Overcoming US Market Barriers to PVPermitting, Interconnection and other soft costs in between

Intersolar, 7/13/2011

Doug Payne, SolarTech Executive Director

Our InitiativesLocal best practices

Scalable

National impact

Performance`

Interconnect

Financing

Workforce

Permitting

Installation

Our BoardEntire Value Chain

Systems Approach

Collaborative Consortium

Process + Speed = ScaleSolarTech Mission – Local Gov’ts, Utilities, Customers, Banks, and Developers grow the market 3x faster through standardization to achieve economies of scale.

StrategyStandardize “Best in Class” processes in customer and project transactions,

permitting/inspection interconnection

Metrics# of Cities, Utilities, Customers, and Banks are using “Best in Class” tools

“Think Velocity” Total project cycle time

Pay for itDesign

ItApprove

ItBuild It Check It

Turn it On

Make Sure it's working

Take Care of

It

Close the Deal

Customer Acquisition & Finance

Permitting, Inspection, Interconnection

< 60days (Res)< 90days (Comm)

“To solve a problem, one must first understand it”

The Industry Pillars – Each play a critical role in achieving Market Evolution

5

Rogers Diffusion of Innovation (1962)

Policy

Products

Process Speed, Scale, Efficiency

Create Markets

We are here

Get here

Innovation

Relative % of

market share

Process efficiencies enable scale

Permitting, Inspection, Interconnection: Everyone’s problem, no-one’s problem

6

1

50+ x 3

National Electrical Code (NEC, article 690)

Federal

State State Building Codes (Electrical, Structural, Fire)

18,443 “AHJs” + 3,273 Utilities

LocalCity Building Codes, Policies, FERC (Electrical, Structural, Fire, Fees)

Forms, Fees, Rates, are ALL different

AHJs = Authorities Having Jurisdiction

$ $

Impact extends beyond PV into solar thermal, EE, wind, biomass, etc.

“The U.S. vs Germany comparison as an argument for reducing

permitting/interconnection costs is flawed.

The root of these costs can be traced to the inherent structural differences

in separation of jurisdictional authority at federal, state, and local government in place since Dec 15,

1791”(10th Amendment to the US Constitution, Bill of Rights)

0

100

200

300

400

500

600

700

2006 2007 2008 2009 2010

Insta

lled

Cap

acit

y (

MW

-dc)

Non-Residential

Residential

The 21st Century US Permitting story…The Market

The Mess(age)

2006

Macro-Policy

runways

We’re so busy, what

Permit costs?

2007

Macro-Policy reigns

Red-Tape starts to

hurt

2008

Hey look at GDE!

Where did all this paper work come from?

2011

Message delivered

It’s all about

execution

2009

Hard costs

decline,

Process Matters

Be like “Them”

2010

Real market

pain

3-5% lost gross

margin

Fix it now!

Low by 10% or more

Low by 5-10% Within +/- 5% High by 5-10% High by 10% or more

28.8%

20.5%

24.7%

9.6%

16.4%

How accurate is a $0.98 / W estimate of these costs?

So what?• Distributed PV

market was 6-600+MW in 2010

• Permitting, Inspection, Interconnection costs +/- $1.00 / W on average

• $600MM of market friction

0

100

200

300

400

500

600

700

800

900

1000

2005 2006 2007 2008 2009 2010

Ins

talle

d C

ap

ac

ity

(M

W-d

c)

Utility

Non-Residential

Residential

2010 Installed Capacity (SEIA / GTM)

Feb ‘11 SolarTech survey75 companies, 74% residential

Opportunity Cost of Red-Tape to date(installed MW x $/W soft BoS cost)

State

MW of distributed PV installed

(2010)

Market Share (in

MW)

Opportunity Costs to date (in Millions $)

CA 920 53% 920$ NJ 286 16% 286$ AZ 92 5% 92$ CO 80 5% 80$ NY 55 3% 55$ PA 50 3% 50$ HI 40 2% 40$

MA 32 2% 32$ FL 19 1% 19$

90% 1,573$

90% of US Market (2010, GreenTech Media)

11

(1) Source: ThinkEquity “Think Greentech” Feb 2010. Modified by SunRun (2)(2) The residential market sizing by ThinkEquity assumes that solar facilities are purchased by individual homeowners. We have

modified the analysis to reflect additional federal subsidies worth $0.50/W from which commercial owners such as SunRun benefit.

