Rollercoaster year for U.S. residential solar segment

From pv magazine 11-2023

pv magazine: How would you describe the residential solar market segment in 2023?

Ethan Miller: I have been in this business for a couple of decades and this has been one of the most dynamic years that I have seen. There is a confluence of factors, such as the [Californian net-metering regime] NEM 2.0 sunset leading to a surge in installation and then the introduction of NEM 3.0, combined with climbing interest rates causing a slowdown. In addition, as the industry evolves nationwide, the value proposition of solar is changing throughout the country and is requiring a lot of adaptation throughout the entire value chain. At the same time, there is a long-term positive outlook with the Inflation Reduction Act providing the industry with strong tailwinds.

What can you tell me about the installation surge?

There was a big run-up in California that saw more contracts closed in the first four months of the year than would typically be completed in an entire year. But now there is a big reset period to get engagement, articulate the new value proposition, and to ensure equipment, technology, and software can support that. It was positive that we had the run-up in the first four months. Now it is important that companies can adapt so that they have the momentum to carry them through this transition.

Can you provide expectations for volume in the United States distributed market segment?

As the entire residential market has experienced, there has been a downturn in the second half of the year and almost every company has revised their outlook, and not upwards. That has the potential to sit with us for the first quarter or two of next year, and then the market could see a reset and start growing significantly again.

What about for Powur? What has been the trend for your business?

We are on a similar trajectory. We were successful in building up the Californian pipeline. In other markets we continue to see great business success, especially where there have been no major changes to net metering.

This rollercoaster of California, Texas, and Florida – which are the country’s largest markets – affects the success of the entire industry, including us. Luckily, our platform model is very elastic and allows us to get through this with a lot more grace than other companies.

With NEM 3.0, and in light of California having an outsized impact on the national market, there could be an uptick of residential energy storage. Is that your expectation?

These expectations are predominantly appropriate. The long view of what NEM 3.0 is doing is that it is pushing installations towards being 80% completed with storage attached – which is up from sub-20%, historically, in California.

At the end of the day that is prompting more investment in energy storage technology. There used to be just a couple of options available and now we have a lot more. This will exert downward pressure on prices. That shift is a great thing for the bigger picture. Every homeowner will ultimately want a battery – it is just a case of whether they can afford it.

Powur is playing what I feel is an interesting role, which is the professionalization of the distributed market segment – one that was populated by small, often family-run companies. There are a few models emerging, solar leasing itself is well established but some other companies that are acquiring smaller installers are trying to build them into a portfolio. Why is it that you think Powur’s model – as a service provider to support distributed solar companies – is an attractive one?

Solar has to achieve scale in all 50 states, all of which are very different solar markets. It is one of the most complex trades – dealing with rooftop work, electrical work – you are in someone’s home. I can’t think of one vertically integrated contractor that has been successful in solar on a national level.

Because of this complexity, it is going to take a partnership model that combines local knowledge backed by national expertise. It is too difficult to service all 50 states and every county with a vertically integrated approach and model. That’s because some services need to be customized to meet the local and individual needs while other aspects need to be standardized and scalable to ensure quality and speed.

That’s where Powur comes in. We try to bring to the table consistent design, quality, proposal tools that estimate production accurately while also staying agile at the local level. Our quality assurance and project management programs ensure that our local installation partners are doing it right every time.

Ideally this model will professionalize the industry in an elastic way that can flex up and down. This becomes even more important because we are nowhere close to a nice, stable market with national energy policies. There are going to be markets that pop up, go away, and if we can bring that professionalism to the table in a flexible way, then that is a good thing.