By: Christopher Doyle, Solar Power World Contributor
Solar Leasing and Power Purchase Agreements (PPAs) have had a good run over the past three years, serving as the industry workhorse and paving the way for what Greentech Media is calling “mainstream” solar. As financial products become more competitive, solar PV installers (installation partners) are in high demand to drive the value chain. The significance lies in the installer’s ability to meet face to face with customers and drive new business through the value chain.
We are seeing a trend with finance companies vertically integrating with their customer acquisition and installation channels (i.e. Sunrun-REC, SunEdison-Roof Diagnostics) However, some finance companies and potential new market entrants will be enticed to stick to their finance roots and leave customer acquisition and installation to the channel partners. New financing firms and diversified financial products in the market will drive competition amongst financing firms for these valuable installation partners. With only so many existing partners to go around, the next best option will be to invest in smaller installation partners that will become permanent channel partners.
These market conditions are similar to the Harvard Case Study, “Cola Wars Continue” where Pepsi and Coke quickly duke it out for bottling and distribution channel partnerships. Pepsi and Coke end up making such an investment in the bottlers that it makes it nearly impossible for either party to break away from the channel.
In the Solar PV industry, finance companies and installation partners will have a similar interdependence where they rely on one another for customer acquisition, leveraging payment terms and simple business infrastructure. This is a win-win for the solar industry and an opportunity for small businesses to gain access to resources needed to succeed in responsible growth.
There is plenty of room for competition in the market for both financial products and installation contractors. Increased competition will lead to installers differentiating themselves to provide additional value to the consumer through customer service, quality equipment, quality installation and enhanced brand recognition.
This process has already started in the marketplace. However, the innovation in financial products such as debt financing and lease structures will soon produce new market entrants that will compete for the installation partners’ in a way that gives good installers new leverage to ask for more from the relationship.
Christopher Doyle is a program director at IBTS, a leading provider of Investment Grade Quality Assurance services to public and private sector clients for the past 35 years. www.IBTS.org.