Do a time and motion study on what’s involved in a rooftop solar PV installation and you’ll find that hardware costs are decreasing and “soft costs” are increasing.
The fall in solar PV cost has created a boom for sales and price reductions. PV hardware is now a small part of the overall system cost and further price reductions are going to need to focus on soft costs such as installation, logistics, cost of sales and compliance. In the US, there have been a number of studies on this topic, due primarily to the fact that their soft costs are very high when compared to Australia and Germany.
We did some numbers on this last year as part of a project we were involved in for the Clean Energy Regulator and this week, I revised the original spreadsheet and updated it with some recent data to see where we have got to. Of course, there is huge price elasticity in PV pricing so we have worked on average’s to get a sense of things.
For the 2013 numbers, we used the Clean Energy Regulator’s average Out of Pocket Expenses data as a guide to where final prices should land. The graph below shows some interesting shifts in where the big costs are in solar systems.
In proportional terms, it shows that:
- PV price has reduced from 50% of price to around 32% of price
- As a result everything else has increased as a proportion, although costs declines have offset some of this.
- Racking has reduced from 10% to 8% for example.
- Inverters, despite being almost half the cost in $/W have increased from 9%-14% of system price.
- Other BOS (typically metering, fusing, conduits and safety gear) has increased from $0.20c/W to around $0.35c/W and from 3%-14% of system cost.
- And administration is up in our view, from around 1% to 10% of total costs and in absolute terms from around $0.08c/W to $0.25c/W.
Focusing on administration and compliance for a minute, I’m sure every installer out there will agree that sticking with the rules, regulations, standards, codes, legislation, safe work, rebates, and consumer codes is getting ever more complex and when you look at the data above it highlights this very fact.Including a bit of overhead in the profit and some extra install time, it could be argued that it’s in the range of 15-20% of total system cost now – second only to PV cost. So how can installers more reduce this?
There are two ways in my humble opinion.
The first is by understanding them, in intimate detail. Simply knowing what to do, when and working hard on systems and processes that are as streamlined as possible can make a huge difference. And believe it or not, there are some installers who still don’t know (or choose to ignore) what is required. Some comply only when forced to do so and maintain basic systems that waste time under the false illusion that they can get away with it. This might work for a little while, but when things go wrong, the few bucks you saved by skimping will quickly be lost, and I’ve got the evidence to prove it (but that’s another story).
The second is by having incredibly efficient operational systems. This is one area where I have seen some companies do really well although its also an area where investments have to be heavily scrutinised.
Enter the Clean Energy Council.
Love them or hate them, the Clean Energy Council have a big team of dedicated people working really hard every single day to further our cause; just like the rest of us, and they have been doing it for a long time.
I was delighted and surprised to see the launch this week of their installer app; the Solar Checklist.
I was lucky enough to get a log in and take a run through the app today and I really like it. In simple terms it allows an installer to pretty quickly create an installation and enter all the crucial details needed for the major compliance issues. It is ostensibly a check list for their own CEC guidelines which installers are required to comply with as part of the accreditation and installation process which is great news; its on-line, dynamic and constantly being updated so it means it makes life easier.
It takes you through a simple to use checklist of things that you would normally have to know of have your own checklist for, categorized into practical groups such “AC switchboard, System Testing, Documentation and Finalise” for example. I dived through a sample installation and found that the AC Switchboard then threw up a sample photo of what the labelling should look like when I checked a box, saying I had done certain things. Good, practical and simple.
It also allows you to (for example) use a bar-code scanner via the app, to upload serial numbers of solar panels and inverters and to include photos of the finished job. Having battled with this very issue many years ago when the technology was prohibitively expensive, it is a massive relief to see this in a real world application; and its free!
This particular feature provides a great route to traceability, on-line customer and product databases and of course, streamline the process of annual case study submissions because it’s already up there on the cloud.
Now some of you might say “any good installer should know this stuff and have their own systems; we are just making it easier for new companies to be lazy and enter the industry”. Perhaps; but you know what, for all our sakes we need a more level playing field where everyone does the right thing and new entrants have every right to enter the industry too; as long as they do the right thing.
This subtle little app might just help everyone compete a little better, reduce compliance costs and streamline their operations. The app is available from the iTunes store.
Well done Clean Energy Council!
Nigel Morris is director of Solar Business Services.
