NewEnergyNews: WHO BUYS SUN AND WHY/

NewEnergyNews

Gleanings from the web and the world, condensed for convenience, illustrated for enlightenment, arranged for impact...

The challenge now: To make every day Earth Day.

YESTERDAY

THINGS-TO-THINK-ABOUT WEDNESDAY, August 23:

  • TTTA Wednesday-ORIGINAL REPORTING: The IRA And The New Energy Boom
  • TTTA Wednesday-ORIGINAL REPORTING: The IRA And the EV Revolution
  • THE DAY BEFORE

  • Weekend Video: Coming Ocean Current Collapse Could Up Climate Crisis
  • Weekend Video: Impacts Of The Atlantic Meridional Overturning Current Collapse
  • Weekend Video: More Facts On The AMOC
  • THE DAY BEFORE THE DAY BEFORE

    WEEKEND VIDEOS, July 15-16:

  • Weekend Video: The Truth About China And The Climate Crisis
  • Weekend Video: Florida Insurance At The Climate Crisis Storm’s Eye
  • Weekend Video: The 9-1-1 On Rooftop Solar
  • THE DAY BEFORE THAT

    WEEKEND VIDEOS, July 8-9:

  • Weekend Video: Bill Nye Science Guy On The Climate Crisis
  • Weekend Video: The Changes Causing The Crisis
  • Weekend Video: A “Massive Global Solar Boom” Now
  • THE LAST DAY UP HERE

    WEEKEND VIDEOS, July 1-2:

  • The Global New Energy Boom Accelerates
  • Ukraine Faces The Climate Crisis While Fighting To Survive
  • Texas Heat And Politics Of Denial
  • --------------------------

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    Founding Editor Herman K. Trabish

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    WEEKEND VIDEOS, June 17-18

  • Fixing The Power System
  • The Energy Storage Solution
  • New Energy Equity With Community Solar
  • Weekend Video: The Way Wind Can Help Win Wars
  • Weekend Video: New Support For Hydropower
  • Some details about NewEnergyNews and the man behind the curtain: Herman K. Trabish, Agua Dulce, CA., Doctor with my hands, Writer with my head, Student of New Energy and Human Experience with my heart

    email: herman@NewEnergyNews.net

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      A tip of the NewEnergyNews cap to Phillip Garcia for crucial assistance in the design implementation of this site. Thanks, Phillip.

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    Pay a visit to the HARRY BOYKOFF page at Basketball Reference, sponsored by NewEnergyNews and Oil In Their Blood.

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  • WEEKEND VIDEOS, August 24-26:
  • Happy One-Year Birthday, Inflation Reduction Act
  • The Virtual Power Plant Boom, Part 1
  • The Virtual Power Plant Boom, Part 2

    Thursday, January 14, 2010

    WHO BUYS SUN AND WHY

    Photovoltaic Incentive Programs Survey: Residential Participant Demographics, Motivations and Experiences
    Yasmeen Hossain, Mike Taylor and Ming-Jay Shao, November 2009 (Solar Electric Power Association)

    SUMMARY
    What kind of a saintly person is willing to wade through the decision-making complications and spend the big upfront money it takes to put a solar system on the roof?

    The answer is Innovators and Early Adopters. After them, there will be an Early Majority. These terms come from Everett M. Rogers’ Diffusion of Innovations.

    There is one thing important about that Early Majority: If it starts buying solar soon enough, the community of nations may have a shot at restoring this good earth’s steady-state climate. So it is crucial to understand what drives the Innovators and Early Adopters and what needs to change to convince the Early Majority.

    To better understand the solar buyer, the Solar Electric Power Association (SEPA) designed an online survey and obtained data in the fall of 2007. Photovoltaic Incentive Programs Survey: Residential Participant Demographics, Motivations and Experiences had 2 specific goals: (1) To get answers for state utilities and incentive program designers and (2) to obtain data that explains how and why one part of the public sees a good thing and gets involved and another part turns away and waits.

    The survey is broken into 5 sections: (1) The demographics of solar customers; their attitudes and experiences (2) in the Pre-Installation period, (3) in the Installation period, and (4) in the Post-Installation period; and (5) their Financial Considerations.

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    The survey revealed patterns: Demographically, solar customers very much resembled the Early Adopters described in Diffusion of Innovations theory.

    More specifically, the 3 top concerns of these Early Adopter solar purchasers prior to installation were the quality of the equipment (17%), the initial cost (14%) and finding a qualified installer (14%).

