Clean Power

Published on March 20th, 2012 | by John Farrell


German Policy Could Make Solar in America “Wunderbar”

March 20th, 2012 by  

The Germans are debating significant revisions to their landmark renewable energy policy, and instead of declaring the death of the German solar market, Americans should focus on why solar still costs so much on this side of the Atlantic.

After a significant step down this month, revisions to the German feed-in tariff will require utilities to buy electricity from solar projects 10 kilowatts or smaller for 19.5 euro cents per kilowatt-hour (kWh) on a 20-year contract. Larger projects (over 1 megawatt) will get just 13.5 euro cents per kWh. Using insolation data for Munich, these prices translate to installed costs of approximately $2.24 and $1.55 per Watt, respectively.

For comparison, in the U.S. in the 3rd quarter of 2011, the average installed cost of solar was $5.20 per Watt, with residential-scale projects costing $6.40 per Watt.

What would German installation costs mean for the U.S. solar market, where sunshine is 29% (in the cast of Minneapolis) to 70% (Los Angeles) more abundant? Americans could buy solar on long-term contracts — with no subsidies — for 18.6 cents per kWh in Minneapolis, and just 15.4 cents in Los Angeles. Factor in the federal 30% solar tax credit and Minneapolitans could get solar for 14.3 cents per kWh, Los Angelenos for 11.8 cents.

Already, the trajectory of solar costs and electricity prices suggests that 100 million Americans will be able to get cheaper electricity from their rooftops than from their utility in the next decade (see ILSR’s new report — Rooftop Revolution: Changing Everything with Cost-Effective Local Solar).

But if Americans could install solar at the same price as the Germans, 47 million Americans in the nation’s largest cities would be at solar grid parity — without subsidies — right now. By 2015, assuming no change in the cost of solar and a modest 2% per year inflation in retail electricity prices, 100 million Americans in major cities could beat grid prices with rooftop solar.

Yes, Germany is cutting their solar contract prices. But this is in a market that installed 7,000 megawatts of solar per year in the past two years — 20 times the U.S. pace on a per capita basis. And it is doing it at half the cost (or better). That’s the benefit of a decade of consistent renewable energy policy — the feed-in tariff — that provides a low-risk, long-term contract for solar project owners. Compare that to America’s hodge-podge of fifty individual state policies, stacked on top of federal incentives that can only be used by businesses with big tax liability (or their Wall Street partners).

The irony is that Americans point to Germany and say, “they pay too much for electricity,” while a majority of Germans continue to say, “we’re willing to pay more for clean power,” because they can (and do) own it. In fact, over half of Germany’s renewable energy capacity is locally owned, multiplying the economic benefits of their renewable energy policy and reinforcing political support for clean energy (while support for clean energy has declined in the U.S.).

Quite a few folks have decried the price cuts to the German solar feed-in tariff as “the end is nigh,” but especially in comparison to American solar policy, it’s more appropriate to declare, “mission accomplished.”

This post originally appeared on Energy Self-Reliant States, a resource of the Institute for Local Self-Reliance’s New Rules Project.

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About the Author

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 (, and articles are regularly syndicated on Grist and Renewable Energy World.   John Farrell can also be found on Twitter @johnffarrell, or at

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  • electric38

    Now bring on the massive electric car market. It will be interesting how quickly political power (and funding) is lost, when an energy shift (to consumer owned rooftop solar PV) occurs. It will be great when the youth of America realizes this.
    The older folk are so heavily invested (mentally and economically) in the VROOM VROOM big macho truck and fast and loud car market, they can’t see their grandchldren slowly choking to death on the fumes.

    • Bob_Wallace

      In the US we have an aging population and older people tend to drive less. Older people also tend to become more fiscally conservative which means that VROOM becomes less important than gas mileage.

      Additionally, the younger folks seem to not be developing the love of cars that was so prevalent in previous generations. When I was a teenager and young adult a car was your ticket to freedom. That’s just not how it is these days. These days one can do things in their bedrooms, even their living rooms, that we would never even imagined when we were young.

      NPR did a piece this morning on the future of gas in the US. The argument was made that we may have already passed peak gas consumption in the US.

