Everyone in the solar industry is focused on soft costs—that is all the extra expenses that are rolled into the cost of installing a solar power system. Since prices for solar modules have dropped to below a dollar/Watt, the percentage of an overall system price consumed by soft costs continues to increase. But soft costs are really hard to reduce and we just had a painful example to help drive that point home.
One of the most pernicious of the soft costs are those associated with getting approvals from the Authorities Having Jurisdiction (AHJs) over the project. That includes both the utility that must approve any rebate application and interconnection agreement, as well as the local building and safety department which must issue the permit and inspect the project. The requirements for approving a solar power system vary considerably from jurisdiction to jurisdiction and that lack of standardization—combined with just plain arbitrariness that runs rampant in some places—means long, pointless delays in moving projects forward.
We are working on a medium-sized residential project in Los Angeles. If we were doing this in Pasadena, it would be installed by now, but as everyone knows, LA isn’t Pasadena. We submitted the requested materials for reserving the rebate on this project on December 3 of last year and then sat back while we waited to hear from them. Weeks went by without a peep—while we reassured our client that we would update them as soon as we heard something.
Then, finally, we did. On February 19th, seventy-eight days after we submitted the application, we got an email telling us that the application was “incomplete” and that:
If you fail to submit the requested documentation by the above date your incentive application will be subject to cancellation without further notice.
(It really was in red type.) How long did they give us to respond? Two weeks. In other words, we get less than one fifth of the time that LADWP took to, in its sole discretion, identify “deficiencies", to cure those deficiencies.
If that wasn’t bad enough, LADWP adds insult to injury by sending a copy of the “deficiency” email to the client! Pity the poor client—they have picked a contractor, signed a bunch of paperwork, and made a down payment, all months ago with nothing to show for it, and then they get an email that suggests for all the world that their contractor has botched things and their project is about to go south! How helpful.
So now the contractor has to spend time reassuring the client that despite the dire tone of the email, everything will be ok. Then you spend more time addressing the “deficiencies” that have caused all the ruckus in the first place.
I won’t bore you with the entire litany of nonsense that we were asked to cure, but my favorite one was this: when you submit information about the system online, you are supposed to show the cost of modules, the cost of the inverter(s) and the balance of system (BoS) costs. You are also required to submit a copy of your contract for the sale. This we did. But they complained that the contract price and the system price entered online did not agree. Now here’s the thing, once you submit the rebate application to LADWP you can no longer see those details, so the contractor has no way to know where this “error” came from. So, with no other options, you tell them that the contract is the controlling document as to the system cost so they should use that.
Instead, they send out yet another email, this time with the scary heading: “FINAL NOTICE” (yes, all in caps) with the following declaration:
The Los Angeles Department of Water and Power (LADWP) has received your Solar Incentive Program application, and it is still incomplete.
And yes, they send a copy of this email to your client as well.
Now if they had actually read the contract they would have understood that the discrepancy is due to the rebate amount itself. Online, the total cost reflects the price before rebate. But because we front the rebate for our client, the contract price is net of the rebate amount. (The contract itself spells that all out, of course, but then LADWP would have to actually read the contract.) We thought about explaining this before coming to our senses and realizing that was a lost cause. Instead, we created a letter requesting that they modify the online data to reduce the BoS amount by the rebate, and uploaded that to their system. Voila, just like that, they reserved the rebate.
By my count, it took eight emails to get this resolved.
Just about everything about this interaction is wrong. The delay in the initial contact is wrong. The tone of the email sent out is wrong. The absurd disparity between the timing LADWP allows itself versus that to the contractor is wrong. And the lack of understanding of what they are reviewing is infuriatingly wrong. It builds in delays and costs to deal with those delays. It is what makes soft costs so damn hard.
It needs to change.
Solar rebates are fleeting in many locations—now you see them, now you don’t. Case in point, Burbank Water and Power (as is the case with its cousin in Glendale) is notorious for offering, and then taking away solar rebates. We monitor BWP’s website for new developments, and we have now learned that they will be holding a lottery for possible rebate funds next July. No additional details were made available; presumably they will be posted sometime in June.