    Their 3 top motivations for purchasing a solar system were environmental concerns (24%), cutting back dependence on foreign oil (20%), and producing their own electricity (20%).

    The 3 most common methods for paying for the systems, after incentives, were cash (67%), home equity loans (21%), and mortgage refinancing (8%).

    The 3 parts of the process they found easiest and most positive were getting utility approval (19%), getting the payment through the incentive program (19%), and getting information about solar energy (18%).

    The 3 parts of the process that were the most difficult and negative were getting utility approval (25%), getting through the installation (24%), and getting the payment through the incentive program (17%).

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    The bottom line: PV system Early Adopters are in a higher income bracket, have a post-graduate degree, live in a smaller household, and are aware of and concerned about the environment and solutions. In short, they are a niche market. Whereas,

    The anticipated PV system Early Majority will have a more median income, median education level and median household size. It will be more wary of new technologies and more risk averse. It will worry about system maintenance and whether the system will perform as marketed. Therefore,

    To achieve higher levels of market penetration, the solar industry must meet these changing concerns.

    The Early Majority will want and require straightforward and reliable information on solar technologies presented by qualified, personable, informative installers. Good websites that provide customer reviews will also help move the marketplace.

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    To win over the Early Majority, the solar industry must also sell reliable systems that fulfill the promise of low maintenance. It must make grid connection and incentive applications simpler and it must make the presentation of its information simple, realistic and comprehensive. There must be no hidden costs and all aspects of financing and payment must be clear.

    In short, the Early Majority customer will require a seamless process overseen by an installer they can trust.

    The survey’s results reveal much about customer motivations, concerns and experiences before, during and after a PV system is installed. Because the field is so new, the data will at least provide a baseline for future surveys. SEPA believes the data will be useful in designing incentive programs to drive solar industry growth.

    Most importantly, the data reveal that short- and medium-term marketing and incentive programs should be directed at Early Adopters and designed similarly to marketing for environmental products (hybrid-electric vehicles, organic foods). In the long-term, however, the solar industry will only achieve a bigger market position by making solar more understandable, affordable, and accessible and reaching customers who are not willing or able to overcome information and/or cost barriers by themselves.

    Right now, the saintly people who go through the tribulations of installing a home solar system do so because they believe. The market the solar industry needs will need to be convinced.

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    COMMENTARY
    On solar incentive programs:
    (1) The key solar market drivers are Renewable Electricity Standards (RESs), especially those with solar carve-outs, the federal Investment Tax Credit (ITC), and the various solar incentive programs.
    (2) In 2008, there were ~100 solar incentive programs; ~70 were non-governmental (utilities, private entities) and ~30 were state programs.
    (3) They are all intended to ease the cost burden of purchasing and/or installing a solar system and can be broken down into 3 main types: rebates, performance, and financing.

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    With rebate incentives, administering agencies give money back to people who buy a system. It can be an upfront payment that discounts the purchase price, a cash-back payment made when proof of purchase is demonstrated or it can be a one-time deduction from the capital cost. Though rebates are typically given through an open and ongoing process without performance conditions, they may require verification of short-term performance. They differ from grants in that they do not require a competitive application.

    Performance incentives reimburse system owners on the basis of actual electricity production. There are three kinds: Feed-in-Tariffs (FiT), Performance Based Incentives (PBI), and Renewable Energy Credits (RECs).

    An FiT (sometimes called a standard offer) is a guaranteed, above-retail rate paid by utilities for all the electricity generated by a system’s owner over a guaranteed, long-term period (usually 15-to-25 years). Since the electricity is sold at a higher rate than the system owner pays to buy it from the grid, the FiT has no impact on an owner’s utility bill.

    FiTs are common and have been successful at driving solar industry growth in Europe but are uncommon in North America.

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    A PBI is used when there is no FiT arrangement but there is a net metering arrangement instead. The system owner uses the electricity generated by the solar system to wind back the utility bill to zero but cannot earn money from the system’s output. This means that with a PBI the system owner is not selling electricity, which in many states is illegal for private individuals, but earning an incentive.

    A REC is a certificate awarded to a system owner for every unit of electricity (usually in megawatt-hours (mWh) or kilowatt-hours (kWh) that is produced by the system. Its value is determined by the markets into which it is sold (usually voluntary emissions-trading markets like the Chicago Climate Exchange), where it is purchased by businesses seeking to offset their emissions with investments in emissions-free energy. A REC is considered a supplement, not a primary incentive. (Exception: New Jersey)

    In an FIT arrangement, the utility that purchases the system’s output owns the REC. In a net metering arrangement (rebate or PBI), ownership of the REC varies.

