Non-Hardware (“Soft”) Cost-
Reduction Roadmap for
Residential and Small
Commercial Solar
Photovoltaics, 2013-2020
Kristen Ardani1, Dan Seif2, Robert Margolis1,
Jesse Morris2, Carolyn Davidson1, Sarah Truitt1,
and Roy Torbert2
1National Renewable Energy Laboratory
2Rocky Mountain Institute
NREL is a national laboratory of the U.S. Department of Energy
Office of Energy Efficiency & Renewable Energy
Operated by the Alliance for Sustainable Energy, LLC.
This report is available at no cost from the National Renewable Energy
Laboratory (NREL) at www.nrel.gov/publications.
Technical Report
NREL/TP-7A40-59155
August 2013
Contract No. DE-AC36-08GO28308

































































National Renewable Energy Laboratory
15013 Denver West Parkway
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303-275-3000 • www.nrel.gov
Non-Hardware (“Soft”) Cost-
Reduction Roadmap for
Residential and Small
Commercial Solar
Photovoltaics, 2013-2020
Kristen Ardani1, Dan Seif2, Robert Margolis1,
Jesse Morris2, Carolyn Davidson1, Sarah
Truitt1, and Roy Torbert2
1National Renewable Energy Laboratory
2Rocky Mountain Institute
Prepared under Task No. SM13.0530
NREL is a national laboratory of the U.S. Department of Energy
Office of Energy Efficiency & Renewable Energy
Operated by the Alliance for Sustainable Energy, LLC.
This report is available at no cost from the National Renewable Energy
Laboratory (NREL) at www.nrel.gov/publications.
Technical Report
NREL/TP-7A40-59155
August 2013
Contract No. DE-AC36-08GO28308








































































































































NOTICE
This report was prepared as an account of work sponsored by an agency of the United States government.
Neither the United States government nor any agency thereof, nor any of their employees, makes any warranty,
express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of
any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately
owned rights. Reference herein to any specific commercial product, process, or service by trade name,
trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation,
or favoring by the United States government or any agency thereof. The views and opinions of authors
expressed herein do not necessarily state or reflect those of the United States government or any agency thereof.
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Acknowledgments
The authors would like to thank the following individuals and organizations for their contributions to
and review of this work: Barry Cinnamon (Cinnamon Solar), Douglas Fabini (U.S. Department of
Energy Solar Energy Technologies Program [SETP]), David Feldman (National Renewable Energy
Laboratory [NREL]), Benjamin Foster (Optony), Joshua Huneycutt (SETP), Joachim Seel (Lawrence
Berkeley National Laboratory [LBNL]), Jason Keyes (Keyes, Fox & Wiedman LLP), Kelly Knutsen
(SETP), Katherine Liu (University of California Berkeley), Michael Mendelsohn (NREL), Christina
Nichols (SETP), John Rethans (Clean Power Finance [CPF]), James Tong (CPF), Elaine Ulrich (SETP),
Ryan Wiser (LBNL), and Jarett Zuboy (consultant).
List of Acronyms
ABS
asset-backed securitization
AHJ
authorities having jurisdiction
BDC/RIC
business development companies/registered investment
companies
BOS
balance of system
bps
basis points
CPI
Consumer Price Index
CRO
cost-reduction opportunities
DC
direct current
DG
distributed generation
DOE
U.S. Department of Energy
FHA
Federal Housing Authority
FHFA
Federal Housing Financing Authority
HELOC
home equity line of credit
HUD
U.S. Dept. of Housing and Urban Development
IOU
investor-owned utility
IPO
initial public offering
IPP
independent power producer
ITC
investment tax credit
ITRPV
International Technology Roadmap for Photovoltaics
ITRS
International Technology Roadmap for Semiconductors
JOBS Act
Jumpstart Our Business Startups Act
LCOE
levelized cost of energy
LTV
loan to developer equity value
M&A
merger and/or acquisition
MLP
master limited partnership
MUSH
municipal (state/local government), universities, K-12
schools, and hospitals
NREL
National Renewable Energy Laboratory
O&M
operations and maintenance
PACE
property assessed clean energy
PII
permitting, inspection, and interconnection
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PUC
public utility commission
PV
photovoltaics
R&D
research and development
REIT
real estate investment trusts
RPS
renewable portfolio standard
SEC
Securities and Exchange Commission
SIA
Semiconductor Industry Association
SREC
solar renewable energy certificate
VC/PE
venture capital and private equity
VDC
volt direct current
WACC
weighted average cost of capital
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Executive Summary
Non-hardware (soft) costs have become a major driver of U.S. photovoltaic (PV) system prices, and
aggressive soft-cost-reduction pathways must be developed to achieve the U.S. Department of Energy
(DOE) SunShot Initiative’s PV price targets.
This report roadmaps the cost reductions and innovations necessary to achieve the SunShot soft-cost
targets by 2020, focusing on advances in four soft-cost areas: (1) customer acquisition; (2) permitting,
inspection, and interconnection (PII); (3) installation labor; and (4) financing. A fifth soft-cost
category—“other soft costs,” which includes profit and overhead—was not explicitly benchmarked by
past survey efforts and is not roadmapped here. Exploring ways to reduce this “other soft costs”
category will be a subject of future research.
In 2010, U.S. PV soft costs totaled $3.32/W1 for 5-kW residential systems and $2.64/W for small
commercial systems (250 kW and smaller), representing approximately 50% of the total installed
residential PV system price ($6.60/W) and 44% of the total installed small commercial system price
($5.96/W). The SunShot Initiative aims to reduce the installed-system price contribution of total soft
costs to approximately $0.65/W for residential systems and $0.44/W for commercial systems by 2020,
with total installed system prices of $1.50/W and $1.25/W, respectively.
To create the roadmaps, we adapted the methodologies used in the Semiconductor Industry
Association’s International Technology Roadmap for Semiconductors and the SEMI PV Group’s
International Technology Roadmap for Photovoltaics. We gathered granular and sector-specific data
through literature reviews, National Renewable Energy Laboratory and Rocky Mountain Institute data,
and over 70 in-depth PV industry interviews with financiers, analysts, utility representatives, residential
and commercial PV installers, software engineers, industry organizations, and others. The roadmaps
draw on industry expertise to plot conceivable courses to achieving the residential and small commercial
2020 SunShot targets, and they suggest the level of effort that might be required to achieve SunShot-
level cost reductions in specific soft-cost areas.
We used survey data and market analysis to derive baseline values (2012 for financing, 2010 for all
other cost categories2) for residential and small commercial PV system prices and their soft-cost
components. We then assigned corresponding target (2020) values based on DOE’s SunShot Vision
Study to evaluate the level of cost reduction needed to achieve SunShot targets (DOE 2012). We defined
the path from the 2010/2012 baseline values to the 2020 target values in terms of solution sets, each of
which contains one or more specific cost-reduction opportunities (CROs), such as innovative
technologies, business models, financial structures, regulatory changes, and industry best practices. We
asked interview and survey participants to estimate soft-cost reductions—in terms of maximum cost-
reduction potential and market penetration—through 2020 based on the PV industry’s current trajectory
of advancements and expectations. We then re-reviewed research sources, followed up with original
interviewees, and directly inquired with additional interviewees to determine the most likely further cost
reductions from the current trajectory to the roadmap targets.
We estimated the uncertainty of achieving each CRO by calculating the cost-reduction difference
between the current-trajectory CRO values and the roadmap CRO values. We translated these uncertainties
1 Per watt direct current. Expressed as “$/W” throughout report.

