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Clean Power solar soft costs

Published on September 23rd, 2012 | by Zachary Shahan

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Solar Much Cheaper in Germany than US for 1 Clear Reason — Soft Costs

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September 23rd, 2012 by Zachary Shahan
 
 
As we’ve reported several times here on CleanTechnica, German solar is much cheaper than US solar. Clearly, part of that is due to simple economies of scale (Germany has 301.5 MW of solar power installed per million people; the US has 14 MW per million people). Overall, though, from economies of scale and other matters, it has become pretty clear that soft costs are the major place where Germany and the US diverge. This is why the Department of Energy’s SunShot Initiative focus has switched to brining down the soft costs of solar.

Now, a study has been put out by Lawrence Berkeley National Laboratory (LBNL) further confirming that the soft costs of solar in Germany are much lower than in the US. Herman Trabish of NewEnergyNews recently excerpted some of the key points of the LBNL solar costs study, reposted below:


 

Why Are Residential PV Prices in Germany So Much Lower Than in the United States? A Scoping AnalysisSeptember 19, 2012 (Lawrence Berkeley National Laboratory)

“The wide disparity between the installed price of residential PV in Germany and the United States has been well documented and can be attributed primarily to differences in “soft” costs (or business process costs). In order to better characterize the nature of these differences, LBNL fielded a survey of German PV installers to collect granular data on the number of labor hours and labor costs associated with various soft cost elements for residential PV in Germany…The comparison focuses specifically on host-customer-owned systems installed in Germany in 2011 and in the U.S. in 2010.

“Key findings from [Why Are Residential PV Prices in Germany So Much Lower Than in the United States? A Scoping Analysisinclude…[1] German installers reported average soft costs of $0.62/W in 2011, which is roughly $2.70/W lower than the average soft costs reported by U.S. installers…[2] Customer acquisition costs averaged just $0.07/W in Germany, or roughly $0.60/W lower than in the U.S…”

solar soft costs

click to enlarge

“…[3] Installation labor requirements averaged 7.5 hours for German systems, leading to $0.55/W lower installation labor costs than in the U.S. (though these survey data diverge substantially from other estimates, suggesting a need for further validation)…[4] Permitting, interconnection, and inspection (PII) processes required 10 hours of labor, on average, in Germany, with no permitting fee, resulting in PII costs roughly $0.20/W less than in the U.S…

“…[5] German residential systems are exempt from sales/value-added tax, while U.S. systems are subject to an average sales tax of roughly $0.20/W (when considering the geographical distribution of U.S. systems and the existence of sales tax exemptions for PV in many U.S. states)…[6] The remaining gap in soft costs between Germany and the U.S. (~$1.15/W) is associated with overhead, profit, and other residual soft costs not captured in the categories above…”

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About the Author

is the director of CleanTechnica, the most popular cleantech-focused website in the world, and Planetsave, a world-leading green and science news site. He has been covering green news of various sorts since 2008, and he has been especially focused on solar energy, electric vehicles, and wind energy since 2009. Aside from his work on CleanTechnica and Planetsave, he's the founder and director of Solar Love, EV Obsession, and Bikocity. To connect with Zach on some of your favorite social networks, go to ZacharyShahan.com and click on the relevant buttons.



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  • Tim Gulden

    Being a Solar PV Dealer myself (with
    virtually no overhead), I have seen these latest German charts. I have
    researched hundreds of German installs and for their price they do
    not include professional installation in their turn-key (Gross)
    costs. Other costs they do not include are annual insurance, Value
    Added Tax (VAT of 19%), meter cabinet (meter socket), extra
    Electrician supplies, nor scaffolding rental.

    Here is
    actual German installation times:
    http://www.youtube.com/watch?feature=endscreen&v=y5zJwz_EG9A&NR=1.
    This German install consists of 18 modules (3.24kW) installed in 32
    person hours (2 people times 2 days times 8 hours each day). Our
    company installs 20 modules in the same 32 hours so it looks like the
    installation time is very close between the two countries. This is a
    far cry from 7.5 total person hours being reported lately in the graphs. It’s now
    obvious that there is a huge error in the transferring of information
    or someone is trying to scare potential customers into not buying
    solar PV by making them think the US dealers are ripping them off.
    Can the people that write these articles please seek those who can
    offer an apples to apples comparison, as accurate information is key
    to our societies’ advancement.

