solar contractors’ industry trends & outlook...

Solar Contractors’ Industry Trends & Outlook 2016 1© 2008-2016 EagleView Technologies

EagleView Technologies 2016 Solar eReport

INDUSTRY TRENDS & OUTLOOK 2016

SOLAR CONTRACTORS’


The solar industry is growing rapidly and continuously morphing as installers, manufacturers,

and government agencies attempt to keep up with the pace of change. According to GTM

Research, the recent five-year extension of the Investment Tax Credit (ITC) “will foster $40

billion in incremental investment in solar between 2016 and 2020.” In this environment,

leveraging technology can be the difference between success and failure.

Introduction

Impacts of Solar Investment Tax Credit Extension. Retrieved March 10, 2016, from http://www.seia.org/research-resources/impacts-solar-investment-tax-credit-extension

EagleView is the leading provider of high-resolution aerial imagery and exterior property

measurement reports. A fleet of 100 aircraft flying year-round and proprietary, patented

3D technologies allows for delivery of accurate, detailed remote measurements including

dimensions, orientation, tilt and obstructions. Delivered in a CAD file, it can be imported

into existing workflows for precise proposals and designs.

Who we are:


To fully understand the solar industry’s direction over the coming year, we have

surveyed more than 200 residential and commercial solar industry professionals. Many

contractors are aware of the solar industry’s rapid growth and want to shift their

business to take advantage of this activity.

How big is this shift to solar? According to GTM Research, the cumulative number of

homeowners in the U.S. with rooftop solar was projected to reach one million by the

first quarter of 2016.

With that figure in mind, we have analyzed our survey data to provide insight into

building a successful solar business.

U.S. Residential Solar Economic Outlook 2016-2020. (2016). GTM Research. Retrieved from https://www.greentechmedia.com/research/report/us-residential-solareconomic-outlook-2016-2020.

By Q1 2016 the cumulative

number of U.S. homeowners

with rooftop solar will eclipse

the 1 million mark.

1 MILLIONThis year over

homeowners will use solar


Chapter 1: Technology Investment: Residential Versus Commercial

Chapter 2: Technology Budget Allocations in 2016

Chapter 3: Technology Investments by Company Size

Chapter 4: Technology Investments by Region

Chapter 5: Commercial Versus Residential Investment by Geographic Region

Chapter 6: Regions Likely to Have the Most Solar Installs in 2016

Chapter 7: Regions Spending the Most Money for Site Surveys in 2016

Chapter 8: Time Spent on Site Surveys by Geographic Region

Chapter 9: Regions with the Most Site Redesigns in 2016

Chapter 10: The Costs and Challenges of Growth

Chapter 11: Technology Investment for Business Improvement

Chapter 12: In Summary

Contents

In this report, we will highlight the trends in the solar industry—including growth, geographic, investment, and technology—and the outlook for rest of 2016 and beyond.


CHAPTER 1

TECHNOLOGY INVESTMENT: RESIDENTIAL VERSUS

COMMERCIAL



Contractors who plan to invest in technology in 2016

&

71%COMMERCIAL

OF

79%RESIDENTIAL

OF


Ulama, D. (March 2016). IBISWorld Industry Report 22111e Solar Power in the US. IBIS World Inc. Retrieved from www.ibisworld.com.

Due to the recently passed ITC, solar industry revenue will

increase at a projected average annual rate of 6.5% to $4.4

billion by 2021, according to the IBIS World Solar Industry

Report. Yet because of this rapid growth rate and the

opportunities it presents, investment in technology remains vital

for industries looking to stay competitive as well as improve

their business processes.

How many solar industry professionals are planning on investing

in technology in 2016? According to those surveyed, 79% of

residential solar professionals and 71% on the commercial side

stated that they plan to invest in technology in the coming year.

With an average of three-quarters of all solar professionals

making these changes, investment in technology is a

requirement, not an option.

Solar industry growth is predicted to grow 6.5% annually or

$4.4 BILLIONin the next 5 years


CHAPTER 2

TECHNOLOGY BUDGET ALLOCATIONS IN 2016



Respondents to the survey were asked to project how

deeply they intended to invest in technology in the

coming year as a percentage of total revenue.

Residential

62% of all residential stated that they will be investing over 2% of total revenue in technology

23% of all residential stated that they will be investing over 5% of total revenue in technology

Commercial

55% of all commercial stated that they will be investing over 2% of total revenue in technology

19% of all commercial stated that they will be investing over 5% of total revenue in technology

Technology Budget Allocations in 2016

62%of all residential solar

contractors will be investing

over 2% of total revenue

in technology


With these insights, professionals not investing at least 2% of total revenue in technology may want to re-evaluate budgets to ensure that the proper capital allocations are planned in order to remain competitive.


CHAPTER 3

TECHNOLOGY INVESTMENTS BY

COMPANY SIZE



In both residential and commercial markets, the majority of the companies planning to invest in technology in 2016 are relatively smaller-sized companies.

Why are small businesses spending significant portions of their budgets on technology? For one, the demand of communities served may drive such growth. Other companies are also taking advantage of the government’s cost-saving initiatives in solar installations as well as the reduced cost of photovoltaic (PV) panels.


Of the residential solar contractors surveyed, we discovered the following:

87% of residential companies that plan to invest in technology perform an

average of 50 installs or fewer per month.

63% of residential companies that plan to invest in technology perform

10 installs or fewer per month.

Of the commercial solar contractors surveyed, we discovered the following:

84% of commercial companies that plan to invest in technology perform

an average of 50 installs or fewer per month.

71% of commercial companies that plan to invest in technology perform

10 installs or fewer per month.

63%of residential companies

that plan to invest in technology perform 10

installs or fewer per month


CHAPTER 4

TECHNOLOGY INVESTMENTS

BY REGION



50%of contractors investing in technology will be doing so in the Northeast and the Southwest


Survey respondents indicate that the Northeast and Southwest in particular will see the most investments in technology.

Of residential and commercial contractors taking our survey, 48% reported that they will invest in solar technology in the

Northeast, while 51% said they would concentrate on technology investments in the Southwest United States.

These responses are in line with the reports from GTM Research, which pointed to similar trends occurring in 2016.

Shayle Kann, Senior Vice President of GTM Research, explained that the U.S. solar market remains so concentrated that

just 10 states accounted for 87% of solar PV installations in 2015. “But growth has been widespread,” Kann said, “and

24 of 35 states that we track individually saw market growth in 2015.”

10states accounted

for 87% of

installed capacity

in 2015

U.S. solar market breaks record by installing 7.3 GW of PV in 2015. (n.d.). Retrieved March 10, 2016, from http://www.solarpowerworl-donline.com/2016/02/u-s-solar-market-breaks-record-by-installing-7-3-gw-of-pv-in-2015/?utm_source=hs_email


CHAPTER 5

COMMERCIAL VERSUS RESIDENTIAL INVESTMENT BY GEOGRAPHIC REGION



Average U.S. Solar Industry Breakdown for 2016

&

47%COMMERCIAL

53%RESIDENTIAL


New and established solar businesses alike can benefit from

knowing which segments of the industry are growing and where,

geographically, they can plan their next strategic ventures.

Respondents to the survey were asked which segment within the

solar industry they intended to serve in 2016. Within the solar

industry, an estimated 53% of the market will serve residential

customers, and 47% will serve commercial clients.

Compared to these industry-wide averages, however, the

following areas varied the most from the rest of the United States

based on these figures.

Southwest – trending toward higher than U.S. residential industry averages with 58% of the region participating. This is 5% higher than the national average.

Upper Midwest – trending toward higher than U.S. commercial industry averages with 52% of the region participating. This again is a 5% higher than national average variance.

5%RESIDENTIAL solar contracting

business is

higher in theSOUTHWEST than the national average

5%COMMERCIAL solar contracting

business is

higher in theMIDWEST than the national average

Ulama, D. (March 2016). IBISWorld Industry Report 22111e Solar Power in the US. IBIS World Inc. Retrieved from www.ibisworld.com.


CHAPTER 6

REGIONS LIKELY TO HAVE THE MOST SOLAR

INSTALLS IN 2016



It’s not surprising that the Southwest and Northeast

hold the top two positions respectively. When related to

the total number of solar installations between one and

500 per month in 2016, these findings align with other

industry reports.

Yet when the monthly jobs totaling 50 to 500 installations

are observed, the lead shifts, and the Southwest and

Southeast become the leaders in the market. Many of the

companies in the Southeast are likely larger companies

that perform more installations per month.

Regions likely to have the most solar installs in 2016

46%SOUTHEAST and SOUTHWEST total

of all U.S. regions with

50-500 installs per month


CHAPTER 7

REGIONS SPENDING THE MOST MONEY FOR SITE

SURVEYS IN 2016



The cost of doing business is a critical component for solar industry professionals who

want to expand their services to new areas. Site surveys, in particular, can result in pro-

hibitive costs for solar installation businesses.

Survey respondents were asked to report the average cost of a site survey for a solar

proposal. Collectively, the top three responses were:

$50 – $100 per Survey – 29%

Over $500 per Survey – 27%

$100 – $200 per Survey – 24%

The results indicate that more than half (53%) of all site surveys in the U.S. cost solar

contractors between $50 and $200; however, over a quarter of the time, they can cost

more than $500.

53%of solar contractors in the U.S. pay between

per survey

$50 – $200


Which areas of the United States tend to be more cost efficient when it comes to site surveys? The Lower

Midwest holds a higher percentage (42%) of all site surveys that cost only $50 to $100 per instance. Their

neighbors to the north in the Upper Midwest, however, have the highest percentage of site surveys costing

over $500 at 31% of all contractors.

42%in the LOWER MIDWEST

pay less than$100 per survey

31%in the UPPER MIDWEST

pay over$500 per survey


CHAPTER 8

TIME SPENT ON SITE SURVEYS BY

GEOGRAPHIC REGION



47%of surveys in theSouthwest arecompleted in

1 HOURor less

38%of surveys in the

Midwest are completed in over

2 HOURSor less


Conducting a site survey can be time consuming, but completing each one faster gives

businesses the opportunity to meet with more potential customers and potentially close

more jobs. Knowing that there are only so many hours in a day,

which areas of the country are using that time most efficiently?

The most efficient areas of the country (performing site

surveys in under one hour) are:

Southwest – 47% are completed in an hour or less

Northwest – 44% are completed in an hour or less

The areas of the country taking the most time (performing

site surveys in over two hours) are:

Upper Midwest – 38% are completed in over two hours

Lower Midwest – 38% are completed in over two hours


CHAPTER 9

REGIONS WITH THE MOST SITE

REDESIGNS IN 2016



Site redesigns can have a negative impact on a solar business. Not only

are they inefficient, time-wise, but they can also mean the difference

between keeping and losing a potential job.

Do some regions of the country experience more or fewer site redesigns

than others? Our survey revealed a significant variance among regions.

Which regions of the country experience the lowest number

of site redesigns per job (one or less)?

Northeast — 68% of all respondents said they have one

site redesign or less.

Lower Midwest — 68% of all respondents said they have

one site redesign or less.

Which regions of the country experience the highest number

of site redesigns per job (three or more)?

Northwest — 15% of all respondents said they have three

site redesigns or more.

Upper Midwest — 15% of all respondents said they have

three site redesigns or more.

68%of the NORTHEAST experiences ONE site

design or less

15%of the NORTHWEST

experiences THREE site designs or less


CHAPTER 10

THE COSTS AND CHALLENGES OF

GROWTH



Climate agreements in Paris and an extension of tax credits in Washington promise

that the growth that the solar industry has enjoyed this decade is likely to continue.

2016 is on track to be a milestone year for U.S. solar, with more than 10 GW added

on an annual basis for the first time ever and the number of homeowners with solar

installed eclipsing the one million mark.

Paris. Washington. Right in our backyards.

10 Solar Trends to Watch in 2016. Retrieved May15, 2016 from www.greentechmedia.com/articles/read/solar-trends-to-watch-in-2016


Since the implementation of the solar tax credit in 2006, the cost of installing a

solar energy system has dropped 73%.

The U.S. Energy Department has committed to investing $18 million in storage

solution development for the solar industry. This, combined with the rising

emphasis on community and shared solar solutions throughout the country

indicate a continued rise in residential solar power. The United States currently has

a total installed capacity of over 20 GW—enough to power more than 4.6 million

average American homes.

