Australia has led way in slashing solar costs

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RMI

In 2013, the United States installed more solar photovoltaic (PV) capacity than either Germany or Australia for the first time ever.

(The U.S. has tripled their combined population, so arguably this should have happened long ago…). With the decline of feed-in tariffs and other incentives in Germany, it is likely that the US will continue to outpace that country in new PV installations.

However, the U.S. continues to lag behind global PV leaders Germany and Australia in another important category: prices for residential systems installations. As of Q2 2013, the average installed residential system price was $4.93/W compared to Germany’s $2.21/W and Australia’s $2.56/W. That needs to change.

Whether you look at U.S. DOE SunShot targets or RMI’s own Reinventing Fire vision, which has the U.S. solar market scaling from 4.5 GW PV installed per year to 20 GW, system costs have to come down to accelerate residential and commercial customer adoption. A new analysis and report from Rocky Mountain Institute (RMI) and Georgia Tech Research Institute (GTRI)—Lessons from Australia: Reducing Solar PV Costs Through Installation Labor Efficiency—identifies opportunities for the U.S. solar market to take important steps in that direction.

Non-hardware costs (permitting/inspection/interconnection (PII), customer acquisition, installation, and margins/overhead) now dominate system prices in the U.S. For sub-10-kW systems, 80 percent of solar system cost decline in the U.S. since 2008 has been due to hardware price reductions. In the U.S., non-hardware costs now account for 70% of system costs. Setting aside margins/overhead, the U.S. spends $1.22/W on PII, customer acquisition, and system installation. PV leaders Germany and Australia, on the other hand, spend just $0.33/W and $0.65/W, respectively. The U.S. clearly can and should pursue significant cost reduction opportunities to eliminate this difference.

RMI and GTRI previously launched a PV installation labor data collection and analysis effort under the SIMPLE BoS project, which investigated differences in non-hardware costs between the U.S. and Germany, including installation labor. This 2013 report provided a detailed breakdown of primary drivers of PV installation labor cost differences between the U.S. and Germany. Now, in 2014, RMI and GTRI are following up on that groundbreaking work with further investigation of Australian solar installations.

Australia has emerged as a dominant player in the world residential solar market, with more than 10 percent of households possessing a solar system on the roof and system prices rivaling Germany’s. Even as feed-in tariffs (FITs) have declined, demand in Australia for residential rooftop solar has remained high and costs have continued to decline. Much of this is due to a focus on customer-owned PV, and thus an extremely competitive marketplace around system cost. Both retailers and installers have been forced to lean processes in order to offer lower pricing and gain market share; they rely on high volume rather than high margin to remain profitable. According to our on-site analysis, Australian installers are averaging 6.1 labor-hours per kW solar installed, while the U.S. is more than 50 percent higher at 9.4 labor-hours per kW installed. This is similar to averages observed in other industry surveys and studies.

Unlike Germany, Australia does not use motorized lifts, scaffolds, or other advanced installation equipment. Instead, economic incentives drive labor—installers in Australia receive a flat rate per installation, and thus make greater profit by mounting more systems in less time. That Australian installers were able to shift so quickly towards a one-day install as an industry standard indicates that Germany is not an outlier; optimized installations are possible and should be pursued at both the U.S. and international levels.

We noted several factors that may increase efficiency based on observations and analysis of installation practices in Australia, Germany, and the U.S.:

  • Optimizing the pre-installation process
  • Reducing time spent on base installations, especially for clay-tile roofs
  • Pursuing rail designs that minimize installation labor
  • Reducing the number of meters installed in each electrical system to monitor PV output
  • Viewing the one-day installation goal as an opportunity to reduce time spent on non-production activities such as meals, travel, breaks, setup, and cleanup

These opportunities vary in magnitude, but in combination could have a significant impact on the number of labor-hours/kW U.S. installers typically invest in system installations. We believe installers in the U.S. could approach or go beyond Australian levels of efficiency by pursuing these primary measures, as well as other opportunities that help the industry approach the one-day installation as standard. If it can be done in Australia and Germany, there is no reason it cannot be done in the U.S.

We hope this report on Australia, the report on Germany, 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.

 

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