A recurring headline in the solar world for the last few years has been the steady drop in the costs to manufacture solar panels and other solar hardware — the so-called “hard costs” of solar. Since 2011, the cost to make a solar panel has dropped by 60 percent
At the same time, prices for installing home solar are holding fairly steady, largely because all the other costs associated with putting solar panels up on a rooftop — the “soft costs,” such as identifying and signing up customers, permitting, labor and financing — are staying fixed or even increasing.
This week saw the release of two reports that measure the United States’ progress on the Department of Energy’s SunShot Initiative, which aims to make solar energy cost-competitive with other forms of electricity by 2020.
In short, the results suggest that progress is slow, but that there may be hope.
The first report, from Lux Research analyst Fatima Toor, finds that the prices to install solar are two to four times higher than the SunShot targets of $1 per watt for utilities, $1.25 a watt for commercial installations and $1.50 a watt for residential installations. Her research suggests that even 10 years after the SunShot deadline, the current technology will still cost 13 percent more than the target.
The solutions lie in evolving solar technology, Toor suggests. New structures for solar panels, new non-silicon materials for making solar cells, and other innovations in the works and not-yet-dreamed of.
The Lux report is fairly bleak in its outlook, given the financial difficulties facing solar manufacturers and the general lack of research investment in the private sector. But the Rocky Mountain Institute has just published a far-reaching report that offers a much wonkier, but also much sunnier, outlook on how to achieve SunShot goals, by going after those soft costs.
Because soft costs account for more than 50 percent of the total installation costs of home solar, and more than 40 percent of commercial costs, RMI has created a road map for cheaper solar that spells out in some detail ways to reduce soft costs for residential and commercial solar projects along the four main fronts:
- Customer Acquisition
- Permitting, Inspection and Interconnection
- Installation Labor
“Even in light of drastic solar panel cost reductions over the past four decades, rooftop solar systems in the U.S. still are not economically competitive for the vast majority of commercial and residential customers,” Jon Creyts, program director at Rocky Mountain Institute, said in a statement. “Soft cost reductions represent a major challenge and opportunity for stimulating SunShot-level PV deployment in the United States.”
In laying out the road map, RMI details the current and projected costs for each of the next seven years:
Residential solar faces a bumpier path to get down to $1.50 per watt, as the red- and orange-shaded cells in the chart above indicate. But the report spells out some of the needed steps to reduce those soft costs. I’ll summarize them briefly below, since the report is rather dense and technical.
For customer acquisition: RMI suggests three solutions:
- Software tools, which reduce total time spent [to acquire customers];
- design templates, which reduce system design costs; and
- consumer-targeting strategies, which increase the number of leads generated.
For permitting and inspections, RMI suggests five solutions:
- standardization of requirements and
- transparency of requirements, both of which reduce the time installers spend determining jurisdiction specific permitting processes;
- online permit application submittal, which reduces travel and wait time at the permitting office;
- lowering market-wide average permitting fees from $430 to $250, which decrease fixed permitting costs; and
- interconnection best practices, which reduce labor by lowering application expense and wait time.
RMI highlights the streamlined permit process in Vermont, which allows an installer or homeowner in Vermont to use a single registartion form to apply for all necessary permits, and if there are no concerns by any party within 10 days, the project is approved. We have also recently highlighted streamlined solar permit efforts in New York and California in recent weeks.
For solar labor costs, RMI sugests five solutions:
- integrated racking,
- module-integrated electronics,
- plug and play, and
- solar-ready homes
. Finally, for reducing the financing cost of solar, RMI outlines four solutions:
- third-party finance,
- utility finance,
- homeowner finance, and
- community solar
It’s encouraging to note how most of these soft-cost reduction projects are already underway, at least in some of the country’s solar hotspots. California especially has seen a boom in solar leases lately, and residential home builders are pioneering solar-ready homes across the state already.
Based on the information in these two reports, the path to truly widespread and affordable home solar looks bumpy, but the past two years alone have shown how quickly, and unpredictably, the nature of the business can change. Only time will tell what the next two years bring.
Solar installer photo CC-licensed by OregonDOT on Flickr.
By Matthew Wheeland