Soft Costs Most Expensive Part of Solar Installation, NREL Says

With the precipitous drop in prices to manufacture solar modules – down 75% over the past four years, so-called "soft costs" are now the most expensive part of installing residential solar systems – 64% of the total price.

Previous research pegged soft costs at 50% of the total price for installing a solar system.

National Renewable Energy Lab (NREL) conducted that research in 2010 – its latest reports are an update.

Soft costs also consume a greater portion of the final price for commercial systems of all sizes, says NREL. For small commercial systems under 250 kilowatts, soft costs comprise 57% of the cost, up from 44%, and for large commercial installations over 250 kW, they have risen from 41% to 52%. 

For residential systems, the greatest soft costs are supply chain costs ($0.61/watt), installation labor ($0.55/watt), customer acquisition ($0.48/watt), and indirect corporate costs ($0.47/watt), such as maintaining office management and accounting functions. They also examine costs for permitting, inspection, interconnection, subsidy applications and system design.

Permitting and inspection costs currently add $0.50 per watt, or about $2500 to the total cost for the homeowner.

The good news is that soft costs are falling. The costs for installation labor and marketing have dropped by about 30% in the last three years.

Researchers also studied soft costs associated with solar leasing and find that third-party ownership adds $0.78 per watt for residential systems and $0.67 per watt for commercial projects. 

NREL’s two reports provide benchmarks and help track progress of the SunShot Initiative, which has a goal of making solar fully cost-competitive with fossil fuels by the end of the decade – $0.06 per kilowatt-hour.

"Two new reports, along with previous reports, provide a comprehensive look at the full cost of installing solar, while delineating and quantifying the various contributors to that final cost," says NREL analyst Barry Friedman.

The first report updates research on soft costs since 2010 and the second reprot examines third party financing of solar systems: