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Published on December 6th, 2013 | by Rocky Mountain Institute

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Getting To The Bottom Of US–Germany Solar Soft Cost Differences, & How To Make Solar Cheaper In US Than In Germany

December 6th, 2013 by  


Originally published on RMI Outlet.
By Koben Calhoun & Jesse Morris

RMI’s new report with Georgia Tech details U.S. installation cost reduction opportunities

Download the full report, Reducing Solar PV Soft Costs: A Focus on Installation Labor.

A recent Deutsche Bank report projects global newly installed photovoltaic (PV) capacity will reach 50 GW annually in 2014, a roughly 50-percent increase over anticipated new installed capacity during 2013. Germany’s been the longtime undisputed champion of solar deployment, with 35.2 GW of installed capacity as of November 1, though the installation pace lead has shifted in 2013 to Japan. But the U.S. is accelerating—and is expected to install 4.4 GW of solar this year, about the same absolute amount as the Japanese and more than the Germans.

This growth is impressive, but if the U.S. is to transition to the low-carbon, resilient, and sustainable electricity system of the future outlined in RMI’s Reinventing Fire, we need to install four times more solar capacity annually than we’re currently doing, for the next forty-odd years, with most of the installs coming in the distributed market (residential and commercial rooftops). If we’re going to do that, we need to make distributed solar cheaper, and do so quickly.

PV SOFT COSTS NOW DOMINATE THE EQUATION

Between 2008 and 2012, the price of sub-10-kilowatt (mainly residential) rooftop systems decreased 37 percent. However, over 80 percent of that cost decline is attributed to decreasing solar PV module costs. With module and other hardware prices expected to level off in the coming years (and in the near term, actually increase), further market growth will be highly dependent on additional reductions in the remaining “Balance of System” costs, otherwise known as “soft costs.”

US Germany solar soft costs

Soft costs account for 50–70 percent of the total cost of a rooftop solar system in the U.S. today. These soft costs include installation labor; permitting, inspection, and interconnection; customer acquisition; and other costs (margin, financing costs, and additional fixed administrative and other transactional cost). Setting aside those “other” costs, soft costs for U.S. residential systems are around $1.22 per watt of PV, while German soft costs average $0.33 per watt. That’s one heck of a spread. How does Germany do it, and how can U.S. installers approach or even surpass those numbers?

SIMPLE BOS PROJECT SEARCHES FOR ANSWERS

RMI and other groups such as the U.S. DOE, National Renewable Energy Lab oratory(NREL), Lawrence Berkeley National Laboratory (LBNL), Clean Power Finance, and the Vote Solar Initiative have done great work on the issue over the past several years through benchmarking and other analysis on these various soft costs. However, such data remains relatively sparse in comparison to hardware market analysis. The U.S. solar industry has known that German installers are able to install rooftop solar systems at less than half our cost. But we haven’t been able to discern, at the detailed level of specific worker actions, why. Until now.

RMI, in partnership with Georgia Tech Research Institute (GTRI), launched a PV installation labor data collection and analysis effort under the SIMPLE BoS project, which culminated today in the release of Reducing Solar PV Soft Costs: A Focus on Installation Labor. Drawing upon first-hand observations, this report is the first publicly available detailed breakdown of the primary drivers of installation labor cost between German and U.S. residential installs.

The SIMPLE BoS team implemented a time-and-motion methodology for evaluating the PV installation process, collecting data on PV installations in both countries.

AMPLE OPPORTUNITIES TO REDUCE INSTALLATION COSTS

The results indicated that U.S. installers participating in the SIMPLE BoS project incur median installation costs of $0.49/W, compared to a benchmarked median cost of $0.18/W for participating German installers. The figure below shows the comparative costs of each component of the PV installation process in the U.S. and Germany, respectively, looking at four categories of installation-related costs: racking & mounting, pre-install, electrical, and non-production.

 

In addition to providing cost details on the PV installation process, our report outlines several enabling factors from German and leading U.S. installers that can be disseminated throughout the U.S. market. These opportunities range widely in complexity and impact, from redesigning the base installation process and preparing rails on the ground, to implementing a one-day installation process and PV-ready electrical circuits. We’ve shown below the potential impact in $/W of these solutions and how difficult it would likely be to implement them widely the U.S.

 

In addition to highlighting specific opportunities for cost reduction in the U.S., our report also draws upon collected data and analysis to outline one potential pathway for U.S. installers to reduce installation labor costs by up to 64%—potentially undercutting German installation labor costs when relative differences in wages are taken into account. This pathway will not be realized overnight. It requires serious product innovation, uniform adoption of best practices, and a move to one-day installations from the average 3–5-day installation process that’s common for U.S. installers today.

We hope this report and all follow-on work under the SIMPLE BoS project will help the U.S. industry continue to reduce solar PV costs and enable the widespread, cost-effective deployment of residential solar PV systems.

For more information, download the full report.


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About the Author

Since 1982, Rocky Mountain Institute has advanced market-based solutions that transform global energy use to create a clean, prosperous and secure future. An independent, nonprofit think-and-do tank, RMI engages with businesses, communities and institutions to accelerate and scale replicable solutions that drive the cost-effective shift from fossil fuels to efficiency and renewables. Please visit http://www.rmi.org for more information.



  • The world is undergoing a once-off transition to sustainability. Wind
    and solar will overtake coal, oil and other fossils as the world’s
    primary fuels for electricity generation. I am all for all countries in the world get down to reality (not Politics), and business of generating energy from the sun,wind and jobs globally. Energy poverty should be main topic in international debates, climate change and global natural wealth. http://www.solarinstallerdirectory.com

  • StefanoR99

    I would love to see this put together into a how to article, to show people how to go solar in the most efficient way.

