Soft Costs Make A Bigger Difference As Solar Gets Cheaper

August 27th, 2013 by John Farrell

Last week’s graphic on the impact of local permitting on the cost of solar power was a big hit, so here’s a follow-up on “soft costs,” the expenses in a solar installation (including permitting) that are not the solar module. The chart compares the soft costs in the US to Germany (thanks to LBNL’s analysis), where these cost are much lower. The soft costs reductions attributable to the much larger solar market in Germany have already been accounted for and the chart shows those that are the result of other factors.

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Tags: inspection, interconnection, labor, permitting, soft costs, Solar Costs, solar interconnection, solar interconnection costs, solar permitting costs, solar soft costs, US, US Solar Energy, US solar soft costs

About the Author

John Farrell directs the Democratic Energy program at ILSR and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. His seminal paper, Democratizing the Electricity System, describes how to blast the roadblocks to distributed renewable energy generation, and how such small-scale renewable energy projects are the key to the biggest strides in renewable energy development. Farrell also authored the landmark report Energy Self-Reliant States, which serves as the definitive energy atlas for the United States, detailing the state-by-state renewable electricity generation potential. Farrell regularly provides discussion and analysis of distributed renewable energy policy on his blog, Energy Self-Reliant States (energyselfreliantstates.org), and articles are regularly syndicated on Grist and Renewable Energy World. John Farrell can also be found on Twitter @johnffarrell, or at jfarrell@ilsr.org.

Bob_Wallace

Why should it take the US 10 years to catch up with where Germany and Australia are today?

Where’s the logic in that sort of timeline? Is there some assumption that the US is broken and won’t fix itself?
JamesWimberley

Wrong chart? There´s no comparison with Germany, just a tautology. If soft costs don´t go down as panel prices do, then they make up an increasing share of the bill. In other news, sleeping pills have a dormitive virtue.
Jouni Valkonen

note that soft costs are not economic problem, because money does not disappear e.g. into China, but is mostly spent locally. Instead soft costs increases the circulation of speed of money and this is good for the economy.
- Ivor O’Connor
  
  So it would also be good for the economy if the government hired us all to change the color of red in all stop lights on a daily basis. After all the money will then be spent locally.
  
  Or it must be good to just hire 1000x more government employees than are needed, like we currently have, because they’ll keep the money local?
  
  There must some other parameters that are more important?
  - dcard88
    
    We have over 500K less gov employees now than before the recession started.
    - Ivor O’Connor
      
      So we are down from 23 million in 2010 to about 22 million now. It’s a good start but there are still 22 million government employees!!! See http://www.aei-ideas.org/wp-content/uploads/2012/09/9.10.12-Strain-Post-2.png
      
      I don’t see this as a good stat…
      - JimBouton
        
        You do realize that those government employees include local and state governments. Public school employees when you add in state universities account for close to 10 million just in that category. Public hospitals and police / fireman, throw in another 4 million. Post office, libraries, sanitation workers, the list goes on and on. And, then there is the military, probably 3 million right there not counting the support structure.
        
        It might be pointed out that the ratio of government employees to population in 1988 was 7.2%. It is now 6.9%.
        
        http://www.forbes.com/sites/mikepatton/2013/01/24/the-growth-of-the-federal-government-1980-to-2012/
        
        How does that stat look now?
      - Bob_Wallace
        
        It will look way too high.
        
        Until he needs something like an emergency responder or some permits processed in a timely manner, and then it will be the worst thing ever. (That the person he needs isn’t on the job.)
      - Ivor O’Connor
        
        Yes Bob,
        
        Way way too high. We’ve been through this before. We agree on renewable energy and removing monopolistic polluting energy companies. We disagree when I say our government should not spend beyond its mean and that we should start paying back our debt.
        
        Is there some reason why our government should spend beyond its means? I’m willing to listen.
      - Bob_Wallace
        
        “Is there some reason why our government should spend beyond its means?”
        
        Absolutely. At times. When the economy stalls out it pays us to go into debt and get things moving once more.
        
        And in a national emergency we may have no option.
        
        Should we be debt free? Probably not. One reason is that it makes some sense to pay for stuff as you use it rather than pay it off ahead of time, as long as the interest rate isn’t too high. And the US government gets pretty much the best of all rates.
        
        Go ahead, borrow money to build that new highway or school and then let the taxpayers who use it pay for it. Rather than making the generation before them fund it.
        
        Should we spend our selves into bankruptcy? No.
        
        Should we be cutting government jobs? That’s hard to answer as yes or no. We should have some system of determining how much is enough. Cutting numbers just to make some people happy is not the right approach. Cutting numbers when we’re dealing with high unemployment is absolutely the wrong time.
        