Residential Trends

Top Residential Solar Trends for 2016. Retrieved May 15, 2016 from www.homes.com/blog/2016/03/residential-solar-trends-2016/www.energy.gov/articles/energy-department-announces-18-million-develop-solar-energy-storage-solutions-boost-grid-0www.energy.gov/eere/sunshot/community-and-shared-solar2016: The Year of the Solar Spill. Retrieved May15, 2016 from www.currengroup.com/2015/12/solar-industry-will-triumph-2016/

73%

Since 2006, the cost of solar

installation has decreased by

Commercial TrendsCompanies such as Wal-Mart, Apple, Ikea, Facebook and Amazon are deriving

more of their power needs from solar. Other corporations have already committed

to using 100% renewable energy in the coming years, according to a report from

industry analyst Clean Edge:

Goldman Sachs and Ikea by 2020

Nike by 2025

Mars by 2040


Growth is EverywhereThe United States is expected to install 16GW (16,000MW) of new solar power this year,

leading all other developed nations.

GTM Research’s U.S. Solar Market Insight Report 2015 Year in Review.

Australia 1,000 1,100

France 879 1,055

Germany 1,370 1,200

Italy 300 360

Japan 11,800 10,200

UK 3,906 1,600

Annual Installed (MW)2015 2016E


The growth in solar energy production has occurred both on a residential and a large-scale

utilities basis, with a new solar energy project being installed every two minutes.

However, challenges, particularly in commercial and industrial rooftop projects, have kept the

market relatively flat in recent years.

2

A new solar energy project is installed every

We haven’t outgrown the challenges

Commercial Rooftop Success: A Little Ballast and A Lot of Business Sense. Retrieved May 25, 2016. www.solarindustrymag.com/online/issues/SI1501/FEAT_01_Commercial-Rooftop-Success-A-Little-Ballast-And-A-Lot-Of-Business-Sense.html

MINUTES


The site survey is a critical step in securing new business.

The cost to perform a site survey is fairly consistent across

the U.S. While there are slight variations, the average survey

costs between $50 and $200 for 62% of projects.

$50 to $100—32%

$100 to $200—30%

$200 to $300—15%

$300 to $400—4%

$400 to $500—4%

Over $500—15%

Average site survey costs

62%For of projects the average price of site survey is between $50 - $200


Most site surveys are completed in 30 to 60 minutes.

Under 30 minutes—16%

30 to 60 minutes—34%

1 to 2 hours—23%

2 to 3 hours—14%

Over 3 hours—14%

Site survey completion time

On average site surveys are

completed in 30-60MINUTES


Many of the biggest challenges associated with site surveys revolve around

getting proper measurements of a client’s roof. Such challenges, which can

increase the costs of each site survey, may be due to:

Limited roof access

Obstacles that prevent accurate measurement

Travel time to the site

The challenge of roof access and measurement

Partially because of the challenges to roof access and proper measurement,

redesigns to initial solar solutions are a reality in the industry. Across the

country, the typical system is redesigned once or twice after the initial

design—an average of 68% of the time.

Never—22%

One—42%

Two—26%

Three—5%

More than three—5%

Redesigning solutions is typical

68%of the time, a typical system is redesigned once or twice


The reasons that make a redesign necessary are varied, but requests from

the client and cost reductions are recurring themes. While the reasons are

diverse, the fact that redesigns are detrimental to productivity and profit

are undeniable. Companies that have to redesign their solar solutions less

frequently enjoy a competitive advantage over their competition.

Reasons for redesigns

Every change after the preliminary design of a project comes at a

cost. That price may be relatively modest, but in a field with so many

competitors—and more entering the market each day in response to

current and projected growth—minimizing these costs is critical.

For nearly half of contractors, the costs associated with these changes can

range from around $100 to $200 per project. For the other half surveyed,

however, changes can result in expenses totaling $500 or more.

$100 to $200—49%

$200 to $300—22%

$300 to $400—10%

$400 to $500—1%

Over $500—17%

The price of change

Redesign costs anywhere between

$100 to $500per project


The cost of redesigns and change is felt in more than just money. For most contractors, each

change typically causes a delay of two weeks or less. But with each site survey averaging

only a couple of hours, delays that extend into days and weeks can have a dramatic impact

on the bottom line. Changes cause a delay of up to two weeks in 81% of solar installations.

