[FoRK] Crafty Germans: well-crafted economic incentives optimizes market for solar

Stephen Williams sdw at lig.net
Thu Oct 18 20:04:38 PDT 2012

Clever. This is how you guide a market to work properly.
This is enough difference to determine feasibility in many cases.

> Why is rooftop solar cheaper in Germany than in the U.S.?
> By David Roberts
> Photo by Shutterstock.
> The installed cost for residential solar power systems in Germany — 
> that is, installations of up to 10 kW — is considerably less than in 
> the U.S. Why? That’s the subject of a fascinating analysis [PDF] from 
> sharp minds at Lawrence Berkeley National Laboratory.
> The researchers conducted a survey of German solar installers and 
> reviewed public and private consultant data to get a handle on the 
> German market. The answers they found aren’t as obvious as you might 
> think.
> For one thing, it isn’t mainly about the hardware, or the panels 
> themselves. Those costs are comparable. The difference comes almost 
> entirely in “soft costs” — customer acquisition, labor, 
> interconnection to the grid, and the like. Long story short, when it 
> comes to residential solar, in the U.S. it costs a little bit more to 
> do … just about everything.
> Let’s look at some graphs! (All these graphs come from the paper — you 
> can find sources documented there.)
> Here are installed costs of small PV systems in the U.S. and Germany:
> (Click to embiggen.)
> Germany passed us in the mid-00s and hasn’t looked back. As of the 
> fourth quarter of 2011, the difference in installed price was about 
> $2.8 per watt. That’s a big chunk.
> The first and most obvious explanation for the difference might simply 
> be that Germany has installed a lot more solar than us. In 2011, they 
> installed four times as much as us and their cumulative total is five 
> times what we have.
> (Click to embiggen.)
> With a larger market comes economies of scale, right?
> But it turns out market size only explains about half the 
> differential. The following chart shows how soft costs have changed 
> with total capacity in the respective countries:
> As you can see, we’re well behind Germany in capacity, but our costs 
> aren’t even as low as theirs were when they had our same total 
> capacity. Crudely speaking, there’s still a $1.30 per watt 
> differential in costs to explain away.
> That’s where the Lawrence Berkeley survey comes in. Long story short, 
> it looks like just about every single step in the process costs a 
> little more in the U.S. Here are soft costs, broken out:
> Here’s a breakdown of the constituents of the cost differential and 
> how they add to U.S. costs:
> U.S. projects take longer to develop and longer to install, as well. Whee!
> Most of those differences can be attributed to policy, either directly 
> or indirectly. PV installations don’t pay sales tax in Germany. Rules 
> governing permitting and interconnection are much simpler. And of 
> course there’s the biggie, which is German feed-in tariffs, whereby 
> customers who install rooftop solar are guaranteed a high rate of 
> return for the lifetime of the system.
> But note how the feed-in tariffs are structured:
> By design, they decline every year. This has a dual effect. First, it 
> is always pushing German consumers to act immediately, before 
> incentives decline, thereby insuring a stable market for installers 
> and reducing customer acquisition costs.
> And second, it keeps installers competing ruthlessly to reduce costs 
> so that they can maintain their profit margin even as tariffs decline. 
> This is what I mean by “indirect effects.” The way German solar 
> support is structured generates more competition, more discipline, and 
> lower profit margins for solar installers. That’s why installers so 
> insistently and successfully push to squeeze out excess costs.
> Again: the way Germany structured its solar incentives has both 
> expanded and disciplined the market. Capacity is up, costs are down. 
> That is part of the design. Incentives do not have to make market 
> participants lazy and dependent. They can do the opposite.
> By contrast, U.S. solar incentives have been sporadic, inconsistent, 
> and indirect, working through the tax code, state mandates, or big 
> chunks of money grated to individual companies. That kind of sloppy, 
> scattershot approach does not discipline the market. And it shows! 
> Germany’s not only working faster than the U.S. on distributed energy, 
> it’s working smarter.
> Perhaps we could learn the lesson and pass some feed-in tariffs of our 
> own! Crazier things have happened.


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