By Bettina Bergoo
The Hard Hit of Soft Costs
In the last few years, the Department of Energy (DOE) has witnessed unprecedented growth in residential solar photovoltaic (PV) installations while also confronting new obstacles that have arisen on the path to widespread deployment. The news media has diligently covered steps forward in promoting residential solar energy as well as setbacks that have undermined DOE’s support for the emerging industry. Missing from the headlines is DOE’s most pressing challenge to achieving cost-competitive solar energy by the end of the decade: reducing “soft” costs. Soft costs include installation labor; customer acquisition; financing; profit and overhead; and permitting, inspection, and interconnection (PII). While hardware costs related to residential solar PV have dropped precipitously, soft costs have not followed suit. As reported in an August 2013 report released by the National Renewable Energy Laboratory (NREL) and the Rocky Mountain Institute (RMI), soft costs currently account for more than 50% of the $6.60/W average installed cost for a 5-kW residential system in the U.S.
Fees and Delays: The Problem of PII
While the aggregate of different soft costs clearly weigh financially on U.S. solar installers and customers, the single most burdensome cost category is that of PII. In Germany, permitting entails only the submission of a single online feed-in tariff registration form, but in the U.S., solar installers must navigate a complex and demanding process. There are over 18,000 authorities having jurisdiction (AHJs) across the country charged with overseeing and implementing the residential solar permitting process. An AHJ (usually a municipality) may require system design reviews, engineering plans, building and electrical permits required by specific codes, and multiple in-person inspections checking safety or even aesthetics of the solar PV system. On top of the specifications designated by the AHJ, a residential project will fall in one of over 5,000 utility service territories, which have varying requirements for interconnection. In a study conducted during the summer of last year, Clean Power Finance found that in the U.S., various permitting processes require that installers interface with usually at least two – and up to five – agencies within an AHJ.
Managing residential solar PII processes a new issue for many AHJs across the country. As a result, unclear (or even nonexistent) requirements and a lack of corresponding communication channels lead to increased financial and temporal costs for the solar installer as well as to agencies within the AHJ. On a 4-kW system, the $0.20/W (average) permitting fee adds an additional $800 to total installed cost. Copious paperwork means an average of 19 labor hours committed to PII by the installer, the cost of which may also be passed to customers. Not only does this financial burden decrease the number of individuals who can afford a residential solar PV system, but the temporal costs associated with tying up investments on equipments –sometimes made on credit – for months at a time threatens the stability of solar installation companies. While it is a market reality that the cost of newer technology will preclude some citizens from becoming an actor, the fact that about a third of solar installers reportedly avoid operating in certain AHJs due cumbersome or nonexistent PII processes undermines widespread deployment and leads to inefficiencies in existing markets.
State and Local Leadership is Crucial
PII processes are developed and implemented on the local scale; thus, enhancing their transparency within the AHJ and streamlining them across local bureaucracies is a decentralized, local function, but one that states can influence. Local and state government must take the lead in reducing costs associated with PII while achieving the end goal of aligning solar deployment with public safety and reliability standards. This leadership requires the appropriate level of collaboration with other market actors, such as with utilities and Public Utility Commissions on interconnection issues.
A number of federal, state, and local governments have already sprung into action. Arizona, California, and Colorado have issued statewide statues regarding solar permitting fees and caps. The streamlined permitting process in California may soon be reflected in Oregon, Washington, and British Columbia, with which it recently signed a climate action pact that includes taking action on solar and wind permitting. Additionally, California provides solar installers with a Solar Permitting Guidebook that outlines requirements and provides templates for complying with them. In a nod to Germany’s simplistic registration process, Vermont has instituted the use of a single form that ensures a stamp of approval within ten days if no concerns are voiced during that time. Thinking even more broadly, the Interstate Renewable Energy Council has compiled a Best Practices in Residential Solar Permitting list with concrete, actionable steps any AHJ – or state – can take towards a more transparent, less costly PII process.
Resources Available for Navigating Existing PII Processes
While streamlined PII processes on the state level and interstate cooperation are beginning to mitigate the costs of PII to residential PV systems, citizens and solar installers nationwide have a growing number of resources available to aid in navigating current local PII procedures.
In addition to the Best Practices list regarding permitting, the Interstate Renewable Energy Council has also developed a policy comparison of state interconnection policies.
DOE’s SunShot Initiative aims to achieve grid parity for solar electricity without subsidies by the end of the decade. One element of the initiative is the Rooftop Solar Challenge, in which teams are working to standardize and streamline administrative processes acting as barriers to residential solar PV installations. Teams share their lessons learned in the Sunshot Resource Center. An additional $12 million in Rooftop Solar Challenge grants were announced at the beginning of November.
SolarPermit.org was developed by Clean Power Finance and hosts the National Solar Permitting Database. This database houses easily searchable information on permitting requirements in AHJs across the country via an interactive map dashboard.
Also supported by DOE’s SunShot Initiative, the newly released Solar Roadmap is a platform generating customized profiles for cities and counties that display key market information and residential solar potential as well as information on local PII, financing, and planning/zoning.
By utilizing these tools to understand PII and other sources of soft costs while state and local governments streamline them, citizens nationwide will see PII processes bolster, not hamper, future deployment of residential solar PV installation.