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How to navigate state and local government and utility demands
How to cut costs for your PV system installations
How to reduce customer acquisition costs
How to get better pricing on your solar equipment
Solar installations continue to be on the rise.
In the first quarter of 2019, the U.S. solar market surpassed two million installations, growing from one million through 2016. The market is expected to reach three million in 2021 and four million in 2023. Growth post-2020 will see the market increase to 144.6 GW in the year 2025. The International Renewable Energy Agency (IRENA) also projects a 59% cost reduction for electricity generated by solar PV—by 2025.
With increased installations, you should be busy. However, while solar hardware prices have gone down, your soft costs have increased.
You may not always have ways to help cut your PV system soft costs, so this guide will steer you in the right direction and provide solutions.
The pains of your PV installations … and what to do first
You would think that increasing installation figures should be benefiting you, but the fact of the matter is, you’ve got one big problem with your solar installation projects. Soft costs are amounting to an estimated 66% of every job you do.
You need to come up with ways to save money throughout your PV system project processes. These are the areas to look at:
Using workflows to manage your jobs
Soft costs on the large scale
Your individual soft costs
Ways to best acquire your customers
Access to discounted solar equipment
Access to design services
Access to permit packages
But first. One of the greatest issues surrounding your soft cost pains. These have to do with the governments and utilities that stand in the way.
The Big Fish in a Small Pond: State and Local Governments and Utilities
Let’s face it, your PV system installations are the simplest parts of your job. It’s the increasing costs and legwork associated with getting your projects to kick off that are the most frustrating part of being a solar contractor.
The problems are with governments and utilities. They’re the big fish in a pretty small community pond. They’re eating every bit of solar profits in their path. But if government agencies and utility companies want to see greater solar energy adoption in their areas, they have to take on some significant practices to help you cut your PV system costs and reduce your soft costs.
Local jurisdictions and associated utility companies have their work cut out for them. They must
Over 18,000 different jurisdictions have ongoing with slow paperwork and permitting for PV system deployments. In addition, there are 5,000 utilities that have different protocols in 50 different states. To add insult to injury, variations in local permitting and regulation can cost from $3,200 to $4,700 for a 5 kW residential project. That’s a lot of hoop-jumping and cash flying out of wallets.
What do states and locals need to do? They need to take these practices on board to:
Provide permitting checklists – They should provide permitting checklists to help PV system installers to determine what documents they need to accompany their permit applications.
Provide online permitting – This enables solar contractors to apply for their permits online, expediting the process in one day instead of having to wait for the application go through time-consuming processes.
Provide training for staff – This involves training for fire marshals and fire and rescue departments.
Permit as-of-right siting in zoning code – They should enable development to take place without a need for a special permit, variance waiver, amendment, or other non-discretionary site permit with regard to local zoning bylaws.
Engage with the local utility – With the interconnection fee, applicants are responsible for the costs of connecting their PV system to the grid. This also includes any study costs and potential upgrades needed to accommodate their systems. All of this is yet another time-consuming process. Utility companies can make the process easier by enabling online applications, removing the need for manual processing.
Work with local lenders – Adopting PV system installations can become costly due to financing issues from legal fees, internal and external attorneys, non-closing transaction costs, servicing the loan, and closing costs.
Improve customer acquisitions – It often takes up to one year to move from pulling a permit to reaching the PV system plug-in. EnergySage and Geostellar both use online platforms to reduce customer acquisition costs and have attracted millions in funding.
The SunShot Initiative program works with state and local governments to improve solar deployment processes, create solar industry training, expand access to capital, and accelerate solar market growth.
Communities taking a lead – Communities should work to become Solar Powering America by Recognizing Communities (SPARC) designated.
How to Cut Costs for Your PV System Installations
You already know hardware costs have fallen and continue to do so. And current solar project markup is 30% on an average PV system installation.
Yet, your soft costs have now increased to 66% of your project costs.There are a huge number of causes, but there are also various ways to cut costs.
Improve your project workflows
For PV system installations and the tasks surrounding them, they’re no different than any other project. There are many people doing many different things. The key is knowing who’s doing what and making sure everyone is on the same page.
Identify who’s doing what and when, and document their activities. Is everyone on schedule or are there any unavoidable or worse, avoidable delays?
You can best use software, whether it’s a spreadsheet or more specialized, easy to use project management software products that enable you to actually track workflows and see if the project is on time and on budget. The last thing you need is a mistake or series of mistakes to set the project back and result in time and/or cost overruns and thus an unhappy customer.
You can start by listing the following project phases and break them down further with listing the “owners” of each segment in each phase.
The engineering site visit
The site design
Zoning code acceptance including any zoning board meetings if necessary
Permits and necessary documentation
Making certain all equipment is delivered and ready for installation
Preparing your crew
PV system installation
Inspection approval and interconnection
Hire experienced installation labor
There are rising labor costs, but a shortage of skilled labor. You can’t afford to hire inexperienced workers—this only spells possible disaster from faulty work that requires expensive rework and wasted inspections—and unhappy customers. In the long run, you’re better to hire experienced workers.
What can be done?
Schools should adopt solar energy training to provide more labor for the industry. In fact, schools can obtain grants that provide in-depth training. Having experienced crews will actually help you reduce installation soft costs.