    • Bob_Wallace

      VAT has no business in this discussion. Unless it happens to be applied prior to establishing the 1.776€/W. In that case the VAT should be backed out.

      The US has no VAT.

      As for your list of costs not included (scaffold renting, etc.) – really?

      • Tim Gulden

        Germans pay 19% VAT tax plus an income tax on the electricity the system produces. These costs are not included in their 1.776€/W. Visit here and translate:
        http://www.kirchner-solar-group.de/en/photovoltaic-infos/tax-information.html

        When comparing apples to apples on costs, Germans are only 8.2% lower than what I am selling a system for here in the Minnesota…there industry has much greater buying power and I am a 2 man shop so I think I am doing pretty darn good.

        • Bob_Wallace

          The VAT tax is on the electricity produced. That is not the system cost.
          Here is what your link states -

          ————-
          Photovoltaic tax information

          By purchasing a photovoltaic installation you become an entrepreneur from a tax perspective. This means that firstly the earnings that you generated from the photovoltaic installation is recorded for income tax purposes and secondly your new photovoltaic industry is subject to VAT.
          ————-

          The same would happen were an American set up a large system and directly supply electricity to their neighbors in exchange for money. That money, that income, should be reported and would be taxed.

          If, in fact, a utility were to pay an American for electricity fed into the grid as opposed by doing net metering the income received would be a taxable event. The system would be treated partially as a business and, just like in Germany, it would be possible to depreciate the commercial part of the system to offset some of the income tax.

          This tax stuff has nothing to do with system installation cost. If you are able to get within ten percent of the German average you are doing quite well and should be gaining a lot of business.

          But if what you are doing is misrepresenting the actual cost of German solar then you’re likely to earn a “used car salesman” reputation.

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  • waldulf

    As a California based solar contractor or “integrator” with strong family ties to the German market I feel I can comment on this.
    1. Labor Cost: California workmen’s compensation insurance rates are in the 50% range, 50% of the labor paid!. In Germany that would be about 1.5%. Also, most solar installations are done by roofers and not electricians who are not used to working on steep surfaces.
    2. Labor time:
    - In Germany grounding of the array is not required, saving at
    least 30% of the installation cost.
    - Inverters in Germany come with plugs so that the USE-2 wire
    and MC-4
    connectors can be plugged right in while in the US
    everything has to be
    hardwired with metal conduit for no
    apparent reason.
    - neither are building permits and all the associated drawings and
    the time to schedule and attend inspections. The utility
    companies also want to inspect and have their own paperwork
    to submit
    - than there are excessive labeling requirements.
    - in California the incentive paperwork submittal takes at least 5
    hours of a very competent person.
    3. Materials: Labels, expensive copper grounding, conduit, connector boxes, etc.
    So, let’s look at this from a business standpoint.
    In Germany they say it takes 7.5 hours per kw. Let’s look at a 10 kw system. 75 hours to install in Germany, 150 here in California because of planning paperwork, grounding, inspections, labeling, hardwiring. Let’ assume a wage of $25.00 per hour with an additional labor burden of $7 an hour for health insurance, social security etc.
    Germany cost $32.48/hr California cost $44.98/hr
    Now let’s add on profit and overhead per hour of $30.00 and yes, it should be per hour, not per job so that everyone makes the same amount of money in the same time period. Total labor invoice Germany= $62.48 x 75hrs= $4,686.00 California= $74.98 * 150hrs=$11,247.00 Difference = $6,561.00 or 66 cents per watt.
    Also, the material expenses are 20% higher because of excessive requirements. SO, lets add $0.30 per Watt for that. and add another $0.17 for California Sales Tax. And then there is liabilility insurance which is low flat rate in Germany and about 3% of Sales in California. So let’s add another $0.12 just for insurance.
    In my town the minimum permit cost is $600.00 adding another 6 cents.
    We are now at $1.14 per watt in justified added cost. Justified means the contractor can make the same money as in Germany. This cost difference has to do with bureaucracy and overegulation by the various government agencies.

    It is plain ironic that the Department of Energy wants to drop the prices to below $2.16 a watt when it cost us more than that to install because of other Department’s requirements and regulation.

