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Breaking Through
Solar Soft Costs
By Pete Cleveland
Table of Introduction
2
In the US residential solar market, system costs have declined by 25% since 2014. However, customer acquisition and
overhead costs have increased by 31% during the same time. Additionally, the Solar Energy Industries Association
points out that soft costs in the US are some of the highest globally, representing 60–70% of the total cost of
residential-scale solar PV systems.[1] Based on data like these, it is no surprise that solar industry stakeholders have
a collective and often self-reinforcing perception that a solar PV system’s soft costs are perpetually stubborn.
66%
$3.50
Residential Solar PV System Pricing ($/Watt)
64%
Soft Costs as a % of Overall System Costs
$3.00
62%
$2.50
60%
$2.00 58%
56%
$1.50
54%
$1.00
52%
$0.50
50%
$0.00 48%
2014 2015 2016 2017 2018 2019 2020 2021
Although the cost to install solar PV has dropped by more than 70% over the last decade, soft
costs —including installation labor, customer acquisition, permitting, inspection, and interconnection
— remain high. On average, soft costs represent 65% of the total solar project cost.
2
Soft costs, which represent all the costs associated with selling, designing, and installing a solar PV system—excluding
equipment hardware costs—have historically been steadfast. As the solar industry has scaled, equipment costs,
referred to as hard costs, have fallen steadily. In contrast, soft costs, which include customer acquisition, system
design and installation, permitting, inspection, interconnection, and business overhead and profit, have seen modest
reductions and, in some cases, increases in comparison. The resulting trend line illustrates how soft costs represent
an increasing and proportionally more significant percentage of total system costs when viewed over the past
decade.
The disparity between rapidly falling system hard costs and the generally increasing percentage soft costs represent
of total system cost point to the importance and opportunity that soft cost reduction represents. Innovative
businesses and organizations are spearheading and driving initiatives, developing platforms, and launching products
and services to reduce specific components of the overall soft cost group. These efforts include initiatives to
standardize and automate system permitting, equipment design advancements that improve the instability of solar
hardware and reduce installation costs, and software and services that drive down customer acquisition and system
design costs.
$7 Inverter
Module
$6
$5 4.67
4.09
$4
3.60
3.36
3.16
2.94
$3 2.78 2.77 2.71
$2
$1
$-
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Figure 2. NREL residential PV system cost benchmark summary (inflation adjusted), 2010-2020
Source: National Renewable Energy Laboratory, “US Solar Photovoltaic System and Energy Storage Cost Benchmark: Q1 2020”, January 2021.
Here, I explore opportunities to reduce soft costs in residential-scale systems in the US solar market by streamlining
and optimizing the solar sales process and business operations and workflow. Many opportunities to mitigate individ-
ual soft costs presented here also apply to small commercial systems. Some of the most significant opportunities to
reduce soft costs are customer acquisition and related sales and design activities. Leveraging virtual site assessments
and installation-ready designs based on high-accuracy data sets are a top-priority opportunity to lower customer
acquisition and operations costs. Virtual site assessments and installation-ready designs also increase customer
satisfaction, drive business through referrals, increase profitability, and enable companies to scale. In addition, they
allow companies to reduce labor and installation time and work smarter, not harder.
3
Accurate Site
Assessment Data
is an Imperative
4
Advancements in remote measurement allow solar companies to bypass inefficient and error-prone site visits to
measure and record roof dimensions, azimuth, pitch, and localized shading at a given site. Additionally, some remote
measurement technology, such as aerial imagery, captures thousands of measurement points. In comparison, a
rooftop measured manually with hand-held tools captures perhaps dozens of values. Case in point, the solar access
value of a roof measured with a hand-held device typically has 5–10 measurement values per roof. In comparison, the
same rooftop solar access value measured with software based on high-resolution aerial imagery has 12,000–20,000
measurement values per structure.[2] High-resolution site measurements positively impact solar installations across
the board. They allow optimized solar companies to fit more modules on the average rooftop and inform designs that
utilize optimal roof areas that maximize annual solar energy production.
Starting a project with accurate site data has a positive impact on every
step of the solar sales cycle. High-quality data empowers solar companies
to drive down customer acquisition soft costs, which account for 18% of
the total cost of a residential system installed in the US in Q1 2020.[2] To
better understand where potential cost savings exist within the solar
sales cycle, it is helpful to examine the components that make up a
system’s hard and soft costs.
