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Chasing the Rising Sun

Aug. 19, 2016
As solar PV deployments set new records, electrical contractors consider the path forward in what could grow to become a crowded space.

Solar energy appears to be having its day in the sun, setting the stage for more opportunities for those angling to design and install systems that harness the ever-more accessible renewable energy source. But given the solar market’s track record of cyclical ups and downs, the latest good news could amount to little more than a snapshot in time.

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The bare facts, though, are impressive, if a leading source of industry research is on the mark. Citing its most recent “U.S. Solar Market Insight” report prepared along with GTM Research, Solar Energy Industry Association (SEIA) claims the industry reached some important milestones in the year’s first quarter. One is that the 1,665MW of new solar PV capacity added in Q1 included the one-millionth solar project brought online since the first one debuted in the United States in the mid-1970s. Another is that the quarter ranked among the industry’s best ever — and was also notable for being the best on record for a non-Q4 period. Plus, the quarter marked yet another milestone when more solar PV capacity was added than that for coal, natural gas, and nuclear combined, by almost a 3-to-1 margin. It was the 10th consecutive quarter in which more than 1GW of solar PV was installed in the United States, following a year in which solar capacity additions eclipsed natural gas additions for the first time ever.

SEIA frames the quarter’s data as being further proof that solar energy is sinking its roots deeper as costs come down, technology improves, incentives remain in play, and fossil fuels become ever more problematic. The latest numbers bolster the group’s bold prediction that solar growth is in a period of rapid acceleration that in the relative blink of an eye could yield as many projects as the industry’s first four decades produced.

“Projections show that the U.S. solar market is going to continue to experience record-breaking growth, cementing solar energy’s role….we’re expected to hit 2 million U.S. solar installations within the next two years,” says Alexandra Hobson, SEIA senior communications manager. “By 2020, the industry will be deploying more than 20GW of capacity each year and employing more than 420,000 workers.”

Ready or not

With that level of activity predicted, fewer companies engaged in delivering electrical system engineering, design, and installation services will be able to avoid contact with solar. Whether it’s working alongside solar system specialists or delivering the services directly themselves, more electrical professionals are certain to be impacted by its growing integration into both new and existing commercial and industrial structures, utility power generation portfolios, and the residential market. That will almost certainly demand at least some working knowledge of solar and the mechanics of its incorporation into an electrical distribution system.

For adventurous electrical specialists, solar’s growing acceptance and broader penetration will present fresh opportunities. As panels, inverters, and other components become more accessible in manufacturer-direct and distributor channels and prove easier to install, contractors may find themselves better situated to offer comprehensive solutions for customers looking to edge into solar. While established solar specialists have a firm toehold in some markets, especially the residential sector, electrical contractors may be positioned to bring a broader and deeper set of skills and experience to bear, enhancing their relative value.

The Seattle Bullitt Center is being billed as the greenest commercial building in the world (Photo courtesy of Northwest Wind

But it’s revealing that in one of the country’s hotbeds of solar PV installation activity, most members of the San Diego chapter of the National Electrical Contractors Association (NECA) seem content to watch from the sidelines, says Andy Berg, executive director. A host of inducements continue to boost solar’s fortunes in perpetually sunny southern California. And though they continue to evolve, incentives like utility net metering programs, recently extended federal tax credits, localized zero net energy mandates for public buildings, and new state standards for building energy efficiency are in play. Add in the stubborn reality of high electricity costs and a robust “green” mind-set — and there’s a welcoming climate for solar in the region. Still, Berg says, only a select few contractors appear to be especially active in that space.

“It’s still fairly niche among our members, and only a handful are pursuing it in and of itself,” he says. “One of the problems is that component supply is not always readily available, and, when it is, markups aren’t all that big. In some cases, owners will insist on buying the equipment themselves. It’s not a business that will make you rich unless you know what you’re doing.”

One that seemingly does know its way around the market is Baker Electric, Inc. The Escondido, Calif., electrical contractor’s solar division is active in both the commercial and utility-scale spaces with projects averaging 500kW, and is building a backlog of work that is starting to fill the calendar well into 2018.

