I always enjoy sitting down with solar industry leaders and discussing their perspectives on where solar is headed. Last fall, I had the opportunity to sit down with Scott Wiater, President of Standard Solar.
Standard Solar has seen a lot of change in the solar industry—and for itself. Founded in 2004 before the 2007 solar boom, Standard has…well… become a standard for how a small residential solar installation company can do great work and grow into a solar industry EPC leader. Today, it’s one of the largest solar installers and EPCs in the mid-Atlantic region, serving homeowners, businesses, government agencies, utilities, and educational institutions.
But Standard is more than just a successful business. It’s also a successful solar advocacy organization, led by CEO, Tony Clifford, an elected board member of SEIA, as well as president of the MDV-SEIA.
In 2008, Wiater joined Standard as President, and since then has helped expand the company into an EPC, as well as establish Standard Energy Solutions, an energy efficiency division.
Our conversation took place at SPI last fall, when consolidation of solar PV manufacturers was just beginning. The sector is still consolidating, but Wiater’s insights are still very relevant.
“It’s a shake-up period, no doubt about it,” said Wiater. “And I think there will be some more shake out—which is good. I think it needs to go through this painful time, but I also think the industry has a lot of positives going for it.”
Wiater sees the federal sector becoming a greater opening market for solar, especially in the military. While there has been some military support for solar, the growth has been slow and challenged by funding delays and figuring out solar PPA financing structures that are profitable for developers.
“I do think they’re exploring different vehicles to do PPAs. We participate with the Government Services Administration (GSA), and we’re also working with them to try to help them figure out how to change the Federal acquisition schedules to allow for a long term PPA. That’s making good progress, so I think we’ll finally see true government PPAs and a credit offtake of the US government. So, I think the federal sector is going to be a bright spot."
Wiater adds that the residential sector will also continue to play a part in solar’s good news. “It’s not doubling in size every year, but it’s a steady growth, and I think that’s pretty stable.” Part of that residential stability for Standard is due to its diversification. Its energy efficiency division complements its solar business, allowing both to refer customers to each other.
Finally, Wiater believes that there will always be good news for EPCs that have good projects. “As an EPC, if you have a good project, there are people falling down to get the project. Where finance seemed to be an issue several years ago, it’s absolutely a non-issue. I can go get financed by 10 different people now. The problem is that there’s a major lack of good projects out there.”
Wiater attributes Standard’s success with easy financing to its experience and reputation, but that easy financing comes with the pressure of finding profitable large scale projects. “If you have a good reputation and built a good rapport with the people who have the money, they want to do repeat business with the people who keep transaction costs down. So, we have people coming to us and saying ‘I have x million dollars I’d like to put to work right now; what can you help me with?’ So, our problem isn’t a money challenge, it’s finding the good projects to put that money to work.”
With solar being profitable for EPCs, and utilities inevitably losing revenue to large scale solar projects, I asked Wiater about the potential for new utility business models that include solar EPCs. “Do you think the utilities would ever buy a Standard Solar?” I asked.
“I’ve had this discussion with several of our partners,” Wiater said, “and I think right now they would rather not take the risk, since projects are so sporadic. They don’t want to make a bet on one pipeline. Instead, they’d rather have multiple pipelines available to them, and to be able to figure out which projects they want to do. But with that said, NRG started its own EPC group out of Arizona. So, I think that’s going to be the progression. Just how fast that happens, I don’t know. But I think platforms like ours will become more and more valuable as we get closer to grid parity.”
On Solar Subsidies and Growth
With Congress, there is always the threat of subsidies going away, particularly the ITC. But assuming the solar industry keeps the 30% ITC through 2016, I asked Wiater if he thought that that would be enough of a solar subsidy to keep solar’s growth.
“Yes, I do. I think the timeline is turning out pretty well and will be good for us, assuming it stays in place. I think the states and the SREC markets will continue to deteriorate. It’s a free market system, so as costs come down, SREC values will come down, and it will just be high enough to get projects done, but you’ll have to be efficient to get them done. So, I think subsidies will continue to come down, and we’re really looking forward to the time when we don’t need state level support.”
Solar developers in the mid-Atlantic are now utilizing the various SREC markets to partially fund projects, but with solar costs decreasing, Wiater says that solar developers will soon be less dependent on SRECs. “Before, we were looking for a 10 or 15 year strip. Now you can make deals work with a 5 year strip of RECs at a much lower price. So we’re much less dependent than even a year ago on the SCREC market, and I see that continuing.”
On Low Solar Prices Being Sustainable
Despite the U.S. solar PV manufacturers winning anti-dumping case and the U.S. imposing tariffs on Chinese imports, the price of solar PV panels remains at record lows. Standard purchases a lot of panels, and I asked Wiater whether he could see panel prices going even lower. He said that low solar PV was not the only sector suffering from dangerous undercutting.
“I think right now that as an industry, everyone is racing to the bottom line. At some point, we’re going to have to stop doing that. I’m not saying price fixing, but it has to be sustainable. I don’t think we’re going to be sustainable if we continue to do it. So, we have to stop the bad practices—the panel guys and the installers just trying to get deals done and making commitments that are unrealistic. For example, I heard someone yesterday talking about a project in Pennsylvania, I think, and it was $1.99/watt, all in. And I said to myself, that project will never get done. It’s ridiculous. But people hear that price, and they’re wondering ‘Why are you charging me $3? It’s a $1.99, now that’s the going rate.’ So at some point, we’re going to have to wake up as an industry and figure out what’s sustainable.”
As for solar panels, Wiater doubts that prices will ever go up beyond their current levels, but he does see manufacturers improving efficiencies, but that will only go so far. “We may see cost reductions through efficiencies, but there’s no more room for those guys to squeeze lower costs,” said Wiater. “Now, the squeeze is happening in the rest of the balance of system. The inverter guys are starting to get the squeeze, and the racking guys are starting to get the squeeze. So, everyone’s going to start feeling the pain, and the strong will rise, and the weak will go away or get consolidated.”
On Choosing Panel Companies – Choose Technology.
With notable solar PV manufacturers folding, getting out of the business, or having financial troubles, I asked Wiater about whether good reinsurance made a panel brand bankable. Unfortunately, they’re not. He said that most finance people he talks to discount reinsurance programs 100%.
“The way the policy is written, it’s real difficult to put a claim in. So, what I heard at a conference in NY a month or two ago was that all of the financers that I talked to, big names, they pretty much discount that 100%. It’s not worth the money,” he said.
“So how are you going to be sure that the panel you buy is going to be there and assuage investors?” I asked.
“It’s about the technology and getting our partner/owners comfortable that it’s a solid technology with a solid track record. They’re making the bet that it’s a solid technology that’s going to last, versus the company is going to last,” responded Wiater.
That was a refreshing answer. For once, a non-solar PV panel executive is not saying that solar panels are a commodity. Technology trumps the company behind it. That being said, even the best technology still has to be as competitively priced as any company.
As for reinsurance and warranties, that has little to do with the decision today, and Wiater gave an example why. He told me about a large solar project that he was loosely involved and where many PV panels failed—and so had the panel company. The provisions of the warranty stated that the panels would be replaced with the same brand’s panels, and there were plenty left. But considering the high failure rate, the owner didn’t want the same brand and potentially, the same panel failures.
Wiater said, “The owner was, like, ‘They didn’t last the first time, so why should I replace them with more bad panels?’ So, the warranties are okay for onsies and twosies, but if you have a large number of panels go bad, you don’t want the same panels. You want something totally different. So it’s a tough quandary.”
So how does one trust a technology? Through experience, says Wiater. “Usually, within the first year, you see the failure. So, once it’s up ad running for a while, you’re comfortable with it. So, we and our partners are most concerned with the first year and getting it up and running. Then, it’s not so much of a huge risk.”
At the SPI general session, a group of solar CEO’s were asked how many solar PV manufacturers would be left within the next few years, and I asked Wiater the same question.
His answer was blunt, and reflecting the challenge that solar PV manufactures have gaining the trust of developers.
Wiater said, “I can’t name 20 manufacturers that I’d buy from today. The pool that you would put into a pretty big project, it’s a pretty small group right now. And even within that pretty small group, there’s going to be consolidation. Even the big Tier 1 companies, I think there’s going to be consolidation, even with the big players.
Tor Valenza a.k.a. “Solar Fred” advises solar companies on marketing, communications, and branding. Want more solar marketing info? Sign up for the Solar Fred Marketing Newsletter, or contact Solar Fred through UnThink Solar. You can also follow @SolarFred on Twitter.
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