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NREL: “soft” costs account for majority of cost of home solar

The Department of Energy’s National Renewable Energy Laboratory (NREL) has found that “soft costs” make up 64% of the cost of home solar.

Soft costs are those other than the cost of the solar panels themselves, like financing and installation.

The findings come from two NREL reports that look more closely at the costs associated with third-party financing – like solar power purchase agreements (PPEs) and leasing.

One of the reports, “Benchmarking Non-Hardware Balance-of-System (Soft) Costs for U.S. Photovoltaic Systems, Using a Bottom-up Approach and Installer Survey – Second Edition,”  analyzed non-hardware business process and installation costs associated with PV solar systems.

Using data from 55 home solar installation companies (accounting for around 27 MW during the first half of 2012) and 22 commercial solar installation companies (66 MW over that time period), the researchers found that soft costs made up 64% of the total price for home solar systems.

That figure is up from 50% of the total price, the finding from the first edition of the study, released in 2012. And the results were similar for commercial solar installations, with soft costs representing 57% of the total cost for small (<250 kW) commercial systems (up from 44%) and 52% of the total costs for large (250 kW or larger) commercial systems (up from 41%).

Credit: NREL

Credit: NREL

According to NREL, for home solar systems “the greatest soft costs were supply chain costs ($0.61/watt), installation labor ($0.55/W), customer acquisition ($0.48/W), and indirect corporate costs ($0.47/W), such as maintaining office management and accounting functions.”

The second report “Financing, Overhead, and Profit: An In-depth Discussion of Costs Associated with Third-party Financing of Residential and Commercial Photovoltaic Systems” analyzed costs associated with developing, financing, constructing and arranging the financing for third-party owned systems.

The report found that “third-party ownership added $0.78 per watt for residential systems and $0.67 per watt for commercial projects,” but also that solar leasing and PPEs could lower the long term levelized cost of energy and that companies offering third-party ownership options accounted for around 70% of the nation’s solar market share.

“The two new reports, along with previous reports, provide a comprehensive look at the full cost of installing solar, while delineating and quantifying the various contributors to that final cost,” said NREL analyst Barry Friedman.


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