The National Renewable Energy Laboratory (NREL) recently published an 85-page report about the cost of residential and commercial photovoltaics, offering a variety of suggestions for lowering the “soft costs” associated with PV implementation. These suggestions will help the industry achieve the US Department of Energy’s SunShot goals for 2020. I think the report provides opportunities for designers and manufacturers of PV systems.
In researching the report, NREL talked to a wide variety of stakeholders, including PV industry executives, engineers, industry organizations, utilities, installers, and more. The researchers examined NREL data, drew comparisons between the semiconductor industry and the photovoltaic industry, and developed a roadmap to lower the total installed cost of residential PV from $6.60 per watt (in 2010) to $1.50 per watt by 2020, and to lower the cost of commercial PV from $5.96/Watt (2010) to $1.25/Watt by 2020.
Although the cost of PV hardware has steadily decreased over the years, the soft costs have remained relatively flat, making soft costs a larger percentage of the overall system. The NREL report breaks soft costs into four main categories: customer acquisition (sales, site assessments, bidding, etc.); permitting, inspection, and interconnection; installation labor; and financing. I’ll address the first three areas, since they involve engineering. If you’re interested in the financing aspect, please click the “Read more…” link and refer to the report itself.
Customer Acquisition
Contractors in the PV industry are no different than those in other areas of construction. They employ sales personnel, site assessors, estimators, and designers. In order to reduce these costs, NREL suggests that the industry needs to develop better software tools for doing site assessments - especially initial assessments that can be done remotely without travelling to the customer’s house. Ideally the software would integrate assessment, design, and bidding into one package. While software such as Google Earth makes it possible to do initial site assessments remotely, it’s hardly a complete solution. Software engineering firms take note: here’s an opportunity to develop a tool that can be used industry-wide.
Another way to reduce the customer acquisition cost is to create standardized “plug-and-play” system designs. Every location is unique, and designing a custom system to maximize each site’s particular characteristics will generally produce the greatest energy output for the customer. On the other hand, off-the-shelf systems can be much less expensive, providing a potentially shorter payback period. Some companies are making headway in creating package deals - most notably IKEA, who’s offering complete PV systems for less than $3/Watt installed. Currently, that’s only available in the UK, but companies looking to get a foothold in other markets might consider a similar model.
Permitting, Inspection, and Interconnection (PII)
This is possibly the most difficult area to reduce costs, since it involves local government agencies as well as utilities. Each municipality has its own permitting rules, building codes, and inspection procedures. Utilities aren’t exactly motivated to help homeowners connect grid-tied systems that operate on net-metering agreements. This can make the whole approval process a nightmare.
NREL suggests a standardized permitting procedure, including online applications. Germany has a one-page form that takes about five minutes to complete. In the US, the city of Chicago has recently guaranteed a 24-hour turnaround on PV permits. In Vermont, there is no permitting process - you simply register your PV system and pay a fee, much like automobile registration.
A standard “plug-and-play” design could help the permitting, inspection, and interconnection process as well. If you’re using an off-the-shelf system that’s already passed all the safety inspections at the factory, there’s less to approve in advance and inspect at the site. If I were a PV system manufacturer, I’d develop a complete system that meets or exceeds the most common codes and standards.
Installation Labor
Much like prefabricated houses allow builders to assemble most of a house in the controlled environment of a factory - increasing quality while decreasing cost - prefab PV systems have the same benefits.
An off-the-shelf system may integrate microinverters in the PV panels. Although microinverters increase the up-front cost of hardware, they also decrease the labor involved in wiring, and make the system more scalable. Mounting rails can also be integrated into the panels, reducing the time it takes to install them. A combination of these would allow a PV system manufacturer to design custom systems of various sizes that all use the same hardware - just increase the number of panels for higher power needs.
The solar power movement began with “do-it-yourselfers” designing homebrewed systems for their own houses. We now have professionals doing the designs, but they’re still creating homebrewed systems using crude non-standard software tools. The next logical progression is to have readily available off-the-shelf systems and standard software tools to help designers choose the right system for the site. I can see big rewards for those who are innovative enough to make it happen. Those companies could become the Apple, Microsoft, and IBM of the photovoltaic industry.
Hmmm - maybe I need to turn my garage into a workshop...
Images: NREL/US Department of Energy