Can cutting rooftop solar costs make up for losing tax credits?

Rooftop solar costs way more in the United States than it does elsewhere in the world. That’s long been a headache for the sector to navigate. But now with Republicans in Congress killing off the decades-old tax credit for rooftop solar, it’s a life-or-death problem.

Some of those factors are under a solar company’s control, like how much it spends on acquiring customers and managing projects. Others aren’t, like the expense associated with navigating complex permitting and interconnection processes that differ from city to city and from utility to utility.

Those costs rise when solar systems are accompanied by batteries, something that is becoming increasingly common as households look for backup power and respond to new incentive structures that prioritize storage, as is the case in California, the nation’s largest rooftop solar market.

Big upfront costs are the No. 1 reason Americans decide not to put solar panels on their rooftops. The forthcoming spike in installation costs created by the new GOP megabill will only make that hurdle higher. After this year, households will lose access to tax credits for 30% of the cost of solar, batteries, and other home clean-energy equipment, and companies that offer solar systems under third-party ownership models will face a set of uncertain restrictions that could choke off that part of the market.

In order for the U.S. to keep installing rooftop solar at a healthy rate — something that’s key to combatting climate change and helping people manage rising electricity costs and electrify their cars and homes — the industry needs to figure out how to prevent costs from ballooning once the incentives disappear.

“We’re now being forced to operate as an industry without subsidies,” Birch said. That puts the onus on the industry to both tighten its belt in areas that are under its control and press state lawmakers, local government officials, and utility regulators to reform their parts of the equation.

“We can survive and thrive — if we can reduce soft costs,” he said. 

Birch, a native Australian known as ​“Birchy” in the solar world, is working on just that himself.

He helped launch SolarAPP+, an ​“instant permitting” software platform being used by more than 160 cities and counties across the U.S. to process solar permits in hours rather than weeks. OpenSolar, the company he co-founded and leads, offers free solar project design and management software to installers, paid for by equipment manufacturers and dealers eager for the increased sales it can bring.

There’s plenty of evidence that lowering these costs is possible: The soft-cost problem is a bit of a uniquely American phenomenon. In other places with high rooftop solar penetration, like Australia, the world’s rooftop solar leader, these costs are far lower.

Solar companies in Australia can quote, sell, and install a 7-kilowatt-hour solar system with a 7-kilowatt battery for about $14,000 in a matter of days, Birch estimated. In the U.S., that same system costs about $36,000, and getting permits and interconnections can take months — long enough to kill a fair number of installs before they can be completed, he said.

Streamlining permitting at cities and counties

When it comes to cutting soft costs, local permitting reform is a big target.

Permitting regulations and processes vary widely across the roughly 23,000 city, county, and other local authorities that have jurisdiction over building permits, electrical code enforcement, and other must-haves for a solar or battery installation. Permitting can add roughly $1 per watt to the cost of a typical solar installation, according to the industry trade group Solar Energy Industries Association (SEIA).

Some do a good job of making the process smooth and straightforward. Others can be far less helpful and efficient. Slow or cumbersome permitting takes a toll on solar installers, stretching the time it takes to complete current projects and move on to the next.

“If you can ensure you’re making it through in three weeks versus three months, you’re operating much more efficiently,” said Barry Cinnamon, CEO of Northern California solar and battery installation firm Cinnamon Energy Systems. On the other hand, ​“in cities where the permitting is slow, you inevitably get them coming back in two weeks saying, ​‘You’re missing a dash in that form — send it back,’ and then two or three weeks later saying, ​‘We’re not sure the battery can go in that spot. Try again.’”

It’s hard to standardize permitting across local authorities, which range from well-staffed big-city departments to tiny towns with one or two people working on it. But software that can reliably complete the tasks of permitting officials can save time and reduce errors for big and small permitting authorities alike.