An analysis of residential PV system price differences between the United States and Germany
Introduction
Growing levels of greenhouse gases in Earth׳s atmosphere threaten the stability of global social, biological, and geophysical systems (Schneider et al., 2007) and require massive mitigation efforts (Betz et al., 2007). Photovoltaic (PV) technologies offer significant potential for decarbonizing the electricity industry, because direct solar energy is the most abundant of all energy resources (Arvizu et al., 2011). Although PV historically has contributed little to the electricity mix owing to its high cost relative to established generation technologies, technological improvements and robust industry growth have reduced global PV prices substantially over the past decade. Numerous sources document these price reductions, including the national survey reports under Task 1 of the International Energy Agency׳s “Co-operative program on PV systems” and subscription-based trade publications such as those produced by Bloomberg New Energy Finance, Greentech Media (GTM), Photon Consulting, Navigant, and EuPD Research.
In the academic literature, pricing analyses of PV modules and whole systems have been discussed primarily in the learning or experience curve literature (Maycock and Wakefield, 1975, Neij, 1997, Nemet, 2006, Van der Zwaan and Rabl, 2003, Watanabe et al., 2000). Haas (2004) and Schaeffer et al. (2004) expanded the field by comparing pricing trends between countries and by distinguishing among prices for complete systems and costs of modules as well as hardware and “soft” (non-hardware) balance of system (BoS) costs. Although PV system soft BoS costs were already examined 35 years ago (Rosenblum, 1978), they have received increased attention from the private and public sectors recently as their share of total system prices rose in conjunction with a decline in hardware component prices. Today, soft costs seem to be a major attribute for PV system price differences among various international mature markets.
The price difference is particularly stark for residential PV systems in Germany and the United States, averaging $14,000 for a 5-kW system in 2012. This article aims to explain the large residential system price differences between Germany and the United States to illuminate cost-reduction opportunities for U.S. PV systems. This research was conducted in the context of the U.S. Department of Energy׳s SunShot Initiative, which aims to make unsubsidized PV competitive with conventional generating technologies by 2020 (enabling PV system prices of $1/W for utility-scale applications and $1.50/W for residential applications) (U.S. Department of Energy, 2012).
Section snippets
Overview of the U.S. and German PV markets
While the United States was a global leader in PV deployment in the 1980s, the German PV market was significantly larger than the U.S. market from 2000 until 2012. Annual capacity additions (including residential, commercial, and utility-scale projects) accelerated in Germany since a reform of the German Renewable Energy Sources Act (EEG) in 2004, after which annual German PV installations were three to nine times higher than U.S. installations in terms of capacity. During 2010–2012, Germany
Data sources and methodology
For this article, information for complete U.S. PV systems (but not individual soft-cost categories) and information on the country of origin of modules are derived from the database underlying the recent Lawrence Berkeley National Laboratory “Tracking the Sun VI” report, which reflects 70% of the U.S. PV capacity installed between 1998 and 2012 (Barbose et al., 2013). Systems larger than 10 kW and data entries with explicit information about non-residential use were excluded. It is important to
Non-module costs as primary driver of price differences
With the significant growth and internationalization of PV module manufacturing, modules increasingly have become a global commodity that can be purchased at very similar prices in the large and mature PV markets around the world. Previous analyses have shown very little recent pricing discrepancy for PV modules between Germany and the United States (Goodrich et al., 2012). Further, lower-cost Chinese and Taiwanese module brands penetrated the residential markets of both countries similarly in
Discussion of findings
Our preceding empirical analysis shows that the primary sources of price differences between U.S. and German residential PV systems are non-module costs, primarily soft costs such as business process costs and “overhead costs and profit.” The following discussion section contextualizes our quantitative results with a few general hypotheses that are not exclusively linked to individual business process cost categories, but that may explain differences in the broader market characteristics
Conclusion
Residential PV systems in the United States were nearly twice as expensive as those in Germany in 2011—recent price differences of about $2.8/W continued through 2012 and then declined slightly over the first half of 2013. Most of these differences originated in high business process and overhead costs in the United States and cannot be explained by mere differences in national market size. To reduce these costs, actors in the United States could consider policy reforms that enable a larger
Acknowledgments
This work would not have been possible without the assistance of many residential PV installers in the United States and Germany, data support by the firm EuPD, and collaboration and guidance by our colleagues at NREL, especially the work of surveying U.S. installers by Kristen Ardani, Ted James, and Al Goodrich. We thank the sponsors of this work at the U.S. Department of Energy׳s Solar Energy Technologies Office, in particular Minh Le, Christina Nichols, and Elaine Ulrich. In addition we are
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