As we advance into 2019, the residential solar industry finds itself in a very different place compared to the start of 2018. A year ago massive uncertainty surrounding President Trump’s solar tariff decision cast a shadow over the industry; this year there is optimism about a return to growth.
Of course, solar remains a rapidly evolving industry and likely overall market growth in 2019 belies significant changes happening at the ground level in all aspects of how residential solar is delivered to consumers. The coming year will see continued evolution and maturation in the residential solar market including important trends in financing, product offerings, market structure, and technology.
Here are five predictions for what lies ahead for the residential solar industry in 2019. And if you’re a residential company looking to capitalize on these trends and grow your business this year, Sighten’s solar software platform can help you stay ahead of the curve - schedule a demo of our design and proposal tool here.
1. Growth resumes for installers of all sizes
After the residential solar market contracted slightly in 2017 and then gradually stabilized over the course of 2018, the residential solar market will return to growth in 2019. Although we won’t see the >50% annual growth of a few years ago, the latest Solar Market Insight report from SEIA and Wood Mackenzie showed Q4 2018 growth of 1.2% quarter over quarter and 11% year over year.
Not only that, but after two years of losing market share relative to regional companies and small businesses, we expect national players SunRun and Vivint to grow their market share in 2019, clearing the way for shared growth across installers of every size.
Tesla remains a special case, with growth or lack thereof dependent on their long term commitment to SolarCity’s traditional solar installation and financing business. Growth for all types of installers will mean that competition for customers will continue to intensify, making a differentiated brand and cost-efficient business practices more important than ever.
2. Continued innovation in solar financing
The competition won’t just be for solar customers - solar financing companies will continue to look for ways to grow volume within their installer networks.
Over the last few years, solar loans have steadily grown, finally surpassing third party ownership (TPO) as the dominant form of residential solar financing in the first half of 2018. 2019 will see continued growth for solar loans as the preferred method of financing for most installers, chiefly due to their broad availability, competitive pricing, and the ease of selling and processing.
More generally, we expect to see continued innovation in the solar financing market from all types of players, as providers try to differentiate with creative product offerings in an increasingly competitive market.
As an example, 2018 saw the rise of the “buydown” product, which allows installers to offer a lower financing rate to consumers in exchange for an upfront fee. While very popular with certain installers, these products pose challenges from a capital markets perspective, and we expect to see the buydown product market share decline in 2019.
Another trend we’re tracking is the emergence of “hybrid” products - combinations of existing solar financing products that offer unique benefits to installers and consumers. As an example, we’ve seen growth in prepaid PPAs combined with either solar loans or PACE, which allows for efficient monetization of the solar investment tax credit while offering the benefits of solar system ownership for the consumer.
This expanding menu of solar financing options ultimately empowers installers, allowing them to offer a tailored financing solution to each customer. But it will also put pressure on installers to keep their financing offerings up to date and to make sure that they are efficiently operationalizing their different financing programs.
Making it easy for installers to offer a full range of financing options was a big focus for Sighten last year (check out our blog on Sighten’s solar proposal tool), and we’ve already started rolling out new features and partnerships to further support all types of financing in 2019.
3. More solar plus storage & energy efficiency
As installers strive to find more ways to to deliver additional value to their customers, many are expanding their product offerings beyond solar. Adding energy storage or energy efficiency products to a solar project can actually result in a more optimal total energy solution for the consumer relative to standalone solar. Adding products beyond solar also benefits installers by allowing for a larger overall project, which improves margins and profitability.
Storage for both new solar installs as well as retrofits is booming, with behind-the-meter installations growing 198% year over year through Q3 of 2018 according to Wood Mackenzie. The majority of growth to date has been in California and Hawaii due to state regulations, utility rates, and incentives, but 2019 could see new policy-driven growth in additional markets including Massachusetts, Nevada, and Arizona.
Home upgrades, and energy efficiency upgrades in particular, are also rapidly becoming a more popular add-on for solar customers as they seek to maximize their home energy savings. Energy efficiency offerings cover a wide range of services, from hot water heaters to insulation to roofing and beyond. Energy efficiency has the benefit of being more broadly viable across all state markets compared to storage.
Like our customers, we’re expanding our own product offerings here at Sighten with a focus on supporting energy storage and energy efficiency. Look for new features launching later in Q1!
4. New solar business models and partnerships
Just as the solar market itself continues to evolve, solar companies will continue to innovate in how they deliver residential solar to customers. 2019 will see the continued emergence of new solar business models as well as creative partnerships between different companies within (and beyond) the solar industry.
Here at Sighten, we’ve seen this up close through our collaboration with a diverse customer base that includes all types of residential solar companies. For several years now, we’ve seen increased specialization in the residential solar workflow, with a clear division of labor between selling solar and installing solar. Solar sales companies or “originators” can focus on selling effectively and cost-effectively and pure solar installers can develop expertise and efficiency in actually putting solar panels on roofs.
Going forward in 2019, we expect to see all manner of collaboration between solar companies specializing in specific parts of the solar workflow, potentially going beyond the sales and installation division. We also expect these partnership networks to scale further, with installers working with more originators and originators working with more installers.
Lastly, service and product innovation has an important role to play here. New offerings like solar protection plans from Sunnova and Omnidian (both Sighten partners) further influence who delivers what to consumers going solar.
5. Expansion of the solar map
2018 showed a welcome uptick in California residential solar volume and there was growth in solid solar states like Massachusetts. Here at Sighten, we also saw explosive growth in relatively new markets like Florida, as a combination of falling solar costs, rising utility rates, enabling legislation, and creative product offerings have made the Sunshine State into a viable solar market.
In 2019, we expect this trend to continue, with marginal and frontier solar markets starting to grow in earnest. Sighten’s installer customer base has continued to diversify geographically every single year. While we certainly have lots of customers in California, we’ve seen rapid growth in non-traditional solar states like Missouri, Louisiana, Washington, Idaho, and even Alaska.
Growth in these markets is almost always led by smaller, local businesses beginning to offer solar, often in tandem with other products like roofing or energy efficiency. These companies know their markets well, have strong existing brands, and now have access to things like financing and software to scale rapidly.
We’re excited to see solar growing in traditionally underserved areas, and Sighten will release several features this year specifically aimed at better supporting businesses in these markets.
Turbocharge your solar business in 2019
Solar companies targeting growth and expansion in 2019 will succeed if they evolve alongside the ever-changing solar market. Adopting cutting edge software tools can make innovation easier while also driving business improvements that everyone cares about like more effective sales processes and reduced costs.
We’ve seen firsthand how adopting software can have a transformative effect on a solar business. Leveraging technology to make the solar sales and installation process more efficient creates real competitive advantages that compound over time. As software drives automation, solar companies are freed up to focus on things like developing new product offerings, building strong relationships with customers, and devising ways to get great referrals and testimonials.
At Sighten, we’re working just as hard as our customers to innovate and stay ahead of the pack. We have several big new features coming out in March and we’ll be announcing new integrated financing programs in the weeks and months ahead - stay tuned for details!
Best of luck to all of our partners and to the solar industry as a whole in 2019! Here at Sighten, we’re excited to look towards the rest of 2019 with well-earned optimism about the future of the residential solar industry. Check out our blog to learn more about how Sighten is empowering hundreds of solar businesses in 2019 and beyond!
Ready to see how Sighten can empower your solar business in 2019?