2 2010 selected as baseline year for all costs measured in $/W to correspond with beginning of SunShot Initiative.

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into a color code, or “readiness factor,” that indicates the level of research, development, and pre-
commercialization needed to achieve the roadmap targets—similar to the International Technology
Roadmap for Semiconductors (ITRS) and International Technology Roadmap for Photovoltaics
(ITRPV) coding system. In our system, red denotes the lowest level of readiness/certainty; specifically,
it indicates that for a given CRO, the market penetration required to achieve a roadmap target in any
year is more than 25% higher than the current trajectory. Orange indicates a deviation in market
penetration of 10%–25%, while yellow indicates a deviation in market penetration of up to 10%. Green
denotes the highest level of readiness/certainty and that the roadmap target is realizable under the
current trajectory. Results indicate that at both the residential and small commercial scales, the current-
trajectory case does not achieve SunShot targets by 2020. Table ES-1 shows the readiness factor legend
with color codes.
Table ES-1. Readiness Factor Legend
For some cost areas, the resulting roadmap identifies reasonable, yet substantive, advances that reduce
soft costs to target levels by 2020. For other cost areas, there is less certainty about the emergence—and
elements—of specific solution sets and CROs required to reach the targets. In these cases, the roadmap
incorporates future deployment of innovations with greater cost-reduction potential, referred to as
“undefined” solution sets and CROs.
The residential PV roadmap shows a challenging path to SunShot soft-cost targets (Table ES-2).
Additional reductions of $0.46/W and 1.6% weighted average cost of capital (WACC) beyond the
current-trajectory reductions are required. Overall, customer acquisition costs have the highest
likelihood of decreasing to 2020 target levels,3 although the implementation of several individual site-
assessment-software and consumer-targeted CROs is highly uncertain. Financing has the next-most-
certain cost-reduction pathway; the primary challenge is developing scalable homeowner financing
products, for which the homeowner maintains equity control. In contrast, the pathways for PII and
installation labor are highly uncertain. Because achieving the required PII cost target is nearly
impossible with a piecemeal approach, an undefined solution set is introduced that may represent the
3 Preliminary NREL 2012 benchmarking data made available shortly before release of this report show residential customer
acquisition costs averaging below 2013 current trajectory values. Friedman et al 2013 “Second Annual Benchmarking Non-
Hardware Balance-of-System (Soft) Costs for U.S. Photovoltaic Systems, Using a Bottom-Up Approach and Installer
Survey”. Forthcoming.
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combination of unknown regulatory mechanisms that enable wider-scale uniformity across authorities
having jurisdiction (AHJs), a market-wide average fee of $100 [instead of $250 (i.e., in the lower
permitting fees solution set)], and streamlined inspection. Similarly, an undefined solution set is required
to achieve the installation labor target, which could entail a combination of additional equipment
standardization and classification and/or reduced through-roof penetration.
Table ES-2. Residential PV Soft-Cost Reduction Roadmap
The commercial PV roadmap offers a more certain path to SunShot soft-cost targets (Table ES-3).
Additional reductions of $0.11/W and 1.1% WACC beyond the current-trajectory reductions are
required. Overall, customer acquisition has a relatively certain path, although reaching the 2020 target
hinges on the highly uncertain market penetration of improved site assessment and design CROs, in
addition to advanced customer acquisition tools that couple well with market-expanding (“new
markets”) innovative finance. In the area of installation labor, commercial PV is more amenable than
residential PV to streamlined installation practices, thus achieving the SunShot target by 2020 is more
certain; the near-universal adoption of integrated racking provides one plausible cost-reduction pathway.
Commercial financing exhibits a similar level of challenge to reach the roadmap WACC target as
residential financing. However, the commercial financing path requires the highly uncertain
implementation of an undefined host-finance CRO (e.g., special rooftop property rights/easements or
energy service agreements) as well as highly uncertain expansions of green bond programs and
commercial property assessed clean energy (PACE) financing. Though we do not develop a commercial
PII roadmap, our findings suggest that streamlining the interconnection process could reduce the major
PII cost component substantially.
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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Customer Acquisition
($/W)
$0.67 —
— $0.53 $0.49 $0.45 $0.41 $0.36 $0.28 $0.19 $0.12
PII ($/W)
$0.20 —
— $0.18 $0.16 $0.15 $0.13 $0.11 $0.10 $0.06 $0.04
Installation Labor ($/W)
$0.59 —
— $0.51 $0.46 $0.42 $0.36 $0.30 $0.24 $0.19 $0.12
Other Soft Costs ($/W)
$1.86 —
— $1.30 $1.14 $0.97 $0.82 $0.68 $0.56 $0.48 $0.37
Financing (WACC %-real)
—
—
9.9% 9.4% 8.8% 8.2% 7.7% 7.7% 4.8% 3.4% 3.0%
Total Soft Costs ($/W)
$3.32 —
— $2.52 $2.25 $1.99 $1.72 $1.45 $1.18 $0.92 $0.65
Total System Costs ($/W)
$6.60 —
— $4.99 $4.49 $3.99 $3.49 $3.00 $2.50 $2.00 $1.50









