Residential Solar: How One Company is Helping Utilities Navigate the Distributed Energy Revolution
For years now, energy industry followers have been inundated with news articles, blog posts, reports, and predictions about the future of residential solar power and its place within the greater utility business model. With a few exceptions, the vast majority of this coverage has been focused on what solar is worth to a utility, how it can be generated, and how much customers should be paid to provide it (or charged to access it, depending on who’s side you are on).
Notably absent from the conversation has been a firm understanding of who are today’s present (and future) residential solar customers and what their motivations may be. While we have been hearing numerous reports that residential solar is in the midst of a massive growth spurt, very little has been reported on who exactly makes up this booming customer base, or how utilities should be targeting them.
And target them they will. If regulatory developments in New York, California, Minnesota, and Colorado are anything to go by, utilities across the country will be faced with having to coordinate and integrate increasing amounts of distributed resources, including residential solar programs like customer-sited PV and community solar gardens. At the same time, utilities are going to be under increasing pressure to reduce their carbon footprint, whether it’s to comply with the EPA’s new Clean Power Plan or ambitious state renewable portfolio standards, or to simply address surging customer demand for clean energy options and ways reduce energy bills. Knowing who wants to go solar and why will be essential if utilities wish to tap into this growing and increasingly diverse marketplace.
Enter Tendril, a Colorado-based software company with a unique mission: helping utilities and energy providers connect customers to distributed energy resources. Whether its managing peak load demand, accelerating development and enrollment in community solar programs, or enabling customers to better manage their energy, Tendril is at the forefront of the distributed energy revolution, and it has a simple message for utilities: either get ahead of where customers are on solar, or get left behind.
“Utilities don’t have deep experience in understanding their user base and using that knowledge to target them for specific programs, and there’s a reason for that,” said Chris Black, Tendril’s Chief Technology Officer. “A lot of them come from regulated worlds, where they don’t have to fight for customers for their commodity energy products. The only way they gain new customers is if they move into their territory, but that’s not the case for a lot of things customers are now demanding from them, especially when it comes to solar. That’s an area where we help out a lot.”
So who are today’s solar customers? The answer is evolving. While the barriers that used to define who could be a solar customer in previous decades still exist (location, income, household type, etc), they are becoming increasingly less important as the cost of solar power decreases and financing options become more available. Installing a rooftop solar system still requires a significant amount of up-front capital investment (up to $30,000 for a 5 kilowatt system without subsidies), and in the past that meant only wealthier, typically older customers with advanced educations could afford to go solar. However, with the advent of third-party leasing and generous rebate policies, now customers of more modest means are able to install solar panels. Just take a look at this graph by the Center for American Progress, which studied income characteristics of solar photovoltaic (PV) system owners in three East Coast states.
Black said that the recent expansion of financing options has made solar PV customers much more diverse in terms of age, income, and education levels.
“That used to be true [the idea solar ownership favors the wealthy]. It certainly was true,” he said. “Financing options have made that less true,” he said.
No market demonstrates this shift better than California, which added 615 megawatts of residential solar capacity in 2014. According to Tendril, customers in the Golden State who own their own systems tend to skew older (age> 45), wealthier (household incomes >150K with home values> 800K), and with higher education levels (Bachelors or Graduate degree). When it comes to customers who lease, the demographics make a noticeable shift to younger (age >35), middle-class (household incomes>100K) customers with less education (Bachelors or Associates degree with some college). Not only are the base demographics changing, but some new factors are being added in, including greater concerns about environmental impact, as well as demand for homes and communities with solar already installed.
“The demographics are definitely shifting to average middle income families,” said Black. “We definitely see the green mixture and the environmental impacts that are changing who the typical buyer is. Environmental impact wasn’t a primary motivator of the original wave of wealthier PV customers so there does seem to be more of a shift.”
Engaging the next generation of solar customers
Whether it’s a community solar program or providing solar leases, the pure existence of a residential solar program will not sell itself. And utilities, being used to acquiring customers via the traditional method, i.e., by entering their service territory, are often not experienced at things like micro targeting, lead generation, acquisition, or customer engagement. That’s where Tendril comes in.
Black says that Tendril offers utilities the ability to address three core sales and marketing problems faced by traditional solar installers and manufacturers. The first problem is how to identify who is a suitable solar customer, then knowing how to target them. That involves detailed research on customer demographics, home types, roof orientation, sun exposure, and other categories. A strategy must be implemented and a process in place to gather and target these customers once they’ve been identified. The second problem is personalization, or how to personalize your messaging to address a target customer’s specific needs. Are they looking to save money? Do they want to reduce their carbon footprint? Are they looking to increase their home value? Finally, the third problem is how to keep a paying customer engaged once they’ve made the decision to go solar. They need to be able to see how much power they are generating, and more importantly how much they are consuming, and whether or not the consumption curve aligns with their generation curve.
“An engaged customer is a happier customer. Happier customers generally pay their bills on time, are less expensive to support, and are more likely to opt into other programs,” said Black.
Solar for the rest of us
Black notes that these tactics are predicated on targeting a customer who wants to install solar on his or her own rooftop. But what about everyone else who wants to go solar? What about those without suitable roofs or who live in large apartment complexes or multifamily housing? One popular option being implemented is shared or community solar programs. Whether it’s in Colorado, Minnesota, Massachusetts, Wisconsin, or Hawaii, utilities around the country are offering customers the ability to invest in renewable energy by owning portions of an off-site energy facility that sells power back to the utility.
“More utilities are talking about community solar projects,” said Black. “It represents such a huge opportunity since it allows the rest of their customer base access to solar who might not have been able to participate through traditional means. They are realizing that it can be their entry into the solar game in a big way. It’s like an “aha” moment.”
Not only are utilities championing the community solar concept, but so is the federal government. Last month, President Obama announced an initiative that will seek to install 300 megawatts of renewable energy in federally subsidized housing, and is issuing a guide to support states that want to develop community solar mandates. That will mean more utilities will be able to offer community solar programs once more states get on board on their own terms or make use of the federal government’s initiative. Perhaps that’s why the community solar market is expected to grow five-fold in 2015 alone, growing into a half a gigawatt opportunity by 2020.
To help utilities facilitate community solar integration, Tendril offers an end-to-end solution for acquiring and engaging customers. Utilities will be able to manager customer targeting, marketing, acquisition, and ongoing engagement, making community solar projects more accessible.
“Things utilities often need help with are how to engage customers,” said Black. “What are the key messages? How do you calculate the economics for them? And furthermore, how do you drive them into the program and keep them engaged throughout?”
Tendril says its software enables utility customers to research solar participation options to determine which route to solar is best for them, and gives utilities the ability to make personalized communications with customers, taking into consideration factors like living situation, energy expenses, weather, and other data.
Black says that he expects that the time will come when solar technology evolves to the point where a customer can go completely off the gird, however it will be when solar technology is combined with a storage option (such as Tesla’s new Powerwall home battery system) that allows customers to use solar as an actual power source, not just as a means to decrease their energy bills each month.
“It’s something I can imagine in the next 15 – 20 year timeline, where the market has matured, and its an available option for many people,” he said. “Whenever we get to the point where we aren’t saying ‘solar-plus storage’ – when that is redundant – t hat’s when that means the technology has improved, the price has improved, and the storage has improved where it can be a reliable power source and not just a backup. But there will always be a majority of homes that aren’t a good fit for rooftop PV, which is why community solar is so exciting.”
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