Hard Challenges: Soft Costs

If you’ve ever wondered why it costs twice as much to install a PV system in the US as Germany, the answer is red tape and bureaucracy, known in the industry as “soft costs” or “balance of system (BoS)” costs. While solar hardware prices continue to plummet, soft costs – which include customer acquisition or marketing, permitting, licensing, inspection and installation labor – are actually going up. The Department of Energy is funding a variety of efforts to understand what drives soft costs, and how we might be able to reduce them. In a panel at the National Solar Conference, researchers from several national laboratories funded by the Department of Energy, Georgia Tech and others, presented their research on tackling this complex problem. DoE is funding a variety of programs including the $10 million “Race to the Rooftops” prize for soft cost reductions.

Robert Margolis of the National Renewable Energy Laboratory (NREL) described the DoE roadmap for soft cost reduction which uses examples from semiconductor and other industries to track and tackle soft costs. Opportunities for reduction include increased transparency in the form of online databases of permitting requirements, reduced local fees and standardization of the permitting process. James Tong of Clean Power Finance unveiled a free, open source, national database that will track permitting requirements. The project relies on the participation of installers around the country to enter information and assumes that increased transparency will help streamline permitting requirements nationwide. You can visit solarpermit.org to see this Wikipedia of solar permitting in action. Rebecca Cantwell of Colorado Solar Energy Industries Association (COSEIA) works with local communities in Colorado to encourage reforms through public recognition of “Solar Friendly Communities.” She said that Colorado communities won’t accept state mandates because of the state’s home rule traditions. Communities need to evolve their own systems for improved permitting of solar projects, but providing them with “best practices” can help rationalize a patchwork of different requirements. Meanwhile NREL engineer Darlene Steward is comparing state policies and measuring their effectiveness in promoting solar development; CD Dong of Lawrence Berkeley labs is analyzing the impact of project delays and other soft costs on system prices, and Joseph Goodman of George Tech is analyzing technology improvements that will reduce soft costs.
Some installers in the audience were concerned with the DoE roadmap’s focus on cutting installation labor costs; they said that installers were already struggling with thin profit margins and needed assurances that labor on solar projects would be adequately compensated.

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