Addressable U.S. Rooftop Market for Residential Customers(2)

0

50,000

100,000

150,000

200,000

250,000

0

5

10

15

20

25

30

35

MW Addressable for Res-idential Rooftop

# of States with Ad-dressable Demand

Total System Price / Watt

MW

Sta

tes

Tipping point$4.25 per Watt

Avg. res. PV cost in Germany today

US Today

Lower Permitting / Inspection / Interconnection costs expand the Market, Creates Jobs faster

Lower Cost

More Jobs

“You don’t know where you’re going until you know where you’ve

been”- Hitch

2011 “Current State – National Leadership”

1

50+ x 3

National Electrical Code (NEC, article 690)Federal

StateState Building Codes (Electrical, Structural, Fire)

18,443 “AHJs” + 3,273 Utilities

LocalCity Building Codes, Policies, FERC (Electrical, Structural, Fire, Fees)

Forms, Fees, Rates, are ALL different

AHJs = Authorities Having Jurisdiction

$ $

• Balance of System Costs - up to $15 million over three years

– Codes, Standards and Processes –– Software Design Tools and Databases – Regulatory and Utility Solutions

• Rooftop Solar Challenge - up to $12.5 million

(Local and regional government teams of local governments innovating across)

– Standardizing permitting processes;– Updating planning and zoning codes;– Improving interconnection and net

metering standards; and– Increasing access to financing

2011 “Current State of the States – Thought Leaders”

1

50+ x 3

National Electrical Code (NEC, article 690)Federal

StateState Building Codes (Electrical, Structural, Fire)

18,443 “AHJs” + 3,273 Utilities

LocalCity Building Codes, Policies, FERC (Electrical, Structural, Fire, Fees)

Forms, Fees, Rates, are ALL different

AHJs = Authorities Having Jurisdiction

$ $

•DOE’ - Solar Powering Your Community: A Guide for Local Governments. •Network for New Energy Choices 2010: Freeing the Grid –State Net Metering Policies, Interconnection Best Practices•SunRun - The Impact of Local Permitting on the Cost of Solar Power.•Colorado’s Fair Permit Act (HB-1199) limits gov’t permit fees, plan review fees and other fees to install a solar system. •Oregon Solar Installation Specialty Code (OSISC, 10/2010) “Checklist for Prescriptive Photovoltaic Installations”- Model code development, associated checklists•Vermont Energy Act of 2011 (H.56) - net metered solar power in Vermont, as well as implementing a pioneering permitting process for small solar systems (< 5 kW) •The Center for Sustainable Energy (CSE) - New York City’s Solar Energy Future – Solar Energy Policies and Barriers in NY City)

2011 “Current State of a State - CA”

VoteSolar “Project Permit”

•The East Bay Green Corridor (EBGC)• Mayors of 8 cities (800,000+

residents), Lawrence Berkeley National Lab Director, Chancellor of the UC (Berkeley) - uniform solar energy permitting collaboration w/industry and utilities.

•Sacramento’s Solar Access• Design guidelines, best practices,

and education re. solar-friendly zoning, access rights

•Solar Sonoma County • Solar Implementation Plan across

a 52 members, nine jurisdictions and the county of Sonoma

•City of San Diego / CCSE- Progressive fee review, cost-recovery in collaboration w/industry

“A little visioning exercise”

Vision. Action. Destiny.

Customer Acquisition, Permitting, Inspection, and Interconnection costs are <10% of DG PV system

costs.

BoS Process cost reduction curves expand the market 3x

by 2017

Industry processes achieve scalability to deploy solar without incentives

17

“Solar 3.0”TM

A National Platform for Process Innovation

Policy (macro)

Fed PolicyRES/RPS

REC’sSB1CSI

AB32

ProductsTechnology InnovationMaturity

ProcessesProductivity

Scale“Total Cost of Ownership”

“Best in Class” tools

Lower CostsReduced RiskFaster Projects

Better Bottom Line

Process Efficiency = The last frontier

A BSolar1.0

Solar2.0

Solar3.0 TM

Phase 3Technical Innovation

Phase 2Business

Innovation

A path towards “Solar3.0”TM

Phase 1Policy

Innovation

Phase 1Local Policy Innovation

Phase 1 – Policy Innovation

• Scale, standardize, and drive adoption of initial policy solutions (eg. VoteSolar Project Permit guidelines)

• Scale adoption of SolarABCs Expedited Permit Standards work to 50% of US <2 yrs

• Uniform inspection standards for authorities having jurisdiction (AHJ) (example Brooks Engineering checklist)

• Adopt, Implement, Jointly develop standards at local level• A balanced approach to permitting fees• Processes for Commercialization, New Technologies

20

Exists. Scale it.Improve, then scaleNew

Phase 2Business

Innovation

Phase 2 – Business Innovation• One-Stop-Shop for municipal rules,

regulations, and building codes, including changes

• Improve consistency in pass/fail criteria, guidance on requirements to ensure approval, industry held accountable. Set standards where:

