The last mile in the residential solar market is actually sticking those panels on your rooftop. Sounds simple enough, but as the CEO of SunPower, Tom Werner, noted at a cleantech conference this morning, “50 percent of the cost of a residential system is in the installation.” While that bloated cost is a barrier to putting solar on homes, it’s creating opportunities for a variety of solar installer startups to work on new ways to cut costs to compete in the growing residential solar market.
The CEOs of three solar installer companies that tackle the residential market — SolarCity, groSolar and Akeena Solar — talked about the growth opportunities and risks on a panel discussion at the ThinkGreen cleantech conference Wednesday morning. For one, venture money is flowing into solar installer startups coffers. groSolar CEO Jeff Wolfe announced on the panel that the company had just closed a $10 million round of Series B funding led by NGP Energy Technology Partners. And SolarCity has raised over $31 million from Draper Fisher Jurvetson, JP Morgan and Elon Musk.
The venture investors are looking to meet the growing demand for solar-covered rooftops, for both residential and commercial buildings. According to solar provider Recurrent Energy’s estimates, between institutional owners and publicly owned real estate there are enough rooftops for 40,000 MW of solar power. Already startups like groSolar are seeing some impressive early revenue growth — from $11.4 million in 2006 to $27 million in 2007, with $60 million forecast for 2008. And cities like Berkeley, Calif., are working on creative ways to help less well-off residents fund home installations.
But as the CEOs on the panel noted, the residential solar sector is an area with a great deal of risk — individual deals are small and require a lot of work. And building trust with the consumer is both time- and labor-intensive. It’s one reason why these companies are trying so hard to establish a recognizable brand.
Residential solar also has highly uncertain profit margins. When moderator Shez Bandukwala of ThinkEquity Partners asked what those margins would be in the installation business, Akeena Solar CEO Barry Cinnamon dodged the question for a bit before estimating “5 to 15 [percent] for commercial and 15 to 25, maybe 30, for residential.”
Obviously “being green” doesn’t justify the installation for these folks. So what’s the best way to cut the cost of installation? The companies have different approaches. Solar City is working on bulk, community contracts, which can reduce the cost of individual transactions. CEO Lyndon Rive explained that SolarCity works with entire communities who have come together to “go solar.” In one community-wide transaction, Solar City makes an agreement with a number of homeowners and can make multiple installations in one deal.
Akeena, compares itself to Starbucks, saying that it’s trying to be the most visible solar company out there. Through streamlining its business model, centralizing the bulk of the business and only having local sales and installation teams, it hopes it can drop a substantial amount of cost. We’re not sure the comparison to the coffee market is that apt, but smart Starbucks-style consumer branding can’t hurt. The company, founded in 2001, went public via a reverse merger in August of 2006.
groSolar, based in not-so-sunny White River Junction, Vt., is in the northeast away from California’s solar incentives and stiff competition. groSolar’s CEO Jeff Wolfe says that their competitors aren’t utilities or other solar companies but rather granite countertops, pool installations, and luxury home improvements.