In the stage version of The Sound of Music, there is a song about the perils of romance among the affluent titled, “How Can Love Survive” – sadly it was cut for the movie. But I’ve always liked that song and I was reminded of it while reading a piece over at greentechsolar that debated the question: Will smaller solar installers survive? Lest you have any doubt where we come out in this debate, the answer is simple: heck yeah! But let’s see why…
The debate was held last week at the U.S. Solar Market Insight event in San Diego and was reported on by the always interesting Herman Trabish in a piece titled, “GTM Debate: Will Smaller Installers Survive in Tomorrow’s Solar Market?” (H/T solarwakeup.com) The debate featured Vivint Solar’s VP Thomas Plagemann squaring off against SunPower’s Residential Solar VP/General Manager Martin DeBono.
Plagemann’s comments reflect all of the arrogance and self-importance we have come to expect from such major players:
“In this business, we have to take three essential steps,” Plagemann said. “Find and acquire customers, design and install systems, and finance the systems.”
Financing has to come first, he explained. “A typical equity finance fund of $50 million, at $2.50 per watt and 5 kilowatts per system, means 4,000 systems. Using small installers to get that scale cedes control.”
Vivint has installed home security systems nationally for twenty years and keeps that control. “We acquire customers. That’s what we do. We took that customer acquisition engine and applied it to solar. Our success in the last twelve months is the answer to this debate.”
We note that Vivint has mostly done its work outside of the California market, so that $2.50/Watt number is not reflective of their presence in our fair state. Indeed, when we last looked at CSI data for the first half of 2013, Vivint did not even crack our list of the top 16 installers. Here’s that graph:
But even if they aren’t (yet) big in CA, is there any doubt that you could have gotten the same response from someone at SolarCity? Their goal is to make solar a commodity with a standard set of offerings - if your roof fits into that model (and your FICO score is high enough) - you are golden. Just don’t look for any real care and attention to detail.
Speaking for the little guy was DeBono from SunPower (with just a little irony given the size of SunPower). He noted that:
“Small business is the second most popular institution in the U.S., after the military,” he said. People want to buy from small businesses.” In the home building industry, 40 percent of new homes are built by large national builders, but 60 percent are built by small local builders. Solar installation will break out the same way, he said.
“Large solar installers can leverage the advantage of scale as long as everything is uniform,” he argued, “but variance is the rule in solar, and variance is anathema to scale. For customers that don’t fit into a box, local installers are the answer. Variance will cap the rise of national installers.”
DeBono went on to note that forming a partnership with SunPower provides installers with leverage and a national brand.
We agree that establishing partnerships is essential, though we might question the degree to which SunPower is a national brand in the way that matters most - consumer consciousness. Toward that end, we believe that partnering with a company like LG Electronics - which truly is a national brand and has the ad budget to prove it - makes more sense for small installers. But how do you get access to the other essentials of the business?
Run on Sun has been exceptionally fortunate to have partnered with Focused Energy, who is much more than a premier distributor. They have not only been our primary supplier since we first connected a few years ago, but they have offered us support, flexibility and insight that has made them an essential part of our success. If you run a small solar business and you haven’t connected with them yet, we would encourage you to check them out.
As we have said many times, solar has to be more than just another business. We have to be better. At the end of the day, that is why the small installers will survive: because we care more, and that translates into greater value for our clients.
Bonus for sticking around to the end:
Years ago, Archie Bunker - of All in the Family fame - would look over at his daughter and son-in-law locked in an amorous embrace and bemoan, “Aw geez, they’re at it again!” Well, a recent Fox News story attacking solar has us feeling Archie’s pain.
It seems that every story ever aired by those who support the fossil fuel industry will inevitably tie any solar company to Solyndra - regardless of how unrelated the two may be. Case in point is this Fox story about questions being raised about SolarCity and its financial dealings, bearing the circuitous title: Solar firm linked to Obama donors could be ‘next Solyndra,’ top GOP Sen. warns. Wow - how about that for connecting some dots - SolarCity, linked to Obama, linked to Solyndra - a trifecta of irrelevance! (In an interesting tell, it turns out the story is filed under “Politics” which probably tells you all you need to know.)