Permitting Pass/Fail

= Inspection Pass/Fail

= Interconnection Pass/Fail criteria

Wherever possible, for std systems

• Cost recovery “plus” model – Industry adheres to State or National standards– AHJs implement consistent requirements, and

better visibility– Resource gaps covered through incremental

fees above current level

21

Exists. Scale it.Improve, then scaleNew

Phase 3Technical Innovation

Phase 3 and beyond… Technical Innovation

• Online Portals – NEC code versions, Fees, etc can inform / drive Federal, State, Local policy

• Use technology, enterprise S/W, IT to integrate Permitting, Inspection, Interconnection requirements into 1-step, pass/fail criteria

• Automation to MOVE information • Software tools, applications, and systems based on open

architectures across Cities, Utilities, Industry• Off the shelf solutions, on-line, paperless submittals

2222

Exists. Scale it.Improve, then scaleNew

www.solartech.org/thechallenge

23

• Regional/Local

Governments 

• Utilities 

• Industry 

• Technology 

• Finance

24

CA Solar Challenge -“Google 20%’ers”Technology Category – Create a platform for open access to aggregated information related to Permitting, Inspection, and Interconnection requirements at Local levels. Leverage technology to enable process automation through software tools, applications, and IT systems based on open architectures that share and move solar project information between industry, cities, and utilities during the project lifecycle.

https://sites.google.com/site/solperpublic/

“Inspired by ”

25

The CA Solar Challenge Where local governments,

utilities, and industry work on real projects, with less

paperwork, at lower prices, and at faster speeds.

So how does this all fit together?National

DOE / Challenge

A National Roadmap for BoS ‘soft’ cost reduction• Collaboration through standardization

• Scalable Permitting, Inspection, Interconnection processes

• Accelerates Private/Public workflow driven cost reductions for PV

• Best In Class tools, reduce cycle time and soft costs

Non-Hdwr BOS costs as % of Installed Costs

2012

<30%

2013

<20%

2014

<10%

State

Opportunity Costs to date (in Millions $)

Total # of AHJs in the State

Solar3.0 Implementation

Goal (# of AHJs by 2014)

CA 920$ 535 161NJ 286$ 587 176AZ 92$ 105 32CO 80$ 332 100NY 55$ 1,604 481PA 50$ 2,628 788HI 40$ 4 4

MA 32$ 356 107FL 19$ 477 143

1,573$ 1,991

90% of US Market (2010, GreenTech Media)$27MM / 1,991 = $13,561 per City

~1.7% Cost Recovery to date

Cities & Counties

• Create lasting, local jobs

• Economic Development

• A Greener Community

• Revenue grows with volume & tax base

UtilitiesU.S. Solar Companies

• Customer service• Responsiveness• Inspire loyalty• Reduce

administrative costs, less paperwork

• Cut red tape by $0.50 / W

• More lasting local jobs, faster

• Validate best practices, costs

• Increase market size

Everyone Benefits

Turn the page. A new story going forward.• Stop comparing US vs. Germany.

– We’re not going to re-write the US constitution, at least not before <$1/Wp mods

• The “Solar3.0 Story” TM

– Chapter 1 - $27MM DOE catalyst drives down BoS soft costs, Challenges Cities

– Chapter 2 - Jobs. Jobs. Jobs.

– Chapter 3 – Leadership – DOE, Cities/States, Utilities, Industry (ALL of us!)

– Chapter 4 – Education – solarabcs.org, solartech.org/thechallenge, votesolar.org

– Chapter 5 – Tell the story, start using the tools, carry the message.

– Chapter 6 - KISS principle – Ex: Start with homes <15kW / 13.44 Wp inv rating,

<4 strings, code compliant comp roofs, NEC2008, <5lbs/sq ft

– Chapter 7 – Love your NGO(s), State Campaigns, Local Advocates

– Chapter 8 – Investment- Time, treasure, talent and US “Process Infrastructure”

Standardization isn’t free. Market based solutions are needed

NOW!

– Chapter 9 – Innovation (PV+IT<C)

– Chapter 10 – Wealth Creation (A $600M problem becomes a $Billion solution)

The bottom line• US solar market is 18,000 little markets, get over it.• $600MM of market friction needs to simply go away• Assuming 1,570MW of Res PV by 2014 (Navigant, conservative est.)

– Permitting is a $1,155MM headache even if it improves 10% / yr

• $27MM of FY11 DOE funding is 10X less than needed• DC is in budget & political gridlock going into an election• Cities and States are not going to fund “standardization”• Market funded “Process / Delivery Systems” barely exist

Are we so enamored by the need for policy, and our thirst for technology, that we’re losing sight of funding our ability to deliver?

Is there enough innovation in this space to keep pace with demand?

Thank you!

Doug Payne

Executive Director, SolarTech

www.solartech.org

www.solartech.org/thechallenge

permitting@solartech.org

Other resources

http://www.solarabcs.org/about/publications/reports/expedited-permit/

http://votesolar.org/city-initiatives/project-permit/