Labor / Installation costs and unit economics of solar installations

[qcfish]

This is from a contractor's viewpoint . The hypothetical job is for 20k. Contractor costs are half labor and half materials. Contractor adds all their overhead and profit to the entire job, not just their labor costs. The contractor will multiple his raw costs of parts and labor SUM by a certain percentage that they need to turn a profit. If you rremove the materials from the equation then the contractor will have to increase their labor costs in order to receive the same profit from his crew that week. This is something most customers don't understand and the heart of the disconnect. Customer thinks you're screwing them while the contractor feels the same. Customer sees 5k savings and contractor sees 5k profit missing.

You can get some contractors to do labor only but normally it's because the contractor isn't busy for one reason or another,they'll increase labor costs, or some may refuse to send a quote. Besides the economics there are other issues like warranty. When the system doesn't work, the customer wants contractor to remove and replace defective equipment in warranty for free. Except the warranty is through the internet solar supplier and the customer NOT the contractor.

If your car engine blows up, you buy a Pep Boys engine, dealership installs your engine, engine fails......the dealership isn't going to pull it out for free and fix it.

Cotractracting is competitive business. Some people see a lot of profit from solar installation because the internet sites post wholesale prices. However there realty isn't as much money in it as you think. Many very busy solar companies go bankrupt every week.

[russ]

Let us know how badly you screwed yourself at the end of the day please.

[Volusiano]

Here is where the disconnect begins.
A DIY person does not have the soft costs that a contractor does.
In order to run a business there are costs that need to be passed on to the customer. Just like you pay for the rent on the gas station or the retail store.
A DIY person does not have to roll a truck to the job as they already live there. They are not paying people to sit in the truck during the drive ( a cost but not seen by a consumer)
A DIY person is not paying workman's comp, state and federal unemployment taxes, 50% of the social security and medicare costs, truck insurance, liability insurance, cell phones for employees to stay in communication, client acquisition costs, the costs or going on 5 leads and closing 1 of the 5 and a hundred other things that go into running a business.

Very good points, if this is a true DIY situation, but it's not. The OP doesn't want to be a DIY person. The OP just wants to buy the parts from a wholesaler, then hire a contractor to do ALL the labor, including design, layout, permitting, delivery, management, etc. So I assume that the contractor will include the soft costs you mentioned above and will be passing them along to the OP.

From this perspective, he doesn't get to save on the soft costs like a normal DIY person would. That's why I'm not so sure what he wants to do will really save him much money. Usually the main saving is in the DIY labor and avoiding the soft costs like you mentioned.

Without the labor & soft cost savings, the only saving left for you is the part cost. So the question is whether you can find a wholesaler who is willing to profit much less than your normal contractor for the parts or not? After all, the contractor is a wholesaler who's also in the business of installation, too.

Below is quoting his answer to clarify that he doesn't really want to approach this like the normal DIY approach:

Are going to do all the permitting, layout, materials, delivery, management etc?
-- No. Just buy all materials.

[Naptown]

Again, the assumption is that you don't save on labor anyway because you'll be hiring out for labor just the same. And labor here is not just for installation but also for the time to design, coordinate and pull permits, etc.

Here is where the disconnect begins.
A DIY person does not have the soft costs that a contractor does.
In order to run a business there are costs that need to be passed on to the customer. Just like you pay for the rent on the gas station or the retail store.
A DIY person does not have to roll a truck to the job as they already live there. They are not paying people to sit in the truck during the drive ( a cost but not seen by a consumer)
A DIY person is not paying workman's comp, state and federal unemployment taxes, 50% of the social security and medicare costs, truck insurance, liability insurance, cell phones for employees to stay in communication, client acquisition costs, the costs or going on 5 leads and closing 1 of the 5 and a hundred other things that go into running a business.

[wwu123]

I just recently had a turnkey installation done, they bid the full estimated amount, but the actual invoice would be based on actual materials (no markup), a few fixed costs (permitting, online gateway monitoring), and then labor/installation/warranty at a proportional price per watt as you are suggesting. The rate for the labor piece was slightly less than the $0.85/watt you've offered, but only because this is a nonprofit installer that does training and thus using trainees for some of the less-skilled/sensitive tasks. My system is much smaller at 4 KW DC having to absorb all the fixed labor costs, still I could hardly see where a for-profit could go much lower than $0.85/watt, esp if you live in a high-cost area like the SF Bay area.