Given that development, we decided to update our overall rebate status. Here is how things stand generally in the Run on Sun service area as of this date:
|Utility||EPBB ($/Watt)||PBI (¢/kWh)|
|(Click to see website)||Residential||Commercial||Non-Profit||Residential||Commercial||Non-Profit|
|Anaheim||Unavailable until June, 2014||Unavailable until June, 2014|
|Azusa||Wait List||Wait List|
|Burbank (BWP)||Lottery in July, 2014||Lottery in July, 2014 (30 kW or less)|
|Glendale (GWP)||Unavailable until 7/1/2014||Unavailable until 7/1/2014|
|Los Angeles (LADWP)||$0.40||$0.70||$1.45||Not used|
|SoCal Edison (SCE)||$0.20||$0.25||$0.90||2.5¢||3.2¢||11.4¢|
Here are a couple of very important qualifications to what appears in that table:
This is a moving target; watch this space.
UPDATE - We just learned that the Board hearing to discuss changes to the Solar Incentive Program has been rescheduled to Wednesday, June 19th at 9:00 a.m. (Still at DWP HQ on Hope Street in downtown LA.) We will not be able to attend due to a prior commitment with the USC Solar Decathlon team. Anyone who does attend, feel free to pass on our thoughts below to the Board.
Solar is a great fit for non-profit organizations - environmental awareness and good stewardship of resources go hand-in-hand with the mission of churches and schools. But because non-profits are unable to take advantage of tax incentives, their sole sweetener for going solar are utility rebates - and in the City of the Angels, those rebates are about to drop dramatically before they go away entirely.
LADWP’s Solar Incentive Program (SIP) has been divided into two pieces: Residential and Non-Residential, the latter of which was further divided between Commercial (applicable to taxable entities) and Non-Profit/Government (i.e., tax exempt organizations). The Non-Residential program is being phased out in favor of the Feed-in Tariff program (about which we have written extensively). The thing is - the price paid for energy under the Feed-in Tariff program is just too small to pencil out for entities that cannot avail themselves of the 30% federal Investment Tax Credit and depreciation - and unlike under the existing SIP which offers higher rebate rates for non-profits, the FiT only provides a single payment level regardless of the tax status of the entity.
Most non-profits are looking for modest-sized solar systems in the 30 to 150kW range. That is too small to attract lots of financing options and the boards of many non-profits are reluctant to commit to long-term leases for a depreciating asset.
Bottom line - without the help of a generous rebate, many - if not most non-profits - will be left on the sidelines of solar.
Which makes the news coming out of LADWP all the more troubling. We have learned this week that when DWP goes before its Board on June 18th, it will seek a final re-authorization of the Non-Residential SIP with a requested budget of $15 million and rebate rates of $0.70/Watt for Commercial and just $1.45/Watt for Non-Profits. As bad as that reduction is, when that $15 million is gone, that is it - no further funding of the SIP is planned.
How big is the shortfall caused by the lowered rebates? Assume two neighboring entities, one commercial the other non-profit, that want to install a 100 kW solar power system on their respective buildings. If we assume that the install cost comes in at $4.50/Watt, they are looking at an initial outlay of $450,000. The commercial entity will get a rebate of $70,000 and a federal ITC of $135,000 leaving an out-of-pocket amount of $245,000 - and that is before figuring in depreciation. The non-profit qualifies for a larger rebate, $145,000 under the proposed rates, but that’s it - leaving them with an out-of-pocket expense of $305,000 - $60,000 more than their for profit neighbor.
This is curious and troubling since the LADWP website has indicated - at the same time that we were being given this information - that when the SIP program resumed in July it would offer non-profit rebates of $2.25/Watt - a rate which would actually make our hypothetical non-profit come out ahead. A more modest rate of $2.05/Watt would allow non-profits, at least at this level of project size, to break even.
