NewEnergyNews: TODAY’S STUDY: How The Residential Solar Market Works

NewEnergyNews

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

While the OFFICE of President remains in highest regard at NewEnergyNews, this administration's position on climate change makes it impossible to regard THIS president with respect. Below is the NewEnergyNews theme song until 2020.

The challenge now: To make every day Earth Day.

YESTERDAY

  • TODAY’S STUDY: The Many Values Of Solar Power Plants
  • QUICK NEWS, November 13: This Is What It Looks Like; Astonishing Things About New Energy, Part 1
  • THE DAY BEFORE

  • TODAY’S STUDY: Testing Grid Modernization State By State
  • QUICK NEWS, November 12: What Big Oil Is Doing About Climate Change; A Tale Of New Energy In Two States
  • THE DAY BEFORE THE DAY BEFORE

  • Weekend Video: New Energy In The Midterms
  • Weekend Video: On The Algae Case In Florida
  • Weekend Video: Cleaning Up The Pacific Garbage Patch
  • THE DAY BEFORE THAT

  • FRIDAY WORLD HEADLINE-A Collection On Climate Change
  • FRIDAY WORLD HEADLINE-Global Energy Storage Boom
  • FRIDAY WORLD HEADLINE-EU Wind Builders Target Beneficial Electrification
  • THE LAST DAY UP HERE

    THINGS-TO-THINK-ABOUT THURSDAY,:

  • TTTA Thursday-Voters Rejected Climate Change, New Energy Efforts
  • TTTA Thursday-The Heat Stays On Grid Mod Efforts
  • TTTA Thursday-Ways To Make Retail Energy Choice Work
  • --------------------------

    --------------------------

    Founding Editor Herman K. Trabish

    --------------------------

    --------------------------

    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

    -------------------

    -------------------

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

    -------------------

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

  • ---------------
  • ORIGINAL REPORTING WEDNESDAY at NewEnergyNews, November 14:

  • Solar at the crossroads: Is utility-scale, distributed or both the way to go?
  • Solar has transformed into solar-plus-storage: What will net metering become?

    Monday, October 22, 2018

    TODAY’S STUDY: How The Residential Solar Market Works

    The Evolving Market Structure of the U.S. Residential Solar PV Installation Industry, 2000–2016

    Eric O’Shaughnessy, January 2018 (National Renewable Energy Laboratory)

    Executive Summary

    The U.S. residential solar photovoltaic (PV) installation industry is evolving in terms of market structure—the number of installation companies (installers) and the distribution of market shares of those installers. This study explores the evolving market structure. Long-term trends in residential PV market structure are presented using a data set of nearly one million residential PV systems installed from 2000 to 2016.

    About 8,700 different companies installed at least one residential PV system from 2000 to 2016, with about 2,900 installers being active in 2016 (Figure ES-1, left). About half of these companies installed fewer than five systems, and many companies may represent firms from related industries (e.g., electrical contracting) that install PV as a side business. At the same time, more than 800 companies have installed more than 100 residential PV systems, and more than 100 companies have installed more than 1,000 systems.

    The U.S. residential PV installation industry became less concentrated from 2000 through about 2010 as a large number of installers entered the growing market. From 2010 to 2016, the industry became increasingly concentrated as a subset of high-volume installers accumulated a disproportionately large market share (Figure ES-1, right). Increasing market concentration has occurred at every market level, from national to state and local markets. The period of increasing market concentration occurred concurrently with—and may have contributed to—a period of significant market growth overall. As a result, increasing market concentration has generally not occurred at the expense of lower-volume companies. High-volume companies have increased market share, but lower-volume companies have also increased sales in the growing market.

    There are several possible explanations for increasing market concentration in the U.S. residential PV installation industry. In this study, the connection between increasing concentration and the emergence of third-party ownership (TPO) customer financing models is explored. High-volume installers are more likely to offer TPO products than are low-volume installers. Hence, the increasing popularity of TPO products from 2010 to 2016 likely facilitated market concentration. As evidence of this relationship, sales of customer-owned systems did not exhibit the same degree of market concentration as did sales of TPO systems over the study period. The implications of market concentration are an ongoing area of research.

    Introduction

    Market structure describes the organization of firms within a given industry. It is of interest to policymakers and researchers owing to the relationships among competition, prices, and innovation. The number of firms and the distribution of market shares among those firms determine an industry’s competitive intensity. In turn, the degree of competitive intensity determines the pressures on firms to innovate, reduce costs, and offer lower prices (Tirole 1988).

    In the context of the U.S. residential solar photovoltaic (PV) installation industry, stakeholders are interested in how market structure affects installed PV system prices and PV adoption (e.g., Gillingham et al. 2016; Nemet et al. 2017; Pless et al. 2017). High installed prices have posed the key barrier to large-scale residential PV deployment. Significant price reductions over the past two decades have driven a rapidly expanding residential PV market. This price decline is associated primarily with falling PV hardware costs. Non-hardware or “soft” costs—including installation costs—now constitute a larger share of PV price stacks than in previous years (Barbose and Darghouth 2017; Fu et al. 2017).