My installer came in quite a bit under the estimate on the actual materials costs, but it did end up about $1.70/watt for panels, microinverters, racking, connectors - original estimate was closer to $1.95/watt. That may reflect some bulk rates, as they probably buy components for multiple installations at once...

[GridGrants]

Perhaps I was not clear enough.

I understand EXACTLY what you want. I tried to get some install quotes, also, and it is just about impossible. I got one quote of over $4,800 to install a 4-panel 1.08Kw microinverter starter kit. It included 32 hours of labor on the solar side and 16 hours of labor on the electrical side. REALLY?

The old story is would you take your own eggs, bacon, potatoes etc. in to your local restaurant and ask them how much they will charge you to cook them into your breakfast. I don't see a problem with asking an INSTALLATION company what they would charge for an INSTALL only, but it seems to hit a raw nerve in this industry.

You have the proper attitude about understanding the cost of doing business is more than just the expenses for your one job. I have a specific kit I want installed and have been asking for quotes if they include the hardware and if they don't have a source for the hardware, what they will charge to install it if drop-shipped to them. It seems pretty straightforward, but almost nobody will even offer a quote.

I hope I didn't offend any installers, but he appears to be quite succinctly indicating he knows what he is responsible for and what he will expect the installation company to be responsible for. It shouldn't be this hard to get an install-only quote. Make your fair quote and we can take it or leave it. It just gets frustrating as a consumer when we are treated poorly for asking what we feel is a straightforward question.

[Volusiano]

I'm trying to understand the business model of a contractor.

Assuming that the labor cost a contractor charges you using YOUR own bought parts is the same as the labor cost that contractor would have charged you using THEIR own bought parts. In other words, there's no profit to be made in the labor if it's treated as a cost only. Or even if there is profit to be made in the labor, the contractor would stand to make that labor profit either way (via installing his own bought stuff or via installing your own bought stuff).

Then the only saving you stand to make is avoiding having to pay the contractor's profit on the parts, right?

If you buy from a wholesaler, they buy direct from the manufacturer and sell back to you for a profit. The difference is that their target customer is the DIY'ers who will perform the labor themselves to save on labor cost.

The contractor also buys direct from the manufacturer and sells the part back to you for a profit. Their target customer is the homeowner who will also pay them for labor for a turn-key system.

So you're assuming that your saving using your approach will be because the profit you have to pay to the wholesaler will be smaller than the profit you would have had to pay for the contractor, right? The question is how true is this assumption? Why would the contractor not want to compete with the wholesaler's business and win your business by charging you parts at the same cost as the wholesaler (with the same profit as a wholesaler)? If the answer is why not, and you can get the contractor to price match the parts against the wholesaler, then why bother taking the risk and trouble to be your own general contractor? Why not let the contractor take that risk?

Again, the assumption is that you don't save on labor anyway because you'll be hiring out for labor just the same. And labor here is not just for installation but also for the time to design, coordinate and pull permits, etc.

[Naptown]

Perhaps I was not clear enough. The company I contacted is licensed and fully qualifed solar panel installation company. They do both turnkey installs and jobs where homeowner buys all materials. My question was simply to gauage what the non-materials cost of solar installation should be.

So to answer your questions:

Are going to do all the permitting, layout, materials, delivery, management etc?
-- No. Just buy all materials.

Are you going to diagnosis and repair equipment when it doesn't work right the first year?
-- No.
And they are going to warrant the owner supplied materials?
Are you going to pay medical if someone falls off your roof or gets hurt?
-- Nope. No one is getting on my roof without their own insurance.

Are you willing to accept all liabilities when you go cheap?
-- Yes. If I buy cheap equipment and it is crap, then that is on me

Why would you expect someone to warrant stuff that they didn't supply under any circumstances? You have eliminated their profit on the equipment and thus any warranty that hey may have. Say you bought a Ford and had a warranty issue would you expect a Chevy dealer to honor any warranty?

