The new-build solar opportunity

As many Americans who bought a home in the mid-2000s might remember, it was generally very good business to buy and live in a home, flip it, move and get a predictable double-digit return on investment.

For many in the real estate industry, these were the golden days, when homes were being constructed like wildfire at an annual pace of about 2 million new builds a year with housing prices hitting all-time highs in 2005-2006.

Obviously things are a little different now. In fact, we’re only building about a third as many residences per year than we were during the housing bubble’s peak. But picture this: If we could somehow get one-fourth of new residential units in 2012 to be built with solar photovoltaic (PV) systems, the total number of rooftop solar systems in the United States would just about double in size.

As this back of the envelope calculation shows, there’s an exciting opportunity for solar energy in the world of new residential construction. Even with the sector reeling from the financial crisis, 700,000 new builds a year is a huge number for advocates of distributed solar to wrap their head around -- especially considering that about 200,000 total solar systems have been built over the past ten years, according to NREL’s Open PV database.

Personally, it’s not just sheer numbers that gets me excited about the solar opportunity in the new build market. It’s also the potential for rooftop solar PV systems to be installed at much, much lower costs than they would otherwise be on a home that’s already built. For new-build PV, steep cost reductions can be found throughout the balance of system side of the cost equation:

  • Hardware and system design costs can be greatly reduced since designing and sourcing a system would happen at the outset of home design instead of having to customize systems for existing roofs with shading, ventilation or loading issues.
  • Financing costs that currently account for 23 percent of a residential system’s total cost could be removed almost entirely since solar developers wouldn’t need to go shopping for outside tax equity appetite. The PV system could simply be included in the total home mortgage amount.[1]
  • Permitting and inspection costs can also come down dramatically since the system would be constructed, permitted and inspected in lockstep with other home inspections and permitting processes.
  • The cost of acquiring customers is lessened greatly by simply including PV systems with new homes. For the solar developer, the “customers” really become a few large builders rather than thousands of homeowners who must each individually consider a major roof system addition to their home with its aesthetic changes and roof functionality concerns.
  • Labor costs can be greatly reduced on both the permitting and installation fronts, especially when roofers have PV experience and can kill two birds with one stone when building roofs.

These new-build-associated cost reductions aren’t simply theoretical. PetersenDean Roofing and Solar recently launched their The Buck a Watt Stops Here campaign. This program intends to offer rooftop solar power to home-builders for a “buck a watt” (that’s an 83 percent reduction vs. 2011 costs of about $5.89 per watt) so long as builders hire PetersenDean to build both roofs and solar systems for projects.

Now, the skeptic in me says that there might be some fuzzy math going on with this buck-a-watt pricing, including extremely narrow margins and selective cost accounting (e.g. a roofer’s time may be logged as roof construction while they install PV).

But even if we assume that it actually costs PetersenDean another $1 a watt to get these deals done, that’s still substantially cheaper than the average cost of rooftop solar in Germany -- the current undisputed international king of low cost solar.

So remember, even in the midst of a greatly diminished residential construction market, the opportunity for solar PV to be included in new construction is large and available for the taking by clever entrepreneurs looking for new revenue streams in a slowly re-emerging American residential construction market.


[1] Based on RMI analysis of Ardani et al. Quantifying Non-Hardware Balance of System Costs for Photovoltaic Installations in the United States Using a Combined Annual Expenditure-Labor Hour Productivity Approach. IEEE, 2012.