Is Solar Energy is More Expensive in the USA than in Australia?

Is solar energy to more expensive in Australia than it is in the US? The answer is no. Once you have a solar system installed the cost of producing energy is virtually zero no matter whereabouts on the planet you are. Where the big differences come into play is at the beginning. The cost of buying solar panels and then having them installed is another matter. There are two costs involved in the process that is going to do most of the damage to your bank account. The first one is the cost of getting the permits necessary from government authorities to install the PV system. The other cost which regularly blows out in the US is the cost of the installation.

If you are installing a standard system in the United States, it’s going to cost you close to double to have it up and running on your roof than the same system will in Australia. Most of this extra cost is going to be charged first of all by the companies selling PV systems. And in the final hit to your bank balance will be done by the installing company. Surprisingly, in the US market, it might be cheaper to go and build a utility-scale solar plant than it is to put one on your roof at home.

More profit equals higher costs to somebody.

Experts consider the reason why US installers charge margins up to 65% profit, against around 26% for their Australian counterparts is due to heavy competition in the Australian market. Even with a markup of 26% Australian installers like Eurosolar and Truevaluesolar are doing very nicely thank you. Another factor they say is driving down prices in Australia at the moment is the large utility companies. They pay what is called a “feed-in” tariff for home based solar systems putting excess supply back into the grid. Until this year the feed in tariff was close to what the utility companies charge their customers for power. As of this year, most of these feed-in tariffs have dropped by up to 95% for home suppliers.

The dramatic drop in feed-in tariffs in Australia has meant that people are less inclined to install a solar power system for their homes. To counter this, the energy supply companies have raised the price of electricity for domestic consumption by over 300% in recent years. None of these types of massive fluctuations has occurred in the highly regulated US markets. Another primary cause of the recent drops in the price of installing home solar systems has been advances in technology and manufacturing. Smaller panels are now more efficient than they were even two years ago and they can be manufactured faster and cheaper.

Advances in technology mean lower costs.

Experts in the area are currently stating that with the current technology in panel design and manufacture, prices probably cannot go much lower. Some of these price drops have been truly dramatic, in 2011 to 2012 the price of installing a PV system in Australia decreased by 14%. There have been price drops of up to 80% in four years for some PV systems generating less than 10 kW. This kind of drops has allowed a dramatic increase in the number of systems being installed which means much more work for installers.

The amazing thing about Australian uptake of solar systems is that it is virtually an unsubsidized marketplace. Regardless of that, Australia is still one of the three cheapest places on Earth to buy and install a solar system. Some heavily subsidised countries, like Japan and France, are considerably more expensive still. When you start looking at getting a solar system installed, the installing company will talk about two different types of costs involved, hard costs and soft costs. Hard costs which represent nearly 50% of the total cost are the hardware, labour and the like. Soft costs are things like permits and fees, taxes and the installing company’s profit margins.

In Australia a lot of savings are being made in the soft costs area, the Federal government has regulated some of the taxes and fees away from other authorities and streamlined the system. The dollars involved do not sound revolutionary, but saving nearly 90 days on an approval permit is a significant saving. Statistics suggest the soft costs involved in countries like Italy, Australia and Germany are about 40% minimum and up to 60% cheaper than the same expenses in the United States. Compared to Australia of course, the market in the United States is potentially huge. Australia had about a six-year lead over the United States with its regulations and experience, in 2013 the United States started closing this gap rapidly.

Record installations every year.

2014 to 2015 saw the United States install a record 3300 MW of PV system power. That translates into the US market growing from just over $8 billion a year in 2011 to a whopping $11.5 billion in 2013. On top of that, in 2013 California introduced a subsidy system for PV systems. This forced down the price of PV systems by 15% in that state in the first six months of 2013 alone. Other than subsidies, if US regulators seriously decide to drop the soft costs currently charged solar installation companies and homeowners. They will then seriously push down there now extremely expensive installation costs.

Mostly due to the low installation costs and to the high feed-in tariffs that have been available up until now for Australian homeowners, Australia has the highest per capita uptake of solar PV systems. In mid-2016 approximately one in seven homes in Australia has either solar, wind generators or both. About 16.5% of Australian homes are running some renewable system with 15% being estimated as solar. The nearest rival to 16.5% uptake is Belgium which has a current absorption of just under 5%. One thing, however, should be noted, just because the country has the most solar panels does not mean it produces the most solar power. A lot of the systems installed in Australia have only a small output. Most of these smaller systems are 1.5-5 kW in capacity. A typical air-conditioner can use up to 2 kW to run.

Writen by Jayden Vogt