    Financing incentives make money more readily available to system buyers. Below-market interest rates on loans can come from governments or nongovernmental institutions such as utilities. Loan guarantees or non-traditional loans get banks to make the purchase money available. A popular new financing incentive has municipalities putting up the money for the system purchase and being repaid through home and building owners’ property taxes.

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    Financing incentives are less effective with small system buyers because they do not really reduce the cost of the system.

    Tax credits are not, in SEPA’s terminology, considered incentives in the technical sense because there is no administrator, they are part of the tax process, there is no prequalification or application and there is no long-term performance consideration.

    SEPA surveyed only participants in rebate incentive programs.

    U.S. grid-connected photovoltaic (PV) installed capacity grew 48% from 2006 to 2007 and 60% from 2007 to 2008. Residential growth, which was 33% of the capacity but (being small) 84% of the systems installed, followed the trend.

    More importantly, residential systems are usually the leaders in new markets because residential electricity rates are the highest. This makes residential systems the ones most important to small installation companies.

    click to enlarge

    Other polling has been done but never with so much specific emphasis on those who made the leap and the kinds of incentives that drove them.

    SEPA developed, with input from PV incentive program managers, a standardized online survey of PV incentive program participants. 10 state and utility programs participated, largely in the fall of 2007.

    Results analyzed (1) the demographics of solar customers; (2) their attitudes and qualities in (2) the pre-installation period, (3) the installation period, and (4) the post-installation period; and (5) their financial considerations.

    Part (1): 5 survey questions sought information about solar PV system buyers on the demographic subjects of (a) household size, (b) income, (c) financial decisionmaking, (d) education level, and (e) home size.

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    More than half of solar PV system buyers had a 1-to-2 member household (below the national average of 3), suggesting most PV owners either do not have children or no longer have children in the home.

    The biggest PV owner income categories were >$100,000 and $50,000-to-100,000 (while the national average is ~$26,000) so more than three-quarters of PV owners have at least twice the national average household income.

    Almost three-fourths (78%) make financial decisions with somebody else and only 22% are sole financial decision makers. This means that the decision to buy a solar system usually comes from 2 people.

    81% of solar buyers had a Bachelor’s Degree or higher and 51% had a post-graduate or
    professional degree (while 29% of the U.S. has a Bachelors degree and only 10% have a post-graduate degree).

    click to enlarge

    In summary, solar owners live in a smaller household, have higher than average incomes, share financial decisions, live in a smaller house and were highly educated.

    Part (2): 3 questions were about pre-installation purchasing motivations and concerns, using a qualitative ranking system.

    Environmental concerns were the primary driver, reducing dependence on foreign oil was second (64%) and personal generation of electricity was third (63%). There was no important link between purchasing New Energy and concerns about human health.

    On pre-installation financial concerns, the initial price was the first consideration (47%), the incentive program application process was 2nd, and the system’s effect on property taxes, the resale value of the home and aesthetics ranked lower.

    On pre-installation technical concerns, the quality of the solar equipment was the top concern (57%) and finding a qualified installer was 2nd. Maintenance came in ahead of the region’s solar resource.

    Consumers who installed a PV system on their home also purchased a CFL light bulb (93%) and organic food on a regular basis (57%), both indicators of a green inclination, though much less expensive choices. The least frequent purchases, in the same cost category as a solar system, were a high-efficiency heating ventilation and air-conditioning system (HVAC) (18%), a hybrid-electric vehicle (18%) and/or a solar hot water system (10%).

    click to enlarge

    Solar system purchasers tend to get their information via the Internet or at local events (fairs, expos, etc.). An overwhelming 86% majority said it was easy to get such information.

    Part (3): Installation comes after the incentive program application is complete. It most often involves a 2-to-4 kilowatt (kW) solar system (45%) capable of generating ~ 2,500-to-3,500kWh/year of an average U.S. household’s 11,000 kilowatt-hours per year (kWh/yr), or 25-to-35% of electricity consumption.

    Almost half of all the survey’s PV systems were installed in the preceding 1-to-3 years. A little under one-fourth (23%) were less than one year old. 83% did not have battery backup.

    76% of surveyed solar system buyers went through a solar dealer for purchase, installation and management of the process. Only 4% installed their systems themselves. 45% discussed other New Energy and Energy Efficiency options with their dealers, solar hot water systems most often (23%), then energy efficient appliances (18%), efficient heating or cooling systems (13%), weatherization (12%), and finally, wind energy (9%).

