The extraordinarily strong growth of the grid connected application officially began in 1997, when the German 100,000 Solar Roof Program and zero interest financing, Japan’s residential rooftop rebate and subsidy and California’s rebate drove industry drove 234% growth over 1996 to >39-MWp. Multi-gigawatt demand for grid connected installations over the past 10 years (2004 – 2014) is a direct result of the EU feed-in-tariff model and subsequent FiT-like incentives. The FiT incentive model is also directly responsible for driving the success of the multi-megawatt (utility scale in the US, solar farms in Europe) sub-segment of the commercial application. Without large investor interest, the multi-megawatt installation segment would not have proliferated to the point that the industry is dominated by it.

In the beginning, the FiT gave investors the expectation of a stable, reliable, return on investment for ~20 years. Unfortunately, though the market reaction to this generous incentive should have been expected, it was not. Initially, the FiT was envisioned as a driver for distributed generation solar. For better or worse installations in FiT-countries was almost immediately dominated by multi-megawatt installations. The popularity of this incentive led to investment in solar manu-facturing capacity and created a significant number of jobs. Incentives must also be supported, and the expense of supporting gigawatts of recently installed solar has led to abrupt changes in program design, or, cessation of these programs, and much lower incentive rates. As a result, the FiT is no longer seen as an unchangeable, government promise, and investor confidence in this investment vehicle has been shaken.

The FiT is slowly though dramatically (for participants) being replaced by bidding processes to set the rates at which electricity is sold. Unfortunately, bidding processes are typically rife with par-ties that underbid, and the very process of underbidding (even the awareness of the possibility of it) tends to influence all parties in the exercise. As these low bids are seen as reflective of the true cost of installation (including labor), the process tends to hold margins for all participants hostage to expectations of ever lower bids. The price paid for tight margins may well be the quality control function at all points along the value chain and ironically, this may lead to less productive (in terms of kilowatts out) installations.

Unlike other low incentive periods the photovoltaic industry is hampered by significantly high levels of manufacturing capacity and government intervention, which has taken the shape of quotas, price floors and tariffs on modules from China and Taiwan. This government intervention was an attempt to right size domestic content, however, as >70% of manufacturing capacity resides in China and Taiwan, the result is the illusion of a supply constrained industry. This illusory supply constraint is leading to higher prices for module products, which, while a welcome change from previous low margins, has not been corrective, and instead is driving margin pressure for demand side participants (installers, system integrators, EPC, et al).

The grid-connected photovoltaic industry has starkly divided itself into the multi-megawatt (utility scale) applications with installations that are removed from the load and rates are set by bid, distributed generation residential and commercial systems (roof and ground) visible to the populations that are served, and off grid installations, in specific, remote habitation and remote industrial. Multi-megawatt (utility scale) installations effectively commoditize the electricity sold and it is very hard to climb back up that slippery slope, it is difficult to feel a personal attachment to a commodity. DG (distributed generation) residential and commercial installations, near the load and either owned or leased involve the community in its energy present and future and are typically not commodities. Unfortunately, the residential lease and power selling (PPA) business models are contributing to the commoditization of photovoltaic systems by removing the need for the end user, on whose house the PV system is installed, to participate in, understand and be responsible for the electricity generating equipment on their roof. Off grid installation also involve the served communities and are not commodities.

 When I was a ten years old, summers meant long lazy and sometimes boring days with nothing to do but explore, read and get into unscheduled adventures.  Things have changed since then, and if I were a kid today I would be driven from activity to activity with little time left over for where boredom might lead me.  I’m in favor of a little unscheduled boredom from time to time as well as for the adventures and misadventures that can arise from ennui (a lovely word for boredom). 

We did not have air-conditioning when I grew up in Hayward, California, a smallish bedroom community in the East Bay Area.  So, with my father away at work in San Francisco from early morning to dinnertime and my mother cleaning, napping, shopping or insisting that I get some reading done in advance of school in the fall, I was relatively free to wander around unencumbered.

