Labor / Installation costs and unit economics of solar installations

[GridGrants]

If the contractor has to price such unknown risks into the labor-only quote, it makes it an even more lose-lose situation.

There are no unknown risks. More hypotheticals and making a problem where one doesn't exist. What is wrong with an installer quoting, "I need $X per hour for my solar installers and $Y per hour for electrical work. Any BOS parts we provide will be billed at cost plus 25%. We will charge $X for the preliminary site analysis and $Z to secure permitting and interconnect agreement."

I see a market niche opening up for solar professionals like you see in the plumbing and electrical industries. NABCEP solar installers available for $X per hour plus trip charge. Pick our brain, have us help, have us do it all... we don't care. We're on the clock and use us as you wish. We will give you a second opinion on your install done by someone else or we will do small or large repairs if your installer has gone out of business. Here is our a la carte price list... give us a call. I would think that just quotes for insurance companies would be a big need after a storm, etc.

It will happen when you see a greater saturation of systems in an area. I'm already hearing of a lot of grumbling about not being able to find this kind of a person. I have no problem with someone operating however they wish, but the need is going to see "handyman" solar servicers pop up soon.

[Volusiano]

What is wrong with an installer quoting, "I need $X per hour for my solar installers and $Y per hour for electrical work. Any BOS parts we provide will be billed at cost plus 25%. We will charge $X for the preliminary site analysis and $Z to secure permitting and interconnect agreement."

Now this is an entirely different model than what we've been talking about here. Open-ended per hour labor charge is more risky to the homeowner because how are you going to be able to cap your cost if the installer takes forever to get the job done so they rack up max $? I just don't see a per-hour labor cost model is going to work on such a big job as solar installation. You want the installer to be incentivized to work as efficiently and quickly as possible to your benefit. There's no incentive for the installer to complete a job as quickly as possible if it's based on a per-hour labor cost basis.

[GridGrants]

There's no incentive for the installer to do this on a per-hour labor cost basis

How do plumbers and electricians and even mechanics do it on a per hour basis? They perform their duties and if they don't do a good job or if they pad the hours, then that is the reputation they will have in the area. If they perform good work in an expeditious manner, they will be rewarded with referrals and a positive image.

The marketplace quickly takes care of this objection you raised. Any service business has an "incentive" to perform or they won't be in business long.

It is a side-track to the original premise of being able to get a quote for a labor-only project. it is just getting in the weeds to debate the optional business model of per job or per hour pricing. The point is that labor quotes shouldn't be such a big deal and I am amazed with how hard they are to come by.

[Volusiano]

How do plumbers and electricians and even mechanics do it on a per hour basis? They perform their duties and if they don't do a good job or if they pad the hours, then that is the reputation they will have in the area. If they perform good work in an expeditious manner, they will be rewarded with referrals and a positive image.

The marketplace quickly takes care of this objection you raised. Any service business has an "incentive" to perform or they won't be in business long.

It all depends on the size of the job. Most of the times, when you hire an electrician or a plumber for do something for you on an hourly basis, it's usually a small fix-it-up job or a small project costing a few hundred to a few thousand dollars.

If you were to hire them for a job with a potential to cost as much as 5-10 grands or even more, you wouldn't want to have an open-ended arrangement whereby they can just keep charging you per hour until the job is done. I know I wouldn't. I would make sure they give me a quote of how many hours they promise they will get the job done by. If they over run their labor time on this quote, they're going to have to eat it, not me. From that perspective, it's become a fixed quoted job. The contractor is now incentivized to finish at or below the quoted cost, and meeting the quoted cost is going to be what is going to hold them up to the standard. Even if I trust them with their reputation, that would only be the reason I hire them. But it would never be reason for me to enter into an open-ended per-hour labor agreement for a $10K job size, no matter how stellar their reputation is.

[russ]

But it would never be reason for me to enter into an open-ended per-hour labor agreement for a $10K job size, no matter how stellar their reputation is.

Agreed

[GridGrants]

Study after study shows the consumer pays more "per job" than "per hour". How does a job get bid? Compute what you think it will cost and pad the quote by 20% or so for unforeseen circumstances. That means you will overpay by up to 20% for a "normal" install with nothing out of the ordinary popping up. It falls to reason that if a quote for the job is based on worst-case scenario, you will be overpaying for anything less than a worst-case situation.

