Solar cost and profit

[lanb]

I recently started looking at solar and have a question on the margin/profit for the solar installers.
After reading a bunch and researching prices here are some numbers (approximations based on retail)

cost of panel ranges from $0.90 to $1.30 per watt
cost of inverter ranges from $0.4 to $0.6 per watt (unless it is a very small capacity)
cost of mounts/hardware/wiring $0.2 to $0.3 per watt (I am not so sure about this)

so if we take the middle of the road for each, the average works to $1.85/watt ($1.1 + $0.5 + $0.25) for equipment.
Most average solar installs are probably a crew of 4 for 2 days (labor) and at $50/hour comes to $3200 (4 * 2 * 8 * 50).
For a 7 kWh system that works to $0.45/watt.

The total approx cost is $1.85 + $0.45 = $2.3 per watt (based on 7 kWh system)

Yet, the average installed cost is around $3.5 per watt, almost 50% over the cost.

Is the installed cost/margin high mainly due to the 30% tax credit ? Just curious.

P.S -Note that I used retail prices for equipment and I am sure wholesale prices are further discounted.

[J.P.M.]

Seems that a post like this shows up about every 2 - 3 months or so. The responses usually suggest, among other things, that there is a lot more to running a business than what you list. Lots of overhead. For starters, who/what pays for the office/staff/insurance/equipment/advertizing, etc., etc ?

While I'm sure some vendors are dancing with customer's legs, I'm quite certain most reputable folks, while surely in business to make a profit, aren't gouging too many folks at $3.50/Watt.

There's always the DIY option for those who don't like the way the game is run.

[Dave1478]

You are forgetting overhead. Most companies will run from 20-35% overhead. If you take that into perspective they would be operating at a 30% profit margin using your prices. Also have to take in account they do all the plans and permitting. And have to be licensed contractors in solar as well as licensed electricians as well. 10-20% profit margins are near standard for any business. And if you have the 30% tax credit in there it drops prices down considerably for the end user. And most of the time the salesman takes a commission on profit 5-10%, I think in solar it is closer to 6%...Leaving the company at 24%. It's business.


In my business we do 200% markup for product and material cost and run a $75-100 labor rate. We do not like to go under 15% profit.

[solar_newbie]

I recently started looking at solar and have a question on the margin/profit for the solar installers.
After reading a bunch and researching prices here are some numbers (approximations based on retail)

cost of panel ranges from $0.90 to $1.30 per watt
cost of inverter ranges from $0.4 to $0.6 per watt (unless it is a very small capacity)
cost of mounts/hardware/wiring $0.2 to $0.3 per watt (I am not so sure about this)

so if we take the middle of the road for each, the average works to $1.85/watt ($1.1 + $0.5 + $0.25) for equipment.
Most average solar installs are probably a crew of 4 for 2 days (labor) and at $50/hour comes to $3200 (4 * 2 * 8 * 50).
For a 7 kWh system that works to $0.45/watt.

The total approx cost is $1.85 + $0.45 = $2.3 per watt (based on 7 kWh system)

Yet, the average installed cost is around $3.5 per watt, almost 50% over the cost.

Is the installed cost/margin high mainly due to the 30% tax credit ? Just curious.

P.S -Note that I used retail prices for equipment and I am sure wholesale prices are further discounted.

People has to pay for license, worker comp, support of there is issue in the next 10 years.
Cost and time to do permit application
Permit cost :200-500
Pay for labor while not having job ...
Installation is 2 days if there is simple work.

Some places you have to have mid job inspection. Installation can take many days.
Day 1 , day 2 Inspection and fix whatever inspector ask, day 3 inspection again to sign off, day 4 finish the job, day 5 final inspection and fix whatever inspector ask, day 6 final inspect and sign off.

Cost and time to do PGE application .

If you complain, ask how much electrican charge to replace your panel? Just 6 hours job, charge $2500 with 100 material cost. Profit 2000 out of 2500 job (400%). There is no additional permit as solar permit cover it.

[solar_newbie]

One option like couple my friends told me. Just pay PG&E now and wait for couple years. Price will drop to $1-$2/kw.

You see price goes down from $8/kW couple year ago to $3.5/kW now. So it will drop by half in couple year from now.

