Just because we’re not shooting fish in a barrel doesn’t mean we’re moving past the late early majority, venturing into the mainstream, or “crossing the chasm” of residential solar. Since December 2015, I’ve been exploring the macro changes happening in the US residential solar markets and wondering where (and if) we were moving into mature market segments.

I’ve poured over primary and secondary research, conducted surveys and interviews with contractors, and spoken with people who argue passionately for and against the Crossing the Chasm strategy including Warren Schirtzinger, one of the individuals who worked on developing the original strategy during the 90s while with Silicon Valley firm Regis McKenna Inc..

A few lessons emerged from these discussions:

  1. Despite suggestions from the recent NREL SEEDS study, the Crossing the Chasm framework is likely not the right strategy to apply in the situation of solar adoption. Stay tuned for Warren’s insights on that.
  2. Even at 1 million solar roofs (and that’s residential AND commercial), solar is still less than 1% penetration in terms of energy generation. That’s barely out of the innovator market even when using the Crossing the Chasm framework (Innovators are the first 2.5%).
  3. Many installers demonstrated very little understanding of the rising threat of a wider variety of rate reforms aside from just proposed changes to net metering. In less mature markets, installers are more focused on reductions of incentives than any other potential external threats. Few demonstrated understanding of the utility and its rate designs essentially being the “hand that feeds.”

Looking Forward

We are clearly moving into a period of significant change and what worked up until now won’t work in the future. That covers go-to-market strategy, sales operations, fulfillment, and engagement (or lack thereof) with the policies that make residential solar viable. We need to get focused on improving our business skills from business finances to marketing, branding to training, management to leadership, and how to build the simplest and most effective technology stack to support those operations.

SunShot started this part of the conversation in 2013 by shining a light on the how the non-hardware costs had eclipsed hardware costs as the primary drivers of system costs. Since then, soft costs have been mostly stubborn while a number of hardware manufacturers have made gains on reducing their costs. We’re likely to ride another wave of module cost reductions and a shakeout in that sector, too. Meanwhile, many other parts of the supply chain upstream from installers (like distributors) have yielded their margin to support cost reductions – a dangerous game that could lead to business ruin for some who aren’t careful.

SoftCost-breakdown (1)

via energy.gov

“Lowering soft costs” is not a directive. It’s not prescriptive, it’s not actionable, and it’s not even proven to be the optimal route to win customers. Pursuing soft cost reductions, many companies in the industry skipped straight to adopting automations by focusing on software tools as a silver bullet solution even though it is the final step in business optimization after focusing on people/training and process development/optimization.

Competing on price alone will not be enough to break into a more mainstream market. A PV system alone may not be valuable enough for consumers, hence what we can learn from the boom of the third-party owned offerings that bundled easier sales/financing with long-term oversight. While not perfect, and still subject to the same issues with rater reforms, it was a slightly more complete product/service, though it still lacked in a number of fundamental areas.

What are those remaining areas? What else must and should be simplified to create a complete product/service offering for residential solar to make it compelling for a more mainstream audience? We should continue to strive to create that business model. But to step back and do that means we must have the capability to work ON our business and must get our house in order.

Consumers go solar for so many reasons, many of which we do not understand and are masked by follow-up studies where people are asked to essentially rationalize why they decided to go solar. Consumer behavior is so hard to study. Ask a classic market researcher with a focus on this industry like Paula Mints and she will certainly tell you why.

The business of residential solar has traditionally been captivated by short-term thinking. Investors who back project finance and working capital price their services according to the perceived risk. The energy market is in flux but without skills that help develop longer-term planning skills, solar installers will continue to be at the mercy of policy and regulation development.

This article was originally published on LinkedIn.

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