Table ES-3. Commercial PV Soft-Cost Reduction Roadmap
Regardless of the specific path taken to achieve the SunShot targets, the concerted efforts of numerous
PV market actors and stakeholders will be required. We illustrate how the required participation of each
type varies substantially by soft-cost category while noting that roles and responsibilities will be
complementary and evolve over time. This report is the first of a series that will track soft-cost
reductions and quantify the impacts of innovations. Future work will elaborate and refine soft-cost
benchmarks, cost-reduction strategies, and the distinctions among the nation’s geographically diverse
PV markets with the goal of tracking—and helping enable—progress toward SunShot targets.
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Table of Contents
1
Introduction ...........................................................................................................................................1

2 Roadmap Methodology ........................................................................................................................3

3 Customer Acquisition...........................................................................................................................8

3.1 Residential Customer Acquisition Roadmap ................................................................................. 9

3.2 Commercial Customer Acquisition Roadmap ............................................................................. 13

4 Permitting, Inspection, and Interconnection....................................................................................16

4.1 Residential Permitting, Inspection, and Interconnection Roadmap............................................. 16

4.2 Commercial Permitting, Inspection, and Interconnection ...........................................................20

5
Installation Labor ................................................................................................................................20

5.1 Residential Installation Labor Roadmap......................................................................................21

5.2 Commercial Installation Labor Roadmap ....................................................................................24

6 Financing .............................................................................................................................................27

Methodology ......................................................................................................................................... 27

6.1 Residential Financing Roadmap .................................................................................................. 29

6.1.1
Third-Party Finance ........................................................................................................ 30

6.1.2 Utility Finance ................................................................................................................ 31

6.1.3 Homeowner Finance....................................................................................................... 31

6.1.4
Community Solar............................................................................................................ 31

6.2 Commercial Financing Roadmap ................................................................................................35

6.2.1 Third-Party Finance ............................................................................................................ 36

6.2.2 Utility Financing ................................................................................................................. 36

6.2.3 Host Finance ................................................................................................................... 36

6.2.4
Community Solar............................................................................................................ 37

7 Key Actors and Stakeholders ............................................................................................................40

7.1 Customer Acquisition .................................................................................................................. 40

7.1.1 Developers/Installers ...................................................................................................... 40

7.1.2
Service Providers ............................................................................................................ 40

7.1.3 Other Stakeholders.......................................................................................................... 41

7.2 Permitting, Inspection, and Interconnection ................................................................................ 41

7.3
Installation Labor.........................................................................................................................42

7.4 Financing ..................................................................................................................................... 43

8 Conclusions, Limitations, and Future Research .............................................................................45

References .................................................................................................................................................48

Appendix A: Supplemental Data Tables..................................................................................................51

Appendix B. Example Interview and Survey Questions ........................................................................58

Appendix C: Solution Set and Cost-Reduction Opportunity Descriptions .........................................62

Customer Acquisition ...........................................................................................................................62

Permitting, Inspection, and Interconnection .........................................................................................64

Standardization of Requirements................................................................................................. 64

Transparency of Requirements .................................................................................................... 64

Online Permitting.........................................................................................................................64

Lower Permitting Fees................................................................................................................. 64

Interconnection Best Practices ..................................................................................................... 64

Undefined Solution Set................................................................................................................ 64

Installation Labor.......................................................................................................................................64

Integrated Racking.......................................................................................................................65

Module Integrated Electronics..................................................................................................... 65

Prefabrication...............................................................................................................................65

Plug and Play (Residential).......................................................................................................... 65

Solar-Ready Homes (Residential)................................................................................................65

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Undefined Solution Set (Residential) ..........................................................................................65

Power Electronics (Commercial)................................................................................................. 66

Financing .............................................................................................................................................. 66

Residential ................................................................................................................................... 66

Utility Finance .............................................................................................................................67

Homeowner Finance ....................................................................................................................68

Community Solar.........................................................................................................................69

Commercial........................................................................................................................................... 69

Third-Party Financing.................................................................................................................. 69

