Commercial Solar Remains Compelling Opportunity, Says GTM
New figures from GTM Research have shown that on-site commercial solar remains a compelling option for many large energy consumers.
According to a new briefing GTM Research published for its Grid Edge Customer Network members, the firm revealed figures which showed, despite a “slightly negative growth for a second straight year,” how on-site commercial solar continues to remain a “compelling opportunity for many large energy consumers looking to drive energy savings and meet sustainability targets.”
GTM Research outlined several ways that high level customers are doing business with commercial solar.
Cash purchasing on-site commercial solar “can be the fastest and most streamlined approach” for those companies GTM defines as having “available capital and tax appetite to absorb tax credits and accelerated depreciation.” This is not the most sought after method, as the purchase brings with it the responsibilities of operation and maintenance, which not all companies are willing, or even able to accept.
Commercial PV Installations by Ownership Structure
By far the most favorable option, with 65% of 2015 commercial installations, is through third-party financing and ownership structures. This option is unsurprisingly preferred as it minimizes and even eradicates up-front costs, guarantees a fixed energy rate through a power purchase agreement (PPA), and defers maintenance responsibility.
Solar leasing is also similarly valuable, as it allows the host customer to use the equipment in exchange for recurring payment — and upon termination of the lease, the host is often allowed to buy the installation at a reduced cost.
This in mind, the figures show that companies normally side with either direct ownership or third-party ownership, rather than a mix of both.
Cross-Correlation of Solar and Facility Ownership of Select Corporations
Issues remain, however, when comparing the commercial sector with the residential solar sector, as GTM’s Omar Saadeh explains:
Even though commercial solar turnkey development has seen average cost reductions of over 60 percent in the past five years, challenges continue to overshadow adoption drivers. Unlike the more familiar cookie-cutter residential market that uses easy-to-access FICO scores to assess creditworthiness, commercial and industrial developers and financiers often find that the heterogeneous nature of large energy consumers, coupled with a general lack of standardization and evaluation metrics, requires a much more flexible approach.
The specific nature of the commercial sector also impacts the developer landscape, with very few national players in the US rising to the top, allowing for many more local installers per-state than is found in the residential solar sector.
Top 10 Commercial Installers, 2015
Further information is available to members of GTM Research‘s Grid Edge Customer Network, with more information available here.
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