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Why Solar Installations Cost More in the U.S. than in Germany (technologyreview.com)
45 points by iProject 1577 days ago | hide | past | web | 55 comments | favorite

One of the reasons is, as the article states, that US companies have to recover higher costs to acquire customers.

But it doesn't say why. The reason is because grid power is more expensive in Germany: $0.30/kWh compared to $0.10/kWh on average in the US. Therefore potential customers are easier to convince to use solar in Germany.

And, on the flip side, Germany has massive tax subsidies for solar power. It's a lot easier to convince someone to get solar panels installed on their roof if you can show them a tax benefit for doing so.

On a broader note, I don't get why we think it's a good thing for Germany to have this much solar energy. Unlike, say, Spain, the German climate is not especially well suited to solar power. It's too far north, as a country, and climatically, Germany has a lot of cloudy days, which means that solar panels are not really running at peak efficiency most of the time. Germany would be much better served by wind power, because of its advantageous position on the North European Plain. In a free market, that is exactly what would have happened. Instead, German government subsidies have unfairly advantaged solar energy, leading to an inefficiently high number of solar panels and underinvestment in wind.

The notion that Germany is bad for solar is wrong.

If you check the insolation maps you will find that southern Germany is surprisingly sunny. Their cooler temperatures also help with efficiency.

Which insolation maps? I find this hard to believe. Compared to SW USA (or even the east coast), Germany's insolation is pretty bad. The subsidies are all the only thing bringing solar to Germany (or even Spain for that matter)

See: http://maps.nrel.gov/SWERA

I don't know the source of their data, but this map from BP Solar puts Germany on par with most of Alaska (and worse than anywhere else in the US)


I looked at that map. (It's rather pretty, too!) It shows N. Germany between 0.5 and 1.0, and S. Germany between 1.5 and 2.0. The g'parent poster commented about southern Germany, so that corresponds to Michigan, New York, or Washington.

Going off on a tangent, I lived in New Mexico (5.5 on that table). A friend bought German solar panels for his house. He then had to get an upgraded transformer, because it put out too much power for the stock German one to handle.

>Unlike, say, Spain, the German climate is not especially well suited to solar power. It's too far north, as a country, and climatically, Germany has a lot of cloudy days, which means that solar panels are not really running at peak efficiency most of the time. Germany would be much better served by wind power, because of its advantageous position on the North European Plain.

Wind power requires more territory per watt than solar and German population is dense just enough that wind power is on the edge of pay-off.



> underinvestment in wind

estimated electricity production for Germany in 2012:

* Wind: 45 Billion kwh * Solar: 28,5 Billion kWh

Well, exactly - if there was more incentive for wind power, that number would be much higher.

Germany has an incredible amount of wind power, almost to the point of saturation. They are in the process of upgrading old ones to be more efficient instead of creating more. Here are some numbers http://en.wikipedia.org/wiki/Wind_power_by_country

But isn't it better to put all your eggs in one basket?

There aren’t any tax subsidies in Germany for solar installations. There are subsidies, find out for yourself how that works, it’s not that hard. This ignorance about what is actually going on makes me very angry!

Red tape is a big part of the cost in the US and a problem that needs to be solved. Every locality and state has its own requirements, inspections, licenses etc.

A solar industry insider told me one of the worst solar markets in California is Palo Alto. Wealthy, green, suburban, techy: how can this be? The city runs its own utilities and makes it hard to install (apparently).

Regulations need to be streamlined.

Virtually every jurisdiction in the United States has adopted the National Electrical Code [NFPA 70]. Nearly all construction is governed by the International Building Code or a derivative state code (e.g. the CBC).

What varies are enforcement standards and local conditions. Some local conditions such as earthquakes and hurricanes are environmental. Others such as zoning and other land development regulations are political (and some of the most extreme regulations are private in the form of covenants upon title to the land).

There are sound reasons for regulation and enforcement (and unsound ones as well). Among them are life safety issues. Unlike grid power, solar panels have no disconnect. They remain live while exposed to sunlight. This creates a hazard during fires and similar emergencies. It creates a new class of hazard during electrical repairs and unrelated tasks such as re-roofing or cleaning gutters.

Wealthy and suburban tends to correlate with all construction projects being difficult to permit because such jurisdictions have more vocal and resourceful citizens with a concern for maintaining property values.

If one goes to the sticks, there are still places in the US which don't require a building permit.

My first thought when reading this was that it was really confusing cause and effect and (deliberately?) failing to cover the alternatives to solar. So I was pleased to see the currently top rated comment here started out with:"The reason is because grid power is more expensive in Germany: $0.30/kWh compared to $0.10/kWh on average in the US. Therefore potential customers are easier to convince to use solar in Germany." Many of the issues highlighted in the US simply relate to where the US is in the curve of adoption. If Solar was more competitive with the regular grid then a) There would be more demand = lowered customer acquisition costs = lowered installation costs (vols and skills) = reduced red tape based on political clout from industry and consumers. So everything outlined in this article seems more about symptoms than causes. What we do about that can either be government regulation driven or market driven but either way it feels like a pretty big missing piece from the original article.

