Photographer Joseph Holmes was ready to install solar power for his Kensington, California home. He’d paid extra for a special meter required for solar projects, and he’d scoured the Internet—and grilled his solar-electricity-generating neighbors—for information, so he was better off than most.

Still, the process held surprises and complications aplenty. From his first visit from a salesperson for his installer, Sun Light and Power, it took five months and $22,000 upfront (before the 30 percent savings he’s expecting from tax credits and rebates) to install the 2.2-kilowatt system.

His experience backs up a study that technology business consultancy Topline Strategy Group and commercial solar dealer Sunlight Electric plans to publish Nov. 6.

The report, “What the Solar Power Industry Can Learn from Salesforce.com,” concludes that while the solar industry has been focused on lowering the equipment costs, core economics aren’t enough to make solar power mainstream.

To become significant, the solar industry will need to cut non-equipment costs and make it simpler to install and use solar power, said Topline Strategy Group founder Jonathan Klein and Sunlight Electric CEO Rob Erlichman, who wrote the report.

The study cites the large initial expense, the risk that solar costs might not be recouped if the property is sold, the fact that most manufacturers’ warranties only apply to the first purchaser, and the risk of leaking roofs.

“These are all things that stop mainstream buyers from entering the market,” said Mr. Klein said.

Setbacks and Hassles

According to the report, the time required to research the industry, contact vendors, vet proposals, secure rebates, obtain financing, oversee installation, and get everything connected another big issue.

It’s one that Mr. Holmes’ story exemplifies.

First, there was the matter of figuring out exactly how many modules he would need, and of determining exactly where the bolts would go into the roof. “That probably took the most time,” he said, estimating that those steps look more than two months. “It was really difficult.”

Skylights complicated the process, and it turned out to be difficult to get the rafters’ exact positions—despite five people working on the task—and an engineer had to repeat the modeling several times before the sketch of the roof was correct.

Calculating how much the system was going to cost, and when he would get a return on his investment, turned out to be another hassle, he said. Each module has three different ratings from different organizations, making it difficult for customers to figure out how much power they are going to get. And then the inverters’ numbers for converting DC to AC have to be calculated in separately.

Then he had to schedule six installation phases between the roofer and the solar installer, stay home five days to let workers in, make four payments and a deposit to the installer and one payment to the roofer for extra posts, wait nearly a month for the modules to arrive, write three checks for government approvals and an unexpected meter reprogramming fee, sign power-of-attorney forms, get inspections from the county and utility, and remove some plants from his yard.

And Mr. Holmes didn’t find out until the end of the process that his utility, Pacific Gas and Electric Company, required him to maintain homeowners liability insurance, and that the utility needed to have access to the power switch in case it needs to work on the power lines.

Until the last minute, Mr. Holmes wasn’t sure it was going to work the way he wanted, he said. “All that information needs to be in one place,” he said. “Better communication would really help.”

Don’t get him wrong: he’s happy with his system—completed earlier this month—and praiseful of his installer. “I love it,” he said. “It’s so cool that I’m generating power, and Sun Light and Power was a really good company that did a lot of things right.”

But he estimates that better communication and easier access to information about the process could have saved weeks of time for him and up to 10 percent of the costs for his installer. “There’s a great opportunity for information flow to make the whole thing slicker,” he said.

The Bottom Line

Stories like Hr. Holmes’ are commonplace, and the Topline and Sunlight study indicate the difficulties for solar owners aren’t just annoying; they are also expensive.

Only about half the initial costs of a solar-power system come from the cost of the panels, with the other half coming from other equipment, installation costs, selling costs, and sales tax, Mr. Klein said.

And the customer takes all of the risk if things don’t work out. Because warranties mostly only apply to the original owner, there’s no secondary market for solar equipment, he said. Removal adds about $5,000 to the cost, if homeowners don’t find buyers who want to keep the systems, he said. So a $25,000 system would really be a $30,000 risk for a homeowner considering a move.

“If you buy a car and you plan to keep it for five years, and you have no idea how much you can sell it for in five years, maybe you’ll buy less car or think twice about buying a car,” Mr. Erlichman said. “Customers don’t just factor in the hard product costs, so just reducing the cost of a kilowatt-hour isn’t sufficient.”

These problems open the door for players willing to take a different approach because, to compare solar to software, the solar industry is operating like Siebel, Mr. Klein said.

Between 2002 and 2004, the enterprise market for customer-relationship-management software stagnated, with annual revenues at Siebel—by far the dominant player—falling from $1.6 to $1.3 billion, he said.

Salesforce.com, which lowered secondary costs and made its software accessible to people who wouldn’t have bought Siebel software, grew revenues from $22 million to $96 million in the same period. The company concentrated, not just on the software itself, but on dramatically lowering the cost of maintenance and installation, Mr. Erlichman said.

“There’s a tremendous opportunity for players who take a Salesforce.com-like approach to lowering total cost and making solar accessible to people who wouldn’t consider it today,” Mr. Klein said. “You can drive incredibly rapid adoption of new technologies if you can make them simple enough and cheap enough.”

Specific Suggestions

For instance, while the solar industry has been pushing bigger systems that are more cost-effective, it should probably be considering smaller residential systems that would come at lower initial costs—even if it takes longer to get a return on homeowners’ investments, Mr. Klein suggested.

Most of today’s systems have about 3.6 kilowatts of peak capacity and cost about $25,000 after rebates and tax breaks, he said. With industry cooperation, it should be possible to lower installation and sales costs to $9,600 for a 1-kilowatt system, before rebates and tax breaks, and $5,000 after, he said.

With lower installation and removal costs, and a secondary market for equipment, it also would be possible to offer a 6-month or 1-year money-back guarantee, drastically reducing the risk for the homeowner.

“There are many, many more people who would give solar a try if they only had to lay out $5,000 instead of $30,000,” Mr. Klein said.

Other ideas? Lower-priced bundled systems that are easy to install and that require little or no utility or municipality involvement, loans and leases that take reduced electric bills into account, and warranties that apply to secondary owners, not just the original buyers.

There is some evidence that companies are thinking along the same lines as Mr. Klein and Mr. Erlichman. Sharp, for instance, launched a new racking system that combines solar modules, a mounting structure, and an inverter, and that it says is easier to install, cutting costs.

And New Resource Bank and CitiMortage have announced new financing programs for residential solar-power systems with SunPower and Sharp, respectively (See Solar Gets Home Financing, Three Huge Solar Trends).

“These efforts taking place in the industry are positive encouragements of people looking to accelerate adoption,” Mr. Erlichman said. “But we’re in that tough transition between early adopters and the mainstream, so everybody—people who provide financing, governments, and manufacturers—need to take a system-wide view of the entire system, and not just work on their one piece.”

Contact the Writer: jkho@redherring.com

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