Large non-residential (>100 kW) and utility-scale projects accounted for over 70% of the overall U.S. PV market in 2011, and in 2012 these segments are forecast to exceed the 2-GW mark.
As PV systems increase in size, it directly impacts the scale of individual projects and also results in new categories and definitions being applied in the market. As a result, some key changes have recently been occurring in downstream PV channel structures within the U.S., reflecting the different types of services and products on offer.
Traditional installers are referred to as “system integrators” or “turnkey solution providers.” Large system integrators that build utility-scale projects are categorized as engineering, procurement and construction (EPC) providers, and work closely with project developers. Furthermore, industry-leading PV module manufacturers with strong downstream focus – such as First Solar and SunPower – have been increasing their in-house EPC resources to help drive demand for their internal module supply.
Some services that were previously confined to utility-scale and large non-residential systems are now being offered to residential systems, by companies such as SolarCity and SunRun. Options here include financing (PPA or leasing) and/or operation and maintenance (O&M). Reduction or elimination of the high upfront cost and “hassle-free” maintenance and repair offered by the third-party ownership models are infiltrating the residential market.
The expired federal Cash Grant significantly increased the uptake in residential “leasing.” In fact, the third-party ownership model now accounts for approximately half of the residential market in some key states such as California, Arizona and Colorado. Originally established in 2009, the Cash Grant was configured to be applicable only to tax-paying business entities. Therefore, residential PV owners were effectively ineligible for the Cash Grant.
However, solar leasing companies or investors – as business taxpayers – could legitimately apply for a Cash Grant for residential systems by assuming direct ownership of the PV system. By accessing the benefits of the Cash Grant (and state incentives), solar leasing companies have been able to attract homeowners by indirectly passing on these benefits in the form of reduced monthly PV leasing payments.
In addition to the Cash Grant, the increased availability of Asian-manufactured PV modules is viewed by some observers as having a positive effect on the third-party ownership business model. By emphasizing services specific to “electricity delivery,” solar service providers often take a technology- and/or brand-agnostic approach and subsequently identify the lowest module ASPs to sell through.
However, regardless of the PV project size (500-MW ground-mount power plant or 5-kW residential roof-mount), the key issue is that the type of services being offered within the U.S. PV market is growing in importance, not simply the type of module or system installed. Therefore, companies that prioritize ease-of-solution in delivering kWh/MWh of solar PV electricity to end-customers will have an increased value-added proposition within the U.S. downstream PV market.