Community Solar.........................................................................................................................71

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List of Figures
Figure 1. Total PV system prices and SunShot targets.................................................................................. 2

Figure 2. 2011 ITRS lithography technology requirements .......................................................................... 4

Figure 3. Residential PV customer acquisition costs: Current trajectory and roadmap ..............................12

Figure 4. 2020 residential PV customer acquisition cost reductions: Current trajectory and roadmap.......12

Figure 5. Commercial PV customer acquisition costs: Current trajectory and roadmap ............................15

Figure 6. 2020 commercial PV customer acquisition cost reductions: Current trajectory and roadmap ....15

Figure 7. Residential PV permitting, inspection, and interconnection costs: Current trajectory and

roadmap .................................................................................................................................. 19

Figure 8. 2020 residential PV permitting, inspection, and interconnection cost reductions: Current

trajectory and roadmap ........................................................................................................... 19

Figure 9. Residential PV installation labor costs: Current trajectory and roadmap ....................................23

Figure 10. 2020 residential PV installation labor cost reductions: Current trajectory and roadmap...........23

Figure 11. Commercial PV installation labor costs: Current trajectory and roadmap................................. 26

Figure 12. 2020 commercial PV installation labor cost reductions: Current trajectory and roadmap.........26

Figure 13. Residential PV WACC: Current trajectory and roadmap ..........................................................34

Figure 14. 2020 residential PV WACC reduction: Current trajectory and roadmap................................... 34

Figure 15. 2020 commercial PV WACC reduction: Current trajectory and roadmap ................................39

Figure 16. 2020 commercial PV WACC reduction: Current trajectory and roadmap ................................39

Figure 17. Customer acquisition actors and stakeholders ........................................................................... 41

Figure 18. Permitting, inspection, and interconnection actors and stakeholders......................................... 42

Figure 19. Installation labor actors and stakeholders ..................................................................................43

Figure 20. Finance actors and stakeholders................................................................................................. 45

List of Tables
Table ES-1. Readiness Factor Legend.......................................................................................................... vi

Table ES-2. Residential PV Soft-Cost Reduction Roadmap ...................................................................... vii

Table ES-3. Commercial PV Soft-Cost Reduction Roadmap ................................................................... viii

Table 1. Baseline and Roadmap Targets for Residential and Commercial PV System Costs and WACC...6

Table 2. Readiness Factor Legend................................................................................................................. 8

Table 3. Residential Customer Acquisition Roadmap................................................................................. 11

Table 4. Commercial Customer Acquisition Roadmap............................................................................... 14

Table 5. Residential Permitting, Inspection, and Interconnection Roadmap............................................... 18

Table 6. Residential Installation Labor Roadmap .......................................................................................22

Table 7. Commercial Installation Labor Roadmap .....................................................................................25

Table 8. Residential Financing Roadmap.................................................................................................... 33

Table 9. Commercial Financing Roadmap .................................................................................................. 38

Table 10. Residential PV Soft-Cost Reduction Roadmap........................................................................... 46

Table 11. Commercial PV Soft-Cost Reduction Roadmap ......................................................................... 46

Table A-1. Residential Customer Acquisition Market Penetration and Maximum Cost-Reduction

Potential .................................................................................................................................. 51

Table A-2. Commercial Customer Acquisition Market Penetration and Maximum Cost-Reduction

Potential .................................................................................................................................. 52

Table A-3. Residential, Inspection, and Interconnection Market Penetration and Maximum

Cost-Reduction Potential ........................................................................................................ 53

Table A-4. Residential Installation Market Penetration and Maximum Cost-Reduction Potential ............54

Table A-5. Commercial Installation Labor Market Penetration and Maximum Cost-Reduction Potential 55

Table A-6. Residential Financing Market Penetration and Maximum Cost-Reduction Potential ...............56

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Table A-7. Commercial Financing Market Penetration and Maximum Cost-Reduction Potential ............ 57

Table B-1. Example Interview Questions.................................................................................................... 58

Table B-2. Example Survey Instrument (Residential PII)........................................................................... 60