    Only 4% of survey respondents said they had enough knowledge of New Energy and Energy Efficiency and had no need for more information from their dealer/installer. This means that providing information as part of a package of services is a means of reaching the Early Adopter market and likely will be even more important in reaching the Early Majority market.

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    The SEPA survey asked if the homeowners did other New Energy and Energy Efficiency installations with their solar systems. 17% installed two or more new efficient appliances and 16% did efficient roof repairs. Most (49%) did nothing else.

    75% of system buyers rated the installation process as easy. 18% did rate it difficult. 19% did not utilize the services of a professional solar installer but there was little difference in how many found the process easy. There also seemed to be no complication with getting the system integrated with the local grid.

    Part (4): Post installation questions focused on how the system performs, unexpected maintenance issues and how buyers rate the customer support they get.

    95% of buyers were satisfied or very satisfied with the performance of their systems and many noted they liked the lower electricity bills. There were a few complaints that the systems did not meet predicted performance levels and a few complaints of equipment failures.

    21% of 500 owners had unexpected maintenance issues (inverter malfunction, lightning, roof leaks and, rarely, the need to replace panels). This is a troublingly high number because PV systems are marketed as “no maintenance.” But even this 21% reported 95% satisfied or very satisfied rates, perhaps because Early Adopters are forgiving of new technology. Performance needs to improve as the Early Majority becomes the focus of marketing.

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    44% were satisfied with the customer support of their utilities, 35% were somewhat so and 13% did not get the support they wanted.

    Part (5): The most frequently heard excuse for not buying solar systems is the cost. Incentives do not dispense with this obstacle. Paying means cash, a bank loan, using the house mortgage, refinancing or some other form of borrowing.

    Rebate programs sometimes spread the reimbursement over weeks and tax credits only come in April. This means most systems require a lot of financing.

    67% of the people in the survey paid cash. 21% took out home equity loans. Only 5% used more than one payment method (i.e., cash + loan) with their incentives.

    Bottom line: Accessible, easy to understand financing will be crucial to reach a market not so easily able to pay cash as the Early Adopters.

    click to enlarge

    67% of utility incentive programs were described as “easy” or “moderately easy” and 70% of state incentive programs were so described. 81% found submitting for and getting the payment from the incentive program easy-to-moderately-easy and only 12% found it difficult. Delays and inaccurate amounts of payment were the most common problems.

    54% of the solar system buyers in the survey said they would consider performance based incentives (PBI). Of those who wouldn’t consider a PBI, 21% indicated they needed the
    upfront rebate money and 10% saw a PBI as too risky because the system might not perform as expected. SEPA believes this is an area that, like others, requires more study.

    Future Steps: (1) More of the same kinds of surveys again; (2) More states, regions and cross sections; (3) Deeper analysis, especially of incentive programs; (4) Time-based analysis to evaluate learning curves.

    Ultimately, this is an incipient industry with a fantastic product that can meet a virtually unending need. Part of what is holding it back is technological, part of what is holding it back is political and part of what is holding it back is its own need to learn how best to sell itself. Clearly, it is learning.

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    QUOTES
    - From the SEPA paper, describing Diffusion of Innovations, 5th Ed, Everett M. Rogers. 2003: “…In 1962 Everett Rogers’ published his “Diffusions of Innovations” theory on the process of how and when new innovations are adopted by consumers. He used five categories for consumer types and analyzed the sequence at which technologies would be adopted in the marketplace: [1] Innovators>Customers willing to take a risk and try a new product…[2] Early Adopters>Educated opinion leaders responding to positive reactions of Innovators…[3] Early Majority>Customers avoid risk and trust opinion of Innovators and Early Adopters…[4] Late Majority>Skeptical customers by nature, only buys commonplace products…[5] Laggards>Customers will only adopt technologies when there are no other alternatives, resistant to change…Many of the results of the demographic survey questions indicate that PV consumers fall into the category of “early adopters” – high income, high education, smaller households, etc…This has two implications for PV stakeholders. First, current education and/or marketing efforts should target this demographic in the short- and medium-term to develop sales. Parallels to other environmental products, such as hybrid-electric vehicles or organic foods, could be the basis for drawing out strategic outreach plans. However, in the long-term, the larger PV markets will move into the “early majority” customer segment. Efforts to make solar more understandable, affordable, and more accessible need to be developed that have a new approach to consumers who may not be receptive to overcoming information or cost barriers on their own…"

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