5
Breaking Down
Solar Soft Costs
Two general categories comprise the total cost of a solar PV system. Hardware, or hard costs, include PV modules,
inverters, racking, disconnects, monitoring equipment, and wire, cable, and conduit. A residential system’s hard costs
represent approximately 35% of the total system cost. Soft costs account for 65% of the total system cost for residen-
tial solar installations and are typically divided into six main categories. The largest category is overhead (general and
administrative) and profit, representing 21% of the total system cost. Sales and marketing costs, frequently referred
to as customer acquisition costs, account for 18% of the total system cost. Supply chain costs make up 9%, permitting,
inspection, and interconnection 8%, and installation labor 7% of the total system cost. Finally, sales tax accounts for
2% of the total.[3]
Soft Costs Breakdown
2% Sales Tax
7% Installation Labor
Hardware
Costs
Overhead (General and
21% Administrative) and Profit
It is important to consider soft costs on a macro or sector level to identify and address specific opportunities to
reduce soft costs. The percentage of total system cost contributed to soft costs varies widely based on the solar
market sector. For example, as mentioned earlier, soft costs represent 65% of the total cost of a residential solar
system in Q1 2020. In comparison, soft costs accounted for 55% of the total system cost of a commercial-scale
rooftop PV system and only 35% of the total cost of a utility-scale system during the same period.[3] The bottom
line for businesses working in the residential solar sector is that reducing customer acquisition costs should be a
top priority when assessing solutions that will drive down this category of soft costs.
70% 66%
64%
63%
64%
60% 58%
57%
56% 55%
54% 59% 55%
50% 55%
52% 56%
50% 47% 47%
Figure 4. Modeled trend of soft cost as a proportion of
49%
total cost by sector, 2010-2020
44%
20%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
6
Comparing Traditional and
Optimized Sales and Operations
Workflow
On the one hand, the traditional solar sales and operations workflow is riddled with inefficiencies and potential pitfalls
that can dig into a project’s profitability, result in excessive change orders, and often canceled contracts. On the other
hand, implementing tools that facilitate virtual site assessments and installation-ready designs offers solar companies
significant opportunities to streamline workflow and gain a competitive advantage and market share within their service
areas. Inefficiencies in the traditional workflow often begin with inaccurate roof measurements that lead to overly
conservative designs, excessive truck rolls and change orders, longer project timelines, and decreased profitability.
These inefficiencies also frequently contribute to unhappy customers, canceled contracts, and lost potential referrals.
Sales
During an initial sales call, the sales representative may encounter a homeowner who is anywhere from well-informed
about the benefits of solar energy to utterly unfamiliar with the technology. Setting your company’s salespeople up for
success is crucial for both the salesperson and the company. For example, a solar company may prequalify a customer based
on the lead source but not prequalify the home based on accurate site data. Poor quality site data such as that sourced from
satellite imagery frequently result in inaccurate preliminary designs. When used during the sales process, inaccurate
preliminary designs negatively impact the remainder of the project workflow and ultimately the project’s profitability.
7
In the traditional project workflow, a sales representative uses a preliminary design from a do-it-yourself software or
service to develop a proposal. For example, they will use information from the preliminary design to determine how
many solar modules will fit on various roof facets. In turn, the sales representative will engage the customer to present
the proposal and close the sale. If they are successful and close, the customer signs the proposal and is formally under
contract. With a signed contract in place, the project moves on to the planning phase of the project cycle.
In contrast, virtual site assessments and installation-ready designs empower sales representatives with high-accuracy
site data, energy production estimates, and visual rooftop solar layouts before direct customer engagement. Virtual
site assessments and installation-ready designs enable salespeople to have a well-informed first communication with a
potential customer. Additionally, they allow the sales team to optimize its outbound sales efforts by prioritizing homes
with favorable roof facets and solar access values in the sales queue.
In addition to virtual site assessments, leading software providers couple remote measurement and imagery with
solar design and layout software tools that efficiently output installation-ready designs on the front end of the sales
cycle, eliminating the need for “preliminary” designs altogether. Installation-ready designs based on highly-accurate
site data enable salespeople and designers of all skill levels to determine precisely how many solar modules will fit on a
given roof section to maximize an array's capacity and the dollar value of the sale. Accurate, installation-ready designs
also incorporate virtually-measured roof azimuth, pitch, and solar access values to guide the optimal placement of
modules on the roof, resulting in a portfolio of high-performing systems. In turn, these high-quality designs minimize
the possibility of change orders, speed up the permitting process, and shorten the overall project timeline. Additional-
ly, they lead to improved customer satisfaction, and increased referrals, which are the best and lowest cost leads a
solar contractor can get.
