How do Australian solar prices stack up?

What was even more interesting was that this represented a significant reversal from the past when Australians paid about $2000 more than Americans per kilowatt back in 2008. So in the space of just three years we’d not just caught up with the US in PV installation competitiveness, but actually raced ahead of them. 

Since that study came out, Lawrence Berkeley has been busy examining how to get the US non-module PV installation costs down, and in particular, has been focussed on differences in the cost structure between the US and Germany. This research shows that in 2011 Germans paid $2700 less than Americans per kilowatt installed, even though they paid virtually the same price for the key piece of hardware – the solar panel or module.

With solar module prices having dropped so much in the past few years (they are a lot less now than what’s illustrated in the chart above), these non-module costs are becoming the key challenge for further cost reductions. As Jeremy Rich, the CEO of major solar retailer Energy Matters noted in an interview with Climate Spectator, a further 20 per cent cut in wholesale module prices would be a major technical achievement, but it would only make a small change to the overall price of a system for a consumer. Based on current module prices of around $600 per kW, a 20 per cent improvement would only reduce the total system price by about 5 per cent. 

Delving further into these different cost components Solar Business Services, in a report written in conjunction with Green Energy Markets, broke them down in the chart below for the Australian context. Between 2009 and 2011 there have been huge improvements across every single element of the total system installed cost, bar administration. Of course a large proportion of this is the imported hardware of modules and inverters; but reductions in margins, mounting, and installation were also important.

Cost component break-down for Australian solar systems – 2009 vs 2011

Source: Solar Business Services in Green Energy Markets (2013)

A recent blog from the clean energy think tank the Rocky Mountain Institute suggested Australia had matched Germany in terms of installation costs. However they were comparing Australian 2013 data with LBNL data from 2011 and not accounting for changes in module and inverter costs, which is not ideal. Pulling out the inverter and module costs, the LBNL data on Germany gives a cost of 85 cents per watt whereas Australia’s cost is about $1.70 – that’s a pretty big gap.

However there are reasons to suspect that the gap is not as wide as this if we examine the latest data on total system costs.

The March Solar Choice Price Index suggests Australians pay around $2.60 to $2.70 per watt fully installed (ignoring metering charges by network companies), inclusive of GST. Whereas in Germany they pay on average $2.11, exclusive of tax for systems below 10kW in size. Adjusting for GST suggests there is a gap of about 30 cents per watt between Germany and Australia. 

Compared to where we were back in 2008, being this close to the Germans is a remarkable achievement. But it would be even better if we could match the Germans and slice a further 30 cents off the price. The challenge is how.

Some of the difference is to do with system size. On average Germans tend to install systems greater than 4kW. However the picture is murky on how much a difference an increase in installation size might make.

At present the average Australian system being installed is about 3kW. According to the Solar Choice Index, in Sydney you’d only save 5 cents per watt from going from the average of 3kW to a 5 kW system, whereas in Melbourne it would shave off 22 cents. Germans are also known to employ greater levels of automation in installation. In addition customer acquisition costs are low there because households are now highly familiar with solar as a product.

Another option that sits outside of the solar industry itself, is addressing the costs imposed by network businesses.

When I had my solar system installed I was whacked with a $260 bill for the privilege of having the network send a person out to look at my solar system. They told me it was to upgrade my meter, but I know the meter wasn’t changed and was actually reconfigured remotely by the network business  The other justification was to ensure the safety of the system, yet the system had already been inspected by the Office of Electrical Safety. What’s more they wiped out any record of the $100 of generation I’d exported to the grid in the two months it took them to send a person around to my house. This is not an isolated case.