Soft costs present a huge downside for commercial energy storage projects and can sometimes kill them. According to Wood Mackenzie, soft costs for solar plus storage non-residential installations “make up more than 30% of system costs today” (Gupta, 2019). In some cases, soft costs are greater than the cost of all the storage equipment combined. Because soft costs account for a large percentage of solar plus storage system costs, this presents an enormous opportunity for the solar plus storage market. The existing solutions will not be enough to lower soft costs. To drive significant reductions in soft costs, we will need new and creative design-thinking approaches to develop grid-of-the-future solutions and move beyond the current problems. In this article, we will discuss the key drivers of soft costs for non-residential solar plus storage systems and provide a brief overview of AC- and DC-coupled solar plus storage system architecture. We will also delve into interconnection costs, specifically noting challenges with existing utility infrastructure. Finally, we offer insights on trends we’ve seen for reducing soft costs.

Key Drivers for Soft Costs of Solar Plus Storage

Soft costs for solar plus storage installations are notoriously hard to quantify for a solar plus storage project. Soft costs include interconnection fees, permitting costs, project origination fees, customer acquisition costs (CAC), and overhead or miscellaneous costs, such as project siting, landscaping, and design. Omeed Badkoobeh, CEO of Yotta Energy, noted in a recent interview that soft costs are challenging because of the high amount of variability and the large number of stakeholders for each project. Soft costs are project and location specific. In other words, soft costs vary widely project by project. Soft costs also generally scale with system size meaning larger systems have larger soft costs.

It’s worth noting that energy analysts do not predict a decline over the next five years for interconnection and permitting costs. Interconnection fees vary state by state with some having established rules to provide consistency. Permitting, including code compliance reviews, also vary by region or jurisdiction. Additionally, recent battery fires in the U.S. have led to the adoption of stricter codes and standards such as, NFPA 855, UL 9540, and UL 9540A. For example, UL 9540A was developed to address building and fire safety concerns associated with battery energy storage systems, BESS. UL 9540A is a test method for evaluating thermal runaway fire propagation in BESS. These newly adopted fire codes and standards may initially cause delays in the permitting process and increase costs. However, companies will begin innovating to develop creative solutions that meet or exceed the codes and standards requirements. Container and cabinet solutions may be negatively impacted by these stricter codes and standards.

Project origination and CAC are tricky to predict because of the numerous steps they each have. For example, project origination and CAC include tasks such as, marketing, lead generation, qualification, and sales execution. A team’s ability to create a large sales funnel and maximize conversion rates at each step can drive down CAC. Wood Mackenzie anticipates that we will see an increase in CAC “once the solar [incentive tax credit] expires for non-residential customers in 2023” (Gupta, 2019). Overhead and miscellaneous costs are highly variable similar to the other costs mentioned above. New solar plus storage installations may be more lucrative than retrofits in the future.

AC-coupled versus DC-coupled Solar Plus Storage

Before exploring soft costs in much more detail, it’s important to understand solar plus storage system architecture. There are two common system architecture types: AC-coupled and DC-coupled. AC-coupled solar plus storage systems are designed such that the battery charges and discharges through dedicated power electronics. The PV power must go through an inverter before charging the battery. With an AC-coupled design, both a storage inverter and a PV inverter are required. DC-coupled solar plus storage systems are defined by having a shared hybrid inverter. The solar PV system can charge the storage battery without going through the inverter. Having a shared inverter may result in added cost savings. Installing a hybrid inverter also means that solar plus storage systems can continue to operate off-grid in the event of a grid outage. As Badkoobeh simply stated, “AC-coupled is the easy way to do things, and DC-coupled is the meaningful way to do things.” Refer to Figure 1 for a brief overview of the advantages and disadvantages of AC-coupled and DC-coupled system architectures.


As we begin to adopt more solar plus storage technologies, companies will define new products that offer more than the AC-coupled and DC-coupled options we know today. These yet-to-be-invented products will create new revenue streams and potentially increase the solar installation rate. These new products and technologies will also serve to address the soft cost challenges we face today.

