U.S. solar companies are borrowing sales techniques from online retailers to make paying for power as easy as buying an airplane ticket.
The $3.5 billion U.S. residential solar industry is seeking to automate a sales process that often requires representatives to visit prospective customers’ homes. Websites now predict how much power a rooftop system will produce and let homeowners compare prices from multiple installers.
Simplifying the sales process will boost orders and drive down the cost of landing new customers, said David Field, chief executive officer of OneRoof Energy Inc. Prices for solar panels have plunged 39 percent in the past two years. Other expenses such as marketing and permitting may now make up more than half the cost of residential units.
“The market is absolutely huge,” said Field. “The industry has to get past this idea of canvassing and use technology and networks in order to sell.”
Solar-system installers including SolarCity Corp. (SCTY) and Sungevity Inc. are enjoying a boom in sales as customers take advantage of falling panel prices that hurt manufacturers led by Yingli Green Energy Holding (YGE) Co. and Suntech Power Holdings Co. SolarCity shares have more than tripled this year while Suntech’s main unit was dragged into bankruptcy in March.
OneRoof owns rooftop solar panels that are leased to homeowners at little to no upfront cost and says its customers on average save 5 percent to 25 percent a month on their electricity bill. The San Diego-based company is backed by Hanwha Group and Black Coral Capital.
Sungevity uses satellite imagery to design rooftop units for potential customers who lease panels. It offers free price quotes through its website. That’s helped drive down site-evaluation costs to about $100 from about $3,000 a few years ago, a figure that included “truck roll” expenses for on-site assessments, said CEO Andrew Birch.
“The revolution that’s taking place now is all about mainstreaming solar in an efficient way,” Birch said in an interview. Software “takes the whole process online.”
Birch said residential solar companies used to spend about $8,000 to acquire each customer.
Customer-acquisition costs in the industry are now about $2,000 to $3,000, said Lyndon Rive, CEO of SolarCity. He expects that to eventually reach $50 to $100.
Developers are “trying to get best practices from other industries,” said David Arfin, CEO of First Energy Finance LLC, who helped pioneer the solar lease concept.
“In a world where panel costs are somewhere between 60 and 70 cents a watt, and customer acquisition costs are somewhere between 80 cents and $1.20 a watt, it leads you to focus on the customer acquisition cost,” Arfin said.
Sunrun Inc. acquired startup LightMile, founded by former SunPower Corp. (SPWR) and Autodesk Inc. (ADSK) executives, to automate the sales process. Its software lets San Francisco-based Sunrun design power systems “in a matter of minutes” instead of after multiple site visits, according to vice president of marketing Bill Stewart.
That’s helping “increase close rates” and may reduce costs by as much as 20 percent by 2015, he said. “The faster we respond to someone when we find out that they’re interested, the more likely they are to sign up.”
Solar panel prices have plunged to about 84 cents a watt in July from $2.10 in November 2010, according to Bloomberg New Energy Finance data.
There are about 270,000 U.S. residential solar installations. About half are financed by third parties such as Sungevity and SolarCity, according to the Washington-based Solar Energy Industries Association. The U.S. Energy Department estimates that about 25 million of the almost 100 million homes in the country have rooftops suitable for solar.
Solar leasing providers have raised at least $4.6 billion for 46 funds since 2008 to finance rooftop projects, according to data compiled by Bloomberg New Energy Finance.
Fundraising for projects is becoming less of a “bottleneck” to growth, and the industry’s primary concern is shifting to whether customers can be acquired quickly and cheaply, said Zbigniew Barwicz, CEO of Pure Energies Inc., a Toronto-based residential solar provider.
“Without scale nobody will survive in this market,” said Barwicz.
Pure Energies acquired One Block of the Grid Inc. in July to help rooftop solar companies find new customers. One Block introduced an online marketplace in May that compares prices and services offered by companies such as SolarCity, Sunrun Inc. and OneRoof. Evaluating rooftop power plants through the site is similar to comparing plane tickets on the Kayak.com website, Barwicz said. Kayak is owned by Priceline.com Inc. (PCLN)
“We think that it’s important that somebody can have a one-stop-shop and compare apples to apples and be able to explain the details,” Barwicz said. “That was not done in solar up to now.”
Similar strategies have been used in the automotive, health insurance and banking industries, said John Gingrich, head of corporate development for Distributed Energy Research & Solutions Inc.
The company’s EnergySage website lets users select solar equipment, installers and financing on a platform similar to Expedia Inc. (EXPE)’s system for travel. Providers compete to win their business, much like the way residential mortgage companies bid for clients through LendingTree Inc., said Distributed Energy CEO Vikram Aggarwal.
The site can reduce the cost of finding customers by as much as 80 percent, Aggarwal said. Cambridge, Massachusetts-based Distributed Energy gets a fee when client leads are converted into sales.
“That online tool to do research and then to compare your options side-by-side is something that used to be nice to have, but now for most successful industries it’s table stakes to get consumers excited,” Gingrich said.
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