Solar developers urged to prioritize labor productivity in design decisions

U.S. utility-scale developers should focus on components and assembly methods which minimize labor costs to address the rising influence of soft costs, Ran Fu, lead-author of the National Renewable Energy Laboratory (NREL)’s latest Solar Photovoltaic System Cost Benchmark report, told New Energy Update.

U.S. utility-scale installed solar costs fell by almost 30% between Q1 2016 and Q1 2017, according to a new cost benchmarking study published by the National Renewable Energy Laboratory (NREL) in September. Utility-scale fixed tilt PV costs fell by 29.0% to $1.03 per watt (W) while single axis tracker prices fell by 27.9% to $1.11/W, the report said.

The drop in utility-scale costs is mainly due to falling module and inverter prices. Module factory gate prices fell 46% over the year, while inverter prices fell by up to 45%, NREL said.

Labor costs have also fallen, but the larger drop in hardware prices has raised the importance of soft cost components-- such as labor costs and profit margins-- in project budgets.

       'Soft cost' share of total project costs

                             (Click image to enlarge)
 

Source: NREL's 'U.S. Solar Photovoltaic System Cost Benchmark: Q1 2017' report (September 2017).
 

Developers and Engineering Procurement Construction (EPC) companies are combining technology improvements and innovative installation approaches to raise labor productivity.

Higher module efficiencies have helped reduce labor costs and an increasing number of utility-scale developers are using pre-assembly of PV systems and customized component tests for wind codes to optimize designs and reduce installation times, Fu, a Senior Analyst at NREL told New Energy Update.

“The trend for investors is people are more aggressive in terms of customized [tests] and pre-assembly. Last year we saw maybe half of installers doing that, this year it’s maybe more than 70%,” he said.

In order to remain competitive in the coming years, developers will need to focus on technology selections and new logistics which optimize labor deployment, Fu said.

"It’s hard to reduce labor costs...in order to reduce labor costs we have to come up with some very smart designs to improve labor productivity,” he said.

Tracking trends

NREL's study shows that an increasing number of developers are installing one-axis trackers to benefit from higher returns over the lifetime of the project.

One-axis trackers incur higher installation costs than fixed-tilt projects, but provide a lower levelized cost of energy (LCOE). Tracking systems were used on 80% of U.S. utility scale projects in 2016, compared with 70% in 2015, according to NREL.

“The LCOE is what investors really care about...You have a higher upfront capital cost at year zero, however when you look at whole cash flow from year zero to end of system life, the payback is better for one-axis tracking systems,” Fu said.

                    Modelled LCOE for fixed-tilt, one-axis trackers

                                                          (Click image to enlarge)

Source: NREL's 'U.S. Solar Photovoltaic System Cost Benchmark: Q1 2017' report (September 2017).
 

Trackers systems are more complex than fixed-tilt designs, incorporating moving parts such as gearbox, driveline and central monitoring systems, and developers must adapt installation and maintenance techniques accordingly.

Pre-assembly of tracker parts can reduce the need for specialized labor deployment, Fu said.

“That can really speed up the installation work in the field. You just unpack the box and put together the elements,” he said.

Leading tracker suppliers such as Nextracker and Array Technologies are improving the durability and accessibility of trackers to reduce operations and maintenance (O&M) risks.

"Tracker manufacturers not only compete with low capital cost, but also compete with reliability and O&M costs. In fact, some of the selling points are easy maintenance,” Fu noted.

The latest tracker systems are designed to reduce risks associated with high winds, flooding and snow, as well as vegetation growth. In addition, new sensor and analytics technologies are being incorporated to respond to site weather conditions.

In August 2016, Nextracker acquired predictive modelling software firm Brightbox Technologies to improve advanced analytics and real-time control of solar tracking systems.

The acquisition would allow Nextracker to optimize energy production and incorporate smart grid requirements, reduce commissioning times, and provide more granular remote monitoring and control, it said.

Inverter costs

Another way in which developers are simplifying maintenance activities is through the use of string inverters, which can be easily swapped out by technicians if there is a fault.

String inverters may incur slightly higher upfront costs than central inverters, but require lower O&M costs.

NREL's report highlights that inverter choice impacts electrician fees, which can vary between $19.37 and $38.22 per hour, and this could warrant further study.

“We think there is a difference in terms of wiring, in terms of electrician time...We want to understand what the trade-off is,” Fu said.

Last month, the U.S. Department of Energy (DOE) launched a new round of funding for inverter and power electronics programs which cut costs and increase grid reliability.

A key area of the research will be 'holistic' solar PV inverter designs. The DOE believes recent advancements in semiconductors, power density, innovative controls and packaging solutions could cut inverter costs and improve reliability.

"It's important that not only each component in the value chain have lower costs and higher efficiency, but that the pieces in the value chain can work together efficiently," Charlie Gay, Director of the Department of Energy's Solar Energy Technologies Office, told New Energy Update.

Operational gains

Through innovative project management, developers are continuing to improve installation logistics and reduce equipment and labor costs.

Installers of larger projects often divide construction projects into small blocks to optimize human resources and some firms are experimenting with using special trays to transport modules from shipping box to site and reduce the need for carrying or loading of modules. The clustering of construction and maintenance services can also help to increase efficiency.

With the expected removal of solar subsidies in the coming years, labor productivity will remain a key priority for utility-scale developers seeking a competitive edge.

Political risk has clouded the outlook for U.S. module prices and labor optimization represents an important cost driver over which developers have control.

As Fu notes, labor productivity impacts number of cost categories, including direct labor costs, EPC overheads, developer overheads and contingency.

"The most controllable element in soft costs for developers and installers is labor...if companies try to adopt more advanced tech and construction management ideas then they will be able to lower the soft cost,” he said.

New Energy Update