This is a great thought experiment. Can we make solar PV so simple and cheap that we’ll no longer need residential solar financing? Jigar Shah thinks so. Shouldn’t the goal of the PV industry be to NOT need financing? Or, are there technology constraints that will make financing always needed? Like for automobile market. This is a thought that came up in a recent conversation I had with Barry Cinnamon, the CEO of Westinghouse Solar.
Last April, I wrote a post titled “Will Home Depot Kill the Residential Solar Market?” that was first published in cleantechies and then picked up by Reuters. Home Depots goal was to use their massive supply chain bring solar to the masses and reduce installed costs. The article unpacked some fears that solar professionals were having about big box stores entering the solar supply chain and if that would have a large impact on the solar market. The article dug into industry specifics around pricing, permitting, incentives, and comparisons to other trades to determine if contractors would favor the move and also discussed the implications of major brands backing solar. I published the post a little less then 11 months ago and since then all my assumptions have been correct. I havent’ spoke to a single contractors that does business directly with Home Depot to supply their equipment. I think the reason is simple, the technology requires support. It’s still too complicated and a large majority of companies are not comfortable enough with it to buy it from a big box store when no technical support.
Last week, Barry Cinnamon from Westinghouse Solar reached out to me bring up the article and say he felt the reason Home Depot has not helped the solar industry much. I responded to Barry for 3 reasons. First, he wasn’t a PR person. Sorry PR friends 🙂 Second, he brought up a good point, the solar being sold through Home Depot was too complicated. Third, it was too expensive. So, I decided to do an interview with Barry to get his perspective about technology and business model innovations within solar that are using common sense to make solar cheaper and easier.
Here are the highlights from our discussion.
- After talking with Barry about their continued efforts to simplify solar, I realized an interesting point. Isn’t the goal of the solar PV industry to be to not NEED solar financiers? Like Solyndra. Reduce the costs of solar so much that most homeowners will not need financing.
- Westinghouse’s best customers are completely new to solar. They’ll never need to learn string sizing, temperature coefficients, and residential solar will become extremely simple.
- Barry said that AC modules are seeing a 50% direct labor reduction compared to industry norms. They’re seeing around 6 to 7 man hours per kW on residential installations compared with the industry average 10 to 11 hours per kW
Here is the full agenda.
Question: What is the story of your product?
Answer: We’re extremely interested in our new product which is fundamentally an easy to install solar panel.
The genesis of the idea came from us doing solar installation work back in 2011. There were just too many parts and it was a huge pain. We just imaged a future where all of these parts would be built into the module itself. In 2004, we went to the module manufacturers and asked if they could built it. They said no, we just make modules so we decided to do it ourselves.
We released the first Andalay product it was integrated wiring, racking, and grounding but we didn’t have the inverters. In 2009, we offered the product with a micro-inverter and started sell it when Lowe’s approached us. At around the same time, Westinghouse approached us and we decided to change the name. We really worked with Lowe’s to simplify the product. They key innovation is simplicity both in how the product is and how it’s purchased.
Question: What is the typical costs you’re seeing on a standard 5kW system?
Answer: You can go to the Lowe’s website and depend on where you are in the country, you can buy 20 at a time (about 4.7kW) and you can buy them for between $2.60/watt and $2.75/watt. That price is delivered with the panels and on top of that you just need to add labor and profit. The DIYers will only need a role of romex and a circuit breaker with a building permit. If you hire an installers, they’ll typically charge you between $.50 and $1.00 per watt for labor.
Question: What are you seeing for reductions in man hours on the installations. I typically here 15 hours per kW and I’ve personally seen 6 man hours per kW with a 4 man hours installing a 10kW system. What are you seeing?
An NREL report just came out where they studied the installed costs and the breakdown of those costs. I looked at it this morning and in 2010 they said the average time to install a residential system was about 66 hours. So, figure 11 hours per kW. We’re routinely seeing times that are half of that are there are three drivers to labor reduction for our customers.
1. Less mechanical labor on the roof.
2. You don’t need to mess with the writing and the inverters at all.
3. The third is subtle, but there is a reduction in overhead because you don’t need to supply chain and logistic costs.
Question: I’m always on the hunt for new products but very skeptical at the same time. Crews are just starting to get trained and feel confident with the existing technology. So, either the technology needs to be AMAZING and be exponentially better then another product OR the transaction cost of switching needs to be low. Where do you fit on this spectrum are you seeing a learning curve with companies who are using your product?
Answer: We’re seeing some installers that are re-training with our product.
However, far and away the most interest we’re seeing is coming from brand new installers across the US, whether it be dedicated solar installers or general contractors (roofers, electricians, HVAC). They like the fact that they dont’ need to know temperature coefficients, string sizing or deal with racking. There will always be dedicated hardcore installers who are using the old system, but most will go with the simpler version.
Question: You bring up an interesting point in the last question about dedicated solar installers vs electricians, roofers, and general contractors that only instal solar sometimes. What are your thoughts on this dynamic in the industry in general and as it relates with your product?
Answer: We’ve had direct experience with this as an installer and now as a manufacturer.
We’ve noticed that general contractors have 2 distinct advantages over solar installers. First, they have a book of customers so their customer acquisitions costs are lower. Second, they operate their business with a much lower overhead. One reason why they can be more efficient is they can be busy in bad weather.
Question: Clearly labor, and the soft costs like customer acquisitions costs are becoming a large propertion of installed costs as hard costs are dropping. What are your thoughts about roofers cross selling solar shingles a-la One Roof Energy? Are solar shingles going to catch on or will they only be a niche?
Answer: Solar shingles have been around for-ever and I’ve used a bunch, I think it’s going to be a new construction only project.
Question: We’re talking about dropping residential installed cost. When will we no longer need residential financiers? If the installed costs gets really low, what’s the point of financing?
The demand for financing will likely decrease in states with high energy costs, good rebates and when installed costs get below $3.00/watt.
The financing model might still be effective in places where there are cheap electric rates.
Question: Do you have equal interest in your product for residential and commercial projects?
Answer: We have DC modules for commercial products and an AC module for residential products. We’re by far and away getting the most interest from the residential market because it’s the most competitive and pricing.
Question: That’s interesting. I’d think removing the installation of the grounding, wiring, and inverter installation on commercial projects, at prevailing wage, would make this extremely attractive.
Answer: I think one of the reasons we’re seeing this is because the largest number of new installers is in the residential market not in commercial. In the commercial market it’s a lot of similar players that have established supplier relationships direct with China and have well trained crews.
Question: Lastly, there’s always been interest in the combination of thermal and PV, like Echofirst. The training needed to install these projects profitably seems to be intense and the profile of the perfect customers seems small. What is your opinion on this type of technology?
Answer: It’s a great concept, it works really well on new construction and gets more expensive on retrofits.
Question: What are you excited about in the next 5 years, pie in the sky, other then a national energy policy?
Answer: First is always national energy policy would be great, but everyone has a different idea about what that would be.
My number 1 goal would be to eliminate the softs costs with solar (permitting, inter-connections) and standarizing this process will reduce installed costs by $.50/watt and make it super easy.