    I am also comparing this to Germany which is by no means is a Banana Republic and has high quality standards, strict labor laws and much regulation in place.

    • http://cleantechnica.com/ Zachary Shahan

      Wow, thanks for the detail! Very interesting (i.e. sad).

      Yes, i hope the DOE goal of getting solar to that level will involve a LOT of red tape cutting!

    • Bob_Wallace


      In Germany grounding of the array is not required, saving at least 30% of the installation cost.”

      30% of installation cost? For a run of copper from roof to ground and a ground spike?

      Or is this simply a third wire run to the service box and tied into the existing ground system (which should be even less).

      “Now let’s add on profit and overhead per hour of $30.00 and yes, it should be per hour, not per job so that everyone makes the same amount of money in the same time period.”

      No. A fair profit per system is all that should be paid. Not a ‘cost plus’ system.

    • Dee

      the sales tax in Germany is 19% VAT for everything you sell
      - solaraenergyllc .com

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  • Array Solar

    So how much an hour are US installers charging? Ive noticed that solar pv and solar hotwater is expensive in the U.K as well for the same reasons.. Watch out for people who claim to be experts. They usually charge too much and are terrible sales people.

  • http://cleantechnica.com/ Zachary Shahan

    Thanks!

  • http://www.facebook.com/people/Stan-Stein/1756064509 Stan Stein

    So…Germany is running about $3 while we’re rrunning from high 4s to over $6 per watt? That’s not because of anything but greed on the part of the American solar contractors.
    My company is in NJ, and we will install, with the same quality of materials, a system on a private residence, townhouse/condo community, small commercial (under 500KW)..for $3.25 on systems 10KW or larger, and $3.35 in systems 9KW and under. 500K and up @ $3 even.
    If you live, or have a business within 100 miles of So/Cntrl NJ….contact ftp@aol.com

    • Bob_Wallace

      US average $6 – 1.13 “extra profit and overhead” – 0.62 customer acquisition and system design – 0.55 installation labor = $3.75

      Is that how you get your price down to the zone of German installers? Work within their labor and profit ranges?

      You might not want to share your trade secrets with your competitors, but I’d like to hear your route to eliminating the $3.19 “American premium”.

      Is your $3.35/W with or without the 30% federal subsidy?

      I doubt that worrying about competition is worth worrying about. There’s a price point at which solar is going to take off and room for everyone to stay very busy.

      I ran a quick LCOE for a <9kW system based on your price of $3.35/W, 20 year financing at 6%, NJ with 4.2 avg solar hours, and 30% federal subsidy. No NJ subsidies included.

      Looks like the average price of electricity in NJ is 14.68/kWh and with 3% inflation would average 19.2/kWh over the 20 years. Solar, based on the above, would lock in electricity at 13.5/kWh. And then give years of free electricity after that.

      It looks to me (if I've got my pre-coffee math right) that you've been able to hit grid parity and rooftop solar should boom.

      • http://www.facebook.com/matthew.t.peffly Matthew Todd Peffly

        So let me assume that Stan’s “offer” and Bob’s pre-coffee math is correct. Then a PACE program with in “100 miles of So/Cntrl NJ” wold mean a flood of PV there. Every time you got a a couple homes in a neighborhood converted, they would “sell” the rest for you “customer acquisition” drop and its win/win/win. Financing is a issue for many people, we are at the tipping point.

        • Bob_Wallace

          Fair warning:

          Bob’s post-coffee math has been known to wander away from spot on accuracy.

          If you’d like to cook the numbers for yourself and compare you can do it here…

          http://www.nrel.gov/analysis/tech_lcoe.html

          I knocked Fixed O&M, Heat, and Fuel Cost to zero. I think the other numbers are in my above post. 4.2/24 hours = 17.5% capacity.

  • Captivation

    Solar panels are the shields that Climate Defenders use to protect their planet.

    • http://twitter.com/krakenaut predrag raos

      Your poetry is 100% recyclable.

      • Captivation

        Your opinion might change when you’re postdrag.

        • http://cleantechnica.com/ Zachary Shahan

          i’m postdrag and have recycled it several times — definitely 100% recyclable. :D

          • Captivation

            :)

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