Local Solar Mucks Up Industry Costs

Even with the strides witnessed in solar panel technology has made significant gains in terms of price reduction and increased efficiency over the last decade, many officials having jurisdiction (AHJs) around the country have not. The government often gets credit for growing the solar business through subsidies, but this ignores regulatory hurdles in the way of project achievements such as old-timey zoning laws, overly burdensome permitting applications and time-consuming interconnection policies. All of that gluey red tape can stifle PV growth. Certain AHJs are deemed so cumbersome, or confusing, that solar installers avoid them altogether, regardless of the real long-term value of solar as a generating asset to a customer and association.

Soft Cost

According to the National Renewable Energy Laboratory’s PV System Cost Benchmark Study in 2017, from 2010 to 2017 there was a 61 percent decline in the installed cost for residential PV systems, 61 percent of which is attributed to hardware prices and 21 percent attributed to non-hardware “soft” prices. From 2016 to 2017, there was a 6 percent reduction in installed system costs — about half of which is a reduction in module factory gate price.

For residential solar PV, hardware prices account for only 0.89 cents per watt of a $2.80 per watt system price total. A full two-thirds of the cost of a residential solar installation are soft costs, a majority of which are an unavoidable business operating expenses, such as customer acquisition ($0.34 per watt) and overhead ($0.31 per watt). Permitting, inspection and interconnection (PII) only made up $0.10 per watt, which seems a variety of harmless in the bar graph relative to the non-hardware prices leveled in NREL’s study. But what is involved in the $0.10 per watt PII cost benchmark?

Direct Cost Of Solar

“There are direct costs that are easier to quantify, like a building permit application fee, but there are opportunity costs associated with regulatory delays that are more difficult to quantify in terms of installed cost, as measured by dollars per watt,” replies Kristen Ardani, a solar program head and analyst at NREL. “For example, NREL’s cost benchmark for residential PII of 0.10 per watt mainly captures direct costs, including an assumed $400 permit fee and six hours of back-office labor for building permit and interconnection application preparation and submission. It does not include the costs associated with any regulatory delay or needs to submit revised applications.”

She reemphasizes that NREL’s PV system price benchmark represents the national average for a typical PV system and does not necessarily reflect the expense of PV installations in jurisdictions with burdensome permitting requirements. Ardani did note more taxing authorities could easily quadruple the assumptions of the PII benchmark.

“For every day a system is delayed, that’s one less day the system is producing revenue and other benefits,” she states. “Also, think of it in terms of time, delays and the cost impact of those delays.”

While less frequent for the residential market segment, there’s also the cost associated with projects that are delayed to a point in which they are no longer economically viable, which means more indirect costs absorbed in overhead and operating margins. You won’t certainly find these measured in dollars per watt.

“It can be difficult to quantify the whole suite of soft costs that are perhaps better measured in terms of time and lost an opportunity,” Ardani states. “While we have looked more closely at the time required for the utility interconnection process, in terms of business days, NREL has not directly quantified how PV growth is impacted by the lack of standardization in building permitting and inspection processes across more than 18,000 AHJs.”

Curious about solar hard costs vs. soft costs near you, and how that might affect your own solar panel pricing? We here at HahaSmart you will have a look at what we can offer you on the cost of solar panels and cost of solar installations. We will strive to find you the best prices available. Follow the solar experts. Try our price checker tool. It tells you how much solar power you need and how much you can save on your energy bills each month. Please visit our solar blog to find out more about the benefits of going solar.