These were still the days when kid gangs were free to spring up all over the neighborhood and where popularity was both defined and amorphous.  We formed small and sometimes cruel archetypes of adulthood where one week you were in the group and the next you were suddenly adrift, culled out from the herd by that week’s leader. 

During my weeks as the outsider I alternated between reading in the back yard of our small house on Regal Avenue (when my mother chased me out of my bedroom to get some fresh air) and a game that I believed was my own invention: the penny hike. 

The rules of the penny hike were simple.  I walked out my front door and flipped a penny, heads I turned left, tails I turned right.  At each corner I flipped the coin again.  After a few hikes I began carrying paper and a pencil in the pocket of my shorts and writing down how many times the coin came up heads and how many times it came up tails and therefore how many rights and lefts I took.  I noted how many times I ended up circling the block and how many blocks I ended up traveling until the penny arbitrarily led me home. Sometimes I was gone all day and in those glorious unencumbered, long, hot boring days of summer no one was particularly worried unless I missed lunch or dinner.  As my mother’s choice of lunch was usually the dreaded pimento cheese sandwich on white bread and a Twinkie (I preferred Hostess Chocolate Cupcakes) I generally preferred the punishment to lunch, particularly as punishment meant staying in my room and reading a book. 

Towards the end of my first penny hike summer, well before teenage-hood, a longing for boys and a wish to leap over adolescence headlong into adulthood took over, I had a notebook filled with penny-patterns, which I tried to interpret.  I became fascinated with where chance would lead me. How many times would I arrive home faster than I anticipated, after which the rules of penny hike demanded that I stay at home reading. How many times would I get lost and how many times would I discover something interesting when I did get lost?  My notebook was filled with patterns that I was fascinated with but could not decipher. 

My mother never asked me what I did on my long days wandering the neighborhood, but in those days mothers did not ask those sorts of things being happy to have their children out from underfoot for several hours a day.  My only obligation in those years was to take swimming lessons for two weeks at the beginning of the summer so that I would know how to swim in case, as my father said, I ever fell into the ocean and no one heard me screaming for help.  Despite the odds against this ever happening in landlocked Hayward, I took swimming lessons very seriously and dutifully walked the ten blocks to the high school pool where they took place wearing my one piece blue bathing suit, carrying my towel and wearing the ever-embarrassing white bathing cap with my long brown hair shoved up inside of it. 

I sometimes managed to sneak in a penny hike after swim lessons by inventing a rule; if a penny were discovered on the sidewalk on the way home I was required to begin a penny hike with it.  As this happened more often that I would have anticipated I began noting the times a penny was discovered on my walk home on my pad of paper. 

As fall and thus the beginning of school approached that first penny hike summer I became bored with the aimless and self-imposed rules and began fudging the results of the coin flip.  If something interesting beckoned from the right and the penny directed me to go left, I would continue to flip the coin until it agreed with my choice.  I dutifully entered these altered outcomes in my notebook, including how many times I needed to flip the coin until my preferred direction was presented. 

The summer I was ten years old was the summer I fell in love with research, though I did not know it at the time.  I did not realize that I was observing chance, as well as observing the effect of bias on the outcome of an experiment. This observance of bias at an early stage in my life helped make me stalwart in the pursuit of neutrality.

I do know that those long, lazy, hot, sticky, mostly unsupervised summers unencumbered with schedules (other than swim lessons) led my imagination to invent the penny hike game and allowed me time to follow it wherever it might lead also leading to a lifelong love of exploration for exploration’s sake.  More than the kid-gangs, games of tag, hide and go seek, visits to the dime store with my weekly allowance, ad hoc clubs, mischief, alternating best friends and crushes on this or that boy, I remember the penny hike game and long for its simplicity.

The summer I was ten years old was the first time I practiced pure research, learned to love exploration, observe trends, statistics and sought to understand it all.  Even today when I need to remind myself about the joy of research for the sake of discovery as well as reminding myself of the dangers of bias, I dig out my old penny hike notebooks and observe the trends in the data.

More important, the solar industry should make sure they know what questions to ask.

