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Why "Soft Costs" are so Hard

03/03/14

  06:11:00 am, by Jim Jenal - Founder & CEO   , 863 words  
Categories: Solar Economics, LADWP Rebates, LADWP, Residential Solar, Ranting

Why "Soft Costs" are so Hard

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.

LADWP logoWe 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.

No luck.

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.

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Jim Jenal is the Founder & CEO of Run on Sun, Pasadena's premier installer and integrator of top-of-the-line solar power installations.
Run on Sun also offers solar consulting services, working with consumers, utilities, and municipalities to help them make solar power affordable and reliable.

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