December 13th, 2009

Three Things Needed to SUPERCHARGE the U.S. Solar PV Industry

Renewable Energy -

Last month, I finished attending an IREC ISPQ accredited Solar Installer Boot Camp run by HeatSpring Learning Institute. If you’re going to take a solar PV training, it’s best you take one that is accredited. Here is the full list of IREC ISPQ Accredited Solar Trainings. There are only 20 accredited organizations in the U.S.

It was a great three day event. I learned a ton about designing, installing and selling solar PV systems and connected with new industry professionals who were at the training. It was a motley crew of electrical contractors, roofers, general contractors, professional salesman, developers, and financiers. A nice snapshot of the industry. The students represented a wide range of industries and companies from one man shops to 100 million dollar companies.

I came away with four clear conclusions about the solar industry after the training.

Number 1: Technical Training

Technical training to design and install solar systems is needed to enter the industry, but it will not create a defendable competitive advantage in the long run. Technical knowledge is necessary for the industry to grow due to the current lack of knowledge, but it’s only the first step. In short, a company needs to know how to install solar systems to enter the industry but this will only provide a real advantage when there’s little competition, and in 5 to 10 years competition will be intense.

I am not belittling technical training, there is no doubt that it’s needed to maintain and develop a quality solar infrastructure, but it’s important to plan for the future and establish a business model that will give you a competitive advantage. Nexamp, based in North Andover Massachusetts has a very competitive business model. See my interview with Jon Abe VP of Business Development with Nexamp.

After technical training is mastered there are three more elements that will be needed to supercharge the solar PV industry:

Supercharger Number 1: Focus on Sales, Marketing, and Branding

From my work at HeatSpring, talking with plenty of contractors that are entering the industry, I can honestly say that sales, marketing and branding is the most under invested segment of most of the businesses that are entering the industry. The majority of new entrants into the solar industry are coming from the traditional trades but there are some more specialized companies that focus on renewable energy systems. The more specialized companies tend to focus more on branding and selling than contractors from the traditional trades. To illustrate this compare groSolar’s website, or Solar Cities website, to your local electrician’s or contractor’s website (if they even have a website). In order to get solar systems on every roof in the whole country we need to convince homeowners it’s a good investment, this role falls on the salesman.

Supercharger Number 2: Financing

Who buys a car for cash? No one that I know. But the solar industry has been functioning by asking its residential customers to pay the 30k to 40k up front for the systems. This has lead to lower rates of adoption and a focus on Return-on-Investment (ROI) instead of how much your monthly electric payments will decrease. There are a few companies that have taken advantage of financing and have focused their business strategy on the financing of the solar systems. A couple include; Sun Run, Solar City, Sun Edison. The issue is that most of the industry talks about renewable energy investments in terms of payback. This is the WORST and least useful way to discuss an investment in renewables. When was the last time a bank, or Wall Street, talked about an investment in terms of payback? Do you think there is a reason for this?

The best way to discuss a solar investment is the Internal Rate of Return (IRR) of the known cash flows and compare this to the Cost of Capital, or simply the interest rate on the money, to install the system.

If you can get money from the bank for 4.25% and the IRR for a system is 5.5%, or anything higher then 4.25% then it’s FREE MONEY.

Rich Hessler from PV Solar Sales Training has a great post about solar financing titled: Solar: Quite Possible The Next Biggest Bubble & Bust

Here is an excerpt from Rick’s post that hits the nail on the head.


“The question JP Ross posed to the audience, “would you pay $36,000 today for an iPhone if I told you it would last 15 – 30 years?” After a few laughs, he concluded essentially the solar industry is asking buyers to make the same decision if the only option offered is to pay cash for a system.”

It seems that the market is becoming more aware of the need for financing. However, there is a large proportion of solar systems being installed, particularly in less developed markets, where the tradition trades are installing the majority of the systems that have very little experience with financing.

Supercharger Number 4: A Policy Focus on Feed-In-Tariffs

Duh! Everyone in the industry knows this. Solar PV is not possible without government incentives, typically between 60% and 80% of the cost of a solar system is covered with government incentives. However, the type of government incentive is also very important. The critical element to enhancing financing is to make the calculation of future cash flow easy to make financing simple. There is no better policy then with feed-in-tariffs. I asked Jeff CEO from groSolar (Jeff_groSolar) through twitter what he thought was the most effective policy and I received this response:

@topherwilliams most effective policy? Many. Needs to be stable, long-lasting, sufficient, simple (to understand and to finance). #groSolar

Enough said. Feed-in-tariffs are simple, straightforward, and long term, all essential ingredients to a good policy.

Many states are coming online with state solar incentives that are making solar investments attractive. However, the regulations are so complicated that there are large labor costs associated with processing the paperwork both within government and private enterprise. Currently, I’ve heard around 30% of a private companies overhead in man hours is dedicated to applying for incentives. Renewable Energy World posted a great article about the mounds of paperwork associated with solar installations titled: U.S. solar industry.

Renewable Energy World also has an article that is a nice review of the development of feed-in-tariffs in many international markets and within the US titled: Feed-in-Tariffs Have Earned a Role in U.S. Energy Policy. The article does a great job in discussing the historical reasons why feed-in-tariffs haven not caught on so easily in the US while they have in other countries.

The Clean Techies blog has a great article that discusses ways governments are looking to develop solar resources through state incentives: The Pursuit of New Ways to Boost Solar Development

Currently, feed-in-tariffs exist in Colorado, Ontario, Florida, Vermont, Washington, and California. These states coincidentally have the largest number of systems that are being financed.

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Chris Williams

About Chris Williams

Chris Williams is the editor of Green Light Distrikt and Chief Marketing Officer at HeatSpring . He has experience in business development, prototyping and new venture research with a focus on geothermal heat pumps, solar thermal and solar photovoltaic technologies. Chris is an IGSHPA accredited geothermal installer and NABCEP certified solar installer. Chris is focused on solving customer facing issues in the creation and adoption of clean energy technologies and products. Chris has installed over 300kW of solar and tens of geothermal systems. He's invented the PV Pal , developed many trainings at HeatSpring, publishes the NABCEP Study Guide , the Hitchhikers Guide to Cleantech and has done due diligence research for Urgent VC . Feel free to connect with him @topherwiliams , on Linkedin , or through email about new ventures, collaborating, writing, research or whatever is on your mind.