Visualizing the Installation Market as a Factory

The photoelectric zeitgeist tends to focus on manufacturing and its symbol, the factory. This makes sense because the factory has a concrete footprint, a time line to completion and most importantly a measurable cost. As an added bonus we have mental shortcuts (research even) that helps us understand how a 1 GW factory is more efficient and competitive than a 100 MW facility.

I think we fall short when it comes to visualizing what a 1 GW installation workforce looks like. We rarely talk about how creating a 1 GW installation workforce requires a significant investment comparable to building a factory. I think this lack of recognition causes problems. It allows racking manufacturers to claim savings of 50 cents/Watt on installation without anyone calling them on the hollowness of their statements. More generically, we don't seem to be thinking about how installation costs will change as markets transition from 100 MW to 1 GW. This lack of consideration allows us to be distracted by technologies that claim installation savings which will most likely never exist. We're missing the fact that these supposed savings are more likely to be captured naturally by competitive pressures and learning by doing effects inherent is scaling up the size of the installation market. This is similar to the improvement in performance associated with scaling up from a 100 MW factory to a 1 GW factory that some of us have come to take for granted.

Big Installation Market = Cheaper Installation Costs = Higher Panel Price Sensitivity

I suspect a big part of the reason why Germany was able to soak up so much PV in 2009 was because they had a multi-GW workforce. By way of analogy with manufacturing, they had already made the jump from the 100 MW facilities up to the GW level and captured all the associated efficiencies along the way. When the panel prices started plummeting in 2009 the Germany market with it's low installation costs was more sensitive to the drop in panel prices than anywhere else. It's now been a year since Germany's PV market began its surge (June 2010) and Germany is still the only multi-GW market around. Germany still has the lowest installation costs and by extension they still have the greatest sensitivity to falling panel prices.

What does it all mean? Sensei say the zeitgeist is out of balance. There needs to be more focus on the installation side of things. Only then will there be peace.

The Photons, Germany and the EEG/FiT - Plus Thoughts on Germany

Photon Consulting is the smartest kid in the Solar Analysis class. They are the only consulting house that deserves any respect - by respect I mean, when you think they're wrong you need to take a moment and think again. They will smoke you.

Perhaps there's something about using the term Photon in your moniker because the folks at Photon Magazine also deserve props. Their managing director Anne Kreutzmann is the only one I know of within the PV community who has openly spoken out against the current FiT structure in Germany. She has said the obvious. Hey guys look... The FiT is set higher than it needs to be. This high FiT is going to result in a lot more installed capacity than what has been planned for. There are two options. Option 1. Let the FiT stay where it is and apologize in the aftermath Option 2. Recognize that the FiT is too high, control it and suffer a slightly lower growth rate. Option 2 is much better because it gives the PV industry more control over its destiny.

Option 2 points towards sustainability. Sustainability jargon gets thrown around in a lot of smelly ways but the core idea behind "sustainability" is balance. Balance is something the PV industry needs in a big way. There is much too much snake oil and slick-shit advertising these days.

Thoughts on Installation costs in Germany

Many companies have claimed they have some sort of quick snap or stick on technology that lowers installation costs. That's great press but it needs to be examined. We should ask two basic questions.

Question 1: What is the underlying installation cost assumptions of these companies? Question 2: What trajectory are installation costs actually on?

Answer 1: The general assumptions are $1/Watt in installation costs. This is currently a reasonable assumption for the US.
Answer 2: No one knows for sure what installation cost will be in three years but it's a fair assumption to expect the trajectory of installation costs to follow Germany's example. That means installation should fall from $1/Watt to around 40 cents/watt.

The upshot here is all these fancy technologies that claim to lower installation costs are assuming much higher installation costs than we can reasonably expect in the future. To put it another way, a 25 cent/Watt mounting structure that saves you 50% on installation labor will not be competitive for much longer.

I'm not saying all these technologies that claim to lower installation costs are bunk. Just pointing out the obvious trend in installation costs that we're seeing in Germany and how this will project into future markets.

Price Breakdown of a Photoelectric System

Here's a price breakdown for a 12.3 kWp system in Germany. Prices are in Euros and are pre-tax.

German Panels - 2.02 Euro/Watt
Inverters - .33 Euro/Watt
Racking - .156 Euro/Watt
Cabling - .038 Euro/Watt
Mechanical installation labor - .195 Euro/Watt
Electrical installation labor - .068 Euro/Watt
Surge Protector - .012 Euro/Watt
Total - 2.819 Euro/Watt

Note: Total with Chinese panels (Yingli) - 2.455 Euro/Watt

15.12 kW
Installation cost - .30 Euro/Watt