A megawatt (MW) of solar power provides enough electricity for around 250 average homes, according to the US Energy Information Administration. That’s enough to light up a small town, and it gets much more efficient when multiplied by the hundreds or thousands required to power a city. For perspective, consider that a small traditional power plant emits around 100 pounds of CO2 per hour – the same as 8mpg – while a large coal plant might emit 600 pounds per hour – the same as 50mpg. On the upside, however, solar power generates zero emissions, and it has the potential to provide 24-hours of continuous energy when the sun is shining. It also has the potential to provide renewable energy to a location – regardless of the weather conditions – which means that it is virtually impossible to disrupt the supply.
With these advantages in mind, it’s an obvious choice as to why people are flocking to install solar power. The US Energy Information Administration projects that 10.9 million solar photovoltaic (PV) systems will be installed worldwide by 2022, with China and Germany leading the way.
Global Growth
It’s no secret that solar power is a lucrative business, and it is creating an enormous amount of employment opportunities. For example, the International Solar Alliance (ISA) estimates that there will be 100,000 jobs available by next year, with opportunities also expanding into the renewable energy sector as general contractors and electrical construction companies navigate the evolving business landscape. According to the Solar Foundation, the number of people working in the solar industry rose by 18% between 2016 and 2018, with senior management positions seeing the largest share of job creation. As the renewable electricity generation industry continues to expand, so does the need for skilled manpower.
The Evolution Of The Solar Business Model
The first step in any business’s evolution is typically to identify where it is lacking compared to its competitors. The solar industry recognized the need to innovate long before most other industries, which is responsible for much of its current success. To compete in today’s market, solar power providers must keep up with the times and innovate to provide their customers with the best experience possible.
This innovation has evolved from simple things like installation to clientele and business models. For example, some companies focus on owning and operating the solar farm while others focus on providing the technical expertise required to run and optimize the facility. Furthermore, some companies have pivoted from selling solar power directly to the consumer to instead selling energy services to the corporate market, which includes commercial, industrial, and government customers.
The most successful companies in the space have established themselves as thought leaders in their field and provided their customers with a one-stop-shop for all their energy requirements – whether they’re looking for renewable electricity for their data centers or they need energy for their homes. These companies have evolved from selling rooftop solar systems for individuals to providing energy management services for large enterprises.
The importance of customer focus and retention cannot be overstated, especially in today’s market. According to the Global Solar Economy Market Report 2021, it is estimated that there will be 121 million global electricity customers by 2022, with 35 million of those living in Asia-Pacific.
The Rise Of The Customer
Customers are an important part of the solar industry’s evolution, and it is clear that the industry is shifting towards the customer. The report from GTM Research and the Solar Energy Industry Association (SEIA) states that the customer is more important than ever before in today’s marketplace, particularly in the area of revenue generation. In 2021 alone, customers will account for around 40% of solar power revenue, which is a dramatic increase compared to the 20% share in 2020.
The evolution of solar power has shifted from large scale utility-type projects to smaller scale residential and commercial projects. This transition has opened up a whole new market of customers who would not have signed up for a traditional power purchase agreement (PPA), but rather a leasing agreement where the cost of electricity is split over a period of time. This segment of the market requires a slightly different sales approach, as customers will be looking for value and ease of use in addition to cost-effectiveness. To better understand this evolving market, it’s important to examine the differences between a PPAs and a leasing agreement – as these are the types of contracts that are being signed today.
The Rise Of The Leasing Agreement
In a purchase agreement (PA), the customer pays for all energy costs upfront, generally in a single payment or over a period of time. A lease is a little more complex as the customer still pays for part of the energy upfront but will be responsible for the rest of the cost over a period of time. The main difference between the two is that a lease prevents the customer from having to pay for unused energy – often included in the cost of a purchase agreement but rarely offered in a lease. In addition, some companies will include additional fees within the cost of a PA that are not included in a lease. For example, some agreements include a maintenance or administration fee while others include a cancellation fee.
Value For Money
With regards to value for money, it is difficult to quantify exactly how much a customer is worth to a solar company, but it is certainly more than the price of a power purchase agreement (PPA). This is because a company can sell multiple PPAs to different customers for the cost of a single lease agreement. Furthermore, the ability to generate revenue over a period of time provides customers with additional value compared to an initial payment of electricity. This added value is typically found in the form of a revenue-sharing agreement or a no-cost extension on utility bills.
Residential And Commercial
Solar energy is available to everyone, and it’s a great choice for those looking to reduce their carbon footprint and save money. In addition to residential applications, commercial customers – such as hotels, shopping centers, and data centers – have a significant interest in solar power. To attract these customers, solar companies must provide energy management services to large enterprises, as well as offer favorable financing options.
A report from the Solar Foundation states that 80% of the industry’s value is derived from residential and commercial applications, while 20% comes from utility-scale projects. The report also projects that by 2022, 75% of the industry’s revenue will come from these two sources.
Cost-Effective
Cost-effectiveness is a significant factor for any business, especially in today’s market where customers are more conscious of their spending habits. According to the Global Solar Economy Market Report 2021, it is estimated that 80% of the residential and commercial markets are cost-effective, while the utility segment is somewhat less so. This is mainly because utility-scale projects require a large initial investment that tends to make solar power less cost-effective when compared to traditional energy sources. In addition to this, the report also projects that the cost of solar power will continue to decline as the technology improves and new efficient production techniques are implemented.
Large Or Small
The scale at which a solar project is constructed also impacts its value and cost-effectiveness. Generally, utility-scale projects are more cost-effective as they can be built to provide enough energy for large communities or institutions. In comparison, rooftop projects are more cost-effective when constructed on a smaller scale, as they can be customized to provide less energy but are still able to generate power for a similar cost to a smaller scale project. In addition, the report also states that projects implemented on a smaller scale often serve a dual role of providing power for the building and acting as a demonstration project to educate employees about the benefits of solar energy and create a more eco-friendly work environment.
Rising Demand
The Global Solar Economy Market Report states that there is a significant rise in the demand for solar power throughout 2021. This is mainly due to the combination of falling prices and improved technology, which is resulting in more people going renewable. According to analysis firm Solar Market Analytics, the total global photovoltaic market (modules and cells) will see sales rise by 23% between 2020 and 2025.
The demand for solar power will continue to increase in 2022 and beyond as more industries realize the cost- and carbon-reducing benefits of solar power. The International Solar Alliance (ISA) also estimates that there will be more than 100,000 new jobs available by next year, with opportunities increasing into the renewable energy sector as general contractors and electrical construction companies navigate the evolving business landscape.