        I’d feel much better about Republicans and Libertar-icans if they talked about efficiency, how to do the same job for less or a better job with the same resources rather than cut, cut, cut. When it comes down to it they want the stuff that they don’t need cut, but keep the government’s hands of Medicare.
      - Ivor O’Connor
        
        Thank you Bob. Those are pretty much my thoughts too. Up to the point where you say Libertarians want to cut, cut, cut instead of looking for better ways. You make it sound like Libertarians are like Romney. Romney as I’m sure you are aware made his money by raiding companies and then gutting them for short term profits.
        
        There is a fine line between being efficient and gutting for short term profits. Removing the need for a meter man to go around reading meters once a month might be viewed negatively. By Democrats. Or using technology so kids can learn at their own pace might remove the need for much of our educational system. Again unpopular with Democrats. Or using video recordings to issue tickets in the mail might greatly upset the police unions because they feel we our cutting their numbers. This is very unpopular with the Republicans. Or cutting down on the military spending since it doesn’t help our economy or our security. A very unpopular move with the Republicans. What they all have in common is that it helps our nation in the long term and are economically viable. It isn’t simple minded cut, gut, and pocket the change caused by hurting others.
      - JimBouton
        
        Actually most of the people that don’t like their old meters being taken away are libertarians. They feel that the new meters are an intrusion into their privacy. That, and EMF. I showed my neighbor that the EMF on his smart meter is less than his alarm clock less than a foot from his head when he sleeps.
        
        So, your plan is to do away with most of the educational system and have kids sit in front of a laptop to learn? I think our school system could use an overhaul, but taking teachers away is going the opposite direction to improve the situation. Start with eliminating the abundance of testing and concentrate more on critical thinking programs.
        
        You don’t have any teachers in your background that were meaningful role models or catalysts for you in your life?
      - Ivor O’Connor
        
        uh huh. So Libertarians according to you are nut jobs who don’t understand smart meters?
        
        And you yourself believe learning via a laptop is the opposite way to learn. In front of a book though and it’s all good?
        
        May I suggest this not so novel idea of making learning something done via games. So the young like to do it. Make it interactive and well thought out so it has the built in peer approval? To motivate kids from within. Most of which is done via computers?
        
        Yes I had many teachers I thought the world of. There were many other teachers I thought should have been fired. The goal is to improve the educational system which is now one of the worst in all of the industrialized nations while being the most expensive.
      - JimBouton
        
        Ivor, I think that most of the people that want not to have smart meters are big on privacy laws. I think there are issues with government intrusion, but I don’t think smart meters are one of them.
        
        I have worked (and still do) for IBM for 33 years, so I guess you could say I have a lot of experience with computers. There are certainly many places where more computerization can be introduced in the school systems, but that introduces the whole funding problem. I can see it enhancing a teacher’s curriculum, but I don’t think that is why our schools are failing.
        
        I think poverty is a much bigger issue. I also believe that we are teaching rote memory skills, which is the worse kind of teaching. I don’t blame the teachers, though when you provide a fairly low wage then you do get what you pay for.
        
        I would rather have our children tested a lot less, but develop into critical problem solvers and engaged citizens. The lack of arts in school is appalling to me. Literature, humanities, philosophy, and many other social studies have been dropped off for far too long in our school system.
      - Ivor O’Connor
        
        I can agree with much of what you say Jim. Though this smart meter stuff sounds so crazed as to be just a bad joke.
        
        The education system with computers at school are not what I’m thinking about. I’m thinking schools should eventually only be used for social stuff, testing, sports, and special tutoring. The main line educational system should be done at home with their own computers. In games or online environments that are fun. Where they get the same social benefits facebook offers while learning. These kids who are texting each other and checking facebook as they wake up clearly have some extra cpu power in their noggins going to waste. We need to tweak this into something productive.
      - Bob_Wallace
        
        I’ve never seen a Libertarian suggest a better way to solve problem, the solutions I’ve seen are 1) cut taxes, 2) cut regulations and 3) cut taxes some more.
        
        Do that and somehow magic happens and the problem is fixed.
        
        I see no difference between Republicans and Libertarians except on social issues. Many Libertarians are for getting rid of marijuana laws and not restricting abortion.
        
        Now, perhaps Libertarians have put forth new solutions to vexing problems other than the government doing less. I haven’t seen them.
        —
        
        I’ve never seen a Democrat who was opposed to lower taxes or smaller government. As long as the job got done.
        
        I’ve seen a large number of Democrats call for less wasteful military spending and the saved money going to social programs which need more revenue. I have zero doubt that if our military spending (and unneeded corporate giveaways) were cut and social programs adequately funded then most Democrats would be very happy to see taxes lowered.
        
        But fix the problems first, then cut taxes. Don’t simply cut taxes and let the problems get worse.
        —
        
        I’ve participated in multiple discussions about cutting Post Office services, specifically six day delivery.
        
        We don’t need six day delivery any longer, the time-important stuff travels by the web. The only important mail is basically hard copies of important papers. Only getting your magazines and junk mail on Monday/Thursday or Tuesday/Friday would not harm anyone.
        