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1
Introduction
The objective of this analysis is to roadmap the cost reductions and innovations necessary to achieve the
U.S. Department of Energy (DOE) SunShot Initiative’s total soft-cost targets by 2020. The roadmap
focuses on advances in four soft-cost areas: (1) customer acquisition; (2) permitting, inspection, and
interconnection (PII); (3) installation labor; and (4) financing. Financing cost reductions are in terms of
the weighted average cost of capital (WACC) for financing PV system installations, with real-percent
targets of 3.0%4 (residential) and 3.4%5 (commercial). A fifth soft-cost category—“other soft costs,”
which includes profit and overhead—was not explicitly benchmarked by past survey efforts and is not
roadmapped here. Exploring ways to reduce this “other soft costs” category will be a subject of
future research.
With global photovoltaic (PV) module prices declining rapidly, non-hardware PV costs have accounted
for a significant and increasing portion of average installed U.S. PV system prices (Barbose et al. 2012).
Therefore, it is critical to understand non-hardware costs—also referred to as “non-hardware balance of
system (BOS),” “business process,” or “soft” costs—such as permitting, inspection, interconnection,
profit, overhead, installation labor, customer acquisition, and financing. Non-hardware costs are both a
major challenge and a major opportunity for reducing PV system prices and stimulating SunShot-level
PV deployment in the United States.
Results from a 2010 installer survey and cost-modeling analysis indicate that in 2010 soft costs,
including profit and overhead, totaled $3.32/W6 for 5-kW residential systems and $2.64/W for small
commercial systems (≤250 kW) (Ardani et al. 2012; Feldman et al. 2012; Goodrich et al. 2012). This
represented approximately 50% of 2010 U.S. total installed residential PV system price ($6.60/W) and
44% of total installed small commercial system price ($5.96/W) (Ardani et al. 2012; Barbose et al.
2012). DOE’s SunShot Initiative aims to reduce the installed-system price contribution of total soft costs
to approximately $0.65/W for residential systems and $0.44/W for commercial systems by 2020, with
total installed system prices of $1.50/W and $1.25/W, respectively (DOE 2012). Figure 1 depicts
benchmark PV system prices, total soft costs, and SunShot targets for residential and commercial PV.
Of the $3.32/W in residential soft costs, specifically surveyed costs total $1.46/W7 in the categories of
customer acquisition (including system design and marketing); permitting, inspection, and
interconnection (including typical delays and an assumed permitting fee of $450); and installation labor
4 Derived from NREL’s SolarDS modeling basis for the SunShot Vision Study (DOE 2012)at 80%–100% debt and
homeowner’s equity at 0%–20%. For the purposes of this report, this debt was calculated based on 2010-to-2012 average 30-
yr $30,000 home equity loans (2.9%-real) at 80% and homeowner’s equity at 20% at 3.1%-real based on the 30-yr (to
January 2013) Standard &Poor’s 500 real compound annual growth rate.
5 Derived from NREL’s SolarDS modeling basis for the SunShot Vision Study (DOE 2012)at 60% debt and company equity
at 40%. For the purposes of this report, the debt rate came from 2010-to-2012 average Moody’s Baa bond ratings (2.9%-real)
and U.S. corporate WACC from New York University (NYU) Stern
(http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/wacc.htm; data as of January 2013) of 6.8%-nominal
(corrected to 4.2%-real).
6 $/W measured in $/WDC unless otherwise noted.
7 This value is $1.50/W in Ardani et al. (2012). We use $1.46/W in this report because we do not include the cost of
arranging third-party financing ($0.02/W) or incentive application costs ($0.02/W). In this report, we include these in “other
soft costs” because we do not roadmap fixed financing costs (this is the subject of ongoing NREL research) and the SunShot
2020 targets do not include incentives.
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(Ardani et al. 2012).8 Assuming the surveyed soft costs’ proportional shares of total soft costs remains
constant through 2020, achieving the SunShot residential aggregate target of $0.65/W requires an 80%
reduction in total surveyed costs from $1.46/W to $0.28/W.
Of the $2.64/W in small commercial soft costs, specifically surveyed soft costs total $0.98/W,9 or 17%
of the total system price (Ardani et al 2012).10 Assuming the surveyed soft costs’ proportional shares of
total soft costs remains constant through 2020, achieving the SunShot aggregate commercial target of
$0.44/W requires an 85% decrease in surveyed costs from $0.98/W to $0.13/W.
Figure 1. Total PV system prices and SunShot targets
The remainder of this report is structured as follows. Section 2 describes the roadmap data collection
and analysis methodology we used. Sections 3 through 6 present roadmap data collection and analysis
findings for residential and small commercial PV systems by cost category: customer acquisition
(Section 3); permitting, inspection, and interconnection (Section 4); installation labor (Section 5); and
8 Customer acquisition costs account for $0.67/W; permitting, inspection, and interconnection $0.20/W; and installation labor
$0.59/W.
9 This value is $0.99/W in Ardani et al. (2012). We use $0.98/W in this report because we do not include the cost of
arranging third-party financing ($0.02/W; this only reduces the value by $0.01/W because of rounding). In this report, we
include these in “other soft costs” because we do not roadmap fixed financing costs (this is the subject of ongoing NREL
research).
10 Customer acquisition costs account for $0.19/W; permitting, inspection, and interconnection (including an assumed
permitting fee of $25,000) $0.37/W; and installation labor $0.42/W. Commercial soft costs are median values unless
otherwise stated. Given the relatively small sample of commercial installers (n = 17), the median was deemed more
meaningful than a simple or capacity-weighted average (as was used for residential PV, n = 80).
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financing (Section 6). Section 7 addresses the key actors and stakeholders whose participation is
required to achieve the roadmap targets. Section 8 discusses conclusions, study limitations, and
directions for future research. Appendix A contains our underlying data used for calculations.
Appendix B provides our interview and survey questions. Appendix C expands the definitions of the
cost-reduction opportunities.
2 Roadmap Methodology
To roadmap soft-cost reductions through 2020, we adapted the methodology used in the Semiconductor
Industry Association’s (SIA) annual International Technology Roadmap for Semiconductors (ITRS)
(http://www.itrs.net/). Through numerous working groups producing annual updates or full revisions,
the ITRS summarizes the technical capabilities that must be developed for the industry to advance; it
provides a 15-year outlook on major trends and outlines clear targets for researchers in the outer years.
After demonstrating a significant industry impact for nearly 20 years, the SIA roadmapping
methodology was adapted by the SEMI PV Group Europe (a group of European solar energy
manufacturers) in 2010 to develop the International Technology Roadmap for Photovoltaics (ITRPV)
(http://www.itrpv.net/). The ITRPV provides a long-term trajectory for advancements in the
manufacture of crystalline silicon PV and defines the improvements necessary to advance along the PV
learning curve.
The ITRS and ITRPV include tables focused on specific technical areas, listing solution pathways in the
far left column with targets and associated metrics to track progress over time in corresponding rows.
The ITRS and ITRPV use a color-coded scale to depict the certainty of a solution being realized and
distinguish the level of research needed to achieve targets. In the ITRS, white indicates the highest level
of certainty (solutions exist and are being optimized), while red indicates that significant research
breakthroughs are needed or that solutions are unknown. Intermediate levels of certainty and research
requirements are designated with yellow and yellow stripes. Figure 2 provides an example from the
2011 ITRS, illustrating this color coding and methodology for lithography.
3