Less than 1 week—54%

1 to 2 weeks— 27%

2 to 3 weeks—13%

3 to 4 weeks—4%

Over 4 weeks—1%

Time is money

81%of solar redesigns

cause a delay of up to

2 WEEKSWhile each change order means a cost in both time and money, in some cases

it costs even more—when the sale is lost because of changes to the design.

Never lose a sale—39%

Less than 5% of the time—45%

5 to 10% of the time—11%

10 to 20% of the time—2%

Over 20% of the time—3%

Even a little is too much


CHAPTER 11

TECHNOLOGY INVESTMENT

FOR BUSINESS IMPROVEMENT



The growth in the solar industry is certainly due to changes in other

areas of the energy landscape. But it is also undeniably because of

technology that continues to bring the cost of solar down.

In 1953, solar panels converted 4.3% of available energy to

electricity at a cost of $1785/watt.

In 2012, solar panels converted 15% of available energy to

electricity at a cost of $1.30/watt.

In 2015, solar panels converted 23.5% of available energy to

electricity at a cost of $.70/watt.

Technology is changing everything

Solar Panel Prices Down Due To Solar Panel Technological Advancements. Retrieved on May 16, 2016 from www.costofsolar.com/solar-panel-prices-down-due-to-solar-panel-technological-advancements/

62 YEARS , solar panels have converted19.2%

In

of available energy to electricity at a decreased cost


In both the residential and commercial markets, smaller companies are taking forecasts

of continued growth as an opportunity to invest in new technology as a means to grow.

Smaller companies, bigger competition

With forecasts of continued growth, every part of the solar industry is planning to invest.

79% of residential companies plan to invest

71% of commercial companies plan to invest

Investment across the board

In both the residential and commercial markets, smaller companies are taking forecasts of

continued growth as an opportunity to invest in new technology as a means to grow.

Residential

73% of residential solar companies that plan to invest do 50 or fewer installs a month

54% of residential companies do 10 or fewer installs a month

Commercial

59% of commercial solar companies that plan to invest do 50 or fewer installs a month

37% of commercial companies do 10 or fewer installs a month

Small businesses. Big plans.


& 53%COMMERCIAL

OF44%RESIDENTIAL

OF

contractors say detailed design & lead generation

Reasons for Investing in Technology in 2016


For most contractors, technology investments are focused on finding

and securing new business and designing individualized solutions.

Residential companies

23% are investing in lead generation technology

21% are investing in design technology

19% are investing in proposal technology

Commercial companies

24% are investing in lead generation technology

29% are investing in design technology

9% are investing in proposal technology

Technology to win and improve business


By examining trends and best practices in the industry, the formula

for solar success comes into focus:

Calculated business improvement

Industry Growth

Technology Investments

WastedTime

+ –

=

Business Improvement

General industry growth may be outside of an individual solar company’s control. Technology

investments, however, can address and mitigate wasted time due to roof access, measuring issues,

and solution redesigns and hold great promise for strengthening the industry as a whole.

Technology will continue to change everything


CHAPTER 12

IN SUMMARY



Conditions like the renewal of tax credits for solar will enable the industry to continue its

upward climb.

According to Bloomberg New Energy Finance, solar could account for as much as 35%

of new power generation infrastructure throughout the next 25 years. The conclusion

to be drawn is this: solar will continue to rise for a number of years into the future.

No end in sight, but there is a conclusion

5 Energy Trends to Watch in 2016. Retrieved May15, 2016 from www.fortune.com/2015/12/30/5-trends-energy-2016/

According to REN21, the Renewable Energy Policy Network for the 21st Century:

Projections show continued cost decreases, many possible technology advances, and

full competitiveness with retail electricity prices without subsidies. This so-called “grid

parity” will occur in many jurisdictions soon—although according to some is already

taking place—and will be more common worldwide by 2020.

Concentrating solar thermal power (CSP) still has a large cost-reduction potential,

with future opportunities for bulk power supply, for dedicated applications such as

industrial heat supply and desalination, and for power grid balancing...

The future is bright


“I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that.”

-Thomas Edison (to Henry Ford and Harvey Firestone), 1931

Current Thinking. Retrieved July 3, 2016 from //www.nytimes.com/2007/06/03/magazine/03wwln-essay-t.html

solar contractors’ industry trends & outlook...

Documents