Why Are U.S. Solar Soft Costs Higher Than Germany’s?

by Rocky Mountain Institute Koben Calhoun & Jesse Morris.

Solar Cost Price Comparison
Solar Power Soft Cost Price Comparison between the U.S. and Germany.

Originally published on RMI Outlet.

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.”

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.

Solar PV Cost Analysis Chart
Solar PV Cost Analysis Chart

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.

Solar PV Opportunity Savings Chart
Solar PV Opportunity Savings Chart

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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This article, Getting To The Bottom Of US–Germany Solar Soft Cost Differences, & How To Make Solar Cheaper In US Than In Germany, is syndicated from Clean Technica and is posted here with permission.

About the Author

Rocky Mountain InstituteRocky Mountain Institute 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.

Green Energy Is Grassroots Energy In Germany

by Giles Parkinson

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Even the cemetery chapel has solar PV.

Originally published on RenewEconomy.

(Note: This is part of a series of interviews and stories that will run over the next few weeks looking at Germany’s Energiewende, and the transition of Germany’s energy grid to one dominated by renewable energy. You can find them all in our Insight section).

One of the most misunderstood aspects of Germany’s energy transition is the assumption that this is top-down mandate to adopt green energy. Nothing could be further from the truth, and one key statistic underlines this point: the major electricity generators account for just 7 per cent of the renewable energy that now makes up nearly one quarter of the county’s  electricity production. The rest has come from farmers, households, communities and small business.

There is a bunch of reasons why this is so. For many, it is their dislike of nuclear. For others, it’s the opportunity of maintaining a lifestyle, finding independence, or retaining ownership of a family farm. For many it is an environmental issue, for others it is an economic one.

When the price of livestock plunged after the outbreak of “mad cow” disease, the Reinbold family in the village of Freiamt, just north of Freiburg, were worried about losing their farm which had been in the family for generations.

So they turned to biogas to generate electricity and waste heat: They now grow crops of inedible corn, grass and rye and have two small turbines that have a combined capacity of 360kW. Waste heat is fed to the school and nearby homes, the liquid waste from the biomass goes to neighbouring farms. Another turbine will provide heat for the village pool and the hostels, which are popular with hikers.

“It’s more work in summer outside in the field,” says Inge Reinbold, of the need to tend crops rather than cattle. But less work in winter. And despite the large investment, she feels she has risk-proofed the family farm. “Now we have a fixed price for 10 years,” she says. They get 10c/kWh for their biogas electricity – and three solar arrays owned by her three sons gives them a further income.

Higher up the valley, we visit the Schneider family, which has gone even further, installing a heater that uses wood chips instead of oil, and hosting two community-owned wind turbines on their property (pictured below), which features 80 dairy cows and a much admired Schnapps production facility in the basement. (You can see a video here).

freiamt

The Schneider family farm – dairy cows, schnapps making, 100kW of solar PV and two wind turbines.

They, too, have around 100kW of solar in four arrays on the house and barn rooftops. The first was installed at a cost of €4,000/kW and got a feed-in-tariff of €0.49/kWh the most recent as installed at a cost of €1,000/w, and got a FiT of €0.32. The FiT is now around 15c.

(And it should be noted that when German farmers put solar on the rooftop they don’t muck around. Many of them have 30kW on the house and another 30kW on one or more barns if they have them. The Schneider household, Victorian planning authorities could note, is 400m from its turbine. The proximity may have made their schnapps somewhat more potent).

Now Freiamt, a collection of five small hamlets in the foothills of the Black Forest with a total population of 4,200, provides more than 200 per cent of its electricity needs, the locals claim. Five turbines, including the two on the Schneider property,  account for ¾ of this, with the rest made up from two biogas plants,  251 solar rooftops, about 150 solar thermal collectors, wood-chip heaters and four run-of-river hydro’s, which are coming back into vogue after a century of neglect.

The sense of independence is ingrained into the mentality. Most of the farming families were attracted to the area 500 years ago when the Monastery at St Peter, just down the road, offered freehold land to farmers who settled into the area and independence from the Dutch overlords).

“Now you see farms starting to look at battery storage,” says Erhard Shulz, the founder of the locally based Innovation Academy, and my guide for the day. “Independence is very important. That is why the families came here 500 years ago, for independence from the Dutch. Now it is for independence from the nuclear and the fossil fuel companies. This is very important.”

Most other villages in the region are taking similar action to Freiamt.

In Forchheim, the Binder family has invested in a 1.7MW biogas plant using two old ship motors. The aim is to generate 25 per cent of the local gas requirements, which would make the local area independent of Russian gas, which is imported at great expense.

In Weisweil, a village of 2,100 people, solar is installed on nearly available rooftop. Thirty locals pitched in to put a 50kW solar system on the roof of the local school, which also introduced energy efficiency and replaced heating oil with wood chips. Even the chapel in the cemetery has a 22kW solar system on the roof, installed by the local bank which feeds 50 per cent of the earnings back into the community. The village boasts 700w of solar PV per habitant. (In Australia, it is around 125w per capita).

“You need communities like this,” Shulz says. “Someone has to be in front so that others can follow.” Other towns are looking at investing too.

The village of Kenzingen is considering 5 community owned turbines.  The larger town of Ettlingenden and the surrounding district, with its population of 22,000, aims to be 100 per cent renewable for its electricity by 2030, and 50 per cent for its heating needs.

The goal for Etlingenden contrasts with that of the major local city of Freiburg, which is looking to achieve the same goal in 2050. “The centre of initiative is in the small villages,” Shulz says. “People using their own money to invest in hydro, biogas, solar and wind turbines. They don’t wait for the government and the utilities.”

Shulz, who was a student at the time of the anti-nuclear protests in the 1970s that served as a launched for the green energy movement, and later the Greens Party, is a part owner of six wind turbines, seven solar installations and two run of river hydro plants. The number of co-investors ranges from 10 to more than 500, depending on the installation.

This is typical of the country and one of the reasons why no party that got elected to parliament in the recent elections opposes the so called Energiewende, or energy transition. It is one of the driving forces of the policy. The major generators have been blindsided, to the point where the biggest of them, such as RWE, are considering abandoning their traditional business models and moving to a “value add” business that could assist the rising “pro-prosumer” and a new market.

Finally, Shulz take me to the village of Wyhl, where the state government wanted to build the nuclear plant in the 1970s. Shulz takes me to a stone inlaid with a plaque at the site of Wyhl fight, about 50m from the banks of the Rhine river that separates Germany and France. The land had been cleared but was stopped by a protest of 50,000 people. (See some archive video here). It is now a nature reserve. The plaque reads, “We said no.”

Wyhl is now a “solar village”. Virtually every commercial rooftop has solar installed, as do many houses, and solar accounts for between 40 and 50 per cent of its electricity needs. All the solar is owned by the community.  “We have gone from nuclear to solar,” Shulz says. “Now we say no to fossil fuels.”

See also out story Should Australian communities buy back their grids, which traces the history of Schönau, which was the first village to do so in Germany, and our interview with the Australian-born mayor of Green City Freiburg, How the crazy green energy citizens became mainstream in Germany. 

(Thanks to Craig Morris, a Freiburg-based journalist who writes the Energy Transition blog (EnergyTransition.de), for allowing us to share some of his videos. More will be featured in our other stories. You can see all his episodes here).

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This article, Green Energy Is Grassroots Energy In Germany, is syndicated from Clean Technica and is posted here with permission.

About the Author

Giles Parkinson is the founding editor of RenewEconomy.com.au, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia’s energy grid with great interest.