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Source: http://www.itrs.net/Links/2011ITRS/2011Tables/Litho_2011Tables.xlsx (accessed 3/28/13)
Figure 2. 2011 ITRS lithography technology requirements
Our soft-cost roadmap follows the general ITRS/ITRPV methods with some key differences. Unlike the
ITRS and ITRPV, our roadmap addresses multi-stakeholder, multi-business aspects of PV and is not
limited to technical issues. In addition, this roadmap tracks progress in terms of cost reduction—
measured in $/W and WACC—rather than technical nodes. Our sources of information and industry
expertise are different as well. Where the ITRS approach employs industry working groups, we gathered
granular and sector-specific data through literature reviews, National Renewable Energy Laboratory
(NREL) and Rocky Mountain Institute data, and in-depth interviews. Over 70 interview participants
included financiers, analysts, utility representatives, residential and commercial PV installers, software
engineers, industry organizations, and others. Appendix B contains the interview questions.
To create our roadmaps, we used survey data and market analysis to derive baseline values (2012
WACC for financing; 201011 $/W for all other cost categories) for residential12 and small commercial13
PV system prices and their soft-cost components. The residential baseline values are $6.60/W for the
system, $3.32/W for total soft costs, and 9.9% for WACC14 (Barbose et al. 2011; Ardani et al. 2012;
Feldman et al. 2012; Goodrich et al. 2012). Within the soft costs, baseline values are as follows:
$0.67/W customer acquisition, $0.20/W PII, $0.59/W installation labor, and $1.86/W “other soft costs”
(Ardani et al. 2012). The small commercial baseline values are $5.96/W for the system and $2.64/W for
total soft costs (Barbose et al. 2011; Ardani et al. 2012; Feldman et al. 2012; Goodrich et al. 2012) and
8.6% for WACC. Within the soft costs, baseline values are as follows: $0.19/W customer acquisition,
11 2010 was selected as the baseline year for all costs measured in $/W to correspond with the beginning of the SunShot

Initiative.

12 For the purposes of this study, residential systems are installed on single-family residences.

13 For the purposes of this study, commercial systems include systems of 250 kW or smaller installed on commercial,

municipal, university, school, hospital, and multi-family residential buildings, unless otherwise noted.

14 For this study, a combination of in-depth interviews and public and private reports was used to benchmark the WACC in

late 2012 and early 2013. Thus, WACC benchmarks reflect recent and more ITC-monetizing, tax-equity-dependent data, with

2011 data used in some cases.

4

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$0.42/W installation labor, and $2.03/W “other soft costs.��� For commercial PV, we included PII in the
“other soft costs” category because no comprehensive data exists for benchmarking interconnection
study costs and permitting fees in the commercial sector. Anecdotally, interconnection study costs are
reported to vary substantially—from $2,500 to more than $30,000—depending on PV penetration rates
in a given utility service territory and system size. Due to the lack of existing data, this study
quantitatively roadmaps cost reductions for residential PV only and assesses commercial-scale PII based
on qualitative data and interview findings. Collecting comprehensive PII cost data for commercial PV
systems remains an area for future research.
We next assigned target (2020) values for residential and commercial PV system prices and their soft-
cost components based on the SunShot Vision Study (DOE 2012). The residential baseline values are
$1.50/W for the system, $0.65/W for total soft costs, and 3.0% for WACC. Because of data limitations,
we set the specific soft-cost target values by assuming the cost in each category decreases
commensurately based on its proportion of 2010 soft costs: $0.12/W customer acquisition, $0.04/W PII,
$0.12/W installation labor, and $0.37/W “other soft costs.” The commercial baseline values are $1.25/W
for the system, $0.44/W for total soft costs, and 3.4% for WACC, with the following specific soft-cost
targets: $0.03/W customer acquisition, $0.07/W installation labor, and $0.34/W “other soft costs”
(including PII). Refining 2020 soft-cost values to account for different rates of cost reduction across
categories has been identified as an important area for future research.
5

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Table 1. Baseline and Roadmap Targets for Residential and Commercial PV System Costs and WACC
*The baseline is 2012 for WACC and 2010 for all other cost categories.
**For commercial PV, the other soft-cost category includes PII.
We defined the paths between the 2010 baselines and the 2020 targets in terms of solution sets, each of
which contains one or more specific cost-reduction opportunities (CROs), such as innovative
technologies, business models, financial structures, regulatory changes, and industry best practices. For
example, the residential customer acquisition roadmap has a solution set called “consumer targeting
strategies,” which includes four CROs: marketing programs and partnerships, lead qualification and
generation programs, referral programs, and consumer awareness campaigns. The finance section CROs
were limited to financial structures, but other CRO elements (e.g., improvement in business models and
expanded financial data) were assumed to support specific structures. Each CRO has two major
attributes:
1. Maximum cost-reduction potential: The estimated amount by which each CRO could reduce its
corresponding soft-cost baseline value, measured in $/W for all soft-cost areas except for
finance, which is measured in WACC percent.15
15 We assumed that maximum cost-reduction potential is the same in both the current-trajectory and roadmap cases. Market
penetration varies.
6