Rebates are intended to serve a number of purposes but one of those is to help make solar commonplace - to insure that systems are installed where they will be seen and understood to be reliable components of our future. Given that, where should limited rebate dollars be spent: assisting cash-strapped schools and churches to install solar where congregants and students can learn the lessons of sustainability - or simply to aid some company in lowering its operating costs and boosting its profits? (Don’t misunderstand - we are all for commercial rebates, but if it comes down to a choice, surely the non-profits are in greater need of the support.)
On June 18th DWP staff will present this proposal to their Board and perhaps these rates can be adjusted to give more help to non-profits. That would be a welcome outcome, but even more welcome would be an acknowledgement by DWP that as their program plans presently exist, there will soon be no way forward at all for non-profits to adopt solar.
Surely that cannot be the desired outcome.
Drive the freeways, ride the train from San Diego to Union Station, or fly into LAX and you cannot miss the obvious - Los Angeles has tremendous, untapped potential for solar growth. Now a new report from Michelle Kinman at the Environment California Research & Policy Center, seeks to layout the case for Solar in the Southland: The Benefits of Achieving 20 Percent Local Solar Power in Los Angeles by 2020. Here’s our take.
It is beyond dispute that there is a huge gap between the amount of solar that could be supported in the Southland versus the amount that is actually, presently installed. As Ms.Kinman’s report makes clear, even in the City of Los Angeles alone, that gap is enormous, as illustrated by this graph:
Citing a study by UCLA’s Luskin Center for Innovation, Kinman reports that the rooftops just in LA alone could support some 5,500 MW of solar power - of which a paltry 68 MW is installed today. That is a lot of potential. But Kinman’s report doesn’t focus on adding all of that - rather she has documented dramatic benefits that would follow from just reaching the goal of 1,200 MW by 2020.
In addition to supporting some 32,000 job-years of employment (thank you!), Kinman shows that installing that much solar would also have these benefits:
Kinman insists that this is an achievable goal, but one that would take “clear, strong and consistent direction and support” from the Mayor and the City Council to LADWP. Some specific policy prescriptions include:
If we have one criticism of the report it is that it fails to identify funding sources - other than anticipated savings - to spur this growth. For example, providing additional incentives for residential solar or expanding the FiT will come with a price tag. Who is going to put up that money? At a time when solar is under attack from investor-owned utilities for unduly shifting costs onto non-solar customers, the report misses an opportunity by failing to outline a mechanism to pay for its important goals.
Still, the report provides valuable documentation of the as yet unrealized benefits of tapping into LA’s solar potential; and in that it makes an important contribution to the ongoing policy debate.
Back in October, we wrote about some early trends from LADWP’s restart of their Solar Incentive Program and we thought it would be worthwhile to see how things have fared in the months since. LADWP had some flaws in the dataset issued in December so we decided to wait until the next revision which came out last week. (You can access the dataset here.) As before, when reporting on project costs/Watt, we used the reported cost and the CSI AC Watts as we believe that is a more reasonable reflection of the value of the projects being proposed.
In our previous post, we predicted that the Residential rebate program would drop from Step 5 (paid at $2.20/Watt) down to Step 6 (paid at $1.62/Watt) on or about November 26, 2011. The last confirmed rebate reservation to be paid under Step 5 was #1120 and it was submitted on December 12 and confirmed on December 30. So our November 26 prediction was not too far off, and a complete application that was submitted by then should have received a Step 5 rebate.
We also previously predicted that the residential sector would run out of rebate funds around April 3 of this year. How has that prediction held up? The chart below summarizes requested rebate amounts by week starting with the program restart on September 1, 2011 up through last week. Also shown is the cumulative amount requested and a linear trendline.
As of the last day in the data, the total rebate amounts requested was $11.2 million out of the available $20 million. It is also apparent from the graph that there has been a significant decline in the requested amounts following week 15 (starting December 8, 2011). Our revised prediction is that the residential sector will run out of money around May 7, 2012.