Homeowners choosing to either buy lease or buy power generated from a solar system on their roof are doing a valuable environmental service as well as ensuring themselves against long term electricity rate volatility.  You will be installing the means of electricity production on your roof and you should educate yourself before you do so.  Here are more than a few suggestions for questions you should ask before you take the leap into generating your own electricity.

Homework before you buy lease or sign a contract to buy power.

  1. Before you buy, lease or sign a contract to buy power: Do an audit of your annual electricity usage (your utility will have the records). 
  2. Before you buy, lease or sign a contract to buy power: Know what you are paying on average per kilowatt hour (your tier if applicable).
  3. Have your own energy audit and make changes. 
  4. After your audit wait six months and see the difference in your electricity usage.
  5. Have your roof inspected.
  6. Have your electrical inspected.
  7. Do your research on installers/companies in your area and read up on solar – Home Power Magazine is an excellent resource.
  8. Understand the basics of what to expect from solar as well as the terminology (see number 7 for a resource).
  9. Call a few real estate agents and ask if owning a solar system is an asset or a liability and if the same holds true for leasing or buying electricity from a system that is on your roof and that you do not own.

Questions potential residential solar system buyers/lessees as well as those buying the energy they use (Power Purchase) should ask:

  1. For the sales person/installer/company: how long have you been in solar and how many systems have you installed?
  2. May I see a sample of your customer reviews both positive and negative?
  3. What incentives are available for me?
  4. What financing is available for me?
  5. What is the local net metering policy and how will this affect me?
  6. How long on average will it take to install my system?
  7. What are the typical causes of delay?
  8. If there are delays caused by the utility or permitting delays who will resolve them and what is the typical time to do so?
  9. What technologies (modules and inverter) will you be using?
  10. May I know the warranty policies of these companies?
  11. May I know the financial health (ability to stand behind the warranty) of these companies?
  12. May I see ratings of these technologies (failures in the field)?
  13. What is the mean time to failure of the inverter?
  14. What are the odds that I will have to replace the inverter over the next 20 years and what is an estimate of the cost of doing so?
  15. How may I monitor my system?
  16. What will monitoring cost?
  17. Will I be trained to understand my inverter’s functioning as well as maintenance (cleaning) of my system?
  18. In case of a house fire (unrelated to my system) what are the local fire ordinances concerning buildings with PV systems?
  19. How many kilowatts should I put on my roof (not just how many panels)?
  20. How much energy production should I expect on average?
  21. If net metering, what is the utility’s policy and if I am reimbursed for the power generating what is the per kilowatt hour reimbursement?
  22. Is there an annual true up from the utility?  (This question relates directly to the expected energy production of your system – in general, if you over produce it will be handled one way and if you under produce it will be handled another way.)
  23. Will I have a production guarantee and will you reimburse me if my system under produces?
  24. What other charges should I expect monthly from my utility?
  25.  

For Lessees and Power Buyers:

  1. For lessees: Is there an escalation charge, how often is it assessed, how is it calculated and is there a cap on how high my monthly lease payment can go? Will this be clearly spelled out in my contract?
  2. For lessees: Is it in my contract that you will take care of any problems and all maintenance for my system and if I have problems getting service what are my rights in this regard?
  3. For lessees: Is there an annual true up that I should expect from the utility and if my system does not produce what I need what is the kilowatt hour charge?
  4. For Power buyers: Do I pay for all the power I generate or just what I use?
  5. For Power buyers: Is there an annual true up from the utility – and from your company?
  6. For Power buyers: If I do not generate power equal to my usage will the utility bill me and at what rate? (another way of asking about the true up)
  7. For Power buyers: If my system generates more than I use will you bill me for the extra power generated and at what rate?  Also, will the utility reimburse me for the extra power and at what rate? (Another way of asking about the true up.)
  8. For Power buyers: Is there an escalation charge per kilowatt hour and how is it calculated?
  9. For Power buyers: How is my kilowatt hour rate calculated?
  10. Who specifically do I call if I need repairs?
  11. Who will be installing my system?
  12. What technologies (inverter and panels) will be on my roof?
  13. May I see the warranties from the panel/inverter company?
  14. Who holds the warranties for the panels/inverters on my roof – you or me?
  15. May I see ratings for the panels and inverters?
  16. Who do I call in case of an inverter failure or panel failure?
  17. What size in kilowatts is my system?
  18. How much electricity will my system provide?
  19. If the PV system needs to be removed who is responsible for doing so?
  20. Should I decide to sell my home is the solar system installed on it a liability or an asset?

