The following is a guest post written by Bill LeBlanc. LeBlanc is the chief instigation agent at E Source, an energy research and advisory firm, and the president of the Boulder Energy Group. LeBlanc previously worked on demand-side management and customer rates at the Electric Power Research Institute and Pacific Gas & Electric.
Photovoltaic (PV) system installations are booming in many sections of North America, but are businesses embracing solar like we’re seeing in the residential sector?
To discover how businesses are thinking about and acting on PV today, and to project how adoption will evolve, E Source held in-depth interviews with more than 30 energy decision-makers at large and midsize businesses. The results provide a glimpse into the formation of this nascent marketplace.
Here are five insights from those conversations:
1. Utilities need a flexible solar strategy
If you’re a utility, is it time to panic about PV adoption among your business customers? From a broad perspective, the answer is “not quite yet.” With the exception of Hawaii and California, business adoption is still likely to be tepid for the next year or two as the early adopters iron out the system kinks. But is it time to worry? Yes, you should be concerned enough about the growth potential to wonder whether your utility is playing the right role in the world of solar. Businesses seem poised to make a move if the conditions are right, and many energy managers told us they don’t see a role for the utility in solar at all. This is alarming, considering the fact that utilities have been the sole provider of electricity for 100 years. So it’s definitely time for utilities to create a robust solar strategy that can adapt to a wide variety of potential scenarios. It will take substantial time and effort to work through regulatory schemes with executives, policymakers, customers, and a wide variety of industry players. Being late to this party will have negative consequences.
2. PV is not just another distributed generation option
Despite the lack of enthusiasm for taking the solar plunge, it was clear from our interviews that business customers see solar quite differently from the myriad other DG options that have become available over the years. So while gensets and combined heat and power have been available and reliable for years, businesses seem much more likely to move straight to solar, with its associated simplicity, lack of on-site fuel, and environmental benefits.
3. Environmental benefits drive solar interest (sort of)
Several energy decision-makers told us that installing solar provides a great boost to their company’s environmental and sustainability goals. Yet when asked about how much that benefit was worth from an investment standpoint, the answer generally was “not much” or “it’s hard to quantify.” When pressed, they admitted that solar investments have to compete with other capital investments and must meet return-on-investment and payback thresholds. However, reading between the lines of their comments led us to believe that the clean and green attributes will allow solar to get its foot in the door, at least on a trial basis, and then it will grow from there as businesses see the benefits of pleasing their customers and shareholders while investing in an energy source whose price won’t rise with inflation.
4. The decision-making process influences the rate of adoption
Companies with relatively streamlined decision hierarchies (where the CEO can pull the trigger upon a recommendation) appear more likely to adopt PV in the near term than those with multiple layers of decision-makers (such as school districts and government entities). This stands in contrast to the ultimate outcome we’re likely to see in the future, however, based on our experience with energy-efficiency investments. Specifically, public entities have a greater tolerance for longer payback periods (5 to 10 years) than their private-sector counterparts that focus on 1-to-3-year paybacks. Therefore, we anticipate that once the initial PV decisions are made, these public entities will codify those decisions and adoption will accelerate.
5. Barriers abound, but customers are waiting for bona fide solar options
During our in-depth conversations, energy managers listed a slew of barriers, including high up-front costs, fear of technology, and siting difficulties. Yet they were also lamenting the fact that they haven’t seen real solutions from entities they trust—offers that clearly lay out the costs, terms, risks, and benefits of solar. To us, this implies that there are opportunities for utilities or solar firms to make progress with businesses if they can put together attractive packages that overcome common barriers.
Our advice to utilities: Get cozy with your large customers through energy-efficiency and pricing solutions right away. These options are favorable ways to become your business customers’ trusted energy advisor. These offerings, in turn, will naturally flow into solar solutions when the time comes. In addition, it became evident in our research that it’s important for utilities to understand the nuances of their customer segments.
Finally, it’s time for utilities to work independently or through a trade ally network to develop packages of solar solutions that are easy for customers to understand and that work within the utility framework. In this way, the benefits of PV will flow in both directions.