They can—and should—take on additional training, whether it’s through the SEIA or for NABCEP certifications. It’ll save you when you use experienced crews.
Get a permitting partner
Permitting is perhaps the greatest bane of any solar contractor’s existence. It seems everyone requires permits for PV systems, whether it’s states, counties, or jurisdictions. And this more often than not means taking a good deal of your time.
When it’s available, take advantage of online permitting applications. Many jurisdictions are offering one-day permitting where you can pull your permit quickly and easily. You can reduce or eliminate the costs of phone calls, emails and the travelling expenses incurred when in-person visits are required to submit, review, and sometimes resubmit paperwork.
There is also a service that can help you take care of all of the documentation you need in order to pull your permit.
Use online forms for interconnection application fee
This is yet another time-consuming process to achieving the PV system completion. Because of the increase in applications, utility companies are experiencing backlogs. However, some utilities are finding ways to speed up the process, moving to online forms.
Use NABCEP-certified inspectors
Inspectors need to be properly educated. The NABCEP System Inspector Program is intended for those who are performing AHJ inspections as well as quality assurance for PV systems and solar heating systems. The credentials also provide increased knowledge of code compliance.
In order to cut your costs, you can have access to a service who has on-staff NABCEP-certified inspectors who will travel to your site and inspect the system.
Have the potential to reduce or eliminate taxes
Some states now offer incentives or stipends rather than charge sales tax. As a result of this forward-looking practice, your sales taxes could be eliminated.
You can also use a wholesale equipment and solar services provider who can provide you with discounted prices on top-of-the-line solar equipment—solar panels, inverters, and components. With these reductions, you’ll have to pay less on taxes.
Work with knowledgeable financing experts
Financing can be a dicey area for the solar contractor. You’re faced with multiple financial methods as some lenders feel the need to raise prices. With the rise of smaller local installers, this has worked in favor of loan providers when those installers approach them for consumer financing. In addition, other sources may be unavailable if you’re a small installer.
On a more positive note, some lenders are offering low-interest products. As a result, solar loans will also become simpler, enabling traditional commercial banks to offer direct-to-consumer loans.
More dedicated solar loan providers will likely still have an advantage once commercial banks enter the solar space. They have large installer networks and the technology to seamlessly integrate into those installers’ sales tools.
Engage in ways to improve supply chain costs
Because of the huge increase in the demand of solar installations, this has placed stress on the equipment supply chain. This equates to a demand on hardware with shorter lead times and lower costs. According to the National Renewable Energy Laboratory (NREL), any delays in the supply chain may contribute to module prices. As a result, there are needs to develop more efficient channels and better supply chain management in order to reach installers with even greater lower pricing.
Rather than relying on purchasing your solar modules directly from a supply chain channel, there is a dedicated wholesale company who has your back when it comes to supplying all of your PV system hardware.
Introduce a complete design service
Solar design services can be expensive. Not only that, but there’s the stress and time to deal with government agencies. Your design must meet the requirements of the AHJ, the utility, and your customers.
With a good design, you should know what the PV system will need.
The daily energy use should be calculated using the W/h use each month/year. The homeowner will have this on any electric bill. From there, the size and layout should be estimated, followed by comparing systems and how many solar panels will be needed, and then coming up with a final plan.
All of this work can prove costly. However, when you access a dedicated design service that saves you money, it’s a win-win for you and your customers.
How to Reduce Customer Acquisition Costs
As with any business, acquiring customers is labor-intensive. In solar, customer acquisition costs are at about $0.69/W. This doesn’t include general and administrative labor costs or sales commissions. After those are paid, you’ll be looking at a total customer acquisition of over $1/W.
When you look at the total cost in hard-cold dollars, expect your costs to come in around $1000, but this can increase to over $4000.
You also need to consider your costs for marketing and advertising. You don’t have the time to design ads, build and manage a website, or develop a social media presence. That means having to hire advertising people, social media managers, a Web designer to build your website, and someone to manage it (although the designer and manager can be the same person).
What’s worse, with all that time and expense, 95% potential customers never follow through.
However, the good news is that people will often go solar if see their neighbor’s doing it. It’s a case of wanting to be like the Jones’—unless they finally realize the benefits a PV system can give them.
What are some things to talk about when you’re meeting a potential customer? Take them step-by-step:
Talk about solar energy in general
Talk about the benefits of solar and how it’s a sustainable form of energy
Roughly compare the savings from a solar system as compared to their current electricity bill
Demonstrate your experience in the industry and how many years you’re in business
Provide them with copies of your license and certifications, including your state license and NABCEP certification
Let them know how many systems you’ve installed
Be comfortable about walking the customer through the installation
Provide support before, during, and after installation
Provide previous customer testimonials/referrals
Be comfortable talking project costs
Let potential customers know you can provide them with a wide selection of discounted, yet high quality solar equipment from reputable manufacturers supplier
Let your potential customers know that you’ll be able to lower the additional costs found in soft costs
How to Get Better Pricing on Your Solar Equipment
There are ways to cut the costs of your PV system installations. Some are more representative of wider initiatives involving local jurisdictions and utility companies, while numerous others are cost cutting areas you can do yourself. Many of these are the direct result of collaborating with a supplier who’s got your back when it comes to equipment pricing and the ability to lower some of your soft costs…