      Higher gas prices, affordable EVs/PHEVs and we’ll switch from petroleum to electricity. We’re already seeing the wind industry gaining political power (Republican governors are campaigning for wind supports). As the renewable/EV industries grow political power will shift.

      • CaptD

        I agree, 100% with your projections, and I would add that between bicycling and electric scooters many not just the older folks will start using what we used to call mobility scooters as a low impact, low cost way to get around town.

        Why take a car when you can “scoot” around, park anywhere, and have fun doing it while not paying for tags or insurance?

        Mass transit will struggle to provide ways for the huge numbers of new riders that want to also bring their scooters with them on the bus, remember the number of folks turning 65 will skyrocket over the next 10 years as the baby boomers retire.

        Instead of seeing buses with a few bicycles on the front, future buses should be designed to allow folks in scooters to ride aboard and “park”, providing their own seating until they scoot off at their stop!

        Ride ON

        • Bob_Wallace

          If you need something more than a scooter part of the time then there’s no tag/insurance savings with a scooter. And riding a scooter around without insurance is a foolish thing to do.

          I expect we’ll see more ‘tiny’ EVs, something about the size of the Smart that will hold four people in a pinch or a couple of people and a bunch of groceries. (My city experience is that you don’t walk to cheaper grocery stores in most neighborhoods.)

          We should be able to build a highway-capable modest range small EV for under $15k once batteries come down. A great city/suburban car that can be supplemented with public transportation and highway-friendly rentals.

          Scooters on city buses? Don’t see that happening. Walk the last block or two….

          • CaptD

            Have you seen the buses that “stoop down” to allow those in motorized wheelchairs to drive aboard? This same concept will be used to allow those in all forms of electric scooters to do the same thing, because the transit system cannot discriminate; future boarding platforms will require that those in motorized scooters or “chairs” be able to drive on (bus “bed” and platform at the same level) in order to save time at each stop!

            The future will see massive increases in transit ridership that will be using powered scooters because the cost of them will drop as battery tech and volume sold drive prices downward.

          • Rental cars & car sharing.

            Great supplements for many folks.

            But yes, getting people to do the math and understand this is a challenge.
            Last I heard, car companies were the #1 TV advertisers. That has an effect — people think they need to own a car when many of them don’t. It’s an assumption baked into our society, but not necessarily correct.

    • CaptD

      I think for those in urban settings, the electric scooter will begin to take over market share from electric cars with the possible exception of electric motorcycles that are now serious highway machines that can plug into 110VAC to recharge…

      I expect to see folks in the future RENT when they want to take a long trip and then rely upon a much smaller vehicle that requires no gas for local shopping and cruising around.

      Remember electric “bicycles” do not require insurance and or tags so they pretty much save their own cost the first year as compared to a tiny car (electric or gas)…

      • Bob_Wallace

        Capt – I suspect you’re under 30 and single.

        I can see electric scooters taking over a sector of the market – those who don’t have children to take to day care, who travel mostly by themselves, who are willing to scoot in crummy weather, don’t need to bring home a lot of groceries, etc.

        • CaptD

          Bob 🙂 Thanks,quite the opposite…

          Have you seen folks in their mobility scooters pulling small trailers with kids and or groceries?

          We will see a completely new type of “bicycle” lane being constructed in order to give those not using cars their own space “on the road”…

          Because the price of gas, tags and insurance are all going upward with no end in site a much large segment of those that traditionally used to own one or more vehicles will start to rent what they need instead.

          Have you seen the Car2Go concept:

          (BTW: I have no economic interest in them)

          • Bob_Wallace

            Yes, I’ve ridden squatting buses. They make sense for people with a real need for short distance motorized assistance.

            I see no need for someone to haul their scooter around town on a public bus.

            Car2Go – Zip Cars – card swipe rental scooters – free bikes – there are solutions for the occasional need for personal transportation in dense cities.

            There are ‘extreme’ solutions such as bikes with trailers. But I’m guessing a small percentage of the public who would utilize those solutions as opposed to public transportation or low cost personal vehicles.

            I’ve spent a fair amount of time in Bangkok which has excellent public transportation. Driving and parking in BKK is a PITA. People use small motorbikes to scoot around their neighborhoods. Lots of people leave their cars parked, use them for family outings and trips out of town.

