Installing solar capacity is much more expensive in the U.S. than it is in Germany. RMI has released a new report with Georgia Tech to analyze U.S. installation cost reduction opportunities. RMI’s Koben Calhoun and Jesse Morris summarize the findings.
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 Laboratory (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.
You can download RMI’s full report, “Reducing Solar PV Soft Costs: A Focus on Installation Labor” here.
This article was written by Jesse Morris, Senior Associate for electricity and transportation practices at Rocky Mountain Institute, and Koben Calhoun, Associate for Electricity and Buildings Practices at Rocky Mountain Institute. It was first published at RMI Outlet and is republished with permission.
Nice article. Germany gets its installation costs down by economies of scale in automated mass production of rooftop racking installation systems, more cost effective transformer-inverter systems, cheaper transportation and automatred storage logistics.
New developments in solar p.v.- namely fresnel lens systems, and something else, will cost effectively boost the efficiency of German solar panels to the maximum- of 50%, while cutting the materials costs, effectively driving the cost per installed watt capacity to lower than 50% cents per producing wat.
The feed in tariffs will expire in about 3 years time when 52 gigawatts are installed, however, the “below grid parity” costs of advanced solar will keep installation going at paces between 8 to 10 Gigawatts per annum.
I have problems with the original LBNL study and with the current RMI study also.
Quite honestly, I think one of the big differences in the costs is how labor is burdened with overhead costs — customary and cultural differences between the US and Europe.
The studies would have been more useful to show differences in hours not convert the costs back into dollars. I also believe, that while the RMI/GTI study this time included references to scaffolding, that the associated costs with scaffolding is far too low. And that is said having looked at scaffolding used around Germany for installations and noting that for many of the two/three story installations the time to install is more than one hour… and it takes more than an hour to remove.
Travel time/costs and overhead related to it are also big differences… normalizing those items to dollars makes it difficult to really identify the cost drivers. A close inspection of distribution cost and travel site costs… the cost of fuel is often 1/4 of the equivalent cost in Germany. Some of those fuel costs are used to offset social/health programs which lower the German labor rates. In the US the fuel costs are lower, but overhead labor costs are higher — because that is where we capture the costs.
Sample size for the RMI study is too small to be accurate. And the costs in the US are specific to just a few states not the nation. The German RMI/GTI studies were specific to just a few installers. Five German installations total… if I remember correctly.
Why use scaffolding at all? There is a big saving in reducing the ground costs too.
It aught to be a mechanical lift used to pick and place the panels, and connect them and fasten them in the same motion, snap together. With sealants and adhesives, explosive bolts if needed, careful alignment jog in the mechanical lift place jig, then single button pops solar panels down. move to next. Eventually make the solar panels the roofs that will last 100 years, 75% output. cheaper then 3 reroofings.