TODAY’S STUDY: THE COST OF RED TAPE IN ROOFTOP SOLAR

Rooftop solar panels have moved from an exercise in eccentricity for environmental enthusiasts and survivalists to a normal part of house and building construction. Developers now include them in initial designs as a standard feature and a part of the basic electrical system. Cities drenched in sun want more rooftop solar on big box stores and highrise apartments.

The more rooftop solar panels appear, the more there is concern about standardizing installation to aesthetic, safety and efficiency norms.

There is value in regulation. Paying for traffic flow laws and enforcement keeps the byways of crowded cities safe and orderly. Rush hour traffic would be unmanageable otherwise.

It can be, in the same way, wise to regulate energy sources and dwelling spaces. Good fences may be, Robert Frost lamented about the state of neighborliness in an imperfect world, the best humans can do.

The trick is to institute necessary norms without overburdening those who advance the needed infrastructure. Polluters must be curbed like speeders and reckless drivers but regulations should not rule out or even impede the “new” just because it is “different.”

The best response to so many of today's challenges, after all, is to get vehicles on the grid and build a pollution-free grid. Enacting this simple formula would all by itself end dependence on foreign oil, reinvigorate the economy and heal human and environmental ills.

Just as there is an unencumbered place on freeways for plug-in vehicles that conform to important safety standards, the advance of rooftop solar panels shouldn’t be slowed by the kind of red tape described in the report highlighted below. The report describes reasonable solutions that would be, in the poet's phrase, "good fences." To paraphrase Robert Frost, good fences can make for New Energy.

The Impact of Local Permitting on the Cost of Solar Power; How a federal effort to simplify processes can make solar affordable for 50% of American homes
January 2011 (SunRun)

Executive Summary

The policy goal of supporting solar is to create the scale necessary to achieve grid parity, the point where solar stands on its own as an economic choice for millions of homeowners, without the need for subsidies. While solar equipment prices are falling, the total installed cost of residential solar is falling more slowly because of inefficient local permitting and inspection processes. It is appropriate and necessary for the Department of Energy (DOE) to address this problem because DOE has already built the tools to quickly streamline local permitting and inspection processes without sacrificing safety.

Local permitting and inspection add $0.50 per watt, or $2,516 per residential install, as described in detail in this report, due to:

• Wide variations in processes, most of which do not improve safety

• Excessive fees

• Slow, manual submittal and inspection processes

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Permitting costs are equivalent to a $1 billion tax on solar over the next five years, and make it hard for installers to achieve any economies of scale. Countries like Germany and Japan have eliminated permitting for residential solar, handicapping the U.S. despite our superior solar resources.

A streamlined, consistent process for basic installations, like the ―Common Application for colleges, will eliminate waste and variability across jurisdictions, while meeting code and ensuring safety.

DOE already funded and developed the resources to quickly and efficiently implement a better process:

• Streamlined process—―Expedited Permit Process‖ by Solar America Board for Codes & Standards

• Local partnerships—25 cities in DOE’s Solar America Communities program

• Local outreach channels—DOE’s Solar America Communities Outreach Partnership

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Leveraging these resources, DOE should launch a Residential Solar Permitting Initiative:

• Create a contest that rewards jurisdictions for improving permitting in key solar states

• Fund outreach organizations like DOE’s Solar America Communities Outreach Partnership

• Target DOE’s 25 Solar America Cities and 200 other high-volume cities

• Build an online ―Common Application‖ tool and grade jurisdictions’ progress

Standardizing local permitting will transform residential solar:

• Bring the cost of solar to grid parity for 50% of American homes by 2013

• Close Germany’s 40% cost advantage

• Deliver the equivalent of a new $1 billion solar subsidy over five years…

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The Impact of Local Permitting on the Cost of Solar Power

How simplifying processes can make solar affordable for 50% of American homes ― I’ve been trying to put solar panels on my house for the last five months. And the regulatory process – you can’t get through it. What’s going on here? Why is there regulatory opposition to solar energy? - George Schultz, former Secretary of State, Sep 5, 2007.

Schultz’s observations become more relevant every year as equipment costs fall and jurisdictions add rules. In 2007, local permitting and inspection added 13% to what a homeowner would spend on panels. Today, they add 33%, and within a few years they will add 50%.1 Consider thousands of local processes, fees, and timelines, and it’s not surprising that a significant amount of the cost of a solar system is embedded in a local regulatory morass. These costs prevent millions of Americans from enjoying solar as an economic choice without rebates or other subsidies and prevent installers from achieving any economies of scale.