          • CaptD

            Expect to see ever more young folks resist the temptation of auto ownership as they strive in this economy to provide basic necessities like lodging, food and their entertainment!

        • All depends on location. In some places, these things are very practical — help give your kids some exercise, freedom and fun! (But, yes, not all places.)

      • CaptD: i agree, logically/theoretically. it’s actually much more practical and cheaper to go with 2 wheels most of the time and supplement with transit/carsharing/rental cars the rest of the time. most people just don’t think it through. however, as someone who worked in the field of alt transport advocacy and planning, i know the urban environment in many places poses a steep challenge for many people getting over that first hump (realizing it’s practical and possible) and that many folks will just never get it. i’m hopeful that we’ll see more and more of this transition, but am in observe mode more than predict mode :D.

        • CaptD

          The biggest challenge is to get those that promote for mass transit to actually use it day in day out… Far too many professionals use it little or never and fail to see it’s short comings because they are “too busy” and use their own vehicle instead. Irritations like smell, delay, safety and weather never enter into their concept of using mass transit.

          NIMBY thinking: Mass Transit is great for the poor to get them off the roadways…

          Mass transit I believe is doomed because as Society get “rougher” folks will fear waiting for transportation alone or in the night because of increased crime.


          • Good points.

            Not sure about the last one, but maybe.

          • CaptD

            Zachary, when is the last time you have been dropped off at night and had to walk home alone; now imagine being a young women or elderly and doing it, especially in a questionable neighborhood!

  • Bob_Wallace

    John, help me understand your numbers.

    Chasing your numbers back to GTM, where they seem to originate, US residential solar averages $6.42/W (without subsidies) and utility solar averages $3.75/W.

    That’s pretty much in line with SolarBuzz’s latest summary of $3.59/W for large building roof solar.

    Now, you’re saying that German residential rooftop is $2.24/W and large/utility is $1.55/W? And neither of those prices include any sorts of subsidies?

    If so, does that not mean that large scale solar in Germany is buying panels somewhere just under $1/W and hooking them up for half a buck?

    Further, if that’s correct, then we’re spending 4x to 5x as much for installation/balance of system. Could that be possible?

    • As of February 2012 prices for crystalline modules have dropped to 0.80-1.05 €/Wpeak, thin film prices are down to 0.60-0.70€ / Wpeak.

      The prices for rooftop installations are down to slightly below 2€/Wpeak.
      As far as I know those prices are without subsidies, as the return of investment is done by the 20 year FiT.

      There are cheaper & subsidized loan programs by the KfW-Bank group, that help financing these investments.
      But that doesn’t change the price for installations.

      • Bob_Wallace

        So it costs ~$5 to install a watt of rooftop in the US and ~$1.50 to install a watt of rooftop in Germany.

        That difference cannot be due to rack/wire costs. It must be labor/permit/price gouging. Or can someone think of another reason?

        (Labor, I doubt, unless there is something very inefficient about how we use our labor.)

        • Well, rooftop is at about 2€ a Wpeak.That’s about $2.5 Dollar.
          In a recent parliamentary hearing, a solar energy company CEO said, that labour cost are about 30-40% of the cost for small residential rooftop solar projects.

          I don’t think that Americans are less efficient.

          My guess is, that it’s two things:
          1. I would guess that it’s propably a question of supply and demand. There is a high density of companies selling Inverters, the neccessary wireing, substructure equipment, … AND about half of the electricians know how to do the job.
          In my case, I got the offices of two buisnesses that are specialized on solar technology in walking distance from my appartment.
          That kind of “supply” is also the reason why it takes so much less time to move from purchasing decision to grid-connection. (a few weeks I think)

          2. Due to the (up until recently) very stable market framework, the companies that invest in solar energy, are able to have buisness models that are long term oriented.
          They don’t need to consider their financial situation in terms of 6 months or 2 years… they can think in 5-10 year categories.
          This allows them to plan return of investment for their initial investments over longer periods => smaller RoI/profit-margins => which translates smaller buisness costs for individual projects.

          That would be my guess 🙂

          • Bob_Wallace

            I seem to remember some discussion as to how Germany solar is more efficient.

            With the higher rate of installation it’s possible for crews to work neighborhoods, moving quickly from roof to roof rather than having to drive across town to the next job.

