We’ve all seen the positive growth statistics for solar. The United States recently passed one million solar installations, and solar jobs now outpace those in the oil & gas industries, growing by 20% for the third year in a row. But this growth is mainly driven by residential buildings and large businesses - what about the small and mid-sized commercial markets? Nearly 30 million small businesses currently operate in the United States; but they remain largely untouched by the benefits of solar.
Many solar developers don’t have the committed capital, standardized underwriting practices, operational capability to manage varying contract terms, or the accessible financial tools to make solar work for small- and mid-size commercial businesses. As a result, they are left with a dusty filing cabinet of abandoned small projects they didn’t have the capacity to contract and build. GTM Research suggests that projects under 1MW represent a significant opportunity for the solar providers who can overcome these barriers and bring standardization to the deal review, financing and development process.
To understand how to unlock the mid-size commercial solar segment we have to understand the needs of the buyers.
In a study recently fielded by REC Solar to 200 energy decision makers at businesses in the mid-market segment that have already gone solar or are considering it, we asked about the drivers of the decision to invest in solar. The primary driver was cost savings, followed closely by the ability to reinvest energy savings into other business areas, energy independence, and to align with company sustainability goals.
Businesses that go solar do it for the cost savings. This recaptured revenue can go into developing other areas of their business.
There is often a lower level of education and sophistication within small businesses than the larger commercial projects. That makes sense, since many of the smaller companies don’t have a dedicated facilities or operations role. As the small- and mid-size market segment becomes more mature, solar providers serving these customers will need to become subject matter experts on educating business owners on energy savings options - particularly those options that do not require a capital investment such as a PPA or operating lease.
Reinvesting solar savings into the business
When asked an open-ended response about where they will reinvest savings from solar, there are two common themes for the investments - creating differentiation and driving growth. For example, one company that had already gone solar indicated, "We are using our initial solar project to drive future investments in company sustainability initiatives." Other responses included reinvesting in company operations, employees (bonuses, benefits, workforce training) and ongoing R&D.
Energy price volatility can impact high energy users at smaller companies as much as it does large commercial users. The ever-changing rates, incentives and demand charges make it difficult for many smaller businesses to manage their energy cost planning. At REC, we can demonstrate that by investing in onsite power generation like solar, businesses can more effectively manage & plan for future business expenses. Companies of all sizes need an energy partner that understands the current market, where it is headed, and how a business can optimize their near and long-term strategies.
With this understanding of the needs of mid-sized commercial customers in mind, solar providers still need to address the hurdles that have historically kept the market from being opened up.
At REC we are working to enable more small to mid-sized companies to invest in solar by working with our authorized solar partners across the country to offer a standardized credit review process, making financing available for qualified deals, and offering value-added services like proposal development and project management. We are seeing strong demand from authorized partners with a backlog of these deals, indicating a maturation in the industry that is going to bring the benefits of solar to the mid-size commercial market.
Written by Ryan Stepp, Director of Channel & Partner programs at REC Solar, where he manages relationships with the Authorized Partner network.