by Shane Henson — December 9, 2013—Two reports from the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) find that solar financing and other non-hardware costs—often referred to as “soft costs”—now comprise most of the cost of commercial and residential solar systems, reflecting how soft costs are becoming an increasingly larger fraction of the cost of installing solar.
The first report, Benchmarking Non-Hardware Balance-of-System (Soft) Costs for U.S. Photovoltaic Systems, Using a Bottom-up Approach and Installer Survey—Second Edition is a follow-up to the first edition published in 2012, but offers a more in-depth look at non-hardware business process and installation costs associated with photovoltaic (PV) solar energy systems.
The authors found that in the first half of 2012, soft costs represented the majority of all costs—57% of the total cost for small (less than 250 kilowatts) commercial systems (up from 44%); and 52% of the total costs for large (250 kilowatts or larger) commercial systems (up from 41%). Similar results were found for residential systems.
The second report Financing, Overhead, and Profit: An In-depth Discussion of Costs Associated with Third-party Financing of Residential and Commercial Photovoltaic Systems, takes a deeper look at the five sub-categories identified in the benchmarking study that had been lumped together in the first edition of the benchmarking study.
Researchers found that third-party ownership added $0.67 per watt for commercial projects and $0.78 per watt for residential systems. They also noted three of the main benefits of third-party financing arrangements:
- Third-party financiers offer additional services, such as shopping for systems, maintaining systems, and applying for incentives.
- Third-party financing may effectively lower the levelized cost of energy over time through economics of scale.
- Businesses offering third-party ownership of installations have gained approximately 70% of residential market share in the United States, driving much of the PV demand.
