Category: Solar Power

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High Administrative Cost of Solar Power Hampers Growth

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The Department of Energy (DOE) has recently stated that up to half of the cost in solar power installations is due to administrative tasks. These administrative or soft costs are the costs associated with pe

rmitting, zoning, metering, financing and arranging a grid connection. Obviously, until grid parity with fossil fuels is reached, then the growth of solar will lag behind. Countries such as Germany, Japan and France are in a more competitive position with solar than the United States because they have eliminated permitting for basic residential installations. Germany has the lowest cost of installation in the world currently, at 40% lower than that of the U.S. and a recent study has found that solar has even achieved grid parity in many regions of Canada.

Department of Energy’s (DOE) Plan to Lower Administrative Costs The DOE realizes that the United States needs to take steps to make the cost of solar more competitive by substantially reducing the amount of red tape involved in the permitting process. Reducing the cost of installing solar power systems for home and small commercial properties has now become a top priority with the DOE. They believe that reducing the soft costs will increase the number of installations and invariably will bring down the cost of hardware.

The DOE has awarded a total of $12.5 million in grants to 22 entities in a competition called the Rooftop Solar Challenge, which was created to come up with better processes with the ordinances, which have impeded solar installations by driving up their cost. These 22 participants are involved in what the DOE calls the SunShot Initiative, fashioned in the spirit of the moon shot program during the Kennedy administration to put a man on the moon. At its completion, the DOE will develop best-practice guides for implementation. It hopes to be able to lower kW-hour down to 6 cents by using the new criteria in these guides. They are also hopeful that by achieving this new price point, solar power will be able to account for 15% to 18% of the country’s electricity generation by 2030.

Other Initiatives to Make Solar Cost-Effective Cities like San Jose, Philadelphia and Portland have streamlined permitting for most installations while following code and maintaining safety. These jurisdictions allow for faster turnaround of permitting and less time for waiting on site for inspections. San Jose is now one of the lowest cost cities for solar in California.

SunRun headquartered in California and operating in several states, has come up with a business model to provide more affordable entry into solar by offering a fixed-rate program for 20 years whereby a household or business could purchase or lease a PV system. Going solar can be very expensive since purchasing a system could costs between $15,000 and $60,000. They pay for the installation and monitoring of their system for 20 years while the customer enjoys a fixed cost lower rate. In fact, it was SunRun who conducted a comprehensive study of the administrative costs of solar and offered their recommendations to the DOE.

Benefits of Streamlined Permitting Streamlined permitting processes can bring the cost of grid parity to 50% of Americans by 2013 and we could be able to close in on Germany’s 40% cost advantage. Germany has already reached $3.50/watt not including any subsidies. Although equipment costs are expected to fall to less than $1 per watt over the next year, without streamlined permitting and inspection procedures, the US will not only struggle to reach $3.50/watt price that Germany has, but also the longer term DOE goal of $1 per watt. Although there are some efforts in place, a more comprehensive program of lowering the costs of solar installations by simplifying permitting tasks is essential in the United States so that more Americans will be able to afford and enjoy the benefits of clean, renewable energy.