This report reveals that local permitting and inspection processes add an average of $2,516 per installation, or $0.50 per watt, based on in-depth interviews of the nation’s leading installers…The report also explains that the Department of Energy (DOE) already has developed the tools to begin solving this problem and that DOE leadership is appropriate and necessary.

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By comparison, other countries have much simpler, less expensive processes that do not sacrifice safety. Germany, France, and Japan have eliminated permitting for basic residential installations…Not surprisingly, Germany has the lowest installed cost in the world, 40% lower than the U.S., even though total incentives are expected to be lower in Germany in 2011…

The bulk of the problem is local process and variation, not electrical code itself. Inefficient local process wastes time and money, and local variation forces installers to spend time and money customizing plans for each jurisdiction. Standardizing this process makes sense because most installations are relatively similar and ―share many similarities of design... that allow for a nationally standardized expedited permit process, according to Solar America Board for Codes and Standards (Solar ABCs), an organization funded by DOE.5 However, jurisdictions often design cumbersome processes to account for the minority of complicated installations that require more in-depth review.

A streamlined, consistent process for basic installations, like the ―Common Application for colleges, will eliminate waste and variability across jurisdictions. DOE has already funded development of these standards through Solar ABCs6 to allow jurisdictions to streamline permitting for most installations while following code and maintaining safety. Jurisdictions can use this process to ― simplify the structural and electrical review of a small PV system project and minimize the need for detailed engineering studies and unnecessary delays.‖ In addition, jurisdictions make process improvements, like fair fees, email submission, fast turnaround, and less time waiting on site for inspections, to reduce unnecessary cost and delay. Cities like San Jose and Philadelphia have adopted similar measures and maintained safety. San Jose is now one of the lowest cost cities for solar in California…

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With the standardized process already developed, a sponsored outreach initiative with incentives is necessary to influence understaffed and diffuse building departments. This initiative should encourage jurisdictions to adopt the streamlined process for these installations. Outreach has already happened on a small scale, with organizations like Sierra Club and Vote Solar proving that advocacy is effective at influencing local permit processes. To scale these efforts to multiple jurisdictions, we need federal leadership, similar to the federal leadership that in 2005 directed states to review solar interconnection policies and offered best practices…

It is appropriate and logical for DOE to lead this initiative since DOE already engages in local solar advocacy and market development. In 2007 and 2008, DOE launched the Solar America Cities program that designated 25 major cities ―to identify barriers to solar energy use… and to collaboratively develop solutions to those barriers.‖9 Certainly, one of these barriers is local permitting and inspection. Additionally, DOE funded the Solar America Communities Outreach Partnership, which educates and influences local jurisdictions to adopt solar best practices…

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DOE can leverage existing programs and quickly launch a new Residential Solar Permitting Initiative:

• Create a contest that rewards jurisdictions for improving permitting in key solar states

• Fund local advocates, e.g. DOE’s Solar America Communities Outreach Partnership

• Focus initially on DOE’s 25 Solar America Cities and 200 other cities with high solar volume

• Build online ―Common Application‖ tool and database that grades jurisdictions’ progress

By leveraging existing programs and focusing on 200 cities with significant solar volume—instead of all 18,000 jurisdictions—this initiative can impact more than 50% of the solar market rapidly and at a limited cost to DOE.

DOE can model its efforts after Department of Education’s ―Race to the Top, which is a powerful example of federal government driving reform and standardization in traditionally slow-to-change organizations. ―Race to the Top‖ was designed ―to spur systemic reform,‖ by issuing guidelines for reforms and rewarding states that made the most progress.11 States responded to this contest with once-in-a-generation educational reform, in hopes of winning grants, before Department of Education awarded a single dollar of grant money. Similarly, DOE should fund a permitting contest to incentivize jurisdictions to streamline permitting. This solar permitting contest should focus on the four to eight states that have successfully emerging solar markets and where installers are facing roadblocks.

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There is recent precedent for federal government to lead reform of local renewable energy permitting. In November, 2010, Department of Interior launched the ―Smart from the Start‖ initiative to streamline offshore wind permitting by coordinating with ―local, state, and federal partners…Federal involvement will strengthen industry efforts to address permitting, such as SolarTech’s 2009 permitting challenge and countless other local efforts…

Success will provide a positive feedback loop for the solar industry that will create even more value than today’s cost of permitting and inspection. German residential solar costs $3.50 per watt because the residential market has scaled and simplified the design and installation process, leading to lower costs. Similarly, with limited local variation in the United States, installers can benefit from scale and the solar industry can drive down costs to reach grid parity sooner.

