“Soft Costs” Squeeze US Solar
September 29, 2014
So it turns out those crazy socialists in Germany are doing a better job of beating bureaucratic red tape out of solar installations, while the US’s “free market” has an obstacle in that area.
Those states that address this issue and grease the skids for solar installers will gain a competitive advantage quickly, with no need for technological advances.
In its report entitled REthinking Energy 2014 (PDF), the International Renewable Energy Agency (IRENA) produces a very useful set of overviews, essentially showing that renewable energy will continue to become less expensive up to 2020. For photovoltaics, the organization has produced a few especially interesting charts.
(top), we see that the price of turnkey PV is expected to drop by roughly another fifth from now until 2020 (though it would have been nice to have future years marked as estimates, such as “2015e”). The panels themselves will continue to become cheaper, as will “other,” which essentially signifies “soft costs.” As I explained two years ago, this cost item is a major factor when trying to explain the difference in PV prices from one country to another – but more on that later.
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Another chart shows the difference that soft costs make. In a comparison of array prices in Germany and the US, it turns out that balance-of-system costs are easily twice as high in the US, while panel prices are nearly the same. This finding is in line with other previous reports.
Between 2008 and 2012, the price of sub-10-kilowatt (mainly residential) rooftop systems decreased 37 percent. However, over 80 percent of that cost decline is attributed to decreasing solar PV module costs. With module and other hardware prices expected to level off in the coming years (and in the near term, actually increase), further market growth will be highly dependent on additional reductions in the remaining “Balance of System” costs, otherwise known as “soft costs.”Soft costs account for 50–70 percent of the total cost of a rooftop solar system in the U.S. today. These soft costs include installation labor; permitting, inspection, and interconnection; customer acquisition; and other costs (margin, financing costs, and additional fixed administrative and other transactional cost). Setting aside those “other” costs, soft costs for U.S. residential systems are around $1.22 per watt of PV, while German soft costs average $0.33 per watt. That’s one heck of a spread. How does Germany do it, and how can U.S. installers approach or even surpass those numbers?
SIMPLE BOS PROJECT SEARCHES FOR ANSWERS
RMI and other groups such as the U.S. DOE, National Renewable Energy Laboratory (NREL), Lawrence Berkeley National Laboratory (LBNL), Clean Power Finance, and the Vote Solar Initiative have done great work on the issue over the past several years through benchmarking and other analysis on these various soft costs. However, such data remains relatively sparse in comparison to hardware market analysis. The U.S. solar industry has known that German installers are able to install rooftop solar systems at less than half our cost. But we haven’t been able to discern, at the detailed level of specific worker actions, why. Until now.
RMI, in partnership with Georgia Tech Research Institute (GTRI), launched a PV installation labor data collection and analysis effort under the SIMPLE BoS project, which culminated today in the release ofReducing Solar PV Soft Costs: A Focus on Installation Labor. Drawing upon first-hand observations, this report is the first publicly available detailed breakdown of the primary drivers of installation labor cost between German and U.S. residential installs.
The SIMPLE BoS team implemented a time-and-motion methodology for evaluating the PV installation process, collecting data on PV installations in both countries.
AMPLE OPPORTUNITIES TO REDUCE INSTALLATION COSTS
The results indicated that U.S. installers participating in the SIMPLE BoS project incur median installation costs of $0.49/W, compared to a benchmarked median cost of $0.18/W for participating German installers. The figure below shows the comparative costs of each component of the PV installation process in the U.S. and Germany, respectively, looking at four categories of installation-related costs: racking & mounting, pre-install, electrical, and non-production.
click to enlarge
In addition to providing cost details on the PV installation process, our report outlines several enabling factors from German and leading U.S. installers that can be disseminated throughout the U.S. market. These opportunities range widely in complexity and impact, from redesigning the base installation process and preparing rails on the ground, to implementing a one-day installation process and PV-ready electrical circuits. We’ve shown below the potential impact in $/W of these solutions and how difficult it would likely be to implement them widely the U.S.
Climate Denial Crock of the Week 
September 29, 2014 at 3:01 pm
The International Energy Agency have just released two reports predicting solar technologies will become the most significant power source by mid century.
The IEA prediction is based on a number of major challenges being met, both by the PV industry and policy makers. Driving down the cost of capital and facilitating large amounts of PV in electricity grids were pinpointed as being the major two potential bottlenecks.