[solarix]

The material costs are even lower than you list. About $1.25/watt (wholesale) for the equipment. Its the so call "soft" costs that hit us hard. If you want to lower the installed cost of solar to more like what Germany or Australia pays, get on board the Sunshot program and streamline the permitting and interconnection processes. One of these days an energy/climate crises could hit this country and they are going to turn to the solar industry for rescue. I've got my list ready for how they can relent on all the red tape and make solar affordable.

[skipro3]

Kicking back in the lawn chair with a cold brew while you warn the guys not to dent your gutters is worth the price, IMHO. Self-install and one slip, your savings are out the window. A reputable company is fast because they got the staff to get it done fast; the inventory, the installer schedules, the engineers, the permits, drawings, scheduling inspections, etc.

If you get a good installer, you won't begrudge the price.

[sensij]

Kicking back in the lawn chair with a cold brew while you warn the guys not to dent your gutters is worth the price, IMHO. Self-install and one slip, your savings are out the window. A reputable company is fast because they got the staff to get it done fast; the inventory, the installer schedules, the engineers, the permits, drawings, scheduling inspections, etc.

If you get a good installer, you won't begrudge the price.

Big +1 here.

[rock]

normal down payment ??

this looks like a place to ask this question.

what is normal "deposit" or down payment on a solar install. job.

[skipro3]

I paid 30% when the plans met my approval, 15 when the permit was issued, another 15 when materials arrived, 15 when the construction was done and demonstrated to work, 15 when the county inspector signed off and the final 10 when PTO was approved. That's not what they offered on the first contract. I set those payment performance as my terms I wanted in the contract.

[sensij]

this looks like a place to ask this question.

what is normal "deposit" or down payment on a solar install. job.

In CA, the deposit is legally limited to $1000 or 10%, whichever is less.

[solar_newbie]

this looks like a place to ask this question.

what is normal "deposit" or down payment on a solar install. job.

1k deposit -- law say you should not pay more than 1k.
Material cost when everything is delivered and installation starting
The rest when city permit sign off and all promise job done

[lanb]

Thanks to all who responded.

Just to clarify - I am not looking for a self install as I lack the expertise and agility to do that

As for overheads like paperwork/insurance etc., yes I did remember those but used retail prices in my
calculations to pay for some of those. As solarix mentioned, the wholesale per watt price is less than the $2.3/watt
I arrived at.

I guess, It is what it is at this point. Let us see what happens when the 30% credit ends in 2016.

[solar_newbie]

Thanks to all who responded.

Just to clarify - I am not looking for a self install as I lack the expertise and agility to do that

As for overheads like paperwork/insurance etc., yes I did remember those but used retail prices in my
calculations to pay for some of those. As solarix mentioned, the wholesale per watt price is less than the $2.3/watt
I arrived at.

I guess, It is what it is at this point. Let us see what happens when the 30% credit ends in 2016.

Like I say in other note. There are a group of my friends like yours . You can wait for couple years the price will drop to $1.5/watt (50% drop) as we have seen the last few years from the start of solar until now. The price drops from $8 to $3.5. Maybe that is the entrance point ... My calculate is a bit different. Once the price goes down, less number of installers would be able to stay in business. Their cost might not be able to drop too much as labor cost is raising (never go down). There will be no or less competition, you pay what you are quote. What you can get is cheaper material. Current material cost is around $2/watt. In order to go to $1.5watt, you would expect to pay 0.5/watt on all material (assume installer will charge $1/watt ... down from today price). It is around 75% price drop. It is possible, but I do not want to bid it.

However, there are many things to consider beside price. Such as connect to the grid and what the value you get back from it. With NEM 1.0 and TOU, you get average 25% more credit vs the actual amount you product. So virtually, you get 125% more for your value in the next 20 years. Plus you get 30% from tax. So the actual price is $1.96/watt (account for 25% benefit and 30% tax credit)
I assume we do not talk about environment now Just money talk...

[SanDiego_installer]

Other expenses:
Design
Permitting
Vehicles
Gas and maintenance
Workers Comp
General liability
Auto ins
Tools and ladders
Office rent
Utilities
Sales and marketing
Supervision
Legal and regulatory compliance
CPA and bookkeeper
Safety programs
Training programs

Solar contractors are not getting rich at $3.50Watt.