Good points, but on the flipside, German solar is probably roughly a third as productive as sunny American states could be... so when you factor in the added output per equivalent installation, the 3x grid cost should be roughly mitigated. However, the trouble is the costs are not primarily correlated with size of installation and the cost of the panels themselves are no longer the primary cost driver. This means tertiary costs like installation and regulation, which do not necessarily scale with system size, are an important and complex piece.

edit: it's not 3x but still as high as 2.5x in some places: http://www.nrel.gov/gis/images/us_germany_spain/pv_map_us_ge... and more if you compare to northern Germany. Anyway some parts of the US have significantly higher power costs than others (not surprisingly these are generally good solar sales markets)

So, it sounds like most of the reason for the higher cost in the United States is that solar panels aren't a common sight - they have to be marketed more heavily to the end consumer, and power companies have to ensure that the system is safe to hook up to the grid.

I got solar a while back, and the company seems desperate for customers. They call and want to throw parties for my friends at my house, ask for referrals, etc. I think part of the challenge is that solar here in the US is still a pretty big up-front expense. We need to get the financing figured out better. Maybe the power company should own the panels...

SolarCity has some interesting options where they can install their systems for free and rent it out to you, on a per kwh or per month basis.



I don't understand why more people haven't taken them up on this offer. If it really guarantees you cheaper power and you don't have to put any money in, what's the downside?

These are some of the reasons that discourage people I know:

* Having to make a decision

* Opportunity cost (doing this deal means not getting some other solar arrangement and means not getting next year's better technology)

* "To qualify for financing, you need to have excellent credit (a FICO score of 700 or greater)."

* Some of us don't like companies that keep basic information off the Web and require you to talk on the phone to a sales rep: "Availability of SolarPPA and SolarLease vary by location based on what your local utility company prefers." ... "Financing terms vary by location and are not available in all areas. To find out which plans are available in your area, request a free consultation."

* Not knowing people in-person who will vouch for the company's honesty and good service.


I have a solar city PPA.

I suspect what you see on their website is just to grab customers. They don't try to snow anyone, at least IME. They will give you sheets that show exactly what they estimate and are willing to guarantee a year, and show exactly how all the numbers are derived.

5 of my friends (all engineers, actually) are doing PPA's as well.

A few things:

1. Sadly, a lot of folks try to compare generation charges vs what solar city is asking you to pay.

For example, in my area, Pepco's generation charge is 8.9 cents, and my PPA with solar city is 6.5 cents. Not so great, right?

However, when you include pepco's distribution charges, various tariffs and taxes that i don't have to pay solar city, etc, the actual pepco cost is closer to 14 cents a kwh (i'm going by my actual power usage divided by actual utility bill cost).

I am probably a weird case, but i have saved plenty this year. Since i'm on a PPA, as long as the PPA rate stays below pepco's rate, i will always save money.

2. The PPA numbers they guaranteed me vs actual generation amount is pretty spot on. They are very good at calculating the actual power generation of the panels. They do not overpromise and underdeliver (and as i'll get to, they guarantee this by contract). For this year, I was guaranteed 10400kwh of power at 6.5 cents, and so far, i've generated ~10320kwh with 4 days left.

For example, I know they calculate historical cloud coverage using real data (google earth, et al)

The PPA contracts have two sets of performance guarantees: Under and over:

First, for every kwh they guarantee but do not deliver, you get exactly the right amount of money back. IE i was promised 10400kwh this year, and paid 6.5 cents per kwh for it. If i do not generate that much, they pay me exactly 10400-actual generation * 6.5 cents. So you always at least get your money back (though yes, this is effectively giving them a loan). In some PPA's they do the refund price is greater than the actual price, so that there are teeth to them not meeting the guarantee.

The other underperformance guarantee is that if they are under performing by more than 10%, they are required to do whatever is necessary to ensure this does not happen the next year, or they are in breach of contract (and there are plenty of penalties on their side for this). I know of cases where they've installed tracking systems, etc, in order to make this happen.

They also have overperformance guarantees. If my system overgenerates (which for me, is profitable, as i'll get to), I pay 6.5 cents per kwh, up to 20% of the yearly number guarantee. Over 20%, I don't pay them unless i am able to sell the power myself.

So you do have upper/lower bounds on the numbers, set by contract, though historically solar city installs are within a very small percentage of the guaranteed numbers

3. At least for me, overgeneration is profitable. Maryland is a net energy state, and pepco is required to pay me the residential generation rate. It comes in the form of net energy credits that carry over month to month, and any remaining excess is paid out in real money at the end of each year.

