The price of a solar photovoltaic module has dropped dramatically over the last few years. But to get solar installations down toward ideal price points, the cost of making the panels isn't the only thing that needs to come down: so-called "soft costs" represent half or more of most solar installations. These costs include permitting, labor, inspection, interconnection (if you're going grid-connected, at least), and others, and the U.S. Department of Energy's National Renewable Energy Laboratory (NREL) thinks we can cut those down to size as well.
In a new report, NREL maps out a way to bring soft costs down from $3.32/watt in 2010 for a 5-kilowatt residential system to $0.65/watt in 2020. For small commercial systems below 250 kW, the report suggests a drop from $2.64/watt in 2010 to $0.44/watt in 2020. These soft cost reductions would allow the U.S. to reach the Department of Energy's SunShot Initiative goals of $1.50/watt and $1.25/watt for residential and commercial installations, respectively.
But first, the bad news: if the current trajectory of soft costs continues, those SunShot goals will not be met. Achieving the extra cost reductions necessary to get there won't be trivial, especially for residential installations—in fact, an additional $0.46/watt is needed beyond the current trajectory, a sizable amount when we're gunning for $0.65/watt in total. Financing and customer acquisition costs are most likely to get there without much help, while permitting and interconnection need some help. That help could take the form of streamlined inspection processes and a standardized permitting fee that is substantially lower than what currently exists. The average permitting fee now, though it varies widely across jurisdictions, is $430; NREL suggests bringing that to $250 across the board.
Commercial systems, meanwhile, need only $0.11/watt beyond current trajectory in order to achieve the SunShot goals. Labor costs may come down easier than with residential systems; the report suggests that universal adoption of integrated racking, where modules arrive at a site already assembled and ready for installation, is one method for dropping costs in the right direction.
In general, soft costs are increasingly recognized as perhaps the primary barrier to bringing solar prices down into the truly competitive range. And that seems to go for manufacturing of solar panels as well as for installations: A recent paper in Energy and Environmental Science compared costs of solar manufacturing in China and the U.S., and found soft costs including labor and supply chain are the biggest differences. If the U.S. wants to keep up with the world's biggest solar manufacturer, working on those costs unrelated to materials is a good place to start. And they better hurry: the cost of building a PV module at major companies in China is going to drop all the way to $0.36/watt by 2017, according to one recent report. With module prices continuing that sort of decline, focusing on the soft side of solar is getting more and more important.
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