Post-ITC Planning: Key Questions for Everyone in the Solar Value Chain

The solar industry received a holiday gift this year in the form of the extension of the ITC. But we aren’t entirely out of the woods. Numerous threats to NEM and rate cases at dozens of utilities across the nation stand to fundamentally change the value of solar. Already, Nevada has retroactively eliminated its NEM program as its solar industry was just getting off the ground.

Always remember that solar is a highly political space. Look no further than Stephen Lacey’s blow-by-blow analysis of how the ITC was extended for just how complicated the politics of solar have become.

Take some time this winter in what is hopefully a slightly slower season for your company and do some planning. With the ITC extended for five years with a reasonable step-down, clearer thinking can prevail about pursuing growth in a more logical manner.

Here are key questions we need to examine in each part of the value chain:

Manufacturers and Distributors

• How can I work more closely/in concert with my dealer network?
• Where can I provide the most value and differentiate myself while pursuing profitable operations?

Financiers

• How will I enable smoother, clearer, less complex business processes both within my walls and within my customer network?
• What function is most important to my customer base – convenience/ease of use, integration into sales process, transaction cost, terms, settlement period?

Service Providers:

• Am I adding value or merely shifting cost to a cheaper cost center?
• How am I bringing insights about the buyer (consumer/end user) into the products and services I am providing to the dealer/installer?

Entrepreneurs:

• How will I best assess the industry and determine where the root cause needs are, not just the symptoms, and solve for that?
• How do I ensure that I’m aware of all the policies and trends at play that could affect how I assess the viability of my business idea?

Installers:

• How will I respond to policy changes, technology changes, and increased interest in storage and smart home/internet-of-things technologies?
• What is the core competency of my business?

Back in November, I examined how solar contractors could survive in a highly competitive and post-incentive market. A few days later, industry veteran Barry Cinnamon examined the residential soft cost stack in great detail, looking at which areas would need what levels of reductions and how if the ITC was removed.

On customer acquisition cost, Barry expounded “no charge and likely up” upon removal of the ITC. Will we still see the same result even with the ITC in place? Very likely- we’re moving into early mainstream adoption.

Barry also did not include any silver bullet statements about software products- and there is a lot of attention being paid to software solutions to the soft cost stack. Software solutions are an important piece of effective business operations, but not the entire answer. As I’ve written before, business owners need to grasp the key metrics that define their business and how to affect them using process techniques first. Then, the most appropriate software solutions will help automate and streamline their business.

Using software solutions to manage the business is a small part of an overall organizational development strategy that starts with people (right people on the right seats on the bus) and business process. Barry also spoke to the need for tighter supply chain coordination and developing a deeper understanding of how end users actually use the products and how that makes the product competitive/valuable or not. These are the fundamental tenants of Lean Manufacturing.

We have a lot to think about as we prepare for the year ahead. Let’s get to it.

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This article first appeared on Chaolysti. 

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Additional HeatSpring Resources:

• Free Tool: Commercial Solar Leverage Model 
• Online Course: Financial Modeling for Solar PV Projects
• Online Course: Solar Executive MBA Training
• HeatSpring’s Career Guide for Women in Solar Energy 
• Free Tool: Megawatt String Sizing Tool