The Sunvestment Energy Group Blog

A Bright Future for an Underserved Solar Market

Posted by Matt Cordes on Nov 5, 2015 3:30:00 PM

Mid-Market Opportunity

The mid-market solar sector, generally including arrays sized between 50kW and 2 MW (or electric bills roughly between $500 and $20,000 monthy) just might represent the largest potential market in the domestic solar space.

Size estimates vary, but most industry analysts put the price tag for this market somewhere around $2~$4 billion. And with these arrays requiring so little real estate to begin creating free energy, it’s no wonder that mid-market solar has posted year-over-year growth figures of approximately 16% since 2010.Solar array on field

On its face, that’s an impressive figure. No one is going to turn their nose up at double-digit growth, after all. But compare the mid-market expansion rate to the residential and large commercial sectors--which clock in at 45% and 54%, respectively--and the mid-market figure starts to pale.

With so much going for it, why is the mid-market seeing growth that is less than half that of projects both smaller and larger? And more importantly, what is being done to fix the problem?

How Did We Get Here?

 Two of the primary factors contributing to this growth are the Power Purchase Agreement (PPA) and the federal Investment Tax Credit (ITC).

PPAs are simply third-party-owned solar arrays. Under this structure, a solar contractor installs a system with no up-front cost. In exchange, the individual or entity owning the roof (the site host, in PPA parlance) agrees to buy their electricity from the installer, typically at a generously discounted rate.  Where before consumers had to foot the bill entirely, PPAs gave them the option of going solar with little or no initial cash outlay.

The ITC, meanwhile, an incentive offered as part of the American Recovery and Reinvestment Act of 2009, extended a 30% federal tax credit to those investing in renewable energy.

The rest, as they say, is history.  The domestic solar industry shined up nicely, but it did so in some unexpected ways. First on board were the savvy investment managers who saw the can’t-miss tax benefits and threw their support behind utility-scale and large-commercial solar projects.

Residential systems came next. Despite tumbling housing prices, credit-worthy homeowners saw solar as a way to invest in their properties in order to reap the generous incentives.  And if they lacked the cash for an actual purchase, PPA providers were happy to help.

In no time at all, the solar industry found itself with tremendous growth at opposite ends of the size spectrum. If there was a hole in this doughnut, it was--and still is--mid-market commercial and non-profit organizations.

Any one of the many PPA providers doing business today will be happy to put a contract in front of a homeowner, and in just a few weeks they'll be enjoying the benefit of renewable, less-expensive solar energy.  Mid-market commercial deals, though, carry disproportionately higher price tags, fail to use standardized documentation, and have long sales cycles; as a result, this vast sector has been remained underdeveloped.

Sunvestment Energy Group (SEG) Steps in

SEG’s online platform consists of a powerful suite of tools and services that bring all stakeholders—solar customers, investors, and contractors—together to conduct transactions, simplifying what has previously been a fragmented and opaque process. Through this platform:

• Community organizations are able to contact our team of solar advisers to plan their project, design their system, conduct a financial analysis, and generate a proposal to present to decision makers and prospective investors;

• Investors have dedicated dashboards where they can manage their solar investment portfolios and access the associated investment and tax documents; and

• Developers have the ability to submit projects through a streamlined intake process. SEG will evaluate the submissions and provide financial proposals for delivery to their clients.

Sure, our Community Power Purchase Agreement (CPPA) approach is a departure from the norm.  But remember that the solar industry itself represents a pretty radical shift from generating power by burning stuff to simply harnessing the vast amounts of energy that come our way all day, every day. And if our recent experience in Start Up Alley at Solar Power International is any indication, the time is right for this new approach.

We realize that with some independent thinking and a mindset that focuses on overcoming challenges, the mid-market offers some pretty incredible opportunities.  We’re working to bring efficiency, standardization, and (most importantly) a financial solution for these smaller mid-market projects.

There’s a new kind of opportunity emerging in the mid-market, and SEG has dedicated itself to being on the front lines.  Our new website is up, and we're ready to hear from you. Contact SEG today to learn more.

Topics: community solar finance, Solar for Non-Profits, Sunvestment Energy Group

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