“Capital cost is the main reason why solar is more expensive in Greece than in Germany,” said IEA’s Frankl. “It is also why in developing countries, where the perceived risk by investors is high, sometimes requiring 15% ROI, it destroys [the business case for] PV and any other capital intensive [generating] capacity.”
http://reneweconomy.com.au/2014/iea-solar-worlds-main-energy-source-2050
September 30, 2014 at 1:33 pm
Despite having failed repeatedly,mor perhaps because of failing repeatedly to accurately assess the growth of solar, they have finally seen the light. 🙂
September 29, 2014 at 3:20 pm
[…] So it turns out those crazy socialists in Germany are doing a better job of beating bureaucratic red tape out of solar installations, while the US's "free market" has an obstacle in that area. Thos… […]
September 29, 2014 at 4:03 pm
“The International Energy Agency have just released two reports predicting solar technologies will become the most significant power source by mid century.”
I predict it will be firewood. To quote Albert Einstein: “I don’t know how we’re going to fight WW III, but I know how we’re going to fight WW IV…with sticks and rocks.”
September 29, 2014 at 5:30 pm
I’m impressed to see that “Big Blue” is onto the technology, with this impressive and futuristic array, it has jointly developed:
http://www.computerworld.com/article/2687236/ibms-solar-concentrator-can-produce-energy-clean-water-and-ac.html
September 29, 2014 at 5:41 pm
It was this great enterprise that launched the “PC” revolution in 1981, that has completely changed the way we work and communicate, looks like they can be a leader in energy to.
http://www-03.ibm.com/ibm/history/exhibits/pc25/pc25_birth.html
September 29, 2014 at 11:49 pm
IBM is always causing crazy things to happen in the market:
Also relevant in the video is why ‘good’ companies (think fossil and utility companies) fail.
September 30, 2014 at 12:15 am
Thanks for sharing that interesting piece, I think I was like the Digital CEO (a mainframe bigot), I remember having an intense discussion in a pub/bar (in the early 1980s) with an aerospace technician who said computers would be small, distributed and configured on rings (token rings), I thought he was crazy.
Who feels silly now ?
September 29, 2014 at 8:27 pm
The killer cost of PV has always been BOS costs, which are not subject to Moore’s Law. Even if US cost for BOS drop as low as they are in Germany, it is highly questionable whether PV can ever become as cheap as wind, much less coal, gas, hydro, or nuclear, without significant subsidy.
We have reached the point where, after decades of political delay, the only way to save the climate is to deploy zero- or low-carbon energy as rapidly as possible, and the fastest way to do that is to deploy the cheapest generators. Those technologies are, in order, shallow geothermal (where available), hydro (where available), wind (short term) and nuclear (long-term).
Spending large sums on the PV dream diverts valuable resources away from those technologies that could do more with less.
September 29, 2014 at 8:41 pm
I should also mention that the decarbonization strategy described above has already successfully decarbonized the grid in Iceland, Norway, Sweden, France, Belgium, Switzerland, and Ontario, without significant increases in the price of electricity.
September 30, 2014 at 11:17 pm
None of the places you’ve mentioned have particularly good insolation and in the sunny parts of America, the electricity demand literally follows the sun.
TX would be better off to cutback on building wind farms and ramping up solar, if they had to choose between the 2.
California, with nameplate of wind & solar roughly equal at this point, frequently gets more MWh daily from solar despite it not producing significantly before 9am or after 5pm
http://www.caiso.com/green/renewableswatch.html
September 30, 2014 at 6:43 am
BOS costs also go down with mass production of inverters and more efficient panels.
September 30, 2014 at 8:32 am
as the referenced article shows, btw. Oh, and calling nuclear cheaper than solar – really K-P?
September 30, 2014 at 1:27 pm
Keith – take a look at the graphic. Solar is cheaper than coal, geothermal, and nuclear. The article cites Austins PPA at 5c/ kwhr. Solar is just above wind costs and dropping more rapidly than wind.
http://www.austinchronicle.com/news/2014-07-04/aes-solar-deal-game-changer/
In areas of the world like Australia, it makes little difference what the price of wind is. The utility rates are 40c/ kwhr, so rooftop solar already easily competes. While we debate the merits on an academic level, there are real world considerations. Solar only competes with wind on as a utility source. There, BOS costs are higher. BOS costs are dropping rapidly as states enact laws to reduce paperwork.
https://joinmosaic.com/blog/california-bill-b-2188-drastically-lower-cost-solar/
In fact, one might argue just the opposite, that BOS costs wil reduce solar costs much more rapidly, because they are legislative, not technology based. Once passed, changes are rapid.
September 30, 2014 at 1:28 pm
Sorry. That should be, utility BOS costs are lower.
August 19, 2015 at 9:14 am
[…] long as these soft costs continue to squeeze the price of solar, we may be the ones standing in our own way of successfully converting to a sustainable […]