Residential solar is getting cheaper – except for third-party

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EnergySage’s Solar Marketplace Intel Reports provide yet another view into the evolution of the rooftop solar industry. As the company’s online marketplace is only a small portion of the overall behind-the-meter market, this report does not provide as definitive of data as those by the U.S. Department of Energy’s network of national laboratories. However it complements these, data from the state of California and quarterly reports from large publicly held companies in giving a more full understanding of market trends.

The latest Solar Marketplace Intel Report starts with a shocking number: the average price for PV systems quoted through the EnergySage online solar marketplace in the first half of 2019 had fallen to $2.99 per watt-dc. This is a decline of more than 4% versus a year ago, and 23% less than four and a half years ago, when EnergySage began counting.

And, if you look at the distribution of costs, this shows that the due to the data being skewed somewhat by more expensive systems, many systems were substantially less expensive than this.

This trend matches that shown in Lawrence Berkley National Laboratory’s Tracking the Sun series. The latest version of Tracking The Sun, published earlier this month, shows a median system price of $3.70 per watt-dc across the United States in 2018. While this is 24% higher than EnergySage’s quotes, it shows a 5% decline from 2017 to 2018.

 

The third-party exception

However, neither the Solar Marketplace Intel report nor Tracking the Sun show all solar installations; chiefly Tracking the Sun excludes all solar sold under lease or power purchase agreement arrangements, dubbed “third-party-owned” solar. Likewise, EnergySage excludes data from Sunrun, Vivint and Tesla, which are the three largest third-party solar providers, and, with the exception of SunPower and its dealer network, the three largest companies in the residential space.

Tracking the Sun shows prices third-party systems tracking closely to “host-owned” systems, but Berkeley Lab’s data stops at 2018. In 2019, costs have been increasing at both Sunrun and Vivint, which are the only solar companies that provide system price data as part of their quarterly results. And it is unclear how much these costs are being passed on to customers.

System costs at Sunrun increased 6% in the first quarter of 2019 and 2% in the second quarter over full year 2018 levels. Vivint saw an even higher increase in costs, with prices growing 7% year-over-year in the first quarter and 10% in the second quarter, to rise to $3.56 per watt. In both cases, rising sales, general and administrative costs were the main driver.

These rising costs are likely to have inspired Tesla’s move to online sales, which has allowed it to slash costs to below $2 per watt for residential systems. However, it remains to be seen if this move will turn around the fortunes of Tesla’s share of the rooftop solar market, which has plummeted.

And despite rising costs the market share of both Sunrun and Vivint  are increasing. This is happening even as the total share of third-party solar has fallen sharply due to the contraction in Tesla’s sales.

 

Falling costs

It’s important not to read too much into EnergySage’s data, as the prices listed are the prices of quotes, not the final systems installed, and it is possible that these prices were higher. However, the trend from both EnergySage and Berkeley Lab is clear: residential solar continues to get cheaper.

There remains a big question mark around the third-party solar model, and whether or not companies in this space can contain the rising costs that have been seen so far this year, which is particularly important given the trend of ongoing assaults against net metering. The basic model of third-party solar companies, which is dependent on long-term financing, may insulate them somewhat from short-term trends. But eventually even they have to turn a profit.

Meanwhile, the online solar marketplace model continues to grow. EnergySage estimates that 3-4% of all of the residential solar in this United States installed last year was sold through its site, and the company says that it is seeing “near triple-digit growth” from year to year.