Business Model Implications of Solar's Disruptive Power

Residential solar has been at crossroads before: venturing from off-grid to grid-tied systems, transitioning from environmental-minded to financially-focused consumers, and shifting from direct ownership to options of third-party ownership. With third-party ownership came the introduction of long-term relationships between the installer and consumer.

While long-term customer relationships are still only in their nascence, analysts from McKinsey & Company speculated in a recent article in McKinsey Quarterly that these relationships would pave the way for a host of other home and lifestyle product and service offerings. However exciting this futurist perspective is, truth be told that many of the industry-leading solar financiers and installers offering long-term solar deals have not cracked the code on effectively engaging the customer post-installation with other opportunities to make additional purchases.

While the marketing, sales, and installation delivery sides of the business function well to varying degrees, the processes and teams of these long-term support departments are still in their infancy. Long-term customer support teams, fleet operations, monitoring, O&M (operating and maintenance), and engagement programs are exception management exercises and less resourced than their upstream teams. Solar installers with sales channels generally focus them around driving leads from partners to buy solar, not funnel current solar customers into other purchasing opportunities. Why is this? Solar companies offering 3rd party financed solar have a growing captive audience!

Core Competency and Streamlining

Most solar companies understand a basic process to acquire solar consumers, size systems, and deliver projects and can do this with varying degrees of effectiveness. The reason most solar companies are not cross-selling other products or services, with some notable exceptions like SolarCity's storage solution (and even that is suspended currently due to interconnection problems with some CA utilities), is primarily due to focusing and streamlining sales efforts and training programs in order to simplify a technical and often complex choice for the consumer. Solar companies now are, rightly so, focusing on their core area of staff expertise and process competency: delivering and decreasing the costs and process complexity around fulfilling solar PV projects. Hence, you don't see the market leaders offering solar PV, thermal, pool heating, passive solar sun rooms, and energy efficiency work. Each of these disciplines is a different sales cycle, supply chain, value proposition, price range, installation technique, and project management process.

Expanding Offerings: What Works?

Options that expand upon your core offering work. Consider how vehicle purchases make great use of this concept. With most vehicles, you start with a base vehicle feature set and then add packages of features to meet your desired user experience. In residential solar, consider how added features would impact your operations before offering them. How will you integrate the choice of that feature into your sales process, permit paperwork, dashboards, installation checklists? Who will be responsible for delivering it? Will it be an exception management process? This will help determine how to handle its fulfillment. For example, the addition of battery backup to SolarCity's system dovetailed nicely with PV system purchase. It could integrate into the same process with flags for special design consideration, supply chain, installation process, and interconnection paperwork. Consider how DC optimizers, advanced monitoring, or extended warranty plans could dovetail with the standard solar PV purchase. What about system upgrades (expansions w/ DC optimizers or microinverters), refinancing of leases, electric vehicle-related products?

Missing Out on Recurring Revenue & Repeat Business

Residential solar is missing out on recurring revenue and repeat business potential. Unlike other building/contracting companies, solar companies are offering solar and that's it. The potential to capture additional revenue is not baked in to the business model yet. The McKinsey analysts suggested solar's coming partnerships with home energy data analytics, energy efficiency, and energy storage. This is more likely to draw solar into these business ecosystems rather than the other way around due to afore-mentioned process considerations. In terms of your own solar company, do you see how you could engage the customer with recurring revenue options after the project is complete?