In the US, residential solar installation has seen record growth across the country. From 2017 to 2020 the residential solar market almost doubled its size, growing from 10.5 GW of installed capacity to 19 GW. Yet, the top 10 installers hold around 35% market share. They used large marketing campaigns and third party financing products to make average Americans (with FICO scores 680+) comfortable with rooftop solar. However, as Andrew Bebe beautifully explained the “long tail” (small regional solar installers, roofers, plumbers, electricians, general contractors) has a huge impact on residential solar. Independent contractors should be very confident their solar installation businesses are competitive with national solar installers and that their businesses are the future of residential solar.
1) Cost & Quality
For the majority of installs, the most important factors are Cost & Quality (economics). Independent installers have an advantage over national installer’s economics. Both independent installers and national installers are using top tier panels, SolarEdge/Enphase, and racking systems that protect roof warranties. In addition, independent solar installers have great access to high-efficiency modules like Q-Cells and LG Solar. The biggest difference in value-add is that independent installers can complete their installs for less money.
Since 2017, independent solar installers across the country have not had issues selling systems for less than $3.30/w (dependent upon roof type and module); installation costs are consistently below $2.75/w. However, according to SunRun’s Q3 2020 financials, once marketing and administrative costs are included the average cost per watt is $3.55/w. Before Tesla's merger with SolarCity, they achieved an installed cost of $3.18/w and their financials are a little harder to dig into with some of their overhead costs also being tied to their production of cars. But with only $21 million of margin from their solar business, the odds are that over $21 million of their $888 million total overhead costs are causing them to lose money on solar currently. The main reason large installers have these higher costs is marketing and administration costs. In Q3 2020, Sunrun spent $70 million in marketing alone. While anything is possible, it seems difficult for national installers to overcome these costs challenges. It is not surprising that previous national installers such as Verengo, One Roof, and NRG Home Solar have gone bankrupt or exited residential solar. Sungevity had their merger canceled and after multiple rounds of layoffs is now defunct.
2) Service
Independent installers should always win big with service. They are known and trusted professionals in their respective communities and potential solar customers quickly know their name and face. Because they are familiar with local authorities having jurisdiction (AHJ), they know how to navigate the interconnection process as efficiently as possible. If there ever was a service issue, the homeowner will have their cell phone and they can attend to the installation immediately. It can be much more difficult for a national installer to provide this high level of service and develop a personal relationship with the homeowner. Involving a national installer will require communication with multiple layers and it will be difficult to match a local installer’s communication. A national installer will take longer to interconnect the system and previous national player Sungevity acknowledged that their average install time (sale to system installation) is 90 days.
3) Financing
One of the most interesting predictions for the future solar market is there will be more residential loans than residential leases. Homeowners--that have enough tax liability--save significantly more with loans than a lease and they are available across the country, unlike third party ownership. While national installers generally had the advantage with PPAs and leases, it is an equal playing field with loan and PACE products. Mosaic and GreenSky are two of the most popular loan providers for independent contractors and they handle Tesla and SunRun’s loan product as well. Independent installers can also more fluidly work with the homeowner to find a financing product that better fits their needs. They can compare multiple loan options and also explore PACE, HELOCs, and Mortgage Refis. Since the same financial institutions are providing loans for both national and local installers, there is no benefit for the national installer. It is also likely local installers will use multiple financing products and they can work with potential solar customers to find the optimal financing solution.
4) What about Storage?
Storage without a doubt will be critical for residential solar in the future. While Tesla has a strong brand name to help it, independent contractors have access to great battery alternatives. Products such as Enphase Encharge, Generac PWRCell, Q.Cell Q.Home and Panasonic EverVolt have led the battery market to become extremely competitive. With comparable Levelized Cost of Energy and more importantly being readily available to install these products allow the local installer to compete nationally on storage.
Although it may get overlooked, independent contractors can prepare elegant sales proposals efficiently with programs like Energy Toolbase. National installers have IT departments and have allocated resources to create sales proposals. These proposals are important marketing materials because they allow the homeowner to calculate their savings and understand their systems. While national installers have more resources to develop sales proposals, independent contractors can deliver the same proposal. Energy Toolbase helps solar contractors accurately forecast savings, especially with complex and/or new rate tariffs. Again, the sales proposal is another tool or feature that would previously offer a national installer an inherent advantage but now there’s no difference.
While some homeowners will prefer national installers, and there will always be homeowners that independent contractors can’t reach, independent contractors should not fear a national installer in their hometown. Instead, they should leverage the demand generated and be ready to shine amongst the competition.