The Cost of Solar: America vs. the World

Although 2011 was a banner year for the U.S. solar industry, the country still lags behind the rest of the developed world in solar deployment. The U.S. installed 1.9 gigawatts of solar capacity last year, which is a good deal more than it has in years past; still, the E.U. accounted for nearly 75% of all new capacity, coming primarily from solar powerhouses Germany and Italy.

China, though only just beginning an aggressive push toward solar development, installed 2.2 gigawatts. The U.S. has a lot of work to do if we want play a role in shaping this dynamic market.

The reason for the difference in capacity is pretty simple - it costs more to develop solar in the U.S. than it does overseas.

Much of the disparity has to do with the divergent approaches to government support for the industry. In the U.S., federal government incentives, including the Treasury grant program 1603 and a tax credit for solar development, have spurred the growth of the solar industry in the U.S. over the last several years.

Additionally, state renewable energy credit programs have enabled investments in clean energy projects, but the level of all that support combined does not come close to that of European governments and those of other developed nations.

Over the last decade in Europe, governments established ambitious goals for renewable energy in order to reduce carbon emissions and take control of domestic energy consumption.

As a result, investment in solar exploded. Feed-in-tariffs that promote renewable energy development by guaranteeing a price per kilowatt and therefore, a predictable return, have been in place in Germany since the 1990s, and created a robust solar market in the country.

Other countries have also adopted feed-in tariffs as well, with Japan joining the movement in June of this year with some of the highest PV solar feed-in-tariffs seen to date. In China, the government uses eminent domain freely to promote favored projects and industries, and it has recently begun to use some of the massive capacity manufactured in the country in domestic installations.

In addition, the country’s newly revised 5-year plan calls for a target of 21 gigawatts to be installed through 2015.

Further government support for the U.S. solar industry is unlikely, as the issue has been politicized to the extreme. Before the 30% investment tax credit expires in 2016 the solar industry needs to figure out how to go it alone. We must lower costs and provide a robust return on investment, without continuing reliance on subsidies. In order to be competitive in the global market, soft costs must come down.

One issue that the solar industry needs to tackle is the web of permitting and interconnection regulations. In Europe, the costs associated with these activities are about ten cents per watt, while we generally shell out eight times that in the U.S. Project managers often struggle with the varying and complex permitting requirements that change from county to county, and certainly across state lines.

Because local jurisdictions may be less familiar with solar installation than other building and construction processes, multiple departments often have to sign off on plans, adding time and expense to projects. A streamlined permitting process would lower the costs of development and encourage growth within the sector, adding new jobs and more revenue to local governments.

Relatively simple changes could mean the difference between continued growth and falling behind. Solar is a maturing industry, and though some growing pains still linger, it is time for the policies and processes surrounding the industry to smooth the way, not raise barriers.

TAGS: Leadership
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