What I learned About Solar Working at A Solar Company
A big part of my job as the Community Manager at a residential solar company has been learning everything I can about the solar industry. There are many things I already knew, things that anybody who is socially/environmentally conscious already knows (solar and other renewable energy is better for the environment than burning fossil fuels, climate change is scientifically proven etc..) That solar is “better for the planet” is taken as a given. Like any good startup, what we talk about is the business of solar. The industry. In trying to learn everything I can about solar, I’ve eavesdropped on water cooler conversations and asked impertinant questions. This is what I have learned from being inside the industry, what the people who know everything about it talk about when the customers aren’t listening.
PEOPLE DON’T REALLY CARE ABOUT THE ENVIRONMENT
Our market research has shown that “the environment” is second or third on most people’s list for why they go solar. People care about the environment, but not enough to make actual, real purchasing decisions for their home based on the environmental impact. At the end of the day it’s cost and pricing that matter the most. This is important because there may come a time, in the not so distant future, when the bottom falls out of solar financing and it’s no longer “$0 down, huge energy savings” to get a system. How will we get people to switch to home solar then? Nobody has a good answer right now — the focus is purely on who can get you the cheapest energy bill.
THERE IS A HUGE EARLY ADOPTER ADVANTAGE TO GOING SOLAR
For consumers, there are two key components to the financial benefit of switching to a solar system for your home. The savings come first in the form of a huge solar tax credit, and then in the form of lifetime savings on their energy bill.
This tax credit is based on legislation and a budget which is going to dramatically shrink in the next two years. In California, the California Solar Initiative incentivizes the installation of residential solar with a total budget of $2.167 billion between 2007 and 2016 and a goal to install approximately 1,940 MW of new solar generation capacity.
This piggybacks on federal legislation which provides a tax credit for 30% of the cost of your solar installation. In 2016, this tax credit will shrink to just 10%. The CSI budget will expire, and with the current dire financial state finances there are some who believe it will be renewed at a substantially lower rate.
Both pieces of legislation are based on laws that require utility providers to start generating a certain amount of power from “renewable sources.” This number is based on a percentage of the total energy usage, but it hovers somewhere around 30% of their total production and includes not just residential solar, but also large solar plants, wind, and hydro power.
From a business perspective, it makes some sense that energy companies decided to take advantage of homeowners and their roofs. Most residential solar is connected to the large, municipal power grid that your average utility user also utilizes. The main difference between a solar user and your average home is a system called “net-metering.”
Net Metering is pretty simple – instead of just monitoring the power you use, it also records the amount of power your solar panels are generating and putting back “onto the grid”. You get “credit” for what you generate, but pay for what you use.
Most people who go solar today, will end up saving on their energy costs because the Power Purchase Agreement (PPA) locks in a lower rate for the power you use than the power you generate. That difference in rates comes back to the homeowner in the form of credits on your bill.
But what happens when the electric companies hit their renewable energy quota? Think they’ll still be willing to buy your roof solar power for a higher rate and sell you power for a lower one? This deal is only going to be good for the people who help the energy companies fill that mandated quota… and if you’re not one of them, you might be out of luck.
NOBODY KNOWS WHO’S GOING TO MAINTAIN THE GRID
If you were paying attention, you might have noticed that I mentioned that the current residential solar installations essentially “plug into” the municipal grid. The power your panels generate needs to be processed and stored. Because of all these laws and regulations, the electric companies are letting solar companies use the grid — and eating the cost of maintaining it — for now. But what happens when they hit their mandated “renewable energy” quota? At some point, there will be a tipping point where putting solar homes onto the grid is not profitable for the power companies. The math is simple, the electric companies are both absorbing the cost of maintaining that grid and losing their profit margin on the solar homes. When this tipping point happens, homes who want to use solar will need their own power processing and storing facilities. They will not be allowed to just use the grid without any profit for the electric companies. Which means either solar savings will end or homes will need “solar batteries.” And who does batteries better than anybody else? Our friend Elon Musk. There’s a reason this guy is a visionary.
All these upstart solar companies that rely solely on selling people on the tax incentives and energy savings are going to need a new business model, new installers, a whole new strategy to maintain their survival. This will be solar startup armageddon.
The smart companies have a plan in place for what will happen when the entire industry changes in just two short years. The dumb ones will not survive.
If you’re thinking about solar for your home, don’t wait until “someday” — the cost and pricing are not going to get any better than they are right now. But choose your provider wisely, because like the solar savings, these companies may not be around forever.