What is this really about? It turns out that Senator Jeff Sessions (R-AL), ranking Republican on the Senate Banking committee, sent a letter on Monday to Treasury Secretary Lew, asking some pointed questions about how SolarCity determines the value of its systems for the purpose of claiming the 30% federal investment tax credit. Fair enough, as far as that goes, since many in the industry have raised questions about SolarCity’s practices in that regard. (Anyone who follows this blog knows that we have expressed our own concerns going back several years including this piece from 2011 and this one from 2012.) But it is the spurious - and frankly quite tortured - connections to Obama and Solyndra that are most annoying.
First of all, as SolarCity itself was quick to point out, Solyndra failed because it bet that high silicon prices would make solar panels that were dependent on large amounts of silicon ever more expensive. Their design required less silicon to produce comparable power output - a clever idea if the premise were to hold true. But it didn’t - silicon prices plunged and panel prices followed. Suddenly Solyndra’s products found themselves priced out of the market and the company failed. As we have noted before, smart investors with political leanings on both sides of the aisle backed Solyndra. Yet it is that very drop in prices for solar panels that has fueled the growth of the installation industry - and SolarCity with it. Say what you will about Solyndra, but what pushed them out the door has propelled SolarCity to dramatic growth in its stock price since the start of the year, nearly quadrupling from $12 in January to $47 as this is being written.
Second, the assertion that SolarCity has lost millions despite receiving tax credits represents two accurate statements that have nothing to do with each other. They are placed together simply to suggest some sinister linkage in the reader’s mind. SolarCity has lost money, like many other start-ups do, while it expands its business model. Part of that model is installing solar systems and then receiving the investment tax credit - just like everyone else who installs a solar power system does. There’s just nothing sinister there. It is the equivalent to saying that they have lost a lot of money, despite their customers having paid them millions. This is nothing more than the difference between revenue and profit.
Will SolarCity ever turn a profit? Not at all clear, but then, lots of savvy investors think that is a bet worth making.
Finally, the reference to “Obama donors” is just plain silly. For example, the Fox article asserts that Elon Musk - Chairman of the Board at SolarCity - donated $750 to Obama’s first presidential campaign. Really? Seems like awfully small potatoes for a man with Musk’s money. And of course, it isn’t accurate at all. According to the brilliant Open Secrets website operated by the Center for Responsive Politics, Mr. Musk has donated freely to both political parties, with donations of $212,750 to Democrats and $211,500 to Republicans going back to 2003. From what we can see, he actually donated $7,300 to President Obama, but he also gave $2,000 to President George W. Bush and $5,200 to Senator Lindsey Graham. (Perhaps he should have donated something to Senator Sessions!) Far and away his largest contribution total is to the National Republican Congressional Committee - $150,900 since 2003 with $32,400 just this year. Seems unlikely that he made those contributions at President Obama’s behest, but Fox can’t be bothered to tell people that.
No, this is nothing more than Fox News trying to push as many buttons as it can with its base and using Sessions’ letter to attack, yet again, the value of solar energy to this country and the world. The public deserves better.
We saw two news reports about an impressive, 2.3 MW solar array powered by Enphase Microinverters - one at the Enphase Blog and the other over at Renewable Energy World. Interestingly, the two stories had somewhat different spins. Here’s our take.
First, and not surprisingly, the folks at Enphase are rightfully crowing over this development, and why shouldn’t they? An installation this large - the biggest PV project so far under the Ontario (Canada) feed-in tariff program - would be a feather in the cap of any inverter manufacturer. But for a microinverter company, a project of this size is huge as it shatters the ceiling on appropriate system size for microinverter projects.
Enphase notes that the usual drivers for microinverter adoption - increased yield in shade conditions, safety given the lack of energized DC runs and enhanced monitoring - all played a role in the decision to use microinverters on this project.
Meanwhile over at REW, the spin is a bit different with much of the piece - Microinverters Make a Move on Multi-MW Solar Power Installations by Tildy Bayer - devoted to discussing an analysis of the market for microinverters by IHS Research. It is that analysis that we found puzzling.
