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Soft Costs Reductions are Essential for Solar Energy Industry

What needs to be done to accelerate adoption of solar in the U.S.? The price of solar cells is continuously dropping and financing mechanisms are put in place to create affordable solar. Yet despite the seemingly obvious fiscal choice to switch to solar, it still remains an exceedingly hard sell. Part of that is due to the soft costs, which inflate the installation price tremendously. Cost perception is monumental for someone to make the switch, and these soft costs are a major deterrent.

According to the most recent National Renewal Energy Laboratory (NREL) studies, hardware costs are decreasing, while soft costs are continuing to grow. Soft costs now account for 64% of residential, 52% of small commercial and 57% of large commercial solar installation costs.

simuwatt SolarThe U.S. Department of Energy’s (DOE) SunShot Initiative is aimed to make solar energy fully cost-competitive with traditional energy sources by 2020. SunShot aims to combat the challenge of going solar associated with soft costs through many different funding programs. One of these companies, Colorado-based concept3D, received $1.3 million in cost-share funding. concept3D partnered with NREL to create simuwatt Solar, a  mobile and cloud-based application that uses 3D modeling for site survey, shade and economic analysis, permitting, bid preparation and preliminary system design in one visit. It is the first product to streamline the entire process, from sales to engineering, to permitting in a single application.

Soft costs are not associated with hardware, but rather labor, acquisition, management, accounting, permitting, inspection, interconnection, subsidy applications and system design. SunShot has many incubator programs that offer cost-share funding to companies developing technologies to accelerate solar adoption and cut costs. Some of these incubators are specifically focused on technologies targeting the challenges of soft costs, specifically, the balance of system costs. 

Initial test trials of simuwatt Solar showed savings of up to $0.10 per watt on the front end engagement, and there is room to reduce costs even more. “Consideration is given to all stakeholders including sales people, designers, permitting offices, and the customer, thereby shortening the sales cycle and increasing our bottom line. simuwatt is changing the way we evaluate commercial roof-mounted PV sites. The software’s effective feature packed tools organize a project from start to finish,” said Kevin Wright, Managing Partner, United Management and Consultants, LLC.

“If we want to see a real movement of commercial solar we need to decrease soft costs,” Oliver Davis, CEO of concept3D said. “simuwatt Solar can save hours if not days in the process by addressing costs associated with sales, design, engineering and permitting. Salespeople now have the power to automatically generate quotes and 3D design, the application generates one and three line diagrams for project engineering, and materials are created to support the permitting process. Our charter with SunShot is to reduce BOS and take this concept to market. We’re excited to get this product in customer’s hands while contributing to BOS savings.”

Jake Rozmaryn's picture

Thank Jake for the Post!

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John Miller's picture
John Miller on December 23, 2013

Are Solar PV soft costs actually increasing?  NREL reports that “residential systems soft costs have increased from 50% (2010) up to 64%” (2012).  NREL also reports that average solar systems’ costs have dropped from $7,000 down to about $5,500 per KW (Re. Figure 2). This means total soft costs for 2010 were ($7,000 x 0.50 =) $3,500/KW and ($5,500 x 0.64 =) $3,520/KW for 2012.  Statistically equal.  To state that soft costs have increased significantly does not appear to be supported by NREL’s own data.

Josh Nilsen's picture
Josh Nilsen on December 23, 2013

This isn’t really an accident.  The imcumbent utilities are artificially raising soft costs to protect their obsolete business models.  You won’t be able to hold solar off forever!

Jake Rozmaryn's picture
Jake Rozmaryn on December 23, 2013

Increasing as % of total installed cost, as hard costs decrease. Interesting info, thanks for sharing, John.

James Van Damme's picture
James Van Damme on December 24, 2013

If only we had a national cabinet level agency to reform permits, regulations, and standards. They could call it the “Department of Energy” or something. And hire a German to run it.

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