Residential solar installation industry: Major short-term threat and long-term challenge

The U.S. residential solar industry has experienced phenomenal growth on the back of fast decreasing solar panel costs and solar-friendly incentives and regulations, both at the local and federal levels. For this trend to continue one major short-term threat needs to be avoided while another long-term challenge needs to be overcome.

On the short-term: Solar Trade Case

There is one major threat looming over the U.S. residential solar installation business which has the potential to effectively reverse the upward market trend seen so far. The U.S. International Trade Commission (ITC) is currently expected to decide on a trade dispute case involving two bankrupt U.S. solar panel manufacturing companies. The original petitioner Suniva, joined later by SolarWorld, argue that they have been “seriously injured” by imports. They propose a blanket tariff on all foreign made solar cells and modules. What they propose are duties of 40 cents per watt on imported cells and a floor price of 78 cents per watt on modules. This is to be compared to some ~30-40 cents per watt for current module pricing. The petition could result in doubling or tripling the cost of solar panels used in residential solar. A cost of $3 per watt for a roof-top installation could easily become $3.8 per watt, an increase of 27% that rooftop-installers will have to pass to customers! If the U.S. ITC agrees with the petitioners, it will be up to President Donald Trump to decide on what the remedy should be. Unsurprisingly, the U.S. Solar Energy Industry Association (SEIA) and related industries have expressed their strong objection. Nevertheless, it will probably take an outrage at a much larger scale to protect the U.S. residential solar installation industry.  The decision of the ITC is expected to be announced around the end of September.

On the long-term: Customer Acquisition

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Although hardware costs of rooftop solar systems have been coming down steadily, soft-costs, especially customer acquisition costs have been stubbornly high. In some cases, they have been increasing. This could be attributed to many reasons such as non-optimal business models, rush for market share at the expense of profitability, capital intensive sales approaches etc. Debates (or non-debates depending on how you see them) whether climate change is happening or whether solar can save you money have created psychological barriers to the expansion of solar which in-turn make customer acquisition even trickier. Add to that unsatisfied solar adopters who didn’t see the expected savings from their solar installation due to high system cost, poor installation practices or poorly performing panels are warning friends, family and neighbors from going solar. Besides these unfortunate experiences and some ideological barriers, incumbent industries such as utilities have also fought hard to resist rooftop solar regulations and incentives every step of the way. When all these challenges are combined with self-inflicted wounds where major residential solar players are pushing customers towards financial or hardware choices that benefit their business’s short term goals at the expense of their customers best interest, it is hardly surprising that customer acquisition costs remain high.

If the residential solar installation industry is to avoid any short-term threat and overcome persistent challenges, it will need to do some soul searching and connect back to the original noble vision of a better world, that has prompted so many early adopters to go solar. Unless, the solar industry maintains its reputation as vanguard in the fight against climate change and unfair business practices, it will not keep the overwhelming popular support it has been enjoying. The winner solar companies of the future will be those understanding this reality today and adapting, quickly.

Andenet Alemu, PhD

Senior Solar Consultant, PMax Solar Inc.


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