Untapped Potential in Commercial Solar

The global solar PV market is expected to grow 21% and add 66 GW of installed capacity by the end of 2016. In the US alone, the solar industry will grow 119%.

While large-scale utility installations have driven a lot of this development, distributed generation in residential is also experiencing rapid expansion due to the competitive prices of solar power coupled with state, local, and federal incentives.

The commercial sector, however, has had trouble taking off in the same way. According to a recent article by Renewable Energy World, this is largely due to market fragmentation.

In residential, the top three national companies hold 50% of the market. Their ability to create standardized project profiles ensures that investments will yield predictable, reproducible results. This attracts large financiers, and allows for large-scale projects.

In commercial, on the other hand, the top three US players control 10-15% of installations. Each project looks at factors unique to local markets and local utilities when drawing up a proposal.

There are more moving parts to commercial, such as rotating tenants, that make standardizationchallenging. This tends to scare away financiers, leaving prospective commercial/industrial customers on their own and much less likely to make an investment.

Corporations are key drivers in renewable energy growth, involved in 50% of overall PPAs in 2015. Contracted capacity has doubled year-to-year since 2012, and will follow a similar trajectory in the future. This makes for an enormous amount of untapped potential in the non-residential market.

Ultimately, the commercial sector will need market consolidation similar to what has occurred in residential to take advantage of this opportunity and spur further growth in renewables.

Solar companies in the commercial sector need larger project volumes to open up more financing options, but often lack the bandwidth or funds to procure them. The consolidation of regional and state-level players will help produce the necessary funds to scale up projects and attract consistent, sizeable funding.

Our acquisition of Endura has helped us tap into more of these important opportunities, while expanding our reach internationally. We plan on continuing to scale organically through acquisition to capture more market share and accelerate our growth.

The commercial sector has tremendous potential to drive renewable energy growth at unprecedented and exciting rates, but the market needs coordinated efforts to create the bandwidth needed to tap into larger-scale projects.

Once this is achieved, it will produce the virtuous cycle of market stimulation that non-residential solar has been waiting for.