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CPUC Project Cost Workshop

CPUC Project Cost Workshop. Sue Kateley Executive Director March 13, 2009. Constant Change Constant Uncertainty. CALSEIA comments at June 29, 2007 CSI Forum CSI Application process costs $500 to $2,500/sale CSI process adversely impacts cash flow

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CPUC Project Cost Workshop

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  1. CPUC Project Cost Workshop Sue KateleyExecutive DirectorMarch 13, 2009

  2. Constant ChangeConstant Uncertainty • CALSEIA comments at June 29, 2007 CSI Forum • CSI Application process costs $500 to $2,500/sale • CSI process adversely impacts cash flow • Program issues causing solar installation prices to increase • Tax credit extension uncertainty negatively impacted sales in 2008 • New permitting requirements negatively impacted sales and installations throughout 2008 • Lending crisis negatively impacts industry beginning in 3rd Quarter 2008 and continues in 2009

  3. Project Cost Worksheet • Lump sum vs. Material and Labor Contracts BOE Rule 1521 • Lump sum: sales tax based on cost of material • Material and Labor: sales tax based on marked up cost of material • Accounting: Cost of Goods Sold is the average cost of materials purchased, invoices do not match particular jobs • Customer confusion: worksheet misleads customers into thinking the data is actual cost or angers customer/contractor relationship • Competition issue: market sensitive and proprietary information becomes available to competitors

  4. Ways To Obtain Module Price Data • Gather data from 3rd party vendors such as Solarbuzz.com • CPUC staff conduct confidential survey of manufacturers and distributors on pricing and pricing programs. Provide only aggregated data to CPUC consultants. • Review reports from publicly held companies

  5. It’s Not Just The Modules • Overall PV Demand in California/U.S. has not been large enough to affect downstream hardware price • Historic module shortage maintained a ‘sellers market’ • Expenses are spread across all installations in a single company: low volume/higher proportional overhead costs • If 12K systems installed Statewide in 2008, all solar Contractors are low volume • Many costs are outside the control of CSI: e.g., permitting, labor, insurance, fuel costs, etc. • Solar Publicity attracts ‘Short-term Competitors’ – few customers/many sellers = higher cost to find/keep customer

  6. It’s Not Just The Modules • Marketing costs are significant • Call backs: when a company sends personnel to a site after completion (i.e., building inspection, CSI inspection, interconnection inspection) • Frequent and/or unpredictable program changes: private sector must absorb (losses) and recoup (increase cost attributed to change) from new customers – this slows rate of price decreases • not just CSI, also tax credits, financial markets, permitting requirements (i.e., unpredictable fire department and building department requirements)

  7. What Lowers The Cost Of PV? • PV module supply recently became a ‘buyer’s market’ (how long will this last?) • Higher sales volumes spread admin and overhead costs over larger customer base , Contractors can: • Purchase product in higher volume and receive volume discounts • Automate/standardize paperwork • Reducing CSI inspections for companies with high inspection pass rates (companies send personnel to each inspection) • Consistent permitting requirements and cost-of-service permit fees • Simplify program

  8. The Private Sector is Program Implementation Partner Customer Hedging future energy costs, doing the right thing Procurement decisions: decision making information Affordability: cash, lease, PPA, Property Tax Financing, Tax implications Local financing programs (problem excluding, efficiency and solar thermal), Local rebates taxable Local ordinance (homeowners’ associations and solar rights) shading Local Permitting (Building and fire regulations, permitting fees, green building initiatives) Local Utility intercon-nect Contractor: Licensing, Warranty/Service, Workforce, Training, Sales, Marketing, Administration, bonding and insurance, utility interconnection, rebate paperwork “Integrators”: Hire contractor, investor-financed, procures product, may or may not be licensed, bonded and insured. Utility interconnection New technology: Venture capitalists, Initial public offerings, UL Listing, Warranty State Energy Policies: Goals (loading order, renewable portfolio, zero energy buildings), Incentives (rebates, property tax exclusion, net metering) Tariffs (time of use rates, dynamic pricing, AB1x, demand charges), Mandates (building standards RECs) Greenhouse gas regulations Federal Energy Policies: Incentives (tax credits, accelerated depreciation, grants), R&D

  9. Residential PV Cost Scenarios (How Low Can You Go?) • Notes: • Installed costs will vary based on the factors discussed in this presentation – this is not an actual estimate of costs • CALSEIA does not believe many companies have yet received module pricing this low – but this would affect future sales, not • current sales for companies with module inventory • The highlighted costs will go up over time – not down • When rebate level = rebate processing cost the CSI program will effectively end

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