Halving the Cost Per Watt of Solar Energy in the Average US Home


Andrew Birch, the former CEO of Sungevity, explains why Americans are paying twice the price for energy than other countries – and how to fix this.

Andrew Birch ran Sungevity for roughly 10 years and has just completed a comprehensive tour around the world visiting various . His tour included Europe, Australia, Asia and the United States. According to his statements, the solar industry is growing rapidly all around the world, except in the United States. So, why are we lagging behind in the US?

One of the major reasons why solar in the United States is lagging behind is the fact that Americans pay over twice the price their overseas peers are being charged for solar energy. Here is what this means – your average 5-kilowatt solar system used for residential purposes costs the average American approximately $10,000 more that it would cost a resident from, say, Europe. And the solar panels which are used in all of the countries that Andrew Birch visited are generally the same make and model. So, what’s happening in the United States?

The answer is quite simple: red tape everywhere.

According to Andrew, complex US regulations have doubled the price of solar energy. And this is happening right in the middle of the land that calls itself the leader of technology and of the free market. So, what regulations are we talking about?

There are three solar energy regulations, actually: tariffs, permitting and code. These three regulations are believed to be slowing down the residential solar industry significantly in the US. In other words, changing these regulations for the better should be one of the main concerns of the United States government in 2018 – if the government wants residential solar to pick up the pace, that is.

As an example of how solar regulations are impacting American solar consumers, let’s take a look at Australia. The country has over 2 million solar systems of various sizes and capacities installed. In Australia, installation costs are just $1.34 per watt of solar power. In the US, installed costs are $3.25 per watt. This is more than twice the cost! Why?

The answer is simple: Australia does not have a permitting process in place. All one has to do to install and use solar panels is make an interconnection request on the Internet and then install the solar system. Simple and efficient! In the US, on the other hand, one has to go through all of the city bureaucracy (otherwise known as valueless work). This bureaucracy process adds approximately 47 cents to every watt of solar energy, as well as a two- to six-month delay.

The next problem in the US is code. In Australia, all solar installers are accredited by a government body known as Australian Clean Energy Council. They also approve all solar products and implement a code of conduct that is voluntary. In other words, solar installers are free to make their own code of conduct and market it to consumers who, in turn, get to select the best installers for their needs.

In the United States, on the other hand, the National Electrical Code managed to impose a “best practice” that doubles the installation time of solar systems when compared to Australia. Also, the National Electrical Code manages to add 49 cents to every watt of solar power due to the hardware expense it imposes on installers coupled with the installation time. It is important to keep in mind that there is almost no difference between the safety and the quality of American and Australian solar installations.

The third regulation that is harming the US residential solar industry is tariffs. Anyone can import solar hardware (like solar panels and solar cells) in Australia without paying any kind of tariff. And this is a very smart choice, considering the fact that the vast majority of jobs are in the solar installation and solar sales sectors, not in the solar manufacturing sector. In the US, tariffs add 21 cents to each watt of solar power.

Needless to say, cheaper solar in Australia means that solar systems are a lot easier and faster to buy. Of course, they are consequently cheaper and faster to sell as well. While acquisition costs per installed customer in the United States average around $2,500, in Australia they are just $400.

Because of the higher costs and the up to six months delay, cancellation rates in the United States sit at around 30 percent. In Australia, on the other hand, cheap and fast means extremely low cancellation rates for solar systems. Do you know of many other electronic devices that take 6 months to be installed? The cancellation rate alone adds another 42 cents to the price per watt of solar energy.

The remaining 31 cents per watt is due to problems with leveraging cheap solar energy in the US. Australians get access to low costs per watt and are expanding their residential solar industry rapidly. The bigger the solar industry is, the cheaper the price per watt is (this is known as economy of scale). And low prices means that solar is present everywhere in Australia – from low- to high-income homes – as opposed to the US.

So, Americans are paying $1.91 per watt of solar energy more than Australians. And Australia is just one example. In Asia, are around $1 per watt. In Europe, average costs of solar power are just $1.9 per watt – which is half the cost in the US. As a direct result of the high costs of solar energy, the US solar industry has just fallen 17%. And just 1.5% of the homes in the United States are powered by solar energy (Australia sits at 20%).

The Solutions to High Solar Costs in the US

Can the United States regain its leading position in the solar industry? It can, but radical changes need to be made in the solar regulations. Here are three changes that will almost instantly halve the cost per watt of solar energy:

  1. Eliminate all the unnecessary parts of the NEC code – especially the parts that don’t impact the quality and safety of solar installations in any way.
  2. Follow Australia’s example and replace time-consuming solar installation permits with online applications.
  3. Eliminate the solar tariffs that are killing jobs in the US and trust a free market to deliver the cheapest and best solar panels.

These three changes are easy to implement. And these three changes can halve the per watt cost of solar. We are now in 2018, and it’s just the right time for a positive change in the US solar regulations! Unfortunately, policies under President Trump’s administration could do some damage to the solar industry in America. Follow solar news to see what happens on January 26th, when President Trump will make an important decision impacting the United States solar industry. Hopefully, costs will eventually drop and countries everywhere will see the positive difference that going solar can make.






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