Reducing Residential PV System PII Costs

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  • Soft costs in residential PV installation.
    The US Department of Energy estimates that soft costs account for more than 60% of a typical residential PV system cost.
  • Soft costs in residential PV installation.

in the last 5 years for which complete data is available, the US residential solar industry has exploded, growing from 82 MW of new installations in 2008 to 488 MW in 2012. A steep fall in the average installed system cost (from over $8/W to just under $5/W) accompanied this boom. Equipment and hardware prices dropped precipitously. Module costs fell from about $2.60/W to roughly $0.60/W over this period due to competition from abroad, advances in manufacturing, source-material cost reductions and oversupply. Equipment costs are projected to continue to decrease, but they have likely seen the majority of their reductions.

However, the industry is still grappling with stubborn non-hardware or soft costs, which include project financing; customer acquisition; labor; and permitting, inspection and interconnection (PII). The US Department of Energy estimates that soft costs account for more than 60% of a typical residential PV system cost. Arguably, the most unnecessary source of soft costs is the nationwide lack of standardization in PII for residential-scale PV systems.

The Permitting Landscape

There are more than 18,000 permitting agencies across the US, many of which have their own distinct permitting processes. This abundance of AHJs stems from the distribution of power locally and the autonomy of towns and communities. This can be a good thing, as only local communities can create and enforce the laws that may apply to their part of the country. However, the multiplicity of local laws can be burdensome to solar integration companies.

With the exception of adjustments made for climate-specific variables, the basic PV system designs utilized in residential solar installations do not vary significantly between sites. However, the AHJs’ design requirements often do vary significantly. For example, one local building department may rarely encounter residential PV installations and therefore may not have standardized regulations, another building department may have overly strict requirements, and still another may have outdated rules based on past NEC cycles.

Unfortunately, PV integration companies have little choice but to follow the rules that the AHJs set. Navigating this vast world of requirements is particularly burdensome for small installers attempting to expand into new markets, since they may have to deal with different requirements for each installation in a new sales region. Even large national installers feel the negative impact of PII soft costs, which complicated and often conflicting AHJ requirements make onerous.

To further complicate matters, many jurisdictions require multiple agencies to review a residential PV permit application and perform inspections, which substantially slows the velocity of installations. The order and timing of the review and inspection process also varies from one community to the next. The large number of parties involved may confuse installers, and this confusion can lead to improperly submitted permitting packages, poor communication between stakeholders and increased administrative costs for installers and AHJs alike.

A Baseline Permitting Study

In 2012, as part of a SunShot initiative under the US Department of Energy, Clean Power Finance conducted a study to assess the problems associated with residential solar permitting. The overarching goal was to inform the development of solutions that would significantly decrease PII costs. This study included a comprehensive survey of 273 installers as well as qualitative interviews with installers and AHJ staff members. We collected PII data on more than 500 installations in the top 12 solar states that comprise over 90% of the residential solar market in the US. We found that:

  • More than one in three installers avoid selling in an average of 3.5 jurisdictions because of permitting difficulties.
  • Permitting processes vary widely among locales and usually involve two to five agencies, each with different processes.
  • AHJs require, on average, nearly 8 workweeks to complete their tasks. However, the installer’s associated staff time averages just 14.25 hours.

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