The World's #1 Renewable Energy Network for News, Information, and Companies.
Untitled Document

SolarCity Buys Zep: Behold The Power of Vertical Integration

SolarCity is acquiring Zep Solar and its rackless mounting design in a $158 million stock deal, illustrating the growing importance of improving costs and complexity in residential solar.

Much of the cost-cutting in solar PV has been shouldered by the upstream manufacturing side, but half the costs or more in a residential solar PV system come from the softer side, and they'll have to keep coming down dramatically to support widespread deployment of distributed solar PV. For its part, Zep Solar has planted its flag in the installation innovation field with interlocking frames and specialized components that simplify solar array installations, and its licensees include more than a dozen prominent PV module manufacturers and component/inverter makers.

Last November SolarCity signed up too, and since then the company's crews have doubled their daily pace of residential installations, averaging 4-5 hours instead of a day or two, according to Tanguy Serra, SolarCity's executive VP of operations. That means lower costs, and better service because of less tromping around on customer's roofs. Today "the overwhelming majority of our systems use Zep," he said. And so, as the old story goes, they liked it so much they decided to buy the company.

It's likely no accident that the two largest U.S. solar installers, SolarCity and Vivint, have vertically integrated business models. To get scale and costs down in the U.S. market "you need to be vertically integrated," explained Serra. That means "we want to avoid margin stacking; we take it out everywhere we can." To that end, barely a month ago the company acquired sales channel partner Paramount Solar, underscoring the importance of solar customer acquisition. Snapping up Zep similarly will take a slice out of SolarCity's cost structure for components.

Owning Zep also gives SolarCity access to future technology in the pipeline. Serra was particularly enthusiastic about Zep's development in two areas: non-penetrating commercial roofs, which he emphasized "is a big, big deal for us" as they go after large-scale commercial retail clients like Wal-Mart and BJ's; and carports, which for retailers provide a guaranteed cost of power and shade for customers. Current carport products on the market are too expensive and complicated, he said, and cracking this market is "a phenomenal opportunity."

SolarCity will honor all existing Zep customer contracts to their end, and then will manage partnership requests on a case-by-case basis, Serra explained. (Vivint's also a Zep customer, at least for now.) Ultimately "the vast majority of resources" will be directed to international growth, he said, from Germany to Australia to Japan to the U.K. Residential solar is picking up in Japan, where there's a strong emphasis on aesthetics for any product, and that's Zep's forte -- Zep's sleek black skirt "looks great on Japanese slate," the most common roofing material there, Serra noted. The idea is that Zep also can help pull SolarCity into these markets, but SolarCity won't sell power in international markets "just yet," he said, so it won't compete directly with those regional installers.

So where else in this vertically-integrated solar installation cost stack is ripe for trimming? " If you've got to pay margins to a marketing company, an installation company, a financing company -- that's three or four layers of margin, that ultimately gets borne by the end consumer," not to mention a complex coordination of partners, Serra said. He wouldn't say, of course, citing corporate quiet-period rules, whether that means SolarCity's next M&A target is a financing company, only hinting that "as opportunities come up we will consider them."

Lead image: Clamp putting pressure on American money, via Shutterstock

Untitled Document

RELATED ARTICLES

Welspun Commissions 52-MW Solar Power Plant in India

Vince Font Leading Indian solar developer Welspun Renewables has commissioned the construction of a massive solar plant in the state of Maharashtra. The planned 52-megawatt (MW) solar plant will be located in the city of Baramati. The...

Regional News from the July/August 2015 Digital Edition of Renewable Energy World

Renewable Energy World Editors EcoFasten Solar announced that it launched a new mounting "Rock-It System" that it would be displaying during Intersolar. Product compliance was determined through testing per UL Subject 2703, which reviews integr...

SkyPower Inks $2.2 Billion Deal for Massive Solar Power Plant in Kenya

Eric Ombok, Bloomberg Kenya’s Energy Ministry and SkyPower Global Ltd. will sign a $2.2 billion agreement on Sunday that paves the way for the Canadian company to develop a 1-gigawatt solar project in East Africa’s biggest economy. The solar pro...

Making a Match: How Solar Companies and Banks Hook Up

Jennifer Runyon The announcements are fairly frequent: SunPower Partners with Admirals Bank for $200 Million Solar Loan Program, Deutsche Bank to Lend $1 Billion for Japanese Solar Projects, Financing Partnerships Drive North Carolina's So...
Jim is Contributing Editor for RenewableEnergyWorld.com, covering the solar and wind beats. He previously was associate editor for Solid State Technology and Photovoltaics World, and has covered semiconductor manufacturing and related industries, ...

CURRENT MAGAZINE ISSUE

Volume 18, Issue 4
1507REW_C11

STAY CONNECTED

To register for our free
e-Newsletters, subscribe today:

SOCIAL ACTIVITY

Tweet the Editors! @megcichon @jennrunyon

FEATURED PARTNERS



EVENTS

Presenting at Infocast's Utility Scale Solar Summit 2015

Oct. 21, 2015 4:30-5:15pm Albie Fong, National Director, Solar Frontier ...

Utility Scale Solar Summit 2015

Oct. 21, 2015 4:30-5:15pm Albie Fong, National Director, Solar Frontier ...

5th Annual Hydro Plant Maintenance

Join maintenance professionals to discuss the challenges in maintenance ...

COMPANY BLOGS

Behind Every Good Decision

When something about your business isn’t working, you set out to c...

Clean Energy Patents Maintain High Levels in First Quarter, Solar L...

U.S. patents for Clean Energy technologies from the first quarter of 201...

An Overwhelming Paradox

I’m sure we’re all very familiar with the feeling of being o...

NEWSLETTERS

Renewable Energy: Subscribe Now

Solar Energy: Subscribe Now

Wind Energy: Subscribe Now

Geothermal Energy: Subscribe Now

Bioenergy: Subscribe Now  

 

FEATURED PARTNERS