So if i were to generate 100000 kwh on my panels (let's assume this is under the 20% number i gave above), but only use 10000kwh a year, i would owe solar city 90000kwh6.5 cents. Pepco would then be required to pay me 90000kwh8.9 cents.

So you can actually make money on the deal if solar city messed up the numbers.

4. Because it's a PPA, i am not responsible for anything but giving them access to my roof. They are also willing to guarantee all roof penetrations, and any repairs needed because the panels are there. If the panels explode, break, etc it isn't my problem. Any defects/failures that are in the panels does not suspend their performance guarantee.

Note that I am also a prepay PPA, so my PPA rate never increases. If you can float the money, and will stay in the house for a long time, you should always be able to make your money back, unless your local utility suddenly decides to start charging people a lot less.

The real case it doesn't make sense is if you are going to need to break the lease.

Rereading the above, I realize it sounds a bit like a commercial, but it's really not. Other than the lease length issue, it's often a pretty good deal. The funny thing is, i'm moving, so I will end up transferring the PPA when I sell the house. Even though i prepaid, it looks like i'll still make the money back that I spent in increased home value. (People value homes in funny ways)

What is the minimum lease period?

No idea. I didn't care, but it's probably at least 10 years. Part of their money from PPA's comes from selling renewable energy credits/etc, i'm sure the lease period length accounts for this.

Article on Business Week: "Solar Energy Is Ready. The U.S. Isn't"


One factor that does not seem to have been explored is financing costs. As I understand the situation in the US, residential solar is often financed by banks, and capital for this type is expensive right now, leading to high costs. Anyone in the industry know whether that could account for the cost discrepancy?

You sure about that?

Interest rates are at all-time lows. Lending standards may make loans unavailable, but the cost of capital is anything but high.

well its the tax breaks of course silly. In the UK the grants for solar used to guarantee around a 8% return - this is a tax break for the Upper middle classes who can spend $20k or so.

This is a result of the silly panic over fukishima in Germany and the greens being brought off to keep Adrea Merkal in power.

Germany had a lot of solar a long time before Fukishima.

Germany's use of solar drove up prices of silicon in 2004.


> The price of solar panels fell steadily for 40 years, until 2004 when high subsidies in Germany drastically increased demand there and greatly increased the price of purified silicon (which is used in computer chips as well as solar panels).

If you want to spur private investments it seems to me smarter to target the middle class than those closer to the welfare benefit system.

Home owners are a lot more willing to put money into their property today, i.e. invest money today for the vage promise of the government paying it back over the next 20 years. This seems a much more value creation oriented idea than just to stimulate short term consumption.

The voters in Germany might want to to increase funding for Care homes for the elderly or funding for start ups not providing a subsidy to well-of middle class.

No it’s not, silly. There aren’t any tax breaks for solar installations in Germany. There are guaranteed prices energy companies have to pay for solar energy from small private installations.

And besides, this is about the cost of the installation. You did read the article?

There's a tax break right in the article:

"They pay more in sales tax (German installers are exempt)."

But you're right, that the largest subsidy is not paid out of tax money, but through a (very large [0]) mandated surcharge on private utility bills. There's little practical difference. It's functionally equivalent to a tax subsidy funded by a tax on electricity.

[0] http://www.reuters.com/article/2012/09/25/eu-oettinger-idUSL...

That’s not a tax break specific to solar installations. In fact, it’s not a tax break at all. It is just a consequence of how German tax law is constructed. It has nothing to do with subsidizing solar installations.

If you register your private solar installation as a business, you are exempt from paying sales tax if you also pay revenue tax (= sales tax) for the energy you are selling. Just like the baker buying her oven, if a business buys something for the business, it is (usually) exempt from paying sales tax for it – since sales tax is supposed to be only paid once, not several times.

You know, what annoys me is ignorance about the actual policies and then pontificating as if you have it all figured out.

if the tax law is constructed to have advantages for these "home businesses" then its a tax break and don't get me started on the "hobby" farms that get subsidy's from the CAP budget.

An I am a pro EU guy you can see why Ukip are gaining in popularity

>There aren’t any tax breaks for solar installations in Germany. There are guaranteed prices energy companies have to pay for solar energy from small private installations.

That's even better than a tax break. Who can turn down free money?

That’s not the point. The point is the ignorance on display here. If you don’t even know the basics of a policy you have no right to talk about it.

The installation is the most expensive part. The hardware itself is cheaper in the US, most people just don't know how to install it properly (and there's no detailed guide on the topic, either).

I have never understood residential solar. Seems like a gimmick. Why would I want these panels on my roof? It seems like hosting a server in your basement. It is appealing in theory, but silly in practice. If I just hosted my panels at a site where other people hosted their solar panels, you could probably install it for less than $1.00 per watt.