Hey, I can't argue with those who want to know a price upfront, but you will overpay 99 times out of 100 in a real-world install. I have never known a contractor that didn't pad a quote to a worst-case scenario. An interesting discussion, but it still got us off-track talking about per job vs. per hour quotes when somebody just wants ANY quote.

[russ]

Who pays for the extra trips because the owner bought wrong stuff or not enough or some other problem? Who pays for rework caused by the owner?

Going by the hour leaves all sorts of potential problems open. Here in India buyers leave all sorts of items open hoping to screw the second party - usually both lose though.

[Volusiano]

Study after study shows the consumer pays more "per job" than "per hour". How does a job get bid? Compute what you think it will cost and pad the quote by 20% or so for unforeseen circumstances. That means you will overpay by up to 20% for a "normal" install with nothing out of the ordinary popping up. It falls to reason that if a quote for the job is based on worst-case scenario, you will be overpaying for anything less than a worst-case situation.

I don't know what study after study you're talking about, but actually I don't care either. The force of the free market will weed out the padded up quotes from contractors who don't have enough experience to know how long the job will actually take and have to resort to padding, because the un-padded quotes from experienced contractors who know how long the job will take will come under the padded-up quote and beat them out.

An experienced contractor should know (and not just "think") how long the job will take because he should have done similar jobs before and should have known how long it took him before. He should be able to tell me up front how many hours it will take and other competing bids will keep him honest. Any contractor who can't tell me how long a big job will take and asks me to just pay him by the hours instead and tells me I can rely on his honesty to finish the job quickly and efficiently via this hourly pay model, I'll show him the door.

[GridGrants]

I don't know what study after study you're talking about, but actually I don't care either..

That is where we differ. I care about and respect differing opinions. If you feel more comfortable paying one number thrown out at you... that is fine and I can appreciate some like this comfort level. Some people understand that when a job is broken down into actual units of work performed, they will usually see a savings. We are here to discuss differing philosophies and not shut down one viewpoint.

He should be able to tell me up front how many hours it will take and other competing bids will keep him honest.

You know better than that and you are the one who brought up "unforeseen circumstances". No installer knows upfront how many hours it will take. It is the ones who do not "pad the quote" for unforeseen circumstances that will be out of business. I have tried to get this back on track, but let's try to help the OP instead of continuing down this path in the weeds:

"So, fellow homeowners, what kind of deal have you guys been able to get on install only jobs? $/w basis or hourly rates or day rates, etc."

This is what I received to install a 4-panel, 1.08KW microinverter kit:

32 hr x $83 for install labor, permitting and net metering preparation, meeting with inspectors
12 hr x $65 for electrical labor (we subcontract this out)
2 days x $175 for man lift ( may or may not be needed )
$500 electrical supplies, ac disconnect, junction box
$450 permitting fees including net metering
$100 site survey

Total $4836

I think $83/hr is fair knowing this isn't just the wage paid to the installer, but this installer deems it to be the rate per hour to support his business. I also know this will not take 32 hours of labor for a 4-panel starter kit and an additional 12 hours of labor for an electrician with a microinverter system. If this isn't an example of a padded bill, I don't know what is. Some people don't want to just be quoted the $4836 for the job and I asked to have it broken down. I will have no problem paying these hourly rates and I guarantee you we will be paying less than $4836 for the job. I will let you know what it actually came to and this will be a real-world example of whether it is better to pay a padded total price quote or pay by the hour for the actual work done.

Of course, it will just be one piece of data and will "settle" nothing. I understand the OP just wanting to see the installation end broken out of the total system cost and I continue to be amazed just how difficult it is to find out this basic information in this industry.

[Naptown]

That is where we differ. I care about and respect differing opinions. If you feel more comfortable paying one number thrown out at you... that is fine and I can appreciate some like this comfort level. Some people understand that when a job is broken down into actual units of work performed, they will usually see a savings. We are here to discuss differing philosophies and not shut down one viewpoint.



You know better than that and you are the one who brought up "unforeseen circumstances". No installer knows upfront how many hours it will take. It is the ones who do not "pad the quote" for unforeseen circumstances that will be out of business. I have tried to get this back on track, but let's try to help the OP instead of continuing down this path in the weeds:

"So, fellow homeowners, what kind of deal have you guys been able to get on install only jobs? $/w basis or hourly rates or day rates, etc."