Take this excerpt for example:
The U.S. accounted for nearly 75 percent of [microinverter] shipments IHS recorded prior to 2013, but in many states the residential market for microinverters is approaching saturation. It will be increasingly important, said Gilligan, that microinverters are used by the third-party/solar lease companies which are very active in the country. While solar lease companies such as Vivint Solar and Sunrun have used microinverters in limited numbers, other large companies like SolarCity have preferred to stick with string inverters as the more proven technology, he said. IHS does forecast that microinverters will be used in greater numbers by solar lease suppliers in the coming years as the technology improves and new models are released.
Really? What states would that be? Certainly not in market-leader California where sales of Enphase microinverters are growing rapidly and show no signs of slowing down, let alone saturation. Indeed, our analysis of the commercial inverter market here in Southern California showed Enphase in the No. 1 spot, increasing its market share by 9% year-over-year. We should all be so saturated.
And does anyone really believe that SolarCity has avoided Enphase because they aren’t the “proven technology” - or is it simply that they can get lower prices by going with string inverters?
If SolarCity wanted to install products based on the quality of the technology, they would be using Unirac Solarmount Evolution for their racking, LG solar modules - and they would be using Enphase microinverters. But then they wouldn’t be SolarCity - they would be Run on Sun.
The first half of the year is in the books which means that it is time for one of our perennial favorite posts - our analysis of the State of Solar in California based on the CSI data. Here’s a teaser…
We will kick off the series tomorrow documenting our methodology for analyzing the CSI data, and identifying some key trends about the number of projects, the cost of those projects, and how project size influences project cost.
Then on Monday we will continue with an assessment of Who’s Hot and Who’s Not - manufacturers and installation companies alike.
That will invariably lead to our third - and most popular - installment on Tuesday about the Outliers and Oddities in the industry. Will long time champs Galkos Construction and SolarCity continue to dominate this closely contested category - or will some unexpected player suddenly jump out of the data and into infamy?
It promises to be an informative - and irreverent - take on the State of Solar 2013. You won’t want to miss it!
Oh, and if there is something you want us to include in our analysis, please mention it in the comments and we will try to work it in.
If the California Public Utilities Commission (CPUC) has its way, investor-owned utilities (IOUs) around the state will have a mandate to acquire 1,325 MW of storage capacity by 2020 as part of the plan to have one-third of all electricity come from renewable sources, according to a report from Bloomberg.
The CPUC’s proposed ruling would allow IOUs to acquire energy storage as part of the “general rate case” process by which utilities build infrastructure and pass the cost on to their rate payers.
Energy storage is widely viewed as a critical piece of adding more renewable sources to the grid, given its ability to smooth out the peaks and valleys that come with renewable sources like solar PV and wind. Possible storage technologies include lithium-ion batteries and even molten salt to store heat to later run a turbine to produce electricity. Cost of this exercise? As much as $3 billion, or $2.26/Watt.
The proposed rule making is the result of legislation, AB 2514, by our old friend Nancy Skinner, and it is evident that the CPUC “gets it":
Energy storage has the potential to transform how the California electric system is conceived, designed, and operated. In so doing, energy storage has the potential to offer services needed as California seeks to maximize the value of its generation and transmission investments: optimizing the grid to avoid or defer investments in new fossil fuel-powered plants, integrating renewable power, and minimizing greenhouse gas emissions.
The proposal allocates portions of the 1,325 total to each IOU with SCE targeted to procure 580 MW of storage, of which 80 MW should be customer side, as opposed to transmission or distribution connected.
A final adoption of storage targets is due in October.
Meanwhile, in a separate but related announcement, SolarCity made some news when it disclosed that it intends to incorporate a storage offering by 2015 that would serve customers without net metering. In other words, the storage system would be capable of storing any excess energy created by the solar power system and then feeding it back to local loads without ever sending any energy back onto the grid. If such a system could be deployed in a cost-effective manner, it would eviscerate the utility’s “fairness” argument in opposing the additional penetration of solar.
But can it be cost-effective? SolarCity is hoping that its partnership with Tesla Motors will enable it to procure battery packs at a low enough cost to succeed in this new arena.
Of course, a successful energy storage system is more than just batteries, and as we head to Intersolar in a little over a week, a great deal of attention there will be devoted to the energy storage realm. We will be there and will report back after the show.
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