    Market structure affects these soft costs by determining installers’ incentives to reduce profit margins and installation costs and thus offer lower-priced systems. As a result, market structure can impede or facilitate future soft cost and installed price reductions. Studies to date have described PV market structure at a high level based on limited data sets, showing that—among the thousands of U.S. residential PV installation companies—a subset of high-volume companies accounts for a large proportion of installations (Fu et al. 2017; Litvak 2017; Perea et al. 2017).

    This study provides a more granular depiction of the evolving U.S. PV market structure by applying a rich data set of nearly one million residential PV installations.1 The aim is to provide a benchmark of the key trends in residential PV market structure from 2000 to 2016. Several metrics and visualization methods show how the industry has changed over time in terms of the number of installation firms, rates of market entry and exit, and distribution of market shares among installers. Descriptive analyses are also provided to explain these trends. However, the results do not include evaluation of the effects of market structure trends on industry competition, prospects, and so forth; the implications of the observed trends will be examined in future research.

    The remainder of this report is organized as follows. Section 2 describes the data and methods used for the study. Section 3 summarizes market structure trends in the U.S. residential PV industry in terms of number of installers and market concentration. Section 4 presents a descriptive analysis of the relationship between PV market structure and recent trends in customer financing options. Section 5 summarizes key findings.

    Discussion and Conclusion

    The U.S. residential PV installation market has become more concentrated over time. However, the concentration does not imply that some high-volume companies have grown at the expense of small companies. The period of increasing market concentration from 2012 to 2015 coincided with a significant expansion of the residential PV market. Figure 20 depicts trends for installers that had entered the industry in 2012 or earlier. The left pane of Figure 20 clearly shows that the highest-volume installers increased market share considerably from 2012 to 2015. However, the right pane of Figure 20 shows that other active installers continued to increase sales volumes through 2015 despite losing market share. In other words, market concentration during this period was not a zero-sum game, as the growing market allowed smaller installers to increase sales volumes even while losing market share. The drop in volumes in 2016 corresponds with a drop in installations in the data set overall for 2016.

    The relationship between market concentration and market size in the U.S. residential PV industry remains an ongoing area of research, and plausible arguments of causality run in either direction. The emergence of the TPO model, led by high-volume installers, resulted in a significant expansion of the residential market (Drury et al. 2012; Rai and Sigrin 2013). Thus, increasing market concentration associated with the TPO model may have facilitated an expansion of the residential PV market. Further, several studies indicate that market concentration may generate lower market prices (Gillingham et al. 2016; Pless et al. 2017). At the same time, increasing market concentration may allow some high-volume installers to exercise more market power than lower-volume installers, resulting in higher prices and possibly stymying PV adoption (Bollinger and Gillingham 2014, O’Shaughnessy and Margolis 2017a). Alternatively, high-volume installers appear to experience diseconomies of scale in terms of customer acquisition (Fu et al. 2017; Mond 2017), suggesting that PV market concentration may increase soft costs. The effects of market structure on market size and prices are areas of future research.

    The residential PV industry’s increasing concentration over time does not necessarily imply that the industry has become less competitive. Indeed, several studies show that market prices can be lower in more concentrated PV markets, possibly because high-volume installers engage in price wars or exert downward price pressures on smaller installers (Gillingham et al. 2016; Nemet et al. 2017; Pless et al. 2017). The residential PV industry is also evolving as customers find new ways to procure PV. For instance, several third-party quote providers have emerged that provide platforms connecting customers to installers for the purposes of finding quotes. These quote platforms foster competitive pricing, allowing customers to obtain quotes from several installers and thus benefit from lower prices (O’Shaughnessy and Margolis 2017b).

    Finally, the objective of this study is to describe trends in the residential PV installation industry’s market structure rather than analyze the implications of those trends. The implications of market concentration are not necessarily unambiguously positive or negative for the residential PV industry. The potential accumulation of market power among high-volume installers could be a policy concern because of the implications for PV soft costs. At the same time, market concentration may simply reflect market maturation and the accrual of market share among the industry’s most innovative and successful companies, in which case policies to reduce concentration could stunt further industry growth.

    To conclude, about 8,700 companies installed at least one residential PV system from 2000 to 2016. In 2016, the U.S. residential PV industry consisted of about 2,900 installers. The market has become increasingly concentrated over time as a group of high-volume installers has gained market share. By 2016, less than 1% of installers installed more than 1,000 systems per year, but these high-volume installers accounted for about 60% of all systems installed. The data provide descriptive evidence that the emergence of the TPO model contributed to this market concentration. The effects of this market concentration are areas for future research.

    IFTTT Recipe: Share new blog posts to Facebook connects blogger to facebook

    0 Comments:

    Post a Comment

    << Home