As prices of solar-system components continue downward (panels, racking and inverters, among others), installers still encounter the seemingly impenetrable problem of soft costs.
According to the Department of Energy, soft costs include “permitting, financing, and installing solar, as well as the expenses solar companies incur to acquire new customers, pay suppliers and cover their bottom line. These ‘soft costs’ are tacked-on to the overall price a customer pays for a solar energy system.”
Solar installers can’t just absorb those costs and remain profitable, so they must be included in the project price—and the problem is that some customers resent being asked to cover expenses they see as the price of doing business for the installer. Therefore, as soft costs are becoming more significant in the total project costs, it often becomes a point of contention in sales negotiations.
In the commercial and industrial (C&I) space, where Standard Solar does its business, it’s not just the normal hurdles residential installers incur. When installing solar arrays for businesses, additional costs crop up. In fact, legal and financing costs for commercial projects are also becoming one of—if not the largest—cost drivers of systems. Reducing these costs will ultimately make solar the most cost effective source of power available—and encourage even more solar installations across the country. So how do we get there?
In a perfect world, the solar industry could bring those costs down if it could standardize the steps necessary to construct an array across all jurisdictions—permitting, interconnection, financing, and legal contracts. While it’s a nice goal to have, the idea of getting all interested stakeholders to agree on national standards is unrealistic.
That doesn’t mean national guidelines couldn’t help local jurisdictions develop more standardized approaches. But as we all agree, the best governments are local governments, and we remain convinced local jurisdictions are best equipped to implement the nuances of the codes in their areas.
What could also help is a widespread, organized and targeted educational program for local officials across the country. One of the most time-consuming and frustrating (but nevertheless essential) elements of getting through the initial stages of a project is educating local officials on what solar is and how the process works. Any national educational programs that could save some of that time would certainly help bring costs down.
In addition, we at Standard Solar encourage potential solar host customers to submit an application for interconnection as soon as possible. It helps determine early on whether the project is even viable before investing time and resources into it. There is no obligation for the host customer to install the solar system if they submit for an interconnection, but it does tell us what it should cost and how feasible the project is from a technical perspective.
While the prices of installed solar arrays continue to come down more rapidly than anyone could have expected 10 years ago as material costs plummet, they still can—and should—come down even more. Components are getting less expensive by the day, so the only place the industry can still wring price reductions out are in the area of soft costs. We are getting there as an industry, but there is clearly more work to be done.
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