A program of this size provides some interesting insights into which manufacturers have the “go-to products” in terms of number of projects and total Watts. Here is the data from the Residential sector:
Yingli leads the way thanks to their heavy use by SolarCity which accounted for 144 of the 188 projects using the Chinese panel. Kyocera was a strong second, again benefiting from their use by SolarCity in 137 of their 155 projects. Verengo Solar drove the demand for Suntech panels, accounting for 75 of their 99 projects. Canadian Solar is the true democratic player in this field, its 80 projects were distributed amongst 31 different installers!
Not surprisingly, different panels demand different prices, but the results are not as clear as they might be due in part to how SolarCity includes its accounting/financing costs into its reported costs. As a result, both Yingli and Kyocera are substantially higher on average in the data than one would otherwise expect. For example, Yingli comes in at $8.91/Watt on average whereas Suntech is a mere $6.17/Watt - with both of these being top-tier Chinese panels. The two manufacturers renowned for their high-efficiency, high-cost products - SunPower and Sanyo - came in at $7.60/Watt and $8.07/Watt respectively. No one in the industry believes that Yingli panels outperform those produced by SunPower and Sanyo.
Similarly, it is interesting to see what the distribution looks like in the realm of inverters.
No surprise that SMA leads the way; after all, SMA is the largest manufacturer of solar inverters in the world. Their popularity is driven not only by major players like SolarCity (65 projects with SMA) and Verengo (89), but collectively by 55 different installers. Contrast that with Fronius, which achieved its #2 ranking almost entirely thanks to SolarCity which accounted for 206 of the 231 projects (89.2%).
Coming in at a respectable third place was Enphase Energy with its 74 projects being distributed amongst 31 different installers - clearly the most broadly distributed installer base in the list. None of the Enphase installs were performed by SolarCity or Verengo. Given the sheer volume of installs done by those two companies, surely some of those sites would have benefited from micro-inverters but the leasing giants were not making that technology available to their customers.
Finally, potential clients often ask about the difference in cost between a string inverter system, such as one using SMA inverters, and a micro-inverter system, such as one using Enphase. The average installed cost for the 334 SMA projects was $7.15/W. The average installed cost for the 74 Enphase projects was $7.32/W. That is a negligible difference and given that the two largest players in the data - SolarCity and Verengo - had none of the Enphase projects, we would expect the SMA projects to have a volume pricing advantage from those two companies alone. Bottom line: in the real world, there is very little cost difference between these two technologies.
One of the more disturbing things that we uncovered in our previous analysis was the degree to which some companies were apparently overcharging their customers. In particular, we singled out A.S.E.S Electrical Group (aka American Solar Energy Solutions) for being particularly egregious in this regard. So, after an additional three months of data, how have things changed?
Once again, we restricted the data to only residential projects where the system owner is also listed as residential - a total of 846 projects. Our previous size filter was 20kW; for this expanded data set we increased the size filter to 45kW, meaning that only companies with at least 45kW of projects in the data would be included. As a result, the chart below accounts for 560 out of the 846 projects described in the data.
Sadly, our results are as disappointing as last time - check it out:
What is going on here? While the average system price declined from $8.91/Watt back in September to $8.24 over the entire dataset, the disparity between the most cost-effective performers and the least is as great as it ever was! Indeed, our repeat failure as the biggest gouger of solar consumers in Los Angeles is once again, A.S.E.S. but now their cost is more than three times the cost of the lowest price company, Ronco Solar.
Indeed, while A.S.E.S. did lower their cost somewhat, they apparently did it by replacing the Schuco brand solar panels that they were using before with third-tier Chinese panels from Sopray Energy. (In contrast, Ronco consistently uses Canadian Solar panels, a top-tier Chinese solar panel.)
Certainly caveat emptor applies when purchasing a solar power system, but at some point it seems like the utility should step in and warn its customers about predatory practices. So how about it, LADWP, isn’t it time to give your customers a heads-up about what is going on?
Put another way, if you are considering going solar and your installer proposes a system that is more than $8.24/Watt - and indeed, that is a very high number for installations today - we have one word of advice: RUN!