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Up to Half of Solar Costs are Administrative, DOE Says

Between 40 and 50 percent of the cost of ownership and operation for a rooftop solar system is contributed by administrative costs such as permitting, financing and connecting to the grid, according to the Department of Energy (via the New York Times).

Ramamoorthy Ramesh, the manager of the DOE’s SunShot program and a materials scientist from the University of California at Berkeley, said these “soft costs” are often overlooked. But reducing these costs will increase installations, bringing about innovation and cuts to hardware costs, he said.

The SunShot initiative has a 2020 goal of bringing the price of installed solar power down to about six cents per kWh, on par with fossil fuels, without the use of ongoing subsidies. That’s from an average of 18 cents a kWh for consumers’ rooftop solar power systems today. The DOE hopes that the decrease will help solar power make up 15 to 18 percent of U.S. generation by 2030.

This month energy secretary Steven Chu announced 22 winners of $12.5 million in grants under the Rooftop Solar Challenge, which sought the best ideas for cutting permitting costs. Ramesh said that in a year, the winning teams will report their projects’ effect on these costs.

A recent study by researchers at Michigan Tech and Queen’s University, Kingston in Canada found that solar has already achieved grid parity with conventional energy in many regions, as calculated by the levelized cost of energy (LCOE), GreenTech Media reported.

The authors said that previous LCOE studies for small and medium-sized systems no longer apply because the costs of panels and balance of system have come down so quickly. Maintenance costs are also very low, installation prices are set to fall and durability has increased, the researchers said.

But according to Climate Change & Environmental Services owner Marc Karell, with the costs of solar power front-loaded at the installation stage, the choice to go solar is still a tough one for business. Companies by nature pass on all costs in the products they sell, so firms are concerned that solar PV may put them in an uncompetitive position, he says.

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4 thoughts on “Up to Half of Solar Costs are Administrative, DOE Says

  1. Could these costs be reduced if solar were marketed for community-wide systems where all homes and businesses had solar? Utilites could be “encouraged” to streamline the connections.

  2. The 40 to 50% estimate of soft costs is absurd.
    Either a typo or extreme ignorance.
    Actual cost might be 10 to 15 % maximum, and more likely 5%. Doesn’t anyone proofread this stuff?

  3. @BB: There might be ignorance involved, but the reality is, solar panel production is not that difficult. Seems like it’s more like health insurance. Where does the money go? The middle people. It’s a travesty.

  4. Bilbo ~ i know it sounds crazy – but it is true. 40/50% of a solar installation can be attributed to “soft costs”. Most notably, permitting and interconnection processes are responsible for this ridiculous #.

    A simple metric to give some perspective: It costs our company more to permit a project then it does to pay for the labor of the actual install. (we install over 100 residential solar systems per month).

    Standardization of permit requirements would do a lot to reduce these absurd numbers.

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