The industry refers to pre-designs as tier-one designs and final designs as tier-two designs.
EagleView’s goal is to kill the need and inefficiency of a tier-one design. We make it unnecessary.
Planning
The planning phase of a residential solar project’s cycle includes exterior and interior site assessments, a final design
and plan set for permitting, applications, installation scheduling, and material procurement. Virtual site assessments
and installation-ready designs positively impact many steps in the planning activities.
In a traditional sales cycle that requires an exterior site visit, a site assessment technician needs to drive to the site,
with ladders and tools in tow, to collect the necessary measurements and information to validate a sales proposal and,
eventually, a system design back at the shop. The exterior assessment involves climbing on the roof to hand measure
and log each potential roof facet, including its azimuth, pitch, and solar access values using a hand-held device. Com-
plex hip roofs with many facets, and roofs with steep pitches, are challenging to measure accurately.
8
Potential fall hazards exist whenever an employee is on
the roof. Commonly, an employee making an initial trip
for measurements does not set anchors or use fall
protection equipment, further increasing the potential
for serious accidents. Getting on the roof also means
needing good weather during daylight hours, which can
cause further delays. Many of the challenges mentioned
here are also true for companies who leverage drones
for the exterior site survey. While drones can improve
measurement accuracy when compared to manual
methods, they still require a site visit, good weather, and
daylight hours to complete.
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Final design
A typical residential solar PV system plan set for permitting includes the specified equipment, corresponding values and
calculations, array and balance-of-system equipment drawings, and an electrical diagram. An optimized project workflow
leverages virtual high-accuracy site data to build installation-ready designs during the sales process and eliminates the
need for design revisions after the interior site assessment is complete. With the optimized workflow, CAD downloads of
the roof diagrams are directly imported into the plan set.
In contrast, in a traditional project workflow, a designer reviews the preliminary design considering the now available
manually-collected field measurements to determine if the contracted design can actually be built. If the designer identifies
inaccuracies in roof facet measurements, azimuth, pitch, or solar access, the preliminary design must be modified, and the
costly and time-consuming change order process begins. High-accuracy virtual site assessments eliminate the potential
discrepancies that lead to change orders and allow the designer to use the installation-ready design created during the
sales process to develop plan sets for permitting.
Change orders
Change orders can result from several issues or inaccuracies. In the traditional project workflow, the system designer
frequently identifies discrepancies between the preliminary design used to generate the signed contract and the final design
based on data collected on-site. One common discrepancy involves the module layout on the roof and estimated electricity
production. If, for example, the designer determines that the number of modules sold by the sales representative cannot fit
on a specific roof facet, a change order is triggered, requiring modifications to the initial sales contract. In some cases, the
sales representative must re-engage the customer and present the modified sales agreement for approval.
Change orders are a common source of customer fall off. They extend a project’s timeline, decrease profitability and impact
a company’s capacity for new sales. Change orders also slow cash flow and drag on a company’s ability to scale. When
surveyed, 68% of solar businesses reported losing sales following change orders.[3] According to Wood Mackenzie, customer
acquisition costs represent 23% of the total price of a residential system based on data from the first six months of 2021,
which equates to $0.75/watt or $5,250 per customer for a 7 kW system. Additionally, from 2018 to 2020, customer acquisi-
tion costs increased 9.2% even as total system prices fell 3.6% during the same period.[4] Acquiring customers is expensive.
Successful companies address every source of customer fall off as one of great importance.
Change orders often result in lost sales, customers, and revenue. On the other hand, quality contracts based on
accurate site data bring down customer acquisition costs, improve the customer experience, and drive referrals and
new business.
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
Market Average Tesla Sunrun Large Regional Mid-Size Large Local Long-Tail
Installers Regional Installers
Installers
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Installation
Perhaps the worst-case scenario during a project’s installation occurs when an installation team determines that the
specified array does not fit on the roof due to inaccurate measurements or errors in data entry. When a crew identifies an
issue like this, it often takes on-site changes to "make it work," resulting in a post-install change order. If they cannot
modify the design and overcome the issue in the field, the crew lead pauses the job until they can resolve the problem.
