Residential Solar Is Truly In A Buyers Market
Back in March, residential solar platform Sungevity filed for bankruptcy, adding to the list of troubled companies in the solar industry. The company was touted as having an asset-light model relative to competitors, but never gained significant market share. Last year, the company planned to go public through a special-purpose acquisition vehicle (SPAC or blank check company), but the transaction was cancelled. In January, the company had cut 100 staff and last week cut another 400 in advance of the bankruptcy filing. Here is a summary of companies that have faced a similar fate:
- Verengo Solar: Filed for bankruptcy in November of 2016 and sold assets to Crius Energy for $11 million. Verengo’s headcount reached 1,000 in 2013 and it was one of the top residential solar installers. The company’s troubles may have begun as early as 2014 when it reportedly attempted a sale.
- NRG Home Solar: In May 2014, NRG had acquired Roof Diagnostics, one of the largest residential solar companies in the U.S. at the time with nearly 500 employees. After several restructuring attempts, the company finally shutdown the majority of its solar operations.
- OneRoof Energy: In July 2016, OneRoof announced that it was winding down its solar operations after a change in strategy in May of 2016. The company had announced its “Solar 2.0” strategy in which it moved away from traditional direct sales in favor of a channel strategy. In March, the company announced the sale of residential solar assets to Greenbacker Residential Solar for $8 million in cash. OneRoof Energy was backed by Black Coral Capital.
- Tesla/SolarCity: The company announced in a Q4 shareholder letter that it will be reducing customer acquisition spend and shifting from leases to purchases (a broader market trend).
- Enphase Energy: Enphase announced a strategic investment in early 2017 and a strategy change. The company’s stock has dropped from $15 in mid-2015 to $1.28 currently.
These companies have been impacted in part by a slowdown in large residential solar markets, including California and New York in 2016, which may be due to high penetration. In January 2017 in California residential solar permits fell an estimated 40%, which was likely due to a combination of market forces and record rain throughout California.
Opportunity for Consumers
“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” – Warren Buffett
The turmoil in the residential solar market has presented a buying opportunity for consumers, as solar prices (defined as the lower quartile of the distribution curve) declined to approximately $3.00/watt depending on system sizes. The price decline is a result of an increase in supply in the module market and increasing installer competition, as illustrated by the events listed above. At these prices, solar can make an attractive investment in many states with cash returns exceeding 15% in New York, California and Massachusetts. With the S&P reaching record highs, a solar system could be a very attractive investment relative to common stocks in the next 12-18 months.
NREL Reveals How Solar Policy Affects U.S. Solar Market
The Energy Department's National Renewable Energy Laboratory (NREL) has published a report that aligns solar policy and market success with state demographics. By organizing the 48 contiguous states into four peer groups based on shared non-policy characteristics, the NREL research team was able to contextualize the impact of various solar policies on photovoltaic (PV) installations.
"Although it is widely accepted that solar policies drive market development, there has not been a clear understanding of which policies work in which context," lead author Darlene Steward said. "This study provides much-needed insight into the policy scope and quality that is needed to spur solar PV markets across the United States."
The report, "The Effectiveness of State-Level Policies on Solar Market Development in Different State ContextsPDF," includes statistical and empirical analyses to assess policy impacts in different situations. In addition, four case histories augment the quantitative analytics within each state grouping, specifically:
- Expected leaders. In Maryland, a comprehensive policy portfolio with equal emphasis on all policy types is driving recent market development.
- Rooftop rich. In North Carolina, strong interest in clean energy-related policy distinguishes it from other states.
- Motivated buyers. Delaware's experience illustrates how targeted market preparation and creation policies can effectively stimulate markets.
- Mixed. In New Mexico, the leading state for installed capacity in its peer group, policy diversity and strategic implementation have proven to be critical in effectively supporting the market.
The analysis shows that the effectiveness of solar policy is influenced by demographic factors such as median household income, solar resource availability, electricity prices, and community interest in renewable energy. The data also show that it’s the number and the make-up of the policies that spur solar PV markets. Follow-on research expected for release this summer identifies the most effective policy development strategies for each state context and provides strategies for states to take action.
As part of a larger effort to determine the most successful policy strategies for state governments, this report builds on previous research investigating the effect of the order in which policies are implemented. The policy stacking theory, which is outlined in the "Strategic Sequencing for State Distributed PV PoliciesPDF" report, aims to draw private investors to develop PV markets.
This body of work is supported by the Energy Department's SunShot Initiative, which is a national effort to make solar energy cost-competitive with traditional energy sources by the end of the decade. Through SunShot, the Energy Department supports private companies, universities, and national laboratories working to drive down the cost of solar electricity to $0.06 per kilowatt-hour.
Unknown to the writer of this article is the fact that the Solar Buyers Club in Sarasota Florida is promoting $1.86 per watt which has now undercut the entire industry. If you are considering a solar installation, there is no better option on the table. Especially in Florida... Solar Buyers Club