Why US Solar Soft Costs Are So High and What’s Being Done About It


The U.S solar industry keeps putt-putting along instead of moving full steam ahead. Why? The go-to answer is soft costs. But that doesn’t tell us much.

The term “soft costs” doesn’t even have a universally accepted definition. What does it mean? We can say for sure it doesn’t mean hardware or mounting systems. Soft costs are usually intangible expenses, like marketing, labor, design, installation, and permitting.

So why are they so expensive?

One way to identify where and why the U.S. is lagging behind, is by comparing the country to the smartest kid in the solar energy class: Germany.

The Lawrence Berkeley National Laboratory (LBNL) did just that. After an in-depth study, analyzation, and much beard-scratching, they found the cost of a residential solar system in Germany was less than half of what it would be in the U.S. A typical German PV system cost $3.00/watt. For the same PV system and the same installation, the U.S. cost was $6.19/watt.

Germany’s doing better. But how? And why?

LBNL broke it down in an exhaustive series of charts and graphs. We’ll address some of the most (un)impressive here

(Un)Impressive fact #1: U.S. permitting requirements are dramatically inconsistent from city to city. Over 18,000 municipalities are doing things their own way. There’s no uniformity, and this unnecessary individualism negatively impacts the permitting process.

Why? It makes things difficult for solar installers working in multiple locations. They face longer processes, higher fees, multiple inspections by multiple parties, and piles of redundant paperwork. This hurts the contractor and consumer alike, as the consumer might call into question the efficiency of installing a solar system in the first place.

There are just too many (un)impressive facts to break down in such detail in an article of this scope. Here’s a relatively comprehensive list highlighting some of LBNL’s research conclusions:

#2 – Installation costs in the U.S. are about .59/watt. In Germany they’re .23/watt.

#3 – Marketing for customer acquisition in the U.S. costs about .34/watt. In Germany? .02/watt.

#4 – System design for customer acquisition in the U.S. costs .11/watt. In Germany it was .01/watt.

#5 – Other customer acquisition related expenses came to .24/watt in the U.S. In Germany they were .04/watt.

#6 – Sales tax in the U.S.? .21/watt. Sales tax in Germany? .00/watt.

#7 – Project development time in the U.S.? 126 days. In Germany it was 35 days.

The sad conclusion is that there are too many reasons the U.S. is losing the solar soft costs game. There’s no fix-all solution.

The happy truth is that doesn’t mean there’s no hope for the U.S. solar industry.

Solar industry professionals are known for their ingenuity. Many are taking the situation into their own hands. They’re going virtual, taking to the internet and online networking with the same verve that makes them want to harness the sun in the first place.

Going virtual can streamline the process and reduce costs in many circumstances. It gives professionals and their clients greater access to a wide variety of tools. It allows professionals in different parts of the country to collaborate with one another, and arrive at solutions that wouldn’t be possible without the Cloud, satellite technology, and online platforms.

One company making such strides is GreenLancer. GreenLancer’s offices are in Detroit, but they do their best work in the Cloud. Their virtual platform allows contractors and developers to log in and order from pre-defined services. These templates can be customized, and once the contractor’s project specifications are established, freelance green engineers from around the country bid to work on the project.

GreenLancer is permitted in all 50 states. They’re getting a lot of attention for the ease, quality, and security they provide to both contractors and engineers. The project development process is made easy by Cloud computing, which greatly helps curb costs and streamline things.

Networking through the net isn’t the only way solar industry vets are finding new means of success. Utilizing satellite technology, the Solar Site Design app makes analyzing site potential and financial feasibility simple and quick. The app is compatible with both iPhone and Android devices, and allows professionals on site to send satellite photos and project specs to remote experts, who can then provide accurate estimations for things like feasibility, pricing, and design.

The accessibility and flexibility created by GreenLancer and the Solar Site Design app, and companies like them, is great news for the U.S. solar industry. So while bureaucrats continue to hem, haw, and put up miles of red tape, solar professionals continue to collaborate, network, and innovate new ways to reduce soft costs and help make the U.S. a real competitor in the global market.

Article by Leslie Hedrick, appearing courtesy 2GreenEnergy.



Have any Question or Comment?

4 comments on “Why US Solar Soft Costs Are So High and What’s Being Done About It

Dan Staley

The one point that didn’t have numbers was #1. That % of total soft cost was very low in Kristen’s (et al) paper. On board with the hodgepodge of rules and no right to light, but permitting is far down on the list.

DS

Indrani

Ms. Hedrick has done a good job. The sun gives us free energy. If we could cut down on taxes and on middlemen, and if we could use cutting edge marketing methods that reach so many sources/sites instantaneously through computer prepared lists, we could easily get better at it. Instead, larger companies became wasteful if not downright greedy, misusing resources. This is a layperson’s opinion–not from an expert. I am no expert.

Daniel Ferra

Why cant a Voting, Tax paying Homeowner, be allowed to participate in the Ca. State mandate of 33% Renewable Energy by 2020, with out third party leasing ? or using our Desert Eco-Systems ?

In California alone, third-party solar installations account for two-thirds of the residential PV market, which exceeded non-residential for the first time.

“Examples of how they have been “slowing the process” are:

(1) Renewable portfolio standards (RPS) which create de facto caps on the deployment of renewable energies. (The Germans don’t have any RPSs. Their FIT program is open ended, the more capacity, the merrier!)

(2) Net-metering caps. Most states only allow a small percentage of one to two percent of peak load to be net-metered. Net-metering, therefore, will certainly “hold back the clean energy tide.”.

