Residential Solar Development

Residential solar was a hot topic at the recent Greentech Media Solar Summit.

Nicole Litvak, Solar Analyst at GTM Research, started out the session on “Opportunities and Threats in the Residential Solar Market” by asking each panelist to share the key to success for residential solar -- in just five words. The responses focused on customer service, partnerships, and focus: 

  • Jonathan Doochin, CEO of Soligent, a large solar distributor -- or as Doochin put it, “solar in a box”: “Externally, reputation -- internally, operational excellence.”

  • Chris Tan, Senior Manager of Product Marketing at SolarCity: “Give customers what they want.”

  • Micah Myers, Senior Vice President of Corporate Development at Clean Power Finance: “Focus on your core competency,” or “Do what you do best.”

  • Joe Miller, EVP Marketing and Business Development for Solar Universe, a solar franchiser: “Don’t go it alone.”

While 45 minutes was hardly enough to exhaust the subject of residential solar, a lot of ground was covered as a few themes emerged. 

Vertical integration is not necessary

Although last year saw some acquisitions that might lead to the perception that vertical integration is the way of the future, the panelists were clear that the important thing is to do whatever best serves the residential customer. Most agreed that customers tend to value simplicity. They may not care if they’re dealing with one vertically integrated company or a number of partners -- as long as the brand is unified and, as Tan emphasized, “there’s only one phone number to call.”

Myers pointed out that many other businesses, such as mobile carriers, aren’t vertically integrated, though they generally come across as a unified brand. An advantage of not doing everything under one roof is that it lets “companies who specialize in each piece do what they do best.” In other words, focus. 

There’s room for small installers

Doochin made the interesting point that other industries like HVAC, roofing, and plumbing allow for a localized market. Not only does that bode well for small local installers -- but in fact, some of those industries, particularly HVAC and roofing, will be the places from which more local installers will emerge.

Solar is still relatively new in many states, which will provide an opportunity for branding. And local installers can form partnerships without needing to integrate vertically. As Miller noted, partnerships will be key to success in the complex business of solar. That may be especially true for small local installers.

Local players, Doochin pointed out, can generally leverage the local presence and network they already possess. And they can avoid the infrastructure costs a large company may face when launching in new markets. That can allow them to be cost-competitive. The poliferation of finance will make a big difference to these companies.

Loans are catching on but aren’t overtaking third-party ownership

If you visit this site regularly, you know we think solar loans will be big. A large percentage of attendees at yesterday’s “Crowdsourced Market Insight” session agreed. So Litvak asked the panelists what they think lies ahead for loans.

The consensus? Loans will fill an important niche but will not overtake third-party ownership (TPO). Because each customer is different, a variety of financing options are needed. And as Miller pointed out, “The solar industry is about change and will always be about trying to find right value proposition for the customer.” He added, “Two years from now we’ll be talking about a financial model no one has thought of yet.”

Simplicity and speed are important for most solar customers. Whether loans -- including PACE programs, which are taking off again -- are simple can depend on the local municipality. Some financing methods, like loans and prepaid leases, can even be combined. That translates to a number of options with various pros and cons, loans being just one option in the mix.

Meyers observed that consumers are accustomed to electricity being a service. That combined with tax arbitrage and depreciation opportunities may give TPO financing an advantage. And as Tan noted, many customers prefer to spread out payments over a longer period. The typical SolarCity customer makes $50,000 a year and can save $40 a month -- the sweet spot, he said, is 10% below what they’re paying before solar. Given that 50 million homes fit that profile, SolarCity seems happy to focus on TPO.

Net metering and ITC changes can be weathered

Net metering programs around the country are changing. Meyers sees the trend to grandfather existing net metering customers as a positive sign, since it makes investors more comfortable. But even a small fee imposed on solar customers can be an issue, and Miller noted that’s leading Solar Universe to take a hard look at new markets before entering them.

When it comes to the impending expiration of the Investment Tax Credit (ITC), while no one can say what form that will take, the panelist agreed that solar will still exist in a post-ITC world. Cost decreases are reaching beyond just equipment to financing, installation, distribution, and design. Meanwhile, conventional power costs continue rising. That bodes well for solar.  

Originally published on PV Solar Report

Photo Credit: Home Solar Development/shutterstock