One of the most stunning developments in the residential solar industry recently has been the apparent death of Big Solar.
By that I mean the large national installers who, a few years ago, looked like they might expand into the whole country and grab market share from local and regional installation companies.
You know, the guys who were big enough to offer leases and PPAs and give the people what they want: Zero Down Solar.
Look on My Works Ye Mighty and Despair
Oh, what a difference a couple years makes. Yea, how the mighty are fallen when it comes to Big Solar:
- SunEdison (bankrupt in April 2016)
- SolarCity (bought by Tesla in November 2016)
- NRG Home Solar (stopped doing home installs in Feb. 2017)
- Sungevity (bankrupt in March 2017).
Vivint and Sunrun seem to be doing OK for now, but each is doing more direct sales and fewer leases and PPAs.
And it was that third-party ownership financing, which originally seemed like the strength of the national installers, that finally did in Big Solar.
In the bad old days of $40,000 home solar when many homeowners didn’t pay enough taxes to take full advantage of the 30% federal tax credit, Big Solar offered leases or PPAs that made it affordable for more families to go solar. As a result, leasing companies enjoyed rapid growth. Thus, Big Solar reigned supreme — until it didn’t.
“But the lease doesn’t make sense long term, and its days are numbered, which could cause a lot of upheaval in the solar industry,” writes the Motley Fool:
- Customers can now finance their own solar through various types of loans
- Self-financing solar is cheaper than a lease, especially with low-interest loans widely available
- Smaller installers can bring lower costs to rooftop solar since they have lower overhead
- Who would want to buy a home with an old solar lease? A lease or PPA can reduce the resale value of a home
For all those reasons, what’s left of Big Solar seems to be behaving more like a local solar installer: selling solar panels instead of doing leases or PPAs.
That’s good news for local solar installers, because it validates their business model and gives them back the home field advantage. Local installers may be able to thrive in markets free of competition from big national companies again, if they run their businesses well.
Small solar contractors can win, writes solar management consultant Pamela Cargill, if they focus on their strengths: hiring and keeping good people, maintaining cash flow, diversifying their business from solar into related areas such as HVAC or energy efficiency and planning ahead for changes in the marketplace.
Announcing the New Big Solar
For a while, it seemed like SolarCity or SunEdison might replace the local electric utility in some areas as the provider of home electricity service.
While the branding of the utilities had increasingly started to look like Dick Cheney’s sneer, the solar companies came with a shiny, Silicon-Valley smile, offering to “disrupt” the dusty old home electricity business with innovation that was surprisingly affordable.
Well, wasn’t that fun while it lasted?
Now, the death of Big Solar may make way for local solar done better and cheaper by local installers. But don’t count out the grumpy old utilities just yet.
In fact, if they have their way, utilities might just become the new Big Solar. And that could cut into the business of local solar installers from a direction that they didn’t see coming.
Just take the example of my own boring old utility company here in Virginia, Dominion.
Of course, Virginia is a laggard state for residential solar, though a spate of recent utility-scale installations have pushed us up into SEIA’s Top 20 for installed solar capacity. On the residential side, we do much worse, largely because of the successful lobbying efforts of…get ready for it…Dominion.
For years, the company’s business was all about natural gas and nuclear. They rejected calls from ratepayers and green groups to do their own solar and pressured the state government to keep anybody else from doing solar either, maintaining various legal roadblocks to third-party installers.
Then, in the last year, mirabile dictu, Dominion apparently saw the solar light.
That is, their market forecasters finally figured out that, with the end of coal on the one hand and with solar getting competitive with natural gas on price on the other, the company couldn’t fight solar much longer. So, it became a case of if you can’t beat ’em, then join ’em.
And in keeping with Dominion’s historic arrogance, it’s clear that they’re not just planning to join the solar build-out. They plan to own the solar build-out.
For evidence, you could look at boring stuff like their recent green tariff filing. But a clearer image comes from their parent company’s rebranding effort, just announced a few days ago. See the graphic below for an example of the new imagery they’re using:
Let’s quickly analyze the visual. Of course, the green grass = green energy. And check out the new logo. It’s a PV panel, reflecting the blue sky of clean air from clean energy.
Here’s the message: Finally, a green utility outside of California or the Northeast.
A recent web ad (image to the right) sends the same message, that Dominion is now serious about solar.
But is it too green to be true?
Environmentalists who want the company to do even more solar might say that the company’s rebranding is all PR with very few megawatts of in-state clean power actually planned. The Sierra Club, for example, says that Dominion’s latest plans call for only 10% renewables in their power mix in the foreseeable future, though the PJM grid says it could handle up to 30% renewables.
Though they’ve fought solar for years, Dominion’s recent work installing large solar arrays in cornfields across Virginia makes me think that it’s not all just talk this time. I think Dominion is one utility that sees the writing on the wall. Their evil geniuses are smart enough to know that solar is coming whether they like it or not. It just took them awhile to convince the higher ups that solar wasn’t going away.
Now that the pro-solar Dominionators have clearly carried the day, then why not use their muscle-power not just to go solar, but to own solar?
Can you apply this to your local utility? In this discussion, can you replace Dominion with PG&E or Arizona Public Service or Con Edison?
Dominion’s in a regulated electricity market and the situation may be a little different in deregulated markets. But even where there’s competition, utilities are not just going to roll over and play dead as solar companies skim off their best residential customers. The utilities are going to try to retain ratepayers with their own solar offerings.
And some utilities are actually way ahead of someone like Dominion, who really just came into solar in the last year, kicking and screaming until about ten minutes ago but now trying to make it look like they always loved PV. But in California and the Northeast, you actually have utilities that have been pushing solar for years.
Good News for Utility Solar. Bad News for Rooftop Solar.
Utilities pushing themselves as the best choice for homeowners to go solar will mean fat contracts for the old boys club of utility-scale solar developers to deploy more 20 MW or 50 MW solar arrays.
But for the rest of the solar industry, especially local rooftop installers, utility solar could be bad news.
Utilities already have a relationship with homeowners. If those utilities can convince homeowners that just signing up for green power on their bill every month is a better deal — less hassle certainly — than paying some contractor to put PV panels up on their roof, then rooftop installers will lose many potential customers.
And then Big Solar could be back in the saddle, putting the local installer back on the defensive. But this time, the face of Big Solar will not be a peppy guy like Elon Musk. The face of Big Solar now will be the black helmet of Darth Vader, leading his utility stormtroopers in the latest installment of the The Empire Strikes Back.
The Death Star will sport PV panels, of course.
Local Solar Installers Must Make the Case for Rooftop Solar
What can local rooftop installers do to protect themselves from the threat of utilities eating their lunch?
First, if you’re not already part of a lobbying effort to make sure your state has good net metering and other public policy that creates a level playing field for rooftop solar, then join a group now. Your chapter of SEIA is a good place to start. Don’t let utilities get away with using their massive lobbying power in your state capital to unfairly promote their own solar offerings while killing the business model of rooftop installers.
Second, follow Pamela Cargill’s advice above to focus on good management of people and resources. For a little customized guidance, you might consider scheduling an hour of her time for a phone consultation on your business.
Third, come up with a message for homeowners that rooftop solar is better than solar through their utility. Whether it’s lower cost, energy independence, or bigger environmental benefit, make the case that rooftop solar is real solar while utility solar is, well, just another way for your utility to keep you from dumping them. If not actual greenwashing, then very light green at best.
Finally, communicate that message to your potential customers before the utility gets to them. Then, after the utility gets to them, keep sending the message that rooftop solar is better.
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— Erik Curren, Curren Media Group