    Ive been toying with the idea of buying the panels, inverter and racking from an online source such as wholesalesolar but then I’m running into a what next issue.

    We need a ball park figure of what to pay an installer for putting the equipment on a roof, what the steps are for permitting, how to get your utility’s permission to hook it up etc.

    Really want to do this project next year without being blatantly ripped off by some dodgy installer.

    • JimBouton

      I went with Solar City (in Dallas, Texas) and got an 8.33 kw system for $9,800. It is a PPA (Power Purchase Agreement) for 20 years. I stayed away from buying my own from a local installer for the exact same reason you state. The best deal I could find would have been for 2.5 kw for about $15,000. Plus, I would have had to do all of the work in getting rebates from the utilities. (Solar City did all of the legwork for me, but they collected the rebates since they own the panels.)

      An edge that Solar City has is that they have their own designers, train their own installation teams, and outsource electricians that they negotiate for multiple jobs. I am sure they buy in bulk to get better discounts than a mom and pop solar company can get on panels and inverters.

      It is still early to give an exact estimate for my ROI, but I believe I will have justified the system in under 70 months based on the first three months of data.

      • StefanoR99

        Interesting, so is that $9800 plus a monthly payment to Solar City? If so how much? Did you get the tax credit or do they?

        What bugs me is pricing up the panel cost / inverter online is coming to around $15k for a 10kw/h system. So do I literally have to pay another $10k for some guys to come round and stick them on the roof? Someone is making a killing here.

        • JimBouton

          $9800 was the only payment that I will ever have to make to SolarCity. They were able to claim the tax credit and any rebates (one by Oncor and the other one from the state). I also received the modem to connect to the inverters and have a web page viewing the results (something that the local companies were not providing.)

          Plus, SolarCity is responsible for monitoring my system and fixing any problems. They were easy to work with and I have not had a single complaint. I know of at least three other customers within a few miles, so they are definitely getting a lot of busy in this city.

          At the end of 20 years, it will be their responsibility to remove the panels. (I would have options to purchase them, if I wanted at that time at a FMV.) My guess is that in 20 years, there will be many better options out there then these inverters and the 245 watt panels.

          • Bob_Wallace

            $41/month (ignoring the lost investment value).

            How much do you figure the average monthly utility bill savings will be? (Electricity price inflation may about equalize out lost investment value.)

          • JimBouton

            Bob, it will really vary due to being in Texas and the fact that we have no net metering in the state. However, there are companies (such as Reliant or Green Mountain) that offer a rebate based on the solar you send back to them.

            The plan I am on charges me 9.2 cents a kwh between 5 pm and 9 am. During the prime daytime, I pay 16.2 cents a kwh. Now, the good news is that I get paid based on those same rates (up to 500 kwhs per month), after 500 kwhs, it drops down to a payment of 5 cents a kwh.

            The trick I realized, that to take advantage of this plan, was to ensure that I produce enough electricity during the daytime, so that I never get caught paying 16.2 cents a kwh. Meantime, the excess energy I produce will pay 2x at nighttime.

            I only have two bills to compare the results (and both of them have really been some mixed up weather conditions). So far, my first two bills would have been $90 and $60, if I would have had a standard 10 cents per kwh cost structure. Instead, my two bills were both credits. One was for $50 and the other was for $80. (I could cash them out if I want, but have elected to roll the amounts over.) So, for the first two months, I avoided $150 and made $130. Net plus of $280. Not bad at all.

            A much better test will be when I hit the months of May through September, when the usage numbers are much higher. That is why I am still a little unsure of what my payback will be at this point.

          • Guest

            SolarCity report for the first three months (September was only one week of activity.)

          • Wow, Jim. Very interesting. So you had the $9800 “on hand” and just paid it all off at once? I’d love to hear more as you get more data, and would actually love to post an article on your story. If interested, shoot me an email: zach@importantmedia.org

          • JimBouton

            Zach, yes I just paid cash upfront. Once I get enough data points, I’ll pass you the numbers that I have. Dallas has had some pretty nasty weather here for the last week, and only today have we finally seen the sun. We also use natural gas (not electricity) for heating, so our electric bills are quite low for this time of year.

            (I tried to post my SolarCity report, but had no luck getting the .jpeg to show up.)

          • Thanks. I’d greatly appreciate it. (Weather: yeah, my grandparents live in West Texas — have heard about the crazy weather.) Definitely feel free to shoot me an email. Would love to get those stats out to more consumers. 😀

          • philofthefuture

            My guess is after 20 years they won’t be worth the cost of removing them and you’ll just inherit them.

    • philofthefuture

      Put it on the roof yourself. All you do is screw 4.5″ stainless steel lag bolts into the underlying rafters then mount the rails to the brackets and the panels to the rails. If you contact rack manufacturers they can design your whole rack system. I used Haticon which is half the price of UniRack.
      Go to the SMA America website and download their free design tool. With that you can design the whole system and marry panels to inverters with the best match to get optimal performance.
      Buying on the internet and doing the work myself I did the whole job for $1.09/W. The utility made me pay $85 for the net meter and the state made me pay $87 for the electrical permit but that was it for the permitting costs.

  • Matt

    So If I assume that $1.55 (module/inverter/hardware) is the same in both countries.
    Then the big difference is the $2.16 (financing/other) verse $0.33; which is bigger than the soft cost difference of $1.22 verse $0.33.

    • Wayne Williamson

      Matt, that was also what I saw. I wonder what this is made of and why Germany is much smaller….

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