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2. Market penetration: The estimated annual market penetration rate of each CRO by 2020, as a
percentage of each sector’s total annual installed PV capacity. All finance-related CROs are
assumed to be mutually exclusive, while some CROs in other soft-cost areas could be deployed
concurrently.
To derive a roadmap from the 2010 baseline to 2020 target values, we primarily used information
provided by interview participants, supplemented with literature and data from the following sources:
Ardani et al. (2012); Barbose et al. (2011); Bony et al. (2010); Brooks (2011); Bromsley (2012); Bullard
(2012); Bullock et al. (2012); Coughlin and Cory (2009); DOE (2012); Feldman et al. (2012); Goodrich
et al. (2012); GTM-SEIA (2012); GTM-SEIA (2013); Hubbell et al. (2012); Linder and Di Capua
(2012); Mendelsohn et al. (2012); Pitt (2008); Rose et al. (2011); Schwabe et al. (2012); Seel et al.
(2012); Smith and Shaio (2012); Sunrun (2011); Tong (2012); Vote Solar (2012); and Woodlawn
Associates (2012).
For PII, labor, and customer acquisition, we first asked interview participants to estimate soft-cost
reductions—in terms of maximum cost-reduction potential and market penetration—through 2020 based
on the PV industry’s current trajectory of advancements and expectations. Similarly for financing, we
asked participants how they envisaged WACC changing over time for specific CROs, what additional
CROs should be considered, and what CRO penetrations they expected from 2013 to 2020.16 These
responses produced our current-trajectory case.
We then re-reviewed research sources, followed up with original interviewees, and directly inquired
with additional interviewees to determine the most likely further cost reductions from the current
trajectory to the roadmap targets. In some cases, the authors arbitrated between CROs, particularly when
mutually exclusive market penetration conditions existed (e.g., in the financing section, the sum of CRO
penetrations must always equal 100% in any year). This included lowering the penetration of certain
CROs in the roadmap compared with the current trajectory. This lowering of CRO market penetration
was necessary to allow for higher penetration of other CROs that enable roadmap target achievement by
2020. However, arbitration between CROs is not a zero-sum exchange. The roadmap assumes a larger
overall future market, due to lower cost. Thus, for a given CRO, reducing the market penetration in the
roadmap compared with the current trajectory might actually result in an absolute increase in project
development employing the “reduced” CRO.
For some cost areas, the resulting roadmap identifies reasonable, yet substantive, advances that reduce
soft costs to target levels by 2020. For other cost areas, there is less certainty about the emergence—and
elements—of specific solution sets and CROs required to reach the targets. In these cases, the roadmap
incorporates future deployment of innovations with greater cost-reduction potential, referred to as
“undefined” solution sets and CROs.17
We estimated the uncertainty of achieving each CRO by calculating the cost-reduction difference
between the current-trajectory CRO values and the roadmap CRO values. We translated these certainties
into a color code, or “readiness factor,” that indicates the level of research, development, and pre-
16 Interviewees often made qualitative statements about the penetration of CROs, such as "a lot," "most," "not that much," and

"a minority." Although the interviewees were asked to reframe such responses quantitatively, they did not always do so. In

addition, clear annual resolution between 2013 and 2020 was not always provided. In such cases, we assigned quantitative,

annual-resolution values based on interview outcomes, relative to one another.

17 Over time, we will track progress toward the roadmap targets and will work with stakeholders to identify specific solution

sets and CROs in place of the “undefined” solution sets and CROs.

7

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production needed to achieve the roadmap targets—similar to the ITRS/ITRPV coding system. In our
system, red denotes the lowest level of readiness/certainty; specifically, it indicates that for a given
CRO, the market penetration required to achieve the roadmap target in any year is more than 25% higher
than the current trajectory. Orange indicates a deviation in market penetration of 10–25%, while yellow
indicates a deviation in market penetration of up to 10%. Green denotes the highest level of
readiness/certainty and the roadmap target is realizable under the current trajectory. Table 2 shows the
readiness factor legend with color codes. White is not shown in the color code but denotes a PII, labor,
or customer acquisition CRO that may have no or low penetration and offers very minimal (less than
$0.01/W) or no cost-reduction benefits. For financing, white represents no meaningful (less than 1%)
penetration.
Table 2. Readiness Factor Legend
In this report, readiness factor is provided for each CRO and summarized for each soft-cost category.

For PII, labor, and customer acquisition, the cost category summary readiness factor is determined from

a cost reduction weighted average of the products of the $/W cost reduction enabled by each CRO,

multiplied by its readiness factor (1 = green, 2 = yellow, 3 = orange, 4 = red). The financing summary

readiness factor is determined via a market penetration weighted average of the products of the readiness

factor number (again, 1 through 4) of each CRO multiplied by its penetration.