This is what I received to install a 4-panel, 1.08KW microinverter kit:

32 hr x $83 for install labor, permitting and net metering preparation, meeting with inspectors
12 hr x $65 for electrical labor (we subcontract this out)
2 days x $175 for man lift ( may or may not be needed )
$500 electrical supplies, ac disconnect, junction box
$450 permitting fees including net metering
$100 site survey

Total $4836

I think $83/hr is fair knowing this isn't just the wage paid to the installer, but this installer deems it to be the rate per hour to support his business. I also know this will not take 32 hours of labor for a 4-panel starter kit and an additional 12 hours of labor for an electrician with a microinverter system. If this isn't an example of a padded bill, I don't know what is. Some people don't want to just be quoted the $4836 for the job and I asked to have it broken down. I will have no problem paying these hourly rates and I guarantee you we will be paying less than $4836 for the job. I will let you know what it actually came to and this will be a real-world example of whether it is better to pay a padded total price quote or pay by the hour for the actual work done.

Of course, it will just be one piece of data and will "settle" nothing. I understand the OP just wanting to see the installation end broken out of the total system cost and I continue to be amazed just how difficult it is to find out this basic information in this industry.

The 32 hours may not be that far off. In order to get a permit in many jurisdictions it may mean several trips and hours of waiting. several hours of preping permit drawings etc
Waiting for inspectors is anonther area that can be a time waster.

[Volusiano]

You know better than that and you are the one who brought up "unforeseen circumstances". No installer knows upfront how many hours it will take. It is the ones who do not "pad the quote" for unforeseen circumstances that will be out of business.

Yes, I do know better than that because the "unforeseen circumstances" I brought up is within the context of the situation where the installer has to use the customer-bought materials instead of his own materials. In that case there can be a lot of unforeseen circumstances for sure. In fact, I remember also saying that in that situation, the installer would be forced to pad up the quote to cover unknown risks, didn't I?

But in the case where the installer is in complete control of the job, including using his own materials, and he has been in business for a long time and has done similar jobs dozens of times before, he should be able to give a pretty accurate estimate based on his previous experience of how long it takes. Sure, he can pad it up if he wants. But he should also know that padding it up can cause his quote to be tossed out in light of more competitive quotes.

Also, just to put things in perspective, the original disagreement is not about whether contractors pad up their quote or not. Of course some of them do. But I'm just saying that not all of them do, and if you get enough quotes, then you'll likely find quotes that are lower because they're not padded up. But the original point I was trying to make is that I would NEVER ever agree to an OPEN-ENDED hourly-based job for a big $5K-$10K job like a solar installation job. It has to be capped off with a quote for my protection. And I'm not worried about having to accept a padded quote because I will make sure I get enough quotes so that the padded-up quotes will be weeded out by more accurate quotes.

Now you may say that "well, it's not easy to find enough installers who agree to do labor-only solar installation jobs, so one may not have the luxury of finding multiple quotes to weed out padded-up quotes". And I know you've been keen about saying that we got side-tracked on this discussion already and we should get back on topic about the OP's original question. Well, I think this point will bring us back full-circle to the OP's original question to show why it would be hard to find labor-only quote from solar installers:

1. There are more unknown risks involved with using the customer-bought parts so the solar installer will have to pad up up labor-only quote -> lose-lose proposition for both sides.
2. Why would solar installer want to go with labor-only jobs if they can keep busy enough with complete jobs where they can also make a profit on the parts as well?
3. Those not able to keep busy enough with complete jobs are probably out of business already. They wouldn't be around to give you labor-only installation quotes.

At one point you did say that you believe that if the solar industry comes to a saturation point and receives wide-spread adoption, then you believe there will be a market for labor-only solar installation jobs and the demand will help create the supply. I wouldn't argue with this point at all, except that I think that the solar industry is nowhere near any saturation point currently, what with it being only about 1% of the energy generation market so far. So that's why it's hard to find labor-only quotes at this point, because the demand for labor-only installation that you want to see is not there. Right now, there's only 2 viable markets for solar installation: 1) the complete installation market, and 2) the DIY installation market (buying parts from wholesaler and do labor yourself but not sub out labor).

[albert436]

Great discussion, thanks everyone.

It is interesting to hear the differing points of view.

Setting aside the ethics/philosophy, I have doubts that where I live it would be feasible to get an install-only job done.

I have to say though, it is an attractive concept, especially given the number of solar panel wholesale websites.

[russ]

Not many home owners have the skill set required plus the physical ability required.