Solar energy soft costs are by definition the additional expenses associated with and incurred within the overall solar system package from start to finish. These costs are non-hardware costs related to solar system financing, permits, the cost of labor, and overhead costs such as administration, marketing, sales, and the costs associated with the operation of solar companies and their bottom line. The term ‘soft costs’ describes indirect construction costs that can also be understood as general and administrative costs.
Reducing Solar Energy Soft Costs
In the US, hardware and installation costs have been reduced to make solar more affordable for Americans. However, soft costs have been going up due to outdated permitting and inspection expenses created by the local government. The good news is that since the pandemic, more Americans want solar systems installed, and the government is taking action for reducing solar soft costs to remove barriers to solar energy growth and create new jobs. What is the government doing to positively impact the solar industry?
Congress recently passed a two-year extension of the Investment Tax Credit for solar energy system installation as part of the most recent stimulus bill. And, The US Department of Energy Solar Energy Technologies Office in a collaboration with the National Renewable Energy Laboratory (NREL) has created a new app to help reduce costs. The app is named SolarApp, and it can help in reducing solar soft costs by simplifying the permitting process. Permits can be applied for and approved start to finish online in the app, reducing solar energy soft costs and the time local governments normally would take to review and approve residential solar installation permits. “The Solar Automated Permit Processing platform (SolarAPP) will be an instant online solar permitting tool for code-compliant residential systems. The SolarAPP will create a low-cost, seamless process for rooftop solar and solar+storage installations. It will help make solar energy affordable and accessible for more residents and businesses while enhancing safety and reliability” (SolarApp). While this may not be enough to increase access for all Americans, it’s a big step in the right direction. By reducing solar soft costs, which have been a major barrier to date, more Americans will be able to take advantage of the energy and financial benefits of solar in the not-so-distant future.
Other solar soft costs to consider are:
- Interconnection labor
- Sales tax
- Transaction costs
- Installer/Developer profit
- Customer acquisition
- Supply chain costs
“While there are direct costs associated with permitting (currently $0.13/watt), the indirect costs of permitting can be much higher. Permitting and inspection practices are inconsistent across jurisdictions, so installers must take the time to become familiar with the practices of each jurisdiction they want to work in. Municipal permitting and inspection resources also vary greatly, and in some communities, the gap between system installation and an inspector’s permission to operate might take months. These complications lead to higher labor and overhead costs on the part of the installer, and in some cases can lead to the outright cancelation of the project by the customer…” which is why the new SolarApp is so exciting. The SolarApp could mean money and time savings for a large swath of consumers and service providers across the nation (Solar Soft Cost Factsheet).
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