Residential solar companies’ business clouded by intense competition
Potential customer pool now more likely to need help with financing
Until recently, Sunspot Solar Energy billed itself as the largest installer of residential photovoltaic systems in Las Cruces, but this year, it scaled down from 15 employees to a one-man operation.
The pullback reflects a marked decline this year in residential demand for solar systems after several years of booming growth.
Intense competition among solar installers has reduced the potential pool of customers who can easily afford solar systems. With the low-hanging fruit largely picked, companies are now competing for less-wealthy consumers, a difficult task that’s squeezing the industry, said Sunspot founder and CEO Mellow Honek.
“The ready money in the market has been tapped because the people with cash already bought solar systems,” Honek said. “The remaining market is much larger, but it requires financing, and that’s a trickier sell.”
It’s not just a New Mexico problem. Nationwide, residential PV installations grew just 1 percent in the second quarter of 2017 — 17 percent slower than the same period last year, according to the latest U.S. Solar Market Insight report by GTM Research and the Solar Energy Industries Association.
Overall, installed solar capacity did grow by nearly 2.4 gigawatts from April-June, an 8 percent increase year-over-year nationally. But that was driven largely by utility- and commercial-scale installations.
Companies focused on the residential sector are under pressure, especially with big, deep-pocketed businesses like Solar City active in local markets. That’s tightening the margins for many firms like New Mexico’s Sunpower by Positive Solar Energy.
“It’s been a tough year,” said Positive Solar CEO Regina Wheeler. “There’s a lot of pressure with the out-of-state companies, and we’ve had to drop our prices.”
To better compete, Positive Solar is seeking bigger commercial projects. It also stepped up its marketing appeal this week, opening a new solar design center in Albuquerque for customers to learn about PV through customized designs on computer screens.
Likewise, the state’s largest installer, Affordable Solar, has signed some big commercial con-
tracts. It won a 300-megawatt project with Public Service Company of New Mexico to supply renewable energy to the forthcoming Facebook data center in Los Lunas.
That’s allowed Affordable to grow its revenue by nearly 20 percent this year, from $55 million in 2016 to a projected $65 million, said CEO Ryan Centerwall.
Still, more challenges may be coming. Federal regulators will decide in November about imposing new tariffs on imported solar cells and panels, which would raise prices and likely cut demand.
Even so, industry leaders remain optimistic.
“This is the first year we’re seeing a contraction in residential solar,” Centerwall said. “But solar market penetration is still very low. That offers many opportunities, especially as companies focus more on improving their business fundamentals to reinforce long-term viability.”
Employment projections for the coming years support that optimism. New data from the federal Bureau of Labor Statistics, released this week, show solar PV installers as the top-growing job classification for the next nine years. The number of installation jobs is expected to double nationwide by 2026.