This reminds me of home owners inept in construction becoming their own GC and hiring labor building their custom home. Yes they saved money .....maybe. ....but it never seems to turn out well.....especially the first time. It is better to hire a pro 99.9% of the time IMHO.
-- I can't speak for others, but I feel like I have a good grasp of my own limitations.

Comments in bold and red

[grkmec]

Are going to do all the permitting, layout, materials, delivery, management etc? Are you going to diagnosis and repair equipment when it doesn't work right the first year? Remember.... you buy the equipment ...you warranty it. Are you going to pay medical if someone falls off your roof or gets hurt? Are you willing to accept all liabilities when you go cheap? This reminds me of home owners inept in construction becoming their own GC and hiring labor building their custom home. Yes they saved money .....maybe. ....but it never seems to turn out well.....especially the first time. It is better to hire a pro 99.9% of the time IMHO.

Perhaps I was not clear enough. The company I contacted is licensed and fully qualifed solar panel installation company. They do both turnkey installs and jobs where homeowner buys all materials. My question was simply to gauage what the non-materials cost of solar installation should be.

So to answer your questions:

Are going to do all the permitting, layout, materials, delivery, management etc?
-- No. Just buy all materials.

Are you going to diagnosis and repair equipment when it doesn't work right the first year?
-- No.

Are you going to pay medical if someone falls off your roof or gets hurt?
-- Nope. No one is getting on my roof without their own insurance.

Are you willing to accept all liabilities when you go cheap?
-- Yes. If I buy cheap equipment and it is crap, then that is on me

This reminds me of home owners inept in construction becoming their own GC and hiring labor building their custom home. Yes they saved money .....maybe. ....but it never seems to turn out well.....especially the first time. It is better to hire a pro 99.9% of the time IMHO.
-- I can't speak for others, but I feel like I have a good grasp of my own limitations.

[qcfish]

Are going to do all the permitting, layout, materials, delivery, management etc? Are you going to diagnosis and repair equipment when it doesn't work right the first year? Remember.... you buy the equipment ...you warranty it. Are you going to pay medical if someone falls off your roof or gets hurt? Are you willing to accept all liabilities when you go cheap? This reminds me of home owners inept in construction becoming their own GC and hiring labor building their custom home. Yes they saved money .....maybe. ....but it never seems to turn out well.....especially the first time. It is better to hire a pro 99.9% of the time IMHO.

[SunEagle]

You did a good job estimating the material costs but only say you will be hiring someone to do the installation. You didn't estimate what that is going to cost you.

The local company that will provide you a "turn-key" installation is only charging you about $2.60/watt on top of the hardware. Plus they are totally responsible for the installation, permitting, inspections and that all of the hardware works.

It should also be less paperwork to apply for any rebates or Fed Tax return having only one company doing all of the work including any warranties. With multiple sources you could get into a finger pointing session between the hardware supplier and installer should something not work right.

Like russ states going with one company for everything would be a better solution to me.

[russ]

With the prices you are talking the situation where you supply will be more costly. You will be reponsible for time lost due to problem or missing parts and many other things - let them do it.

[grkmec]

For those of you that decided to buy your own equipment directly from a wholesaler then find someone to install your solar system, what did you guys pay? I reached out to local company and was quoted $1.25 - $1.50 / watt which seems very high for a 17kw job. After going back and forth they dropped the price to 85 cent / watt pending a home inspection. They also advised if they provided a turnkey system they would be in the $3.35 - $3.50 range.

What I am trying to determine is the vale proposition of buying a system turnkey vs. buying materials myself and hiring someone to do just the install. I certainly don't debrudge someone trying to make a living but I like to know what I am paying for. As best as I have able to to determine, here are the major costs components to an install:

Panels - Obviously a range here, but if you exclude Sunpower and higher rated panels, you can get prices in the 85 cents to $1.05 for poly/mono's in the 250-260 watt range
Inverters - String (30-40 cents / watt), Solar Edge (45-50 cents / watt) and Micros (60 cents / watt)
Racking - 30 cents /watt

So for a decent 260w mono panel + Solar Edge + Racking = $1.80 / watt. Then I understand there are fixed costs like permits, interconnection, monitoring, etc. And then to run any succcessful business you need to make enough profit to cover overhead, marketing, warranty reserve + still earn a decent living. I get it.

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.

Thanks