(3) The third party leasing rent-to-own outfits like Sungevity, but more importantly, Solarcity, which just went public with an IPO, fight tooth and nail to protect scarce capacity carveouts (from the state RPSs) so as to bolster their chosen business models as the expense of all others. The same goes for the utility-scale folks. The in-fighting, due in part to the small de facto caps of the RPSs, have significantly slowed the deployment of renewables in the U.S.

(4) Most importantly is how we connect distributed renewable energies to the grid in the U.S., the most salient difference between the American net-metering program and the German feed-in tariff is that net-metering is *retail* energy whereas the FIT is *wholesale* energy. Thus, net-metering does little more than offset onsite loads and in the process it shifts the rate burdens of lost customers onto other ratepayers. Those rate burdens also include all of the utility’s overhead as well since compensation is at the retail rate. A FIT, on the other hand, as wholesale energy feeds the energy directly into the electric grid, and because it is must take wholesale energy it must be used first, and in many cases it will off set more expensive energies found on the grid, such as peaker plant power, spinning reserves and so forth saving rate payers money.” Bob Tregilus.

Third party leasing is fine on the surface and is making a contribution in reducing our fossil fuel consumption, but third party leasers, the Big Boy solar companies that build in the Fragile Desert Eco-Systems, and the Utilities all fight over Renewable Portfolio Standards Pie allowance.

All Three leagues have a piece of the pie, but there is 4 to 8 teams in each league that want a piece of that carve out money pie, causing huge infighting, and as of right now the homeowner is left out of the ballgame, with no chance of eating the all american pie, why? because we are not represented at the Renewable Portfolio Standard dining hall, with a chair at the pie eating table.

“The benefits of owning a renewable energy system far outweigh the benefits of a lease or a power purchase agreement (PPA). Under the American Recovery and Reinvestment Act of 2009, homeowners are eligible for a federal personal income tax credit up to 30% of the purchase cost of their renewable energy system, without a maximum limit.** Homeowners can utilize the incentive money in any way they choose. But homeowners that choose to lease their systems turn over their rebates and incentives to the third party lease or PPA companies associated with the solar systems installed on their homes.”

“The owner of a renewable energy system is also sheltered from rising electricity costs, which have historically increased on average of 3-5% each year. This presents homeowners with opportunities to save money each month on energy and also reduces their reliance on third-party utility companies. By purchasing a renewable energy system with cash or through a loan, a homeowner can completely pay off his or her system and then independently produce clean energy.

By choosing a lease or a PPA option homeowners are essentially substituting their utility companies with third-party leasing companies. Additionally, homeowners will likely be required to purchase their systems, renew their leases, or have the systems removed from their roof and revert to paying utility rates once their leases have ended.” Charlie Angione.

“There’s absolutely no such thing as a $0 down solar lease or PPA and here’s why. A requirement of both of these financing programs is that you agree upfront to give the leasing or PPA company your 30% federal tax credit which is worth thousands of dollars as well as any other financial incentives.

At $5.57 per Watt. a 6 kW solar system would yield a federal tax credit of $10,026!

With a $0 down loan instead of a lease, you’ll get to keep the 30% federal tax credit as well as all other applicable financial incentives for yourself and you’ll own your solar system instead of renting it, for a much greater return on investment.

And if you do decide to lease instead of own, good luck ever selling your home with a lease attached to it. What homebuyer will want to purchase your home and assume your remaining lease payments on a used solar system on your roof, when they can buy and own a brand new system for thousands less.” Ray Boggs

The Feed in Tariff is a policy mechanism designed to accelerate investment in Renewable Energy, the California FiT allows eligible customers generators to enter into 10- 15- 20- year contracts with their utility company to sell the electricity produced by renewable energy, and guarantees that anyone who generates electricity from R E source, whether homeowner, small business, or large utility, is able to sell that electricity. It is mandated by the State to produce 33% R E by 2020.

FIT policies can be implemented to support all renewable technologies including:

Wind

Photovoltaics (PV)

Solar thermal

Geothermal

Biogas

Biomass

Fuel cells

Tidal and wave power.

California law does not allow Homeowners to oversize their Renewable Energy systems.

Allowing homeowners to oversize their Renewable Energy systems, is a true capitalistic tool, that will give us the potential democratize our energy generation and transform millions of homes and small business into energy generators, during Sandy, Solar homes where not utilized to their full potential, because there was no disconnect and or transfer switch, to turn off incoming grid and start in home Solar power. how comforting it would be, to have mandatory transfer switches on all residential and small business renewable energy installations.

The state currently produces about 71% of the electricity it consumes, while it imports 8% from the Pacific Northwest and 21% from the Southwest.

Natural gas was burned to make 45.3% of California’s power generated in-state in 2011. Nuclear power from Diablo Canyon in San Luis Obispo County accounted for 9.15%, large hydropower 18.3%, renewable 16.6% and coal 1.6%.

We need a National Feed in Tariff, for Renewable Energy, with laws that level the playing field, this petition starts with homeowners in California.

Japan, Germany, and our state of Hawaii, will pay residents between 13 – 37 cents per kilowatt hour, here in California they will pay a commercial FiT in a few counties at 17 cents per kilowatt hour, No Residential FiT and they wont let us oversize our Residential Renewable Energy systems.

Campaign to allow Californian residents to sell electricity obtained by renewable energy for a fair pro-business market price. Will you read, sign, and share this petition?

http://signon.org/sign/let-california-home-owners

jgarbuz

The reason why Germany is moves along while America inches along is because Germany does not have a massive oil industry with all those oil barons and tycoons who are going to lose out if solar ever gets seriously going. Where there is little or no resistance, naturally things can move rather smoothly. In the US, the forces of resistance are massive and powerful, and they influence local laws and regulations in devious ways. The fossil fuel industries are going to continue to throw sand in the eyes of the alternative energy proponents for as long as humanly possible, like Al Qaeda does in the field of terror.

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