Standardizing local permitting will transform residential solar:

• Bring the cost of solar to grid parity by 2013 for 50% of American homes…

• Close Germany’s 40% cost advantage

• Deliver the equivalent of a new $1 billion solar subsidy over five years

This effort, as much as any subsidy, will translate into increasing solar investment by the solar industry, in addition to increased local economic activity.

Local permitting costs $2,516 per installation

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This report provides the most accurate estimates of permitting and inspection costs available. The cost averages $2,516 for each residential installation, or $0.50 per watt…Local permitting and inspection processes are the ―bane‖ of the solar industry, and costs are falling at a ―glacial‖ pace.17 Certain installers experience this cost rising, and some even refuse to sell in certain jurisdictions that have especially cumbersome processes. These costs are unnecessary and counterproductive, and streamlining will support safety through efficiency and repetition…

Complete permit application: $505. Since each jurisdiction has different requirements, installers may have to research code, customize drawings, and apply for zoning approval every time they do an install. Many jurisdictions require review by an expensive professional engineer even if similar plans have been approved before.

 Solution: adopt Solar ABCs standards across jurisdictions (longer term: provide national online application tool).

Submit permit application in person: $149. Jurisdictions usually require installers to drop off the application. This wastes time and gasoline—one installer reported driving three hours to drop off a permit, only to have the jurisdiction, short on staff, outsource to an office just three blocks from the installer’s office.

 Solution: allow email submission of permit application (longer term: provide national online application tool).

Pay permit fee: $431. Jurisdictions charge fees that vary widely, some higher than $1,000. Many jurisdictions use solar permit fees to plug other holes in the budget. By comparison, the cost of issuing a permit for a local jurisdiction should be $250 or less, as estimated by organizations like Vote Solar…

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 Solution: reduce permit fees to $250 or cost of issuance.

Variation in building requirements: $726. Jurisdictions often have requirements beyond what state or national code requires, such as larger fire barriers, extra disconnects to turn off the system, expensive labeling, and excessive roof penetrations. These add significant cost to a system. Solar ABCs standards allow jurisdictions to follow code with a simple form, helping jurisdictions feel comfortable that they are ensuring safety.

 Solution: adopt Solar ABCs standards across jurisdictions.

Field inspection: $236. Typically inspectors provide a 4-8 hour arrival window, forcing a costly employee to wait on site for the inspector to arrive, even though inspections are often only 15 minutes. In addition, some jurisdictions require ―in process‖ inspections during an installation, going beyond what is necessary to ensure code compliance, wasting the time of construction crews and extending installation time.

 Solution: reduce inspection appointment arrival windows to two hours or less; eliminate ―inprocess inspections.

Delay: 3.5 weeks. Installers report that local permitting causes an average delay of 3.5 weeks to build. The most significant delay is permit review, which ranges from 0-6 weeks. This delay frustrates customers, reducing satisfaction and referrals to friends and family, driving up cost.

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 Solution: adopt Solar ABCs standards across jurisdictions; provide decision on each permit application within three business days.

Sales and marketing cost: $845. The cost, delay, and increased cancellation rate lower close rates, increasing acquisition cost. Customers usually assume the installer is at fault for delays, harming satisfaction. One east coast installer said: ―this problem ripples through the entire customer process.

 Solution: all of the above.

This report likely underestimates the true cost of solar permitting because it focuses on directly quantifiable data only. Additional hidden costs include management opportunity cost, poor customer experience from delays, constraints to planning and pursuing innovative cost reduction measures, and the inability for installers to realize economies of scale across jurisdictions. This is clear from our interviews. Often CEOs and COOs spend time dealing with processes to handle permitting, and operations managers struggle to plan installations when permits may or may not arrive when expected…

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The prize: grid parity for more than half of American homes

For solar to be mainstream, it has to be at ―grid parity, meaning that the cost of solar electricity is equal to or less than the cost of utility electricity. Residential solar will reach grid parity for mainstream Americans—more than 50% of all homes without any local or state subsidies—if the cost of turnkey residential solar falls to $3.50 per watt…

Germany has already reached $3.50 per watt, not including any subsidies, by streamlining permitting to drive scale. Costs in the United States are falling too. Today, many leading installers can install at a turnkey cost of less than $6 per watt. However, equipment costs are expected to fall less than $1 per watt over the next five years. Without streamlined permitting and inspection, the U.S. will struggle to reach $3.50 per watt and the longer term DOE goal of $1 per watt…

DOE has already identified the issue: ―Permitting has become one of our top priorities here. It is one of the biggest barriers in the solar market right now, said Hannah Muller with DOE’s Solar America Cities initiative…We ask the Department to address the issue with urgency by adopting our recommendations as an initial course of action.