How beauraucracy drives solar technology uptake

By | December 18, 2012

At a cost difference of over 50%…

Page 24 of this document says it all:
US Installation costs $6.19 per Watt, of which $3.34 is profit / soft costs.
German Installation costs $3.00 per Watt, of which $0.62 is profit / soft costs.

Needless to say, the big price difference is a major factor in fewer people installing solar panels in the US than in Germany. On closer analysis, there are a number of factors leading to this huge gap – it isn't pure corporate greed:
1) Labor costs for electricians are higher in the US than in Germany.
2) Customer acquisition rates are higher in Germany than in the US – US companies are spending 10 times the amount that Germans spend.
3) US Permits, and other administrative burdens which are not present (or very minimally present) in Germany.

Points (2) and (3) are room for improvement – that is, if the US wants to see a rise in solar installations, the way that the industry has been booming in Germany. You can see the exact breakdown in the original document.

Is beauraucracy going too far to help technology effectively benefit people?

Read the full report: http://emp.lbl.gov/sites/all/files/LBNL_German_US_PV_Price_Comparisons_FINAL.pdf

/via +Roland Mösl 

5 thoughts on “How beauraucracy drives solar technology uptake

  1. Kevin Barnes

    +David Moore Govt can disrupt the marketplace, but in it can also change the fundamental economics.  If the govt subsidized solution crosses the threshold where the solution actually makes economic sense for the consumer then the companies can't really charge extra since it becomes a large competitive space and the consumer will get the discount from all providers.  I don't know if this really was a good way for Germany to spend its money, but I think you can make an objective argument that it drove costs down.

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  2. David Moore

    How did they formulate that structure +Eric Olson – that sounds like a decent solution.  Where there is often a discrepancy is when companies realize that there will be subsidies that occur for the consumer so the bump up their prices anyway to garner more profit.  "Hey – this thing costs us $2 to make – let's charge $3" – that's fine if there is demand.  Where things get skewed:

    1) Government subsidies to the company…  Government gives $1 / unit to the companies to help offset costs…  Company charges $2.50 for the product.
    2) Government subsidies the consumer ..  Government gives $1 / unit to consumer …  Company knows this so they charge $3.50 / unit.  Consumer still buys because they get the $1 back (psychological) and it's cheaper than the $3 (after rebate) that was being charged originally

    The true benefit though is the increased demand (hopefully) and the potential innovation associated with pushing manufacturing costs down and (potentially) competing with other vendors to optimize the technology itself.

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  3. Kevin Barnes

    I think the subsidies are actually the driver here.  Germany heavily subsidizes in a way that makes it highly desirable to consumers.  That leads to a large market with a lot of competition. In the US, since there is limited financial incentive for the consumer, the solar companies have to spend money convincing consumers and milk all they can from them.

    I should point out that the very high subsidies in Germany are now being questioned (and rolled back if I recall) since the money that went into PVs could have gone into other areas with a potentially larger energy yield per Euro.

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  4. Eric Olson

    +David Moore German solar power is also heavily subsidized, the difference is their subsidies are built in a way that reduces costs to consumers rather than increasing the profits for companies.

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  5. David Moore

    I also think an argument could be made that the injection of additional subsidies, grants, and tax breaks incentivises companies to take additional profits.  IMO (and I admittedly need to do more research and find facts / figures to back this up) it is similar to some of the cost discrepancies you see in education and health care…  When there is a pool of money to be had, companies are going to want to grab it.  If you pull out the cash from external sources and let companies simply start competing on a firm groundwork and demand, it'll be astonishing how the prices would likely come down.

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