How to lower the cost of rooftop solar

When the Commerce Department levied substantial tariffs on Chinese solar panels makers a few months back, GigaOM contributor Ucilia Wang noted that there would be negligible impacts on American consumers because solar panels made up a small part of the actual cost of putting in a rooftop installation. As proof she pointed out that despite a 50 percent drop in panel prices in 2011, the average price of a residential solar system had only fallen 3.6 percent during that year.

And looking at the charts breaking down the costs of rooftop solar, it’s clear that the panel itself only constitutes about 20 percent of the cost of the installation. The rest of the costs are “soft costs,” including permitting, marketing, labor, and supply chain expenses. In fact, a 4 kW solar system for a home still runs about $20,000, creating a fairly lengthy return on investment with the upfront costs being a barrier to installation. So if the solar panel and the inverter run about five grand, is there any way to chip away at the remaining $15,000 to make distributed solar more feasible. The answer is yes.

1) Permitting is the low hanging fruit. For that same 4kW system, Germans don’t pay $20,000, they pay $8,000. Hard to believe but Americans pay more than double what the Germans do and it’s not about subsidies. Permitting and paperwork in Germany are almost nonexistent. In Germany there’s one form to fill out and it’s front and back on one piece of paper with an online registration via its Federal Grid Agency. The U.S. requires building permitting, inspections, permission to connect to the utility. New York City’s permitting goal under Solar America Cities was 100 days. There are anecdotes in Germany of the whole process getting done, from calling the installer to connected to the grid, in 10 days.

2) Lower the marketing costs. In Germany the costs to acquire new customers are low, partially because of education and government support. Making Americans instantly aware of the value of distributed solar will be difficult but there are companies trying to help. Genability has knit together a collection of electric rates from the over 3,000 utilities across the country which it is selling to its customers to make it easy for them to provide comparative rate data for prospective solar customers. It also should allow solar installers to easily target those markets with the greatest disparity between utility rates and solar costs.

Some software is even going straight to the consumer. The Solar Panel Suitability Checker, available for the iPhone and iPad, uses Google Maps technology to determine if your roof would be a good spot for a solar system. The app is free and could be a small step toward allowing consumers to think about rooftop solar in the first place. What would be even better would be if the app could check location and then show comparative pricing data of solar power at that location versus the utility rates. You listening Genability?

3) Cut installation times. Berlin based Solon Energy and China based Trina Solar have announced new designs for mounting solar panels to roofs. The companies say they will cut installation times by more than half. Typically solar panels are anchored to long metal racks on a roof to create a framework that angles the panels correctly. Trina’s new design will get rid of the metal framework and alter the panels themselves so that the frame of the panel itself is grooved so that special hardware locks into those grooves, propping the panel at the right angle.

There’s no magic bullet to move rooftop solar to grid parity but it’s clear that there are ways to reduce costs, and soft cost reductions are the most promising areas to lower prices. And that’s a much better place to start than the other place, which is the incredibly technologically risky area of trying to wring greater efficiency out of a solar panel which requires enormous R&D. Fighting the paperwork battle is easier than the physics battle. At least it should be.

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What’s the best way to lower the costs of rooftop solar?
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Adam Lesser

Analyst Gigaom Research

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