I have a project in Germany where we are exploring numerous technologies including solar photovoltaics (PV) and cogeneration. The installed cost of PV in the U.S. is ~$3-5/Watt whereas in Germany it's $2-3/Watt. Cogeneration installed cost between $2-3/Watt in the U.S. whereas in Germany it costs $0.50-1/Watt.
Does anyone know why these technologies are so much cheaper in Germany, which has higher taxes and labor rates? There are no equipment subsidies in Germany as the energy production is subsidized. The only thing I can think of is that there is a broader adoption and therefore economies of scale and more price competition. Anyone else have any thoughts or references as to what might explain this substantial difference in cost?
I think :
This is only due to Market and Public interest.
For example, in india 5year back Cost of a CFL light was 550/- But Now Cost is 120/-
region is, that time public was not aware to this technology, so public interest was less, .... so production was also less,... only few company was manufactured.
But Now... situation is reverse....
I think may be this type of thing create market variation...
A remark. "No equipment subsidy" is an exaggeration. There are R&D costs In the beginning of every product life-cycle. Those have to be covered later by product's price. European countries provide substantial research as well as production ramp-up grants, while the US tend to leave it to the market forces. Hence the US products may have higher R&D markup. The "harder" the technology in question, the longer R&D phase, the higher R&D expenses, means more investment risk, the higher proportion of R&D markup impacts price.
Second remark. An assumption that EU market is open and free as the US market is could mislead as well. For example, EU is much more efficient in non tariff market regulations. As a result, the US market is floated with substandard technology from third-party countries, while EU provides to consumers an overall comparable high quality. It impacts market share of a particular technology. The market share of high tech is typically lower in the US due to cheap substitutes, thhich are not available to EU. High tech in EU is traded at higher volume.Then the price would sink accordingly.
Thanks for the answers all. It's amazing to me that the U.S. market could still reduce the cost of these relatively mature technologies by 50% just through economies of scale and greater competition.
I'm not sure the R&D mark up would account for 50% cost difference, but 5-10% is probably reasonable.
Thanks again everyone.
Fred,
The R&D markup limits for particular technology have to be investigated. It is thinkable, that at some point the markup could potentially reach multiples of 100%. From my experience, a hardware startup is weak if the costs to sell are higher than 50% of revenue. One could argue if all the profit belongs to an R&D markup. Typically it does, since it serves solely to investor's interests (i.e. R&D sponsors) in form of reinvestment into company growth or direct dividend payment.
In some cases the US cuts costs by excluding the markup. An initial technology stack could be sponsored by German tax payers in hope for a better future. Then, if it is mature, but weakly protected oversea, it's copied. Another option, German suppliers could be bought out by luring them (the founders) into an immediate x3 in exchange for giving up their (collective, tax payer's) long term potential for x10. If I recall it correctly, this was the fate particular for one of the recent solar energy technologies. So you are right, the economy of scale in the US enables the tricks. Though, I wouldn't attribute it solely to the US market virtues, rather to the weak EU's technology investment control. Corporate buy-outs and transfer pricing could be lined up to the investments by government.
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