Around the world, the residential solar sector is strong. Lockdown restrictions have given customers more reason to pay attention to their energy bills, and more time to pursue home improvements like solar.
In Germany, capacity of sub-10kW solar systems installed from January to August 2020 is 22% higher than for the whole of 2019, according to Bundesnetzagentur data. In Australia, where one in four households already has solar, data from the Clean Energy Regulator indicates that the residential solar sector is on track for another record-breaking year. Installations in the first eight months of 2020 were higher than all of 2018, and over 30% greater than the same period in 2019.
In the U.S., Energy Information Administration data shows that installations for the first seven months of 2020 were 21% higher than for the same period last year. Over 1.8GW of new residential solar systems have been brought online in 2020, as American households increasingly turn to rooftop solar for energy savings and resiliency. City permit offices were sitting on large backlogs of rooftop solar permits as they resumed normal operations and have now mostly returned to normal activity levels.
Germany and Australia have similar hypercompetitive market dynamics, which have resulted in some of the cheapest solar systems in the world.
In Europe and Australia, most solar systems are sold and installed by small firms local to the homeowner, often family firms that also do roofing or electrical work. This means that sales and marketing costs are relatively low and competition is high. Some homeowners use online quote aggregators to find a selection of local firms from which to request quotes.
Despite European solar systems being cheap, the economics are often poor, because systems are paid much lower rates for power exported (“export tariffs”) than the consumer pays to buy power. Additionally, northern Europe is less sunny than Australia or California. Calculated payback periods of nine years are usual, but often based on unrealistically high estimates of how much electricity consumers will be able to use at the time of generation to replace power bought from the grid.
In Australia, the economics of solar for households are much better, assisted by a generous government subsidy scheme, plentiful sunlight and high tariffs for electricity and solar exports. In 2020, the average Australian can expect a solar system that lasts 25 years to pay itself off in seven.
Meanwhile, U.S. residential solar systems are much more expensive and, unlike in Europe and Australia, there are large national installation firms like Sunrun or Vivint (which recently merged). Most installers spend a lot of money in sales and marketing, either in-house or by purchasing external leads, rather than picking up customers through local advertising and word of mouth. One reason for the relative consolidation of the U.S. market is that U.S. tax incentives favor solar being owned by investors who can fully monetize the tax benefits, rather than the homeowners or businesses that use the power. Larger installation firms are able to form portfolios and bring in investors, and hence extract more value from rooftop solar systems, thus being able to charge a higher price to justify spending vast amounts of money on customer acquisition and overheads. Tax credits have also created a market for lead generators and other intermediaries that inflate the final price for the homeowner, while still offering a five- to eight-year payback time in California and most other active U.S. solar markets. A relatively minor factor in the high U.S. capex is import tariffs on U.S. modules, which mean that U.S. customers typically pay $0.33/W for modules, compared with $0.21/W or lower in other markets.