The Soft Cost Solution Blog Series- Part One

August 16, 2014 MODsolar Admin

The MODsolar platform was born three years ago, with the specific goal of reducing the costs and complications of generating solar sales. Additional expenses beyond the hardware and installation of a solar system are known as ‘soft costs’ and include anything from the cost of acquiring a customer to permitting and workflow paperwork.

According to an NREL report, these soft costs now account for 64% of the total price of residential solar installations. Reducing and managing these costs is a vital component of any business in the US solar market today. With this in mind, we are presenting a new blog series, exploring the top sources of soft costs for solar businesses and offering suggestions for industry improvement.

We will also be announcing exciting new improvements and features to the MODsolar platform, which will help companies to address these pressing problems. Stay tuned each week to the MODsolar blog as we discuss the issues and solutions of local permitting; the dreaded change order; incentives paperwork; customer acquisition costs; as well as workflow, bill of materials and other costly paperwork.

At MODsolar we believe we are in a unique position to be able to advise people on their soft cost processes because our platform is used by such a broad spectrum of the solar industry. Our customers include small-scale residential installers, larger commercial operations, manufacturers and investors from all over the United States. We really have seen it all; and as such, we can help you to incorporate the best soft cost practices for your business.

To introduce the MODsolar Soft Cost Solution Blog series properly, let’s start by looking at the topics we will be covering and what sort of financial impact they have on industry and business.

1. Permitting

The permitting structure for solar in the US adds around 50 cents per watt for a single residential installation. This can be in excess of $2500, according to a report by SunRun.

2. The Change Order

Change orders usually occur when solar sales are closed before a site visit. Unexpected changes and costs associated by modifying installations can represent between 5 and 10 percent of the system costs.

3. Customer Acquisition

Finding and closing new customers takes up one of the largest chunks of the soft cost pie. Accounting for close to $1 per watt on residential installations, companies are increasingly looking for the best solution to reduce these costs.

4. Incentives Paperwork

Filling out incentives and rebate paperwork takes a huge amount of labor and causes so much hassle. Incentive forms can be up to 45 pages long and cost over 16 hours of employee time. Add this to the disparate systems in different states, and you’ve got a costly problem.

5. Proposals

Although this could be considered a part of customer acquisition costs, proposals could also be regarded as a separate issue, because they can be a very significant cost on their own. ModSolar platform users can decrease the time and money it takes to generate proposals into a simple 3-5 minute job.

6. Workflows, Bill of Materials and Contracts.

The bill of materials, workflows, and contracts might not automatically spring to mind when considering your soft costs. Nevertheless, they are important to think about if you want to streamline your business. According to a report by the non-profit organization, Solar Freedom Now, in California last year, companies spent an average of 43 hours of clerical, designer and engineering time on over 95 pages of paperwork for each rooftop installation.

Next week, we will begin to delve deeper into these topics, beginning with permitting soft costs. Also, tune in for our first exciting ModSolar platform development!