 

 

 

Visit http://www.spvmarketresearch.com and go to Announcements for a sample table of contents or Notes from the Solar Underground for excerpts. 

This annual report — with a 30 year history of publication — observes photovoltaic industry behavior from the supply perspective in terms of pricing, revenues, production, shipments and inventory as well as offering a look forward for PV industry participants.

Lessons from my Second Year in Business

SPV Market Research is midway through its second year in business and, having survived as well as experiencing growth, there have been successes, failures, decisions I would take back and choices I wish I had made. Here are 25 lessons from my first year and a half in business:

  1. Night sweats will (probably) not kill you, try thinking of them as a midnight trip to a Jacuzzi

  2. Networking is key, but, letting go of networking as the ladder to success and thinking of it as developing a sustaining community of partners and friends is crucial

  3. Every idea, even the bad ones, are worth considering

  4. Old fashioned realities are still true: You will spend more than you think and make less than you think on the way to developing a thriving business

  5. A thriving business will grow beyond you and no longer belong to you but to the ecosystem (clients, partners, employees and observers) you have created while creating the business

  6. Answer your calls and emails and send only emails and make only calls that are important to you and have a point – basically be polite with your outreach and considerate to the outreach efforts of others

  7. Say no to any work that goes against your values and mission no matter how potentially profitable, but be nice about it

  8. Keep your word – including the word you gave to yourself when you started on this path

  9. Volunteer to help others for no reason but to help others and if you cannot, be honest about why

  10. Always do your best work (yes, I know duh) and remember that the independent, objective and excellent work you do may not win all of the available market but will genuinely bring value to the customers and partners it does win over

  11. Please and thank you, seriously, say them a lot even if someone is rude to you – Mom was right, manners matter

  12. Don’t always have an agenda, they are obvious as well as annoying

  13. Take work that stretches your skills while staying true to your core values and vision, this is where creativity and success come from

  14. Use all that time lying awake at night wondering what the heck to do next to follow an original train of thought, or two or three trains of thought, to the business or personal epiphany that it or they might prove to be

  15. Never lose the joy of the very work that inspired the vision that led you to want to share that vision and stay true to it through unprofitable and profitable times alike – the work, the process, the amazing feeling of being fully engaged with the process and the work, this is your true core competency

  16. Stay true to your vision for your business and also be nimble and willing to retrace your steps and start again and again and again and yes, again

  17. Not all advice is worth taking, much of it is like a box of free clothes left on the curb, that is, worth discarding

  18.  Then again, there may be something in that box that fits you perfectly or can be altered to do so

  19. Unfortunately, if you are not terrified at least part of the time, well, you probably are not taking the interesting and worthwhile risks necessary to get you to where you never expected to go

  20. If you are not joyful at least part of the time, well, you took a wrong turn, turn back or, try a new direction

  21. Try and look kindly on the motives of others and hope that they are doing the same for you

  22. Not every decision has to be bottom-line based, try a new profit/loss equation: Interesting work + potential of a wider good – cost (and/or time) of doing the work + value (revenue) of doing the work = values driven profit

  23. ASK for the business, harder than you think

  24. Inspiration is everywhere, even in night sweats

  25. Finally, if you are only doing it for the potential of a huge payout, well, better pay closer attention to those night sweats

The solar industry has had little bandwidth to support consumer research — SPV Market Research is currently conducting research into the residential PV system buyers buying and leasing experience — the goal is to improve the buying and leasing experience for consumers of residential PV as well as to providing valuable education for the PV industry in the US.  Please support this valuable research by referring residential PV system owners or by filling out the survey — everyone who participates will remain anonymous.  The link to the survey is:

https://docs.google.com/forms/d/1NIYk5bbpOe4Zf4D7W-lT0U0-oBPn36EYSNl4aGwfJQE/viewform

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