Last week Inovateus came across two new studies that we think will be valuable information for our residential solar partners. Here are the highlights, but we encourage you to read the full reports.
The first report is “How Wealthy Are Residential Solar Customers? Household Income and Solar Adoption in the U.S.,” issued by GTM Research and PowerScout. The second one is EnergySage’s semiannual “Solar Marketplace Intel Report.” If you’re not familiar with EnergySage, it’s an online solar marketplace that matches solar customers with installers. These reports use information gathered from their database of installers and customers to reveal the latest trends in solar financing, pricing, consumer behavior, and other topics.
First, let’s dig into the GTM/PowerScout report. According to the authors, this is the first study to use “household-level data on the relationship between residential solar and household income.” We should also point out that they analyzed data from California, Massachusetts, New Jersey and New York, which have different income and housing prices than our Midwest market.
What makes this data set different? Rather than use national zip code data alone, GTM and PowerScout took satellite imagery and identified all the rooftop solar installs, and then used machine algorithms to crunch the income data in those four states, which represent about 65% of current residential installations in the U.S.
Not surprisingly, the vast majority of solar owners are middle to upper-middle income earners, with households in the $100,000-$150,000 range being the largest solar demographic. On the lower end of the economic spectrum, the study finds that although there’s a decent amount of solar deployed on homes whose families average less than $45,000 in annual income, “low-income households remain underrepresented among all solar customers.”
In contrast to the tightly focused GTM/PowerScout report, the EnergySage study reveals several interesting macro trends in the residential PV sector across a more national sample, not just in those big four solar states. For example, installation costs are falling at an accelerating rate, according to EnergySage. Gross system costs dropped 6% last year to an average of $3.36/watt, the biggest annual decline seen since the firm began issuing the report. In the two Midwestern states surveyed, Ohio and Illinois, the average was even lower, reaching $3.01/W and $3.27/W, respectively. The study also looks at decreasing payback periods for the average system, a stat that found Illinois’ average payback time plummeting 21.4% year over year, from 10.3 years to 8.1 years.
Another “bang for the buck” indicator in the EnergySage report focuses on the percentage of an average household’s electricity bill offset by a solar system. The numbers are positive across the board, with Illinois in particular seeing a healthy increase from 78.6% offset in 2015 to 84% last year.
In a separate drilldown, the study looks at a handful of utility territories, including Commonwealth Edison in Illinois. Regardless of utility, the finding is clear: solar consistently provides a better long-term levelized cost of energy (LCOE) than the residential electricity rate offered by the utility. In the case of ComEd, based on an average system size of 7.3 KW, the electricity use offset by solar was 82%, and the 25-year LCOE for solar was $0.06/kilowatt-hour compared to ComEd’s 2016 rate of $0.13/kWh.
For residential financing trends, EnergySage found that an increasing majority of consumers and installers are choosing loans and cash purchases over third-party financing (solar PPAs and solar leases). In conjunction with this, a growing number of financial institutions now offer solar loan packages, and as a result, the market shares of the top 10 loan providers have become even more fragmented. Our takeaway for Inovateus installer partners: you have more financing choices than ever, so we suggest you offer multiple loan options to your residential solar customers.
When it comes to what solar consumers are looking for when evaluating solar panels, nearly half cite “best value” as the highest priority, followed by “highest production” and “most advanced technology.” What does this mean for installers? Try and find that sweetspot between cost competitiveness and quality that will offer the best value per watt to your customers.
If you would like to dig deeper into the reports, the GTM/PowerScout document can be accessed here and the EnergySage study can be downloaded here.
By Nathan Vogel, director of strategic research, Inovateus Solar