        Of course the real financial problem that the Post Office has comes from the unique requirement placed on them by Congress that they must prepay retirement. No other organization or corporation is required to do this.
        
        Some Democrats are opposed to cutting postal services if it means firing large number of Post Office employees. Presenting it as cutting by attrition and giving employees the opportunity to move to other government agencies greatly cuts that opposition.
        
        What I don’t see from Libertarians or Republicans are suggestions along the lines of “Let’s see if we can reduce the size of the Post Office workforce without hurting individual employees.”
        
        What I see is “Cut, cut, cut. Just don’t cut the stuff that is important to me.”
      - Ivor O’Connor
        
        Well now you’ve “seen” a Libertarian who wants real solutions and doesn’t think they come from the magic of cutting taxes and regulations. That would be me.
        
        However I do believe in a balanced budget, within the constraints you’ve pointed out here, and am worried you only see the “cut, cut, cut” side of it. There are many catch-22 situations that could be fixed with a large outlay of money first to set the architecture in place so the balancing and payback can be accomplished. The whole renewable energy field is a perfect example. Education is another. Along with many others.
        
        Fossil fuel and nuclear proponents might see us as wanting to turn off the American way of living. To make us live in caves with electricity only when the sun is out or the wind is blowing. I think you would agree with me these people don’t see the full picture. Libertarians are about the whole picture but I’m sure there are many nut jobs. Just as there are many nut jobs in the Republican and Democratic spheres.
      - Bob_Wallace
        
        “Well now you’ve “seen” a Libertarian who wants real solutions and doesn’t think they come from the magic of cutting taxes and regulations. That would be me.”
        
        Careful. You could loose your Libertarian Club membership card saying stuff like that…. ;o)
      - Jouni Valkonen
        
        I agree, modern economy does require some public spendings, because individuals – especially rich – are too reluctant to spend their money on job creation. But instead of bureaucrats, I think that we need more public high profile infrastructure projects such as CaHSR (or Hyperloop).
        
        And especially we (the Global people) need ultra high profile space program that is the source of inspiration for all the smart children who are pondering if they want to become unproductive lawyer or productive (Mars rocket) engineer.
      - Ivor O’Connor
        
        There is only so much money. I want a government that is going to be around and is helpful to its citizens. Not collapse under its own debt.
      - JimBouton
        
        I always find the debt question interesting. You’ve made your target on the deficit, that you want it balanced, but what about the debt.
        
        Two questions:
        
        1) How much debt should the federal government carry? (such as a fixed number or a percentage of GDP)
        2) What is the maximum amount of our debt should be foreign based? (again percentage or a fixed number)
      - Ivor O’Connor
        
        I don’t have answers to these questions. I’d like to be a stick in the mud and say zero debt. There are probably many valid reasons this is not a good answer. However once you start making allowances for things it has a way of just going on and on…
  - Jouni Valkonen
    
    it is better than to hire Chinese workers to do the same work as telecommuting job. And we have similarly outsourced millions of jobs into India and China, because modern technology allows telecommuting jobs.
    
    There are enough underemployed people at service sector that if we can find them even little productive work, it is worthy to employ them.
    - Ivor O’Connor
      
      I’m not sure what you are saying Jouni. If you are saying we should hire Americans I’m all for it. However they should be doing worthwhile jobs.
      - Jouni Valkonen
        
        most of the americans do economically worthless and often low paid jobs that would be trivial to automate. Even most of the bureaucrats do more productive work than what people do in the McDonald’s. At least bureaucrats are paid well, so that they are good consumers who has enough purchasing power to buy e.g. solar panels.
- Bob_Wallace
  
  High soft costs slow the transition off coal.
  
  Coal pollution damages health.
  
  Health problems lower productivity.
  
  That’s an economic problem
- Ross
  
  What about the missed opportunity cost from not being able to spend the money on other more productive uses?
  - Jouni Valkonen
    
    usually people just spend extra money to the imported goods, so having free to choose on where to spend money, it usually is not the best option. But these are difficult and complex problems. Value is formed what people want. If we give high enough incentive to spent their money on solar panels, it is money well spent.
    - Ross
      
      If you examine the data I think you’ll find most money is not spent on imported goods and services.
      - Jouni Valkonen
        
        i did not say most. I did say that _excess_ money is usually spent on imported luxury goods. In Finland the fraction is larger, and it would be larger also in United States, if every state was independent. U.S. is just too large single economic zone, that it distorts economic statistics.
      - Ross
        
        Sounds like you’re going out on a limb there with your theories about how people and businesses might behave when they get cost savings from a reduction in soft costs for solar.
      - Jouni Valkonen
        
        Also your statement: “What about the missed opportunity cost from not being able to spend the money on other more productive uses?” is not based on real world fact but it contains most likely more free market ideology than facts.
        
        But as I said in the first place, these are horrendously difficult and complex matters and any attempt to try to simplify things into simple principles will most likely lead into a failure.