In this article, we are going “open kimono” on the solar industry, giving you a view into the extra costs that go into your solar quote.
But first, we want to tell you a funny story that we think you’ll relate to.
It’s Saturday at 10am and you’re just getting ready to go out to mow the lawn. Mowing the lawn is a peaceful time for you. A “Zen” time for you, you might even say. The control and order that comes with mowing the grass helps you get through the week. You could pay some kid in the neighborhood to do it, but why rob yourself of the joy?
And just as you’re putting on your beautiful “dad shoes” to go out to the shed, you get a ring at your doorbell.
Who on God’s green earth dares to disrupt your moment?!
You reluctantly go over to the door and open it slowly to see some 20-something year old guy standing there in a dark polo and a branded hat.
Before you get out a word, they say “Hello sir! How’s your Saturday?”. You’re polite so you respond “Pretty good. How about yours?”
Soon enough, you are having a good time, deep in conversation about the joys of mowing the lawn.
They then transition to the reason they are at your door: to sell you solar. No surprise there I guess.
You hear them out and think the idea is pretty interesting. You can lock in your energy prices for years to come, you end up getting a great return on your money (better than the stock market), and you get to help out the planet a bit too. Sounds enticing.
You set up a time early the next week to have someone come by and generate a quote for you and explain the process. When that individual comes (a different person than the guy at your front door last Saturday), you learn more about the offering, get your roof looked at, and a quote is generated on the spot.
That’s when your eyes pop 👀
$35,000 for a 10kW system? That’s a big chunk-o-change.
You think, “What’s going into this price? Can I get it for a better price or is it the same everywhere? Can I do it myself?”
First, you need to understand that there are a lot of players in the solar industry that all go into making a traditional solar installation possible. These include manufacturers, wholesalers, brokers, dealers, sales/marketing teams, and installers.
With all those hands passing along your solar panels, each of whom need to get their slice of the pie, you end up with a big bill to pay.
Some of these costs can’t be avoided. We will call these the “hardware costs” or “hard costs”. Someone has to make the panels, invertors, and racking system to make it all possible, right?
Then there are the extra costs. We will call these the “soft costs”. These are all the extra middlemen who make traditional solar possible but are really unnecessary in today’s world.
Take a look at the picture below.
As you can see, more than 50% of the cost is coming from “soft costs”! Doesn’t that make you want to slap a horse’s butt and have it kick you in the crotch?
Let’s walk through this more in-depth so you have a better understanding. We will split it into the hard costs and the soft costs.
Panels - You simply can’t have solar without the panels (No shit, Sherlock! someone yells from the back of the room). Manufacturers take in a lot of raw materials and use advanced techniques to make the modern miracle of solar possible. And the good thing is, the price of these panels has come down precipitously over the last decade. In 2010, solar panels would cost about $7.50/watt if bought directly from the manufacturer. Now, it has come down and flattened out closer to $1.25/watt in the last couple of years. Isn’t that great!
Inverters - This is another crucial piece that every solar system needs. Inverters convert direct current (DC) from the solar panels into alternating current (AC) which is what your home and the power grid uses. Without these, the panels would be useless.
Racking and Balance of System - Of course, you need to mount the panels on your roof, making racking essential. And the balance of system (aka balance of materials) is all the other wires, nuts, bolts, and junction boxes you need to make the system work and direct power into your home.
Good so far? Sound pretty reasonable. But wait until we get into the soft costs...
Now, the soft costs will be different for every situation. At the very least, your quote will include sales, permitting, and installation, but will likely include many of the other components listed below.
Sales and Marketing
Remember the 20-something year old knocking at your door at the beginning of this article? That’s called door-to-door sales, and that is how the majority of solar sales happen. The rep who sold you often gets 10%+ of the sale, pocketing anywhere from $2,000 to $5,000 on your deal alone!
One interesting thing to note though: The company that hired that kid to knock on your door is likely not even the same company that has the panels or will do the install. Weird, right?! Weirder yet, it might even be an additional company that came and did the follow-up meeting at your house where they generated the quote for you.
It is very common for a solar company to specialize in a specific part of the process and then pass along the deal to the next company with a markup.
And let me guess, now that you’ve been doing some digging online about the solar industry and looking for options, you’ve started getting a bunch of annoying YouTube ads talking about solar? Welcome to the new age, boomer. These solar companies pay big bucks on marketing so that you know who they are even before they come knocking at your door. Those are additional costs that get passed onto you in one form or another.
Is your blood boiling yet?
Brokers and Dealers
Another middleman that might have been involved in the sale of your system is the broker. These brokers act as a single point of contact during the sales process to get quotes from multiple solar companies. Think of them as a real estate agent but for solar.
This is pretty valuable, of course, as it helps you get the best deal, but it also means additional costs to you. Just like your real estate agent, everyone needs to get paid, right?
Dealers, on the other hand, are authorized sellers for other solar companies. Though it’s often difficult to tell, there is a good chance that your quote came from a dealer rather than the original solar company.
Dealers will hire contract workers (like the 20-something year old) to knock on doors, paying the rep a fee and taking a fee for themselves before handing it back over to the original solar company and then an installer.
Unlike brokers, a person knocking on your door usually won’t be trying to get you quotes from multiple solar companies as they are only representing one solar company (as a third party broker, of course). Their incentive is to sell you on the company they are representing and that’s it. No alternatives.
Design and Permitting
This is a piece of the process that you can’t really skirt around.
You need to get engineering and design done so that your system is set up properly and won’t fall off your roof during a wind storm and crush your mother-in-law. Actually... that doesn’t sound so bad.
This part of the process is usually outsourced to firms who specialize in this stuff and will require pictures of your home to get it done right.
Permitting is the city or county you are in giving sign off that you are allowed to install your system. Then inspection happens to confirm that you did it correctly.
Again, not much you can do about this. It needs to get done and get done right, or else it could significantly impact the value of your home (negatively, of course).
Installation is the “big daddy” of extra costs in the solar industry.
You might have noticed in the graph we showed above that 34% of your solar cost comes from installation (plus margin)!
Installation crews receive the equipment at their warehouse from the solar company and then arrange a time to do the installation. They come over to your house for one to two days setting up the system and turning it live.
Installers need to pay for warehousing, transportation, business insurance, liability insurance, and their crews, of course. Oh, and plus an additional $3,000 for their margin. No biggy.
We have been talking about all these extra costs as if you could do something about it. But I mean, it’s not like you can sell to yourself and install yourself, right?
That is exactly what you can do, and that is where DIY Solar can help.
If you sell to yourself by doing your own research and reading this article, then you’ve already saved yourself $4,000 or more!
And on top of that, we give you the tools you need to install yourself, saving an additional $10,000!
Wow, what a world.
“But isn’t installing solar really hard?”, you might ask.
Nope, it ain’t that bad actually. In fact, we believe the majority of Americans can install solar themselves with minimal hurdles. If you know how to use a drill and understand basic electrical safety, then you are sitting peachy my friend.
And don’t worry if you get stuck during install! We have resources ready for you, including a full install option provided by our trusted partners.
Start by getting a quote or feel free to contact us with any questions.