Wiser Capital Blog

November 5, 2014 | No comments yet

Why Are Solar’s Soft Costs So Hard To Bring Down?

In the solar industry, the term “soft cost” is a literal and figurative four-letter word. Although the cost of photovoltaic (PV) panels has plummeted in recent years, dropping by more than 70% from 2007 to 2012, the clean energy technology’s pursuit to become cost-competitive with fossil energy continues to fall short for anything other than utility scale projects. Despite these drastic price improvements in hardware, soft costs are and continue to be a stumbling block for the solar industry.

In the solar context, soft costs include non-hardware project expenses related to permitting, labor, inspection, interconnection, customer acquisition, and financing, among other factors. They aren’t cheap, either: soft costs represent 64% of total costs in residential solar projects, and up to 57% in the commercial sector. In short, from the moment a building owner decides he or she wants to go solar, up until project completion, the red tape is simply too cumbersome—and too expensive—to allow solar energy to enjoy widespread adoption in the United States.

It doesn’t have to be this way. Much has been made about Germany’s rapid expansion of solar energy over the last decade, and with good reason: as of 2012, renewables accounted for 23% of the nation’s total electricity consumption, a doubling since 2006. Forecasts predict another doubling by 2025, and the nation has set targets of 50% by 2030, 65% by 2040, and 80% by 2050. As of November 2013, the European powerhouse had 35.2 GW of installed capacity. How is Germany able to cost effectively implement solar at such a massive scale?

Where one answer might lie is, you guessed it, in the soft costs. According to a 2013 report from the Rocky Mountain Institute, solar project soft costs account for about $0.33 per watt in Germany, just over a quarter of the U.S.’s unimpressive $1.22 per watt in soft costs. Needless to say, reducing soft costs as much as possible is a major priority for U.S. solar developers.

This roadblock is well understood in the solar industry, but has only recently begun to be meaningfully addressed. The National Renewable energy Laboratory (NREL) recently released a new roadmap for reducing solar PV soft costs to the U.S. Department of Energy’s SunShot Initiative targets of $0.65/W and $0.44/W for residential and commercial systems, respectively. One of the report’s main findings is that the use of software tools to reduce time spent on-site is a great way to significantly reduce solar soft costs.

Wiser Capital’s innovative web-based platform does just that. It allows small and medium-scale commercial host facilities to enter their energy consumption data and design a prototype system using satellite imagery to see firsthand if going solar will work for their building. By bringing together accredited investors and proven systems integrators with these vetted, credit-worthy host facilities, overall system soft costs are reduced drastically, leading to more successful projects.

Those involved in the project see a faster, more streamlined process without the red tape common to typical solar projects in the U.S. The community sees a cleaner source of energy, made easier by Wiser Capital’s innovation. For more information, be sure to visit our website.

Jason Huffine interned at Wiser Capital in the spring of 2014 and is a recent graduate of UC Santa Barbara’s Bren School of Environmental Science & Management, where he earned a Master’s degree with specializations in Energy & Climate and Corporate Environmental Management. He received a BA in Communication Studies from UCLA in 2009 and has several years of editorial experience in print, web, and television media.

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