Each action that follows, including remeasuring the roof and field modifying the design, results in workflow disruptions,
timeline extension, and lost profit.
An additional impact of mismeasurements that contractors often overlook is that even the occasional measurement error
tends to influence overly conservative designs. The fear that it will not fit often results in designers not utilizing roof
facets to their full potential. As illustrated earlier, undersized systems drive up soft costs, decrease profitability for the
contractor and reduce the return on investment and overall satisfaction for the homeowner. High-accuracy virtual site
assessments eliminate the possibility of mismeasurement or undersizing and all of the negative consequences that follow.
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The Ability to Scale
In competitive residential solar markets, a solar sales and installation company competes with an average of 20 solar
businesses for customers, referrals, and market share.[5] Additionally, they likely face labor shortages coupled with a
rapidly expanding customer demand for solar PV. There is typically significant downward pricing pressure in these
markets to reduce system costs—especially soft costs—to stay competitive. As a result, companies are faced with either
narrowing profit margins or the imperative to evaluate the sales and operations workflow to pinpoint inefficiencies and
identify high-impact solutions.
For the typical end-to-end residential project workflow, the soft costs attributed to overhead and profit (21%), customer
acquisition (18%), supply chain (9%), and installation labor (7%) represent 55% of a residential solar project’s total cost.
Virtual site assessments and installation-ready designs positively impact each of these categories. Clearly, competitive
and growing solar businesses need to leverage precise site data coupled with innovative design software to target these
costs through improved workflow efficiencies and optimized business processes.
Fortunately, solutions that offer high-accuracy virtual site assessments and installation-ready
designs transform company workflows. From customer acquisition and design through installation
and project close-out, they create a clear path to drive down costs, increase profits, and free up
personnel and financial resources. Ultimately, these solutions enable solar companies to build
momentum, scale, and succeed where others might fail.
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EagleView Empowers Solar
Businesses to Optimize, Streamline,
and Scale
The competitive advantage of high-accuracy site data, virtual site assessments, and
streamlined design software that leverages high-quality site information is clear.
EagleView is the industry leader in providing these solutions.
For more than two decades, EagleView has enlisted a fleet of aircraft across the US equipped with proprietary camera
systems, collecting high-resolution aerial imagery. EagleView extracts precise three-dimensional structural models
and property data from this imagery, used by the insurance, construction, and now solar industries to inform business
decisions. It delivers this information in various formats, including PDF, DXF, XML, and JSON. EagleView’s products
and innovations are covered by more than 300 patents worldwide, with more than one billion images in its database.
EagleView’s solar solutions offer precise measurements and shading analysis to allow for efficient solar designs that
are optimized for maximum energy production. EagleView’s accessible data and software platforms minimize solar
soft costs by allowing residential solar companies to sell, plan and install in less time, improve cash flow, reduce
external site visits and improve the customer experience. TrueDesign™ leverages the power of our data and gives
solar installers final, installation-ready designs for the solar contract that are auto-generated. Post-sale, TrueDesign™
exports a CAD file of the roof diagrams for permitting and plan sets, bridging the gap between sales and operations
without needing an external site visit. That means fewer change orders and cancellations, lower soft costs, and better
profit margins at every stage of the process.
Pete Cleveland began his solar career in 2010. He initially focused on developing
and implementing system design standards and processes, leveraging his previous
experience in land surveying and heavy site construction.
Before joining EagleView in 2018, Pete drove innovation and efficiencies with one of
America’s largest EPCs by combining LEAN business practices with technology. Today,
as the Vice President of EagleView’s solar business, Pete continues to pursue his passion
Peter Cleveland for evolving the solar industry by applying technology to solve real-world problems in
Vice President, Solar an effort to deploy more solar for the benefit of society and our planet as a whole.
13
Optimize your solar sales and operations process
with EagleView’s solar solutions.
[1] PV Magazine, “SolSmart Targets Pricey Solar Soft-Costs,” August 27, 2021
[ ] Based on proprietary EagleView aerial measurement equipment and software specifications.
2
[3] National Renewable Energy Laboratory, “US Solar Photovoltaic System and Energy Storage Cost Benchmark: Q1 2020”, January 2021.
[4] Wood Mackenzie, “US Residential PV Customer Acquisition Costs and Trends 2021”.
[ ] Renewable Energy World, “How Competitive is the Residential Solar Industry?”, 2017.
5
www.eagleview.com