3 Customer Acquisition
The cost to acquire a customer is influenced by several factors, including market maturity, installer
business model, and system financing options available to the end user. Innovative financing offerings,
including third-party ownership, have been cited in connection with significant decreases in customer
acquisition costs but higher transaction costs. For example, companies offering no-money-down leases
can more easily attract customers, but those same projects incur upfront and continuous costs of
financing. Quantitatively roadmapping this dynamic is outside the scope of this analysis. Rather,
innovative financing, as it relates to WACC, is discussed in the financing section (see Section 6).
The traditional sales model for PV installers often begins with an initial phone conversation with the
potential customer to prescreen for project viability. Typical items discussed include current monthly
electricity expenditures, property ownership status, and customer credit quality. After this initial
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screening, an in-person visit is completed to assess the installation site. After the installer gathers the
necessary site specifications and consults with the property owner, a PV system engineer back in the
office designs the system as part of a bid package. Once the bid is complete, the sales person presents it
to the potential customer, usually requiring a second visit to the site. For many PV installation firms, this
work is completed at risk, without a contract in place. Through technological advancements, this model
is evolving to a less labor-intensive process. High-volume installers in particular have begun to employ
computer-generated modeling to prequalify properties, even before the customer is contacted.
Homeowners and businesses considering the purchase of a PV system have many factors to consider,
including identifying a reputable installation company, gaining familiarity with manufacturers’ and
installers’ warranties, selecting the most suitable financing option, and understanding the overall
customer economics of the system. Increased consumer awareness and retailer-installer partnerships can
streamline the purchasing decision process and increase an installer’s customer base. While most
installers we interviewed consider customer acquisition activities to be a necessary cost of doing
business, they also indicated that reducing expenses related to lead generation, bid and pro-forma
preparation, contract negotiation, and system design can significantly reduce system prices offered to
potential customers and enable broader PV deployment.
3.1 Residential Customer Acquisition Roadmap
Average 2010 customer acquisition costs for residential PV systems totaled $0.67/W18: $0.11/W for
system design, $0.33/W for marketing and advertising, and $0.23/W for all other customer acquisition
costs19 (Ardani et al. 2012). Achieving the SunShot price target of $1.50/W requires an 80% decrease in
total customer acquisition costs from $0.67/W to $0.12/W.
Our findings suggest three solution sets that can decrease residential customer acquisition costs: (1)
software tools,20 which reduce total time spent on site; (2) design templates, which reduce system design
costs; and (3) consumer-targeting strategies, which increase the number of leads generated. Table 3
shows the residential PV customer acquisition roadmap, including the solution sets and corresponding
CROs, the market-wide cost reductions ($/W) enabled by each CRO through 2020, the sum of cost
reductions for all CROs combined, and the resulting average cost target from the 2010 baseline. For
instance, under the software tools solution set, one CRO is remote site assessment tied to bid-preparation
software. Sungevity is an example of a company that uses satellite imagery, aerial photographs, and
commercially available software to gather information necessary for bid preparation, which is then
transmitted to design engineers. Potential customers receive free, customized project quotes within 24
hours of inputting their street address to the Sungevity Web platform.
Compared with the current-trajectory case (in which customer acquisition costs decline to $0.25/W by
2020), achieving the customer acquisition roadmap target requires additional cost reduction of $0.13/W
by 2020 (see Figure 3 and Figure 4).Two CROs require no additional market penetration in the roadmap
18 Interviewees indicated that employee or contractor sales commissions typically range from 3%–7% of system cost and up
to 10% for high margin sales. These costs were not specifically surveyed for prior benchmarking analyses and are thus
included in the “all other soft costs” category.
19 All installer survey results and cost benchmarks are based on PV systems installed in 2010. “All other customer acquisition
costs” include sales calls, site visits, travel time to and from the site, contract negotiation with the system host/owner, and
bid/pro-forma preparation but exclude marketing/advertising and system design.
20 The software tools CROs reduce costs in two customer acquisition categories, sales calls (included in “all other customer
acquisition costs”) and system design. Therefore, the total cost reductions are greater than 100% of the system design costs.
9

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beyond the current trajectory: (1) standardized system designs and (2) marketing programs and
partnerships. In other words, the readiness/certainty of deploying these two CROs at the levels required
to reach the roadmap target is high through 2020. Thus, additional cost reductions of $0.13/W from the
remaining CROs are needed (Figure 3).
In the 2020 roadmap, additional cost reductions of $0.03/W and ~$0.10/W are achieved through
increased market penetration of software tools (remote system design/bid prep and next-generation site
assessment) and consumer targeting strategies, respectively. Specifically, for the solution set of
consumer targeting strategies, the CRO of lead qualification/generation programs captures 30% more of
the market by 2020 than anticipated in the current-trajectory case (see Appendix A), reducing costs by
an additional ~$0.03/W. Increased diffusion of referral programs (18% more of the market) and
consumer awareness campaigns (10% more of the market) yield an additional cost reduction of $0.03/W
each. For these CROs, readiness/certainty is higher through 2017 but then declines; all have the lowest
level of readiness/certainty by 2020.
10

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SOFTWARE
TOOLS
DESIGN
TEMPLATES
CONSUMER­
TARGETING
STRATEGIES
prep on initial site
Standardized
system designs
Market ing
SUM OF COST REDUCTIONS
($/W)*
RESULTING AVERAGE COST ($/W)
*For any given year, equal to [2010 baseline of $0.67/W]- (sum of cost reductions]
•Individual va lues may no t add up to totals
ow ing to rounding
D ROAD MAP TARGET •
REALIZABLE
MEDIUM UNCERTAINTY
LOW UNCERTAINTY
•
HIGH UNCERTAINTY
Table 3. Residential Customer Acquisition Roadmap
11

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Figure 3. Residential PV customer acquisition costs: Current trajectory and roadmap
Figure 4. 2020 residential PV customer acquisition cost reductions: Current trajectory and roadmap
12

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3.2 Commercial Customer Acquisition Roadmap
Median 2010 customer acquisition costs total $0.19/W for small commercial PV systems: $0.10/W for
system design, $0.01/W for marketing and advertising, and $0.08/W for all other customer acquisition
costs (Ardani 2012). Achieving the SunShot price target requires a decrease in total customer acquisition
costs from $0.19/W to $0.03/W.
Our findings suggest four solution sets that can decrease commercial customer acquisition expenditures:
(1) software tools, which reduce total time spent on site; (2) design templates, which reduce system
d