Comparing Photovoltaic Costs in Japanese and U.S. Residential and Commercial Markets

March 28, 2014

EETD's Electricity Markets and Policy Group announces a new joint Lawrence Berkeley National Laboratory and National Renewable Energy Laboratory report, "Comparing Photovoltaic (PV) Costs and Deployment Drivers in the Japanese and U.S. Residential and Commercial Markets." This work investigates the rapidly changing and expanding Japanese PV market, offering primary research on the similarities and differences between the Japanese and U.S. markets, particularly from a PV cost perspective. The research team collected data from a diverse group of more than 80 Japanese PV installers.

Specifically, they compare hardware costs, "soft costs" (non-hardware balance-of-system costs), and installed system prices for residential (less than 10 kW) and small commercial (10–50 kW) PV systems in Japan and the United States. The report finds that Japanese PV systems cost 6 percent less than their U.S. counterparts in the residential ($4.64/W versus $4.92/W) and 20 percent less in the small commercial ($3.59/W versus $4.51/W) sectors in 1H13, respectively.

The report examines the Feed-in Tariff (FiT) policy driving much of the growth in Japan, finding that the differential FiT returns among sectors are contributing to a shift in the Japanese market towards large utility-scale and commercial PV installations, away from the residential sector that has historically dominated the market in Japan.

The analyzed soft costs include customer acquisition; installation labor; and permitting, inspection, and interconnection (PII) costs. The report found that soft costs account for a significantly smaller proportion of system price in Japan than in the United States. Soft costs account for 44 percent of Japanese residential PV system prices and 39 percent of Japanese commercial systems, compared with more than half the system price in both segments in the U.S. PV markets. Among the specific soft costs examined, customer acquisition and system design account for the largest difference between Japanese and U.S. costs.

Two of the key drivers impacting costs in the Japanese market are (1) widespread practice of cross-selling PV by companies already selling other products and services to prospective PV customers and (2) the use of standardized PV system designs. These market characteristics increase the economic attractiveness of PV and represent potential cost-reduction opportunities for U.S. companies and policy makers.