California just moved a lot closer to reducing some of the "soft costs" of installing solar. 

Yesterday, Governor Jerry Brown signed Assembly Bill 2188, making California one of the first states in the U.S. to streamline permitting and inspection for small residential solar systems.

As solar hardware costs have plummeted, overhead (also known as "soft costs") has become the largest cost component of most residential installations. Soft costs are challenging to tease out of a bill of materials and more difficult to eliminate, as they straddle municipal government, building codes and human labor and behavior, as well as supply chain costs, installation labor, customer acquisition, permitting, inspection, interconnection, subsidy applications and system design costs.

A DOE report from 2012 claims that inconsistencies in permitting processes can cost consumers up to $2,500 on a 5-kilowatt rooftop solar system. A study by Lawrence Berkeley National Lab concluded that streamlining the permitting process could potentially reduce the price of a residential solar system by $1,000 or more and cut development time by about a month. The dollar-per-watt cost of solar in the U.S. is still significantly higher than in Germany, in part because most states, counties, and municipalities in the U.S. have inconsistent, time-consuming, and costly permitting processes. 

Much of the cost stems from the time spent by installers in obtaining the building, zoning, and fire department permits, waiting for inspections and approvals from utilities, dealing with changes and unexpected delays -- and losing customers in the process.

AB 2188, authored by Assemblymember Al Muratsuchi (D-Torrance), looks to cut soft costs associated with permitting and inspections of solar energy systems with the following measures:

  • The bill mandates that cities and counties adopt an ordinance that creates an expedited, streamlined permitting process for residential rooftop solar energy systems of less than 10 kilowatts in size by Sept. 30, 2015.
  • For a small residential rooftop solar energy system eligible for expedited review, only one inspection would be required.
  • For systems that qualify for expedited review, the permit process would include a simple checklist that would be published online.
  • An application that meets the requirements in the checklist will be reviewed within 24 business hours. The law provides 1 to 2 days for inspection scheduling.
  • The law cuts in half the allowable limits homeowner associations can apply to rooftop solar and prevents a city or county from holding up permit review based on the HOA process.

Vermont (pop. 630,000) enacted a law in 2012 that provided a simple and consistent permitting process that can get solar deployments approved in ten days. The registration form covers system components, configuration, and compliance with interconnection requirements. 

NREL's Solar Technology Markets and Policy Analyst Kristen Ardani tells GTM via email, “To date, the variation in solar permitting requirements and processes across jurisdictions has been shown to increase the time and cost of PV deployment. As the solar market continues to mature, I think it will be interesting to see the pace of change with respect to other states following California's and Vermont’s lead, as well as the size thresholds considered for streamlined permitting processes.”

The League of California Cities had opposed the legislation, citing safety and cost issues.

Randy Zechman of solar installer Clean Solar calls the law "a needed step," adding, "If the solar industry is truly going to take aim at soft costs, this is a major piece to the puzzle. It will take time -- we won’t see significant impact for a couple of years. Long-term, the efficiency savings will be substantial. It’s a great day for solar, the construction process, and most importantly, future solar customers."

It should be noted that California's AB 2188 is limited to residential installations. The light commercial market is growing, but could also use a similarly streamlined permitting process.

Bernadette Del Chiaro, Executive Director of the California Solar Energy Industries Association tells GTM, "AB 2188 is an historic bill. For the first time, all 500 plus cities and counties will be required to adopt a state-approved streamlined permitting practice, no exceptions. AB 2188 will bring permitting to the 21st Century, replacing multiple trips to the building department with a mandated use of electronic communication tools. AB 2188 has the potential to significantly cut costs as well as headaches associated with permitting."

Walker Wright, Director of Public Policy for Sunrun and spokesperson for TASC commented, "Soft cost reduction represents a 'last frontier' in the overall cost-cutting process for residential solar, and AB 2188 will help California make major progress on that front." A Bank of America industry overview reports, "We estimate that this bill could generate $0.15-$0.20 per watt in installation cost savings for a typical residential system, and significantly accelerate the time it takes for an installed system to become grid connected.”

The DOE SunShot program is looking to get solar to $1.00 per watt installed. That can't happen without a standardized and sensible permitting process.

The new law goes into effect January 1, 2015.