$17 billion.
That was the total revenue of the American solar industry in 2018. It might shock some to discover that many of the largest solar installers in the country failed to show a profit in spite of such a large number. It’s also worth noting that this story pertains to a growing industry.
A growing yet unprofitable industry?
Well, that’s exactly the case. Some of the largest solar companies have struggled to make the numbers work favorably after years of work and thousands of completed installs.
How can this be? Well, part of this story is not particular to the solar industry. Many companies in other industries fail to show a profit for many of their first few years of business.
However, things have been especially difficult and turbulent in the residential solar industry. Case in point is the story of SolarCity. After years of being top of the heap in terms of market share, the company eventually got absorbed by Tesla after years of failing to turn a profit. As of mid 2019, Tesla has yet to aggressively seek solar sales. The SolarCity business model failed.
SunRun is the new leader of the residential solar market pack. Second quarter 2019 financials for the company show them losing $105 million.
Vivint Solar is another major player in the residential solar game suffering from the same problem.
One of the biggest problems for these companies is how much their sales and marketing costs are. Basically, it costs these companies too much money to get more customers. In fact it’s almost a dollar per watt for SunRun. That’s almost a third of the total cost of doing business. This is the definition of unsustainable. The company can actually get an install done for $2.50/watt. Administration, sales, and marketing add another dollar per watt.
There’s certainly no easy answers for these large installers. They’re all hoping to stay afloat long enough for costs to fall in every category.
What’s the solution for homeowners? There’s an easy answer to this question. It’s simply to do business with a local installer.
Some credit, however, must be given to the major solar companies. They have done much to help spread the awareness of solar, albeit at the same time convincing many homeowners that solar power is still too expensive. (It can be assumed that many people approached by a large solar company didn’t follow up with more research online to discover the actual cost to get solar installed.)
The point of this particular post is not necessarily to disparage these larger solar companies. After all, more solar in general, is a good thing, of course. Also, more solar awareness in general is a good thing too. But when a big solar installer disappears, that doesn’t help the cause.
So while major solar companies will continue to attempt to grow at unsustainable speeds, smaller and more local solar outfits will be able to offer significantly lower prices and much better service overall.
