With Intersolar North America 2014 now behind us, many attendees and industry media reflected that it was a smaller, more focused show. For example, instead of the dozens and dozens of nondifferentiable Chinese module manufacturers of years past, there were fewer, mostly larger recognized companies. The presence of solar thermal product lines was also significantly smaller, highlighting the continued struggles of that sector.
As market competition heats up, especially in the residential PV sector, the question many installers on the floor wanted answered was “How will this help me lower my costs?” From modules to racking, module-level-electronics to balance of systems, software tools to operations and maintenance services, many solar installation vendors framed their answers in how their offering was key to lowering solar soft costs.
Exhibitors especially put a larger focus on how their products or services could increase operational efficiencies. Racking and mounting companies competed for attention, as they highlighted integrated or lower-part-count racking systems that would reduce installation labor time.
This trend could not have better timing. The Rocky Mountain Institute has released a follow-up to its “time-and-motion” study performed last year in Germany and written up in RMI’s December 2013 report, Reducing Solar PV Soft Costs: A Focus on Installation Labor. The new report, Lessons from Australia: Reducing Solar PV Costs Through Installation Labor Efficiency, uses the time-and-motion methodology developed for the German/U.S. installation labor study to contrast and evaluate Australian installation practices.
Since nonhardware solar soft costs comprise nearly 65% of the system cost according to DOE SunShot Initiative data, this represents a major opportunity for the solar industry to open up new markets in sectors with lower electric rates or without incentive programs. This approach could become possible if installers can lower their costs enough to make the financial proposition attractive to these new potential customers. For that to happen, U.S. installers have a significant cost-reduction task ahead of them. According to the study, as of Q2 2013, the average installed residential system price in the U.S. was $4.93/W compared to Germany’s $2.21/W and Australia’s $2.56/W.
The RMI study highlighted several key takeaways from Australia that should inform efforts to reduce installation labor costs in the U.S. market:
— Optimizing the preinstallation process.
— Reducing time spent on base installations, especially for clay tile roofs.
— Pursuing integrated racking systems or other rail/grounding designs that minimize installation labor.
— Reducing the number of additional disconnects (non-inverter-integrated) and monitoring meters.
— Viewing the one-day installation goal as an opportunity to reduce time spent on nonproduction activities such as meals, travel, breaks, setup, and cleanup.
Since Australian installers are paid a flat rate for their installations, they have a major incentive to follow these cost-cutting protocols. The upside of this flat-rate reality, according to the study, is that it drives efficiency, fosters specialization of labor, and leads crews to install more kilowatts per day.
“Margins here are so low that [driving] volume is the only way to make any money,” says Jeremy Tranter, a professional engineer with Australian design-build firm Solari Energy. “Administrative and logistics burdens are so huge, these sort of [logistics management] tools are critical to making a more streamlined business. You’ve got to have logistics correct, processes in place, racking systems prefabbed as much as possible as well as proper planning, so that everyone knows what they’re doing. It’s very much about driving efficiencies.” He went on to describe the ideal labor division for large solar projects as having “one team for racking, one for cables, etc. for a megawatt-scale project using teams of subcontractors.”
The Australian market is highly regulated with independent inspections required on most every job. “While some installers were doing quick installs, inspections would reject them from passing, causing more delays on follow-up fixing,” explains Mounesh Badiger, managing director of Australian solar retailer Access Energy and the Solar eCRM cloud business platform. “What has gone wrong [in Australia] is a total failure of back-office practices. Customers were affected on a big scale. For example, delays in installations or whether or not the installer can even find the customer order!” Most companies or retailers with no systems or ineffective whole business systems and tools, be they internally developed or bought from a vendor, have either closed down or suffered significantly.
In the U.S., installation labor efficiencies in soft costs will continue to be constrained by a complex and fragmented policy landscape and jobsite safety requirements that cannot be legally compromised. German and Australian efficiencies pointed out in the RMI study are particular to their national policies and unlikely to take hold in the U.S., based on states-rights’ agendas in many areas of the country and continued gridlock on national policies in Washington, DC. Companies that focus on innovating around market complexities they cannot change will lower soft costs faster than their competitors. Leveraging innovations like integrated racking and grounding, more effective pre-installation planning, and specialized crewmembers–and motivating/rewarding them in support of one-day installation goals–would be a good start.
Additional behind-the-scenes work in project management to automate project progress and paperwork will help reduce wait times and assist with installation scheduling forecasting, a key component to customer communication and customer satisfaction. And what happens when customers are satisfied? They refer the company that did them right, hence lowering customer acquisition costs, as downstream soft costs cycle back and affect upstream soft costs.
With 1.2 million homes and the highest amount of installed per-capita solar, it’s understandable that the question in Australia is not “Why go solar” but “Whom should I hire?” Structuring sales proposals and marketing begs for different approaches when your market shifts from “why” to “whom.” With less than 500,000 solar energy systems installed and a fragmented per-capita landscape, it’s no wonder U.S. solar installers still need to plan and market for the complexities of “why” and still also deliver “why them.”
Pamela Cargill is the founder and principal of Chaolysti, a strategic solar consulting firm located in the San Francisco Bay Area. She has brokered operational effectiveness programs at some of the largest national brands in residential solar. Read more of her business insights on her blog and follow her on Twitter @chaolyst.
PHOTO COURTESY OF SOLARI ENERGY
Tags: BOS / balance of systems, commercial/industrial-scale solar, distributed generation, EPC / engineering, interconnection, LCOE / levelized cost of energy, market research, marketing, performance and reliability, permitting, policy, procurement & construction, project development, PV / photovoltaics, racking systems, residential solar, solar energy, solar power