Nat Kreamer, CEO, Clean Power Finance
“It was the best of times, it was the worst of times” for the solar industry in 2012. Downstream companies enjoyed the lower hardware costs and greater access to vendor financing in the United States while upstream companies struggled to sell equipment above their marginal cost. Upstream overcapacity is driving consolidation, which should translate into improved scale.
While downstream companies selling and installing solar enjoyed higher margins in 2012, it is likely that heavy downstream competition will reduce those margins in 2013, pushing companies to either grow or specialize.
We see a trend of more solar companies focusing on their strengths to drive profit amid declining system prices. For example, in the case of customer acquisition, this often means a company that is great at installation will stop selling directly to consumers and partner with a company that is great at acquiring consumers. Another example we see is more installation companies out-sourcing all of their logistics and/or procurement to large distributors that enjoy comparative advantage in economies of scale, which is the key in logistics and procurement.
In addition to work by private companies, the Department of Energy’s SunShot Program is investing hundreds of millions of dollars with industry participants to develop solutions that drive down soft costs, which will improve industry competitiveness and profitability.
Improved scale and specialization is the key to the solar industry’s growth. Consequently, the entire value chain needs to optimize before solar can become a major source of U.S. electricity generation.
Nat is the CEO and a member of the board of directors of Clean Power Finance. Nat’s original idea to finance solar for consumers led him to co-found SunRun, which he led as the company’s president and CEO. Nat was the president and member of the board of directors of Acro Energy Technologies, a residential and commercial solar integration company. He created the Chicago Climate Exchange market-making business for Pioneer Futures, a division of MF Global.