Will smaller installers survive in tomorrow’s solar market? Moderator Shayle Kann of GTM Research posed that question to open a debate at the U.S. Solar Market Insight Conference.
Pitching for the larger companies was Thomas Plagemann of Vivint Solar, which in just a couple years has catapulted to second place in the U.S. in terms of size. His position: Scale will give larger companies an advantage. We’re talking a big advantage when it comes to financing, one of the peskiest issues in solar. Financing, Plagemann believes, should follow customer acquisition and system design, but many installers are tackling it first. Not having to do that, he feels, will be a bonus for larger companies.
A larger company can also use an integrated model that allows for best practices and standardization. That includes standardizing customer acquisition. Vivint has been in the business of home security systems for 20 years, so they already know how to acquire customers -- and that’s something they can scale.
Martin DeBono of SunPower went to bat for smaller installers, arguing that they’ll prevail because “small businesses are the second-most respected institutions in the U.S., after the military.” He pointed out that about 40% of new home starts come from national builders, 60% from smaller, local ones. “That will also play out in solar,” he said.
While he acknowledged that larger companies do have some advantages in terms of scale, he said that only works in “very standard” situations. Add the complexity of multiple roof types and shading issues, HOAs, or customer preferences, and you have a whole new ballgame. For those customers, the local installer will always have the advantage. The variance between customers is big enough that it would be too expensive to standardize for many of them -- which will cap the rise of national installers.
But Plagemann asked, “Do you want to buy your system from a small shop or a full-service provider?” He did acknowledge that Vivint has stressed simplicity and repeatability to keep their costs low, and will even turn down customers who don’t fit their model. But their ability to deal with variances will increase as they grow, he said.
DeBono noted some additional advantages to being small. The barrier to entry is fairly low in the industry, he said, allowing smaller players to get in easily. And local installers often get into the business because of their passion for solar and their desire to change the world. That means they’re willing to accept a lower return than larger players.
Plagemann, however, asserted that the companies who excel are those who control the whole value chain. While it’s true that a lot of new players will pop up, he said, “Guys with scale typically survive.” In a capital-intensive, business like solar, “Scale will be the best ally in the long run.”
However, he said, in the foreseeable future there’s “enough white space” for a lot of models. “Who are we competing with?” he asked. “Not against each other but against utility rates. It will be really something when I can’t get business because he’s taking it away from me.”
And there you have the answer to the question, Who was the winner in this debate? It seems the future holds room for installers of all stripes, and companies both large and small. One thing we can all agree on is that the winner should be solar power.