When Will Renewable Energy Achieve Vertical Integration?

Since taking on this beat late last year I have been struck by how primitive the renewable energy industry is, in some important ways.

And I’m not just talking about technology.

In computing, where I have spent most of my reporting career, companies long ago discovered the power of vertical integration. Apple controls design, manufacturing, and even retailing of its products. Software companies like Microsoft and Oracle also sell applications, and Best Buy sells services through its Geek Squad.

This is rare in alternative energy. We have manufacturers. We have distributors. We have retailers. We have installers. We have law firms. We have finance firms. Most are relatively small. If you’re not in the industry it’s hard to name one.

What is significant about One Block Off the Grid  and its entry into the Philadelphia market  isn’t the deal, but how it’s created.

Through vertical integration.

One Block Off the Grid is acting as sales agent and financial arm, bringing Canadian Solar in as the manufacturer and Mercury Solar Systems in as the installer.

The deal is being offered on a market-by-market basis, with modest discounts of 15% offered to buyers, because there remains so much diversity in the legal and financial realm. The latest One Block release mentions that in Pennsylvania, buyers can take advange of the state’s Solar Renewable Energy Credit (SREC) program, which it notes is similar to a New Jersey program.

All of which illustrates another advantage of integration. Not only do you reduce costs, but you scale up a company and impose market standards.

Standards are an important way to reduce costs. We need standardized contracts, standard incentives, standards for connecting to the grid, and standard terms consumers can understand. As well as hardware standards that let you replace today’s systems with better ones when they become available.

Not all of this requires new technology. Most is independent of new manufacturing techniques. It means doing the same thing in the same way every time. This can be achieved by companies working together. But it can also be achieved by one company achieving dominance within a market or nationwide, through the magic of vertical integration.

That’s going to happen over time. But do we have to wait until that day before consumers get a break?

 

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Dana Blankenhorn has covered business and technology since 1978. He covered the Houston oil boom of the 1970s, began making his living online in 1985, and launched the Interactive Age Daily, the first daily coverage of e-commerce, in 1994. He has written for a host of off-line and online publications including The Chicago Tribune, Advertising Age, and ZDNet. He has covered PCs, networks, telecommunications, cable technology, Internet commerce, the Internet of Things, Open Source and Health IT, He began covering alternative energy at his personal blog, Danablankenhorn.com, in 2007.

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