Scott Williams, the company’s director of commercial solar, sees a market that, while growing nicely, still presents uncertainties of a type that are less present in the company’s core electrical contracting business. Work is typically not smoothly distributed throughout the year, and it can take various forms that demand different tactics, ramp-up strategies and workforce readiness — from comprehensive or modified engineering, procurement and construction work (EPC) to balance-of-systems (BOS) type work that is geared more to component installation.

“Both have their place, but what often happens with EPC work is that it takes time to develop projects and to get to the permitting stage,” says Williams. “Next year, we’re going to start focusing on increasing our part of the pie in BOS work because we need more of that fill-in work to keep our workforce steady. We’re aiming to go from 10% BOS work to 25%.”

In its grid solar PV work with utilities, begun five years ago, Baker is almost entirely geared to BOS-type work, says Dan Sicard, director of preconstruction, utility scale solar. Working in that space, he says, it’s advantageous to be part of a broad-based electrical contractor with access to a skilled and adequate workforce.

“Labor is a big part of these large-scale projects, and being successful requires large financial resources and benefits from a core electrical contracting business that’s solid and stable,” says Sicard. “Proven years of experience are a key requirement.”

A different mind-set

But at the same time, solar projects can prove to be a bit of a departure from normal operations for electrical contractors. The business can require a different approach to selling and marketing — one that can take some contractors out of their comfort zone.

That’s what SME, Inc. of Seattle discovered in the course of expanding into the solar market in 2009 in a strategy to diversify its business in the depths of the 2008 financial crisis. The company’s renewable energy division, Northwest Wind & Solar, took off in 2011, but only after it got out of the box of “one-off” business and began getting more new business through better positioning strategies, says SME chief financial officer Adam Pinsky. That’s a far different business model from standard electrical contracting, which (especially at higher levels) is sustained by nurturing professional networks and building rapport with decision makers.

“From a residential and commercial standpoint, solar is much heavier on marketing, whereas an EC business is about developing relationships with GCs and developers,” he says. “We at first approached the solar business like a contractor, but we soon learned that it’s not about repeat business, but instead about referrals and getting out and getting people’s attention.”

This house in western Washington State is equipped with a 9.72kW photovoltaic system. It was designed and installed by Northwest Wind

Among other things, that has necessitated a more robust web and social media presence and a laser focus on positioning Northwest Wind & Solar as a market-leading, knowledgeable, and technically capable solar integrator, Pinsky says. Today, the division is a major factor in the Seattle-area residential solar market. It also has a select commercial portfolio that includes the Bullitt Center, a high-profile net-zero energy building project, and is active in the area’s dynamic LEED building and public building spaces.

Another difference that can complicate a contractor’s move into solar is the customer’s perspective, motivation, and expectations. Accustomed to delivering solutions that address a practical operational need related to electrical distribution, contractors quickly learn that there’s another critical dimension to installing an alternative energy solution.

Part of a solar job is straightforward and simple — “it’s pretty much pipe and wire on the installation side, not highly complex,” says Jay Rowe, vice president of Rowe Electric, Inc., Ringoes, N.J. But it’s neither specified nor sold in exactly the same way, and contractors can get tripped up by that, regardless of their role.

“Solar is much more of a financial sale than an electrical sale,” says Rowe, whose company operates a long-standing separate solar contracting division, Rowe Solar. “When you’re called into replace outlets, for example, they’re not doing that to get a return on investment. Solar is a payback thing.”

But in some ways, even the task of installing solar is a departure from how contractors operate. Says Pinsky, drawing a contrast with Rowe: “One thing that’s different is that the majority of work with solar is not electrical, per se; it’s mechanical in the sense that you’re installing racking, working up on roofs.”

That, however, is not too far afield for most electrical contractors who often must work in complex construction environments, Pinsky says. Moreover, their familiarity with detailed electrical and building codes positions them to work in a market that must contend with changing requirements, safety considerations, and red tape. And contractors also can bring a measure of stability that can be reassuring for customers.

