, Democratizing the Electricity System, describes how to blast the roadblocks to distributed renewable energy generation, and how such small-scale renewable energy projects are the key to the biggest strides in renewable energy development.   Farrell also authored the landmark report Energy Self-Reliant States, which serves as the definitive energy atlas for the United States, detailing the state-by-state renewable electricity generation potential. Farrell regularly provides discussion and analysis of distributed renewable energy policy on his blog, Energy Self-Reliant States (energyselfreliantstates.org), and articles are regularly syndicated on Grist and Renewable Energy World.   John Farrell can also be found on Twitter @johnffarrell, or at jfarrell@ilsr.org.

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