One reason why solar is more expensive in the USA than Australia: Larger installer profits

According to the data, average margin for a rooftop solar installation in the United States market is 40 per cent. In Australia, some installers are struggling to get into double figures.

For Australian consumers, this means some of the cheapest prices for installed rooftop solar in the world – a fact more than 1.5 million homes and businesses have already taken advantage of.

But the situation with installers and the cost of rooftop PV is an interesting one. In the US, most states retain a generous feed-in tariff, equivalent to the full retail price. In Australia, tariffs have been slashed to a fraction of the retail price.

But the US market is also subject to heavy “balance of system” costs, mostly related to the planning and approvals process, although this is being smoothed out. Still, Australian solar system prices average around $1.63/watt, less than half the $US3.50/watt average price for residential installation in the US.

Part of this is explained by the intense competition in the Australian market, the impact of large utilities in the rooftop installation market, and the tendency for many Australian households to be happy to put up “cheap” solar panels, equipment of lower quality.

But the mark-up from installers is still quite stunning. Geoff Bragg, from the Solar Energy Industries Association in Australia, says margins for Australian installers range from around 17 per cent to 26 per cent. “Any Aussie installer marking up less will be heading for closure in my opinion,” he said. And many have in recent years.

It is one of the ironies of the solar market that utility scale solar in the US is so cheap, while its rooftop installations are so expensive. In Australia, it is the exact reverse.

The good news for consumers in both countries is that rooftop solar module prices are about to fall sharply, with analysts predicting that module costs could fall by nearly half in the next year to as low as US30c/watt – due to massive amounts of new capacity, and significant cost reductions in the manufacturing process.

As for manufacturers, Deutsche Bank expects margins to contract to the low teens later in 2016, but in 2017 could fall into the single digits. That will put some pressure on share prices for the listed manufacturers. That might make consumers as the happiest of all the components of the solar supply chain.

© 2016 Solar Choice Pty Ltd

Giles Parkinson

Giles Parkinson regularly contributes unique content to Solar Choice News. Giles is the founder and editor of clean energy industry news service RenewEconomy. He is a journalist of 30 years experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the founding editor of Climate Spectator.
Giles Parkinson