            Perhaps, with the higher volume, Germany has been able to establish more efficient supply chains. There could be less wait for parts because shipments would be more frequent and it would be more likely that whatever was needed would be closer at hand.

            Also, if you’re spending all your time installing solar rather than part time and doing different construction/electrical jobs the rest of the time you would be more likely to keep a lot of spare parts in your truck. Having to make a parts run really eats up time.

            I’d be surprised if inverter/wire costs were major contributors. US companies are very sophisticated about finding lowest price suppliers and efficient shipping.

    • Bob,

      This link will be helpful. It’s an index of installed costs for solar projects in Germany 100 kW and smaller:

      Right now it says $2.56 per Watt.

      Now, my estimates were a bit lower because I’ve been using the feed-in tariff rates as a proxy for the installed costs (usually the ratio between the FIT rate for the smallest projects and the price index is about .117). The steep downward turn in rates in March (a 20% cut from the first of the year) is quite a bit more than the drop in price according to the index, but would have corresponded to a cost of about $2.16 per Watt.

      There’s generally about a 25% savings in cost per Watt between small-scale and larger distributed solar (10 kW to 1 MW or more), so that would be around $1.60 per Watt installed.

      I probably should have just used the price index, but it hadn’t been published when I wrote this piece several weeks ago.


  • “Mission too well accomplished” from the perspective of the Fossil/Nuclear Lobby and their political puppets… which is unfortunatly the current government.

    During the entire last week, hard coal powerstations run at only 20-40% of their installed capacity during peak-load hours…
    Gas-Powerstations operated at about 7-18% of their installed capacity… remaining almost totally flat all day.

    This is seriously killing the profitability of those huge investments and could very well turn them into a loss for the energy corporations that build them.
    Because not only, can’t they “sell” coal & gas in form of electicity, but those powerstations require a certain amount of load-hours per year to turn a profit.

    Since those coal, gas, oil and uranium trading corporations (E.On, RWE, BASF, Vattenfall, RAG…) are quite influencial and powerful, they work very hard to kill solar now before it kills them…

    On this sunny day in Germany PV-Solar will once again provide about 8% of the total german electricity demand of the day.
    As I write this, PV-Solar generates about 16 GW of electricity, aproximatly 25% of the entire german electricity demand at noon. Hardcoal & Gas generate less than 10 GW combined…

    Interessting times, but the EEG (Renewable Energy Act) works as it was planned. It’s the implementation of the “Solar-Strategy” put forward by Hermann Scheer back in 1993… and while misinformation is being spread to discredit renewables all the time, it’s indeed “Wunderbar”.

    • Bob_Wallace

      “those powerstations require a certain amount of load-hours per year to turn a profit.”

      More strongly said, “those power stations require a certain amount of load-hours per year to keep from going bankrupt”.

      It’s why we’ll see fewer and fewer people stepping up to finance coal and nuclear plants. When your LCOE is based on 80% – 90% capacity and the market doesn’t want to buy from you a bunch of hours every day you’re going to get hurt.

      Always on plants are going to be forced to give it away during some hours and crank up their bids when the market needs their power. As those rates move upward more renewables along with storage is going to be attracted to the market.

      • It’s an interessting moment of the energy revolution.
        Wind & Solar are claiming more and more marketshare, driving down the operational hours of expensive load-following power plants AND they are starting to cut into baseload territory… especially during the weekends.

        When solar-capacity keeps growing, the transformation will increase pace significantly. Because baseload powerplants have to be taken offline (sooner than it’s being done due to the nuclear phaseout).
        This increases the cost of the remaining centralized fossil/nuclear energy system, making investments in decentralized gas-powerstations & renewable sources even more attractive.

        Since the big cooperations are not only unpopular, but also in debt due to their investments, they will have trouble to massivly expand their capacity into this new decentralized market.

        Hopefully they die off and fall appart into many regional suppliers. 😀

        But at the moment the government is trying everything to stop this energy revolution in favour to the big four energy corporations. Very dirty politics vs. clean energy.

    • Hey Thomas, love this. 😀 Just posted it as a reader guest post — hope that’s ok 😀 & let me know if you’d like anything changed.

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