The main problem with residential solar is that there is a tremendous amount of what is called “soft cost” which are everything other than the direct cost associated with the project. So aside from the actual hardware and take home pay of the laborer, there is overhead, design, sales, supply chain mark-up, installer profit, a partridge and a pear tree, and in mainstream construction, this soft cost margin is around 30%. Solar residential soft costs are far above this figure. It may not be the installer’s fault. In Mississippi, I might design, procure, and install a solar project within seven days start-to-finish. The permit process can take months, with more time spent fighting grid operator obstruction than doing real work. This can create a market where a specialty installer must be used to navigate a time-consuming development cycle, and must charge a huge specialty margin in order to make enough money to simply get by. In other words, the profit made on a one week project might have to last the installation team for two weeks or more. It is no wonder these specialty contractors go out of business whenever there is a policy shift in the local solar market.

 

This soft cost drops dramatically at the utility-scale. But that does not mean that the direct costs of utility-scale projects are substantially less than residential. The soft cost of a rooftop solar project can be brought down substantially through a well-planned design process when there is not substantial obstruction from the local permit authority.

 

Subsidies increase soft cost, yet have a benefit to the project owners by lowering their out-of-pocket expense. Not always – the import tariffs have substantially eliminated much of the tax credit benefit while making solar more difficult to afford for lower income households. Supposedly, the subsidies will vanish with the tax credits and permit offices will realize the bulk majority of residential projects are smaller than the minimum amount of residential electric service mandated by national electric code.

 

But to accomplish solar without reliance on subsidies of any kind, we will have to be smarter about our solar design to reduce those soft costs, which is what mainstream construction

does on a regular basis. That discipline has not yet made it into the solar industry. More likely, building construction experts know little about solar and need to know where to find someone

who knows about solar design, and solar installers are focused on low-hanging fruit retrofit markets rather than incorporating their practices into a larger general construction practice. This is where a smaller solar designer might find an opportunity, working with local architects and engineers to incorporate solar into existing design and construction firms.

Author: John Cromer, instructor

We’re on a mission to reduce system cost and increase production value.

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