A few months ago I wrote about large scale installers increasingly becoming almost as commoditized as their solar PV manufacturer cousins. In that post, I laid out some general solutions for avoiding commoditization, but there’s one tactic I didn’t mention: joining forces, or in business speak, “mergers and acquisitions.”
As I mentioned in the previous post, large scale integrators are facing increasing competition and price pressures, and they’re not just coming from solar PPA developers demanding lower $/watt. Some of the competition is coming from solar PV manufacturers becoming more vertical.
Take SunPower, for example. The company can not only manufacture panels, inverters, and tracking systems, but also can install and provide financing. For utilities and other large scale customers, a vertical one-stop-solar-shop business model is an added value of simplicity. The model not only competes against non-vertical solar PV manufacturers, but also against SunPower's PPA and EPC customers, driving installation prices even lower. As a vertical player, SunPower has a lot more wiggle room to save money in places where stand-alone EPC installers cannot.
Ultimately, a lower installation price is good for generating more solar projects, but as we’ve seen with solar PV manufacturers, commoditized pricing can be costly and can only be sustained by companies with large reserves (or in the case of SunPower, a diversified investor/owner with large reserves).
Before we start to see PV installers go under due to unsustainable price competition, why not consolidate voluntarily before the market does it for you? Even if prices remain stable, merging with a like-minded installer may still be a good idea.
This advice holds true for both large scale and residential installers. In fact, in the last two years, we’ve seen groSolar sell its residential business to SolarCity, and California-based Real Goods Solar acquire Connecticut-based Alteris Renewables, making Real Goods a national installer.
But don’t think you have to go across state lines to see the advantages of solar installers merging. The advantages hold true across town, as well as between cities in the same region. And what are those advantages?
Of course, mergers aren’t easy or seamless. Partners must not only have the same vision and work ethic, but also they must respect each other and their respective employees. Dissimilar company cultures and poorly consolidated organizations can drive away valuable employees and bruise former reputations of quality. Even a little bad word-of-mouth about the new company can sour RFP decision-makers (and their banks), who want stability, continuity, and trust — as well as a competitive $/watt.
So, as much as I think large and small solar installation companies should consider mergers and position themselves for the future, there’s no sense in merging just for the sake of being bigger. Take your time, find the right partner(s), and then… continue to UnThink Solar.
The information and views expressed in this blog post are solely those of the author and not necessarily those of RenewableEnergyWorld.com or the companies that advertise on this Web site and other publications. This blog was posted directly by the author and was not reviewed for accuracy, spelling or grammar.