solar new roof new construction

New report says future homeowners can save big by installing solar with a new roof

According to a new study from the National Renewable Energy Laboratory (NREL), the key to driving down the overall cost of solar implementation may lie in targeting property owners considering new roofs or entirely new construction. The report, titled Cost-Reduction Roadmap for Residential Solar Photovoltaics (PV) 2017-2030, supports the U.S. Department of Energy’s (DOE) goal of reducing the cost of solar electricity to just 5 cents per kilowatt-hour (kWh) by 2030.

Report conclusions, in brief

The new construction and re-roofing market presents a tremendous opportunity to install solar at a low cost. To achieve this, there will need to be reduction in both hardware and soft costs associated with installation, which will require more research and development in building integrated PV, as well as changes in business practices in the industry.

When you’re presented with a price to install a solar panel system, it’s usually “turnkey” pricing, which is the all-in cost of the equipment being installed on your roof plus other expenses like permits and labor. Right now, one of the biggest obstacles towards cheaper solar power are the “soft cost” component of your turnkey price. These costs represent the labor, inspection, permitting, sales and marketing, and engineering required to put solar on a roof. When combined, these can represent a large portion of the overall price of installation.

Solar prices have dropped significantly in recent years. Much of that is due to the growing efficiency of solar technology, which has reduced hardware costs – if your panels are more efficient, you need fewer of them to generate the power you need.

While these factors may be driving the cost of solar down, soft costs continue to be an obstacle that keeps prices from being even lower. Another 2017 report from NREL concluded that there continue to be high costs in the supply chain (for example, the shipping and handling of the modules and inverters). It also found that higher wages for labor associated with a solar installation also drives soft costs up.

The levelized cost of energy (LCOE) for solar – the effective rate you pay per kWh from your solar panel system, based on the cost of installation – has continued to drop from 2010 to 2017. LCOE is now around 15.1 cents per kWh for residential solar panels. If the solar industry continues to operate “business-as-usual,” the goal of 5 cents per kWh will likely not be reached. This study presents multiple ways to drive down the costs of solar further, and continue to combat rising soft costs associated with going solar.

How to make solar as cheap as $0.05 per kilowatt-hour (kWh)

The primary focus point of this study was solar as a solution to homeowners installing new roofs, whether for replacement on their current home or as part of a new construction project.

Why target that market? NREL estimates that roughly 3.3 million new roofs suitable for solar will be built each year in the U.S. between now and 2030. Among the states with the highest potential for solar paired with new construction or roof replacement are California, Florida, Illinois, New York, and Texas.

The study concluded that there is opportunity for reduction of costs with solar equipment, but in particular “soft costs” needed to be reduced by roughly 65% in order to meet the 2030 target, and that stakeholders in the industry will need to work hard to achieve these reductions.

NREL proposed four cost reduction opportunities within the new roof market that could work towards achieving the $0.05 per kWh goal.

Opportunity 1: Business model integration

Business model integration is a key factor in driving down costs. By educating solar installers, contractors, and roofers in each others’ specialties, and more closely integrating these processes, companies can reduce marketing, overhead, and labor costs associated with doing the two separate jobs as two separate entities.

For example, someone who needs a new roof is an ideal solar customer. Companies can market these two options together. There are currently some installation companies that also offer roofing services, but expansion of this in the industry could lead to an overall lower cost to install.

This opportunity is even bigger if we can improve the permitting and inspection process. Today,  jurisdictions see solar and re-roofing as two distinct projects with separate requirements for permitting and inspection. The fees currently associated with both contribute to high soft costs. Integrating the two projects into one package could lead to higher efficiencies in the permitting process and, ideally, lower fees.

Opportunity 2: Product innovation

The second-biggest takeaway from the study was that, in order to achieve the desired LCOE by 2030, there has to be substantial investment in building-integrated photovoltaics (BIPV) technology, like solar shingles.

Using this sort of technology, where someone is installing solar shingles in lieu of standard roofing material, will cut down on solar labor and permitting costs. In addition, savings can be seen in the supply chain, because the roofing material and BIPV can be shipped together. Property owners will see extra savings if they’re not paying for roofing materials and solar separately – BIPV costs can be rolled into one competitive price with roofing that will also cut electricity bills.

BIPV technologies already exist today, such as Certainteed solar shingles and Tesla’s solar roof tiles. However, these technologies are nowhere near where they need to be in order to be cost competitive. Right now, the use of this technology isn’t as widespread as traditional solar. As a result, these PV shingles are manufactured on a much smaller scale, and they require more time and specialized skill to install. They also aren’t as efficient as standard solar panels, so they need more materials and roofing space to produce the same amount of electricity. All of these factors increase the overall cost.

Opportunity 3: Economies of scale

Economies of scale can also play a role in driving down the cost of solar with this market segment. This is particularly true for the construction of new homes.  Installing solar on large subdivisions and neighborhoods at the same time can cut labor and sales/marketing costs if many solar arrays are going up at once.

Contractors or developers who work on many projects throughout the year are also likely to have more efficient business practices in general than contractors who build fewer homes, which typically results in lower costs.

Opportunity 4: Market maturation

Market maturation in the solar industry is also needed, particularly in the supply chain, so that contractors can obtain solar equipment more efficiently and at a lower cost.

Today, the majority of the residential solar market is served by larger solar companies. These companies, when purchasing equipment from distributors, can get more competitive pricing than small-to-medium companies because of bulk ordering. Because they order more equipment at once, they are in a better position to negotiate on pricing because of their volumes. (However, it’s worth noting that despite getting less expensive equipment, larger companies don’t always pass on these savings to homeowners.)

What are the biggest hurdles to reach these goals?

For the goal of $0.05/kWh to become a reality, many aspects of the industry today will need to change.

Cutting soft costs

Soft costs, in particular, need to be driven down. One option is for solar companies to integrate more closely with roofing companies, which could cut down on sales, marketing, and labor costs. It could also reduce costs in the supply chain if these materials can be shipped together and to the same place. If companies choose to go this route, sales and installation teams will need more education and training to become experts in both industries.

Different and better practices in permitting and inspection for this type of work could also go a long way in decreasing soft costs, If installing a solar roof can be seen as one project to be inspected rather than two separate, it can cut down on time requirements for the jurisdiction, and therefore cut down on fees.

Soft costs can also be cut through market maturation, by increasing efficiency and reducing the number of steps from getting the panel from manufacturers to the consumers. This will require big changes to the current state of the market, but is possible.

Improving building-integrated solar technology

In addition to decreasing soft costs, significant advancement in BIPV like solar shingles also needs to be made. As it stands today, solar shingles are more expensive because of manufacturing and installation costs, as well as the relatively low efficiency of the technology. In order to see a much lower LCOE, the industry needs to put time and research into developing lower cost solar shingles that also produce more electricity.

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Categories: Cost Benefit

About Kerry Thoubboron

Kerry is an expert in all things solar – she's worked in the industry for over seven years, initially as an Energy Advisor dedicated to helping people compare their solar options and make well-informed energy decisions. She graduated from Boston University with a degree in Environmental Analysis and Policy.