Well for one, in some parts of the country residential solar means a $0/mo electric bills and in somes cases you spin the meter in reverse and build a credit. The panels themselves are maintenance-free, have 20-30 year warranties and (personally) just look plain cool.

I have a family member who has a large array on his roof and he runs his entire house and charges his Tesla all off the grid. He's still connected, but in most cases he runs a $0 bill.

I think jcampbell1's point is why bother putting the pannels on top of your own roof? Instead, buy your pannels on some other shared property that is already connected to the grid, and share the overhead costs. The same power would be sold back to the grid and offset your own home's power. I call this the co-op model, and I think it's also appealing for areas where not everyone is a home-owner.

It turns a surface that mostly transfers heat into your attic into a surface that transfers less heat into your attic and a great deal of electricity into your house during the part of the day that requires the most air conditioning.

If you live anywhere that's hot much of the year, it's a great deal, dropping your electric bill precipitously and recouping costs often in 2-4 years in that type of situation (as opposed to 7-12 in less reasonable areas). Also due to the nature of how cheap the electricity is during the day, you can set the A/C low during the day "coast" off the temperature differential during the night closer to a temperature you'd like.

Bad areas for solar: Constant cloud cover, Lots of overhanging Trees, far northern latitude. I would not use it in Alaska, Portland or Atlanta for these reasons.

Wait Atlanta? I was with you until you hit an incredibly hot city with a therefore powerful sun.

Atlanta is FILLED with very tall trees. Which then fall on your panels and break them.


Those large green trees? They're 60-160 feet tall. Drop branches every severe wind. There all over the place (Although most are under a hundred feet tall). They knock out our power lines, our cable lines and when they fall, our houses (luckily most people remove them long before that point).

There are certainly suburban areas near Atlanta where they've been clear cut in their past as part of their transformation into chicken farms (Before being turned into housing), and those locations would likely be EXCELLENT areas for solar panels.

But anywhere that has original trees, nope.

There may be advantages if you are using it to run an air conditioner somewhere sunny. Peak output will sync up to peak usage, and you won't need to take the losses stepping it up and down for distribution.

There might be a bit of conspicuous environmentalism, but it's probably mostly about permitting and property rights issues. No one would lease you the roof for $50/month so that you can install panels over them, but they'll happily install their own.

This is something that's allowed for in some solar regulations, using a system called Virtual Net Metering. It works the same way as normal net metering (where power sent back into the grid runs your meter backward), except that the power output can be allocated over multiple people's electric bills. IIRC, there are community solar projects that do exactly what you describe.


Thanks for sharing the link. Virtual Net Metering looks interesting. That particular regulation sounds like it is designed for a multi-tenant use case, and the panels must still be on site. It would be nice if Virtual Net Metering was available even if my panels were co-located at some muni site.

You can use otherwise unused space - that's the theory. Now if you install solar heating panels on your roof you can actually heat your house and warm your water with that, even in winter. They're fairly efficient. Nobody does that in germany though, since it's more economical to sell the power generated by solar panels.

Heating panels are also simpler and cheaper then the eletricity generating ones.

That's exactly what's happening in some places in Vermont. (I know, not the first place you think of when you hear 'solar.') People can buy shares of a solar co-op and get credited on their power bill for their portion of any electricity generated. It will be interesting to see how that model works in the long run.

In the UK, energy used in homes accounts for more than a quarter of all national energy use and carbon dioxide emissions. Space heating consumes the largest amount of energy for most households. An alternative to solar panels is simply better insulation for housing. This can dramatically cut energy consumption.

BTW, Germany has been a pioneer in this regard too as it developed the PassivHaus standard for energy efficiency in buildings. The standard is over a decade old and it's been demonstrated that existing or older housing stock can also be retrofitted to meet the standard (although it can be expensive).

But even without the rigour of the PassiveHaus standard, there are many other techniques to substantially improve the insulation of existing buildings so their energy costs shrink. To me, it seems sensible to think about reducing our energy consumption as well as finding alternative, cleaner (greener) technologies.

Well, proper insulation of houses has been standard for many decades in properly developed countries. UK is kinda infamous over here for not knowing how to insulate.

Examplified in this joke: 'Why do Englishmen put their pipes on the outside of the house? - Because it is simpler to exchange them when they freeze.'


Real estate: if data centers could not stack servers vertically I imagine there'd be a business to renting out rooms in your homes to Google!

Also transmission to places where real estate is cheap is costlier than you'd think, largely due to red tape.

What else is your roof doing during the day if it is not raining? In the hotter areas of the US, covering your roof in solar panels not only generates electricity, but reduces attic temps and the need for A/C.

Integrating solar panels into rooftops seems to be a big opportunity in the future:


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