Australia's lessons to US solar

New analysis shows installation labour efficiency practises used in Australia could close the gap for residential system prices in the US market.

Rocky Mountain Institute

In 2013, the United States installed more solar photovoltaic capacity than either Germany or Australia for the first time ever. (The US 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 US 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 US DOE SunShot targets or RMI’s own Reinventing Fire vision, which has the US 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 and Georgia Tech Research Institute – Lessons from Australia: Reducing Solar PV Costs Through Installation labour Efficiency – identifies opportunities for the US 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 US. For sub-10-kW systems, 80 per cent of solar system cost decline in the US since 2008 has been due to hardware price reductions. In the US, non-hardware costs now account for 70 per cent of system costs. Setting aside margins/overhead, the US 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 US clearly can and should pursue significant cost reduction opportunities to eliminate this difference.

RMI and GTRI previously launched a PV installation labour data collection and analysis effort under the SIMPLE BoS project, which investigated differences in non-hardware costs between the US and Germany, including installation labour. This 2013 report provided a detailed breakdown of primary drivers of PV installation labour cost differences between the US 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 per cent of households possessing a solar system on the roof and system prices rivaling Germany’s. Even as feed-in tariffs 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 adopt 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 labour-hours per kW solar installed, while the US is more than 50 per cent higher at 9.4 labour-hours per kW installed. This is similar to averages observed in other industry surveys and studies.

Unlike Germany, Australia does not use motorised lifts, scaffolds, or other advanced installation equipment. Instead, economic incentives drive labour – 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; optimised installations are possible and should be pursued at both the US and international levels.

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

– Optimising the pre-installation process

– Reducing time spent on base installations, especially for clay-tile roofs

– Pursuing rail designs that minimise installation labour

– 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 labour-hours/kW US installers typically invest in system installations. We believe installers in the US 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 US.

We hope this report on Australia, the report on Germany, and all follow-on work under the SIMPLE BoS project will help the US industry continue to reduce solar PV costs and enable the widespread, cost-effective deployment of residential solar PV systems.

*All amounts are in US dollars

Originally published on the Rocky Mountain Institute blog. Reproduced with permission.