Challenges with Interconnection Costs 

As mentioned above, interconnection fees can be significant especially for large solar plus storage projects. In a 2018 National Renewable Energy Laboratory (NREL) report on interconnection guidelines for the western U.S., “[t]otal upgrade costs per [interconnection] study ranged between $23,000 to $19.7 million, with a median [cost] of $306,000” (Bird, et al., 2018). Mitigation was notably needed to address thermal impacts, protection impacts, voltage impacts, and network expansion. NREL noted that typically “larger projects have a more significant impact on the operation of the grid,” and therefore “they may require more expensive mitigation measures” (Bird, et al., 2018). However, NREL added that any size system could trigger expensive grid updates if the existing infrastructure has insufficient capacity.

According to Badkoobeh, interconnection issues are a huge problem for companies because they add a high level of variability to a project’s soft costs. “It’s the nature of the grid, ” says Badkoobeh. The utility companies are “trying to make sure that they don’t receive more power than they can handle.” Many of the existing transformers, for example, are unable to handle additional capacity. The utility serving a particular region may not have the means to upgrade their equipment so they pass on costs for feasibility studies and necessary upgrades to the client wishing to push more power to the existing system.

Another big challenge with existing utility infrastructure is that there isn’t a consistent set of rules governing interconnection. Additionally, not all states have guidelines for non-residential solar plus storage interconnection which further complicates the matter. Due to lack of standardization for interconnection processes, common barriers across utilities include communication challenges, both internally and externally, unexpected costs, and project timeline delays (Bird, et al., 2018).

Although a few states have instituted policies to clarify the interconnection process for solar PV plus storage installations, the challenges associated with interconnection are expected to continue as we see more non-residential solar plus storage systems installed in the U.S. Further, solar plus storage applications allow for additional configurations and 2-way energy flow to and from the existing grid. As a result, NREL notes that solar plus storage installations will raise new questions for grid interconnection (Bird, et al., 2018).

Trends for Reducing Soft Costs 

Soft costs have been one of the greatest inhibitors that has prevented the widespread adoption of solar plus storage. Badkoobeh believes that “[energy] storage is the value stream to [renewable] energy…as the internet is to the computer.” Energy storage will also drive “increased demand for PV on commercial buildings,” just as the internet drove the demand for personal computers, he added.

To reduce soft costs for non-residential solar plus storage systems we need to look beyond the existing BESS solutions on the market. BESS have not led to an increase in solar deployment because they do not remove the variability of soft costs. By examining future market trends, we can get a better understanding of how we can decrease soft costs and increase solar plus storage system adoption.

One of the biggest hardware market trends, according to Badkoobeh, is the shift toward DC-coupled solar plus storage systems. Even within traditional DC-coupled systems, companies will devise innovative solutions to lower soft costs. For example, Yotta has invented PV-Coupled™ system architecture, a unique DC-coupled solution. Yotta’s PV-Coupled™ design allows a customer to couple energy storage between the PV modules and PV inverter. It’s also designed to tackle soft costs head on by allowing more solar energy to be deployed without overtaxing existing utility infrastructure. See Figure 2 for an example of Yotta’s PV-Coupled™ design.

Two of the biggest software market trends are the shift towards automation and machine learning. Companies are providing the ability to design solar PV plus storage systems in urban areas (e.g., flat commercial rooftops) from the comfort of your (home) office. For example, Station A allows customers to visually explore commercial building rooftops and identify good candidates for commercial solar plus storage installations. A customer can see a satellite image of a commercial rooftop, estimate solar PV and storage system potential, view estimated annual energy usage, access relevant property details, and analyze a slew of other relevant building metrics. Blueprint Power is also changing the energy consumption and production landscape with advances in machine learning. Blueprint Power connects real-estate owners of commercial buildings to new energy markets and customers. They offer a suite of machine learning tools that automate, aggregate, and manage energy assets, which enables building owners to decide how and when to use surplus energy produced.

As we continue to see trends that focus on soft cost reduction, we will begin to see why energy storage is a key part of the solution. In fact, we will begin to understand that smart energy storage can transform the solar PV industry. We will begin to realize new energy storage value streams associated with grid resiliency, demand charge reduction, and revenue generation. And, perhaps smart energy storage will help our society provide an economically viable solution that also helps us adopt more renewable energy.


Bird, L., Flores, F., Volpi, C., Ardani, K., Manning, D., & McAllister, R. (2018, April). Review of Interconnection Practices and Costs in the Western States. Retrieved from National Renewable Energy Laboratory |

Gupta, M. (2019). U.S. non-residential storage system prices: Trends from 2019 to 2024. San Francisco: Wood Mackenzie Power and Renewables.