“If the solar market were to go south, many solar contractor specialists would disappear,” says Pinsky. “But we’d still be around to service customers and support warranties.”

Making the commitment

The preponderance of evidence, though, suggests that’s far from a realistic scenario — at least in the near term. With solar installations seemingly growing at a record pace, business could continue to be brisk for contractors qualified to work in the space and committed to building a long-term presence in the market.

Competition, though, could grow stiffer, putting a premium on well-capitalized and technologically capable contractors who also have strong connections with component supply networks via distributors or manufacturers. The ability to intelligently source solar power equipment in a market plagued by oversupply and a broad quality spectrum will be one defining characteristic of successful solar integration services providers.

In Seattle, demand and competition is likely to increase with the recent passage of a new municipal energy code, says Kevin Charap, general manager of Northwest Wind & Solar. Among other mandates, he says, it appears to require a solar energy component for any new building construction of a certain scale. He suspects that alone could encourage more electrical contractors to explore and possibly get into the solar installation business. His tip-off comes from talking with solar equipment suppliers, who could play a key role in helping contractors evaluate the business opportunity.

“I’m hearing from some vendors that they’re getting a lot of calls and feeling a lot of pressure to be resources,” he says. “But they’re having to try to gauge their level of commitment. They don’t want to waste their time. Solar distributors can make it challenging for companies to sign up and get the pricing they want.”

Nonetheless, solar hardware costs have been declining, and that is helping to spark adoption. SEIA’s Q1 2016 research put the decline in overall system pricing at around 8% for the quarter — one aided also by reductions in both component and “soft” costs (labor, permitting, transactions, etc.) in the residential, commercial, and utility-scale markets. The report identified soft-cost control as a key and emerging area of focus in the bid to improve solar’s affordability.

But steady technology improvements that could boost both system and installation efficiencies without big offsetting component price increases will play a big role in solar’s development curve. Baker Solar’s Williams is starting to see evidence of that, and is optimistic that the combination will help propel the market forward.

“We’re starting to see advancements that allow more panels to be grouped in strings, which means less pipe and less wire,” he says. “And it looks like costs are headed down further as we get into Q3 and Q4, which means the possibility of a faster ROI for the end-user.”

Indeed, ROI remains the pivot point for the solar market, and numerous moving parts play into that essential calculation for potential users. Securing a payback within a reasonable amount of time on a product that has alternatives readily available at costs that remain generally manageable, if not entirely predictable, is the central concern.

But questions of adequate financial return are also sure to continue to dog the market’s supply side for the foreseeable future. Prospective product and service providers will have to invest in market analysis, training, component supplier relationship-building, marketing, labor and certification to approach the market in a serious and committed fashion. The door to the solar market is perhaps as open as it’s ever been, but the trick will be fitting through it and getting in and staking out ground before it closes again.            

Zind is a freelance writer based in Lee’s Summit, Mo. He can be reached at [email protected].

SIDEBAR: Growth Drives Demand for Education

Despite making strong inroads of late, solar energy in many respects is still a work in progress. Some quarters of the utility “establishment” see it as a problematic interloper; others on the demand side may still tag it as exotic and unworthy of serious consideration in all but the most ideal of settings. So it’s no surprise that issues of education and training in how to introduce more solar into the market, and how to effectively design, install, and integrate it continue to draw attention.

One expression of that is a new public-private initiative to advance solar and general alternative energy integration knowledge in college-level power engineering studies. With financial support from four universities and the U.S. Department of Energy SunShot Initiative that coordinates solar innovation efforts, Electric Power Research Institute (EPRI) will spearhead the design of curricula covering how renewable energy resources can be integrated into the power grid.

An outgrowth of EPRI’s involvement in DOE’s Grid Engineering for Accelerated Renewable Energy Deployment program (GEARED) and the Center for Grid Engineering Education (GridEd), the new focus recognizes the need to develop and disseminate knowledge that tomorrow’s power engineers and their employers will demand.

“There’s a need to refocus and retool the existing and future workforce because the electric grid has been designