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Costs Slow Solar Down

In 2011, residential solar system installers paid a little over $1.80 per watt for solar panels in the United States, and added $4.36 per watt to the cost of the solar panel to complete an installation.

Compared to other countries—specifically Germany, the world leader in solar energy—the cost in the United States to complete an installation is three times as much, leading to a lack of willingness for Americans to spend the high amount of money to install solar panels.

However, a report released this month by Lawrence Berkeley National Laboratory explains why the costs in the United States are so much higher than in other countries, and offers solutions to the problem.

While the most obvious difference between the United States and Germany is the total amount of solar power installed in each country (five times as much installed in Germany), the study concludes that this might only account for half of the price disparity.

Instead it seems there are fundamental differences in the U.S. and German markets which keep prices higher in the United States.

Acquiring customers, i.e. marketing, is a large cost for U.S. solar installers, spending approximately 70 cents per watt trying to pull customers in to the program. Further, costs for permitting, connecting the systems to the grid, and having them inspected are also high in the United States. The Germans spend only three cents per watt on these things, while U.S. installers spend 20 cents per watt.

This is due in part to larger amounts of paperwork, in addition to the fact that U.S. installers have to pay permitting fees. U.S. installers also spend more on labor during actual installation, pay more in sales tax (German installers are exempt), and pay more for overhead costs, among a multitude of other “hidden” costs associated with solar installation.

The U.S. government is taking action to reduce the cost of installation, with the Department of Energy taking the lead. The SunShot Initiative is funding projects aimed at reducing the non-hardware costs of an installed solar system. Additionally, $12 million is aimed at cutting red tape, $21 million is for the development of a “plug-and-play” system for solar panels which could reduce installation costs, and a $10 million prize to be given to companies that can lower non-hardware costs of an installation to below $1 per watt.

Government funding is what the solar industry needs to survive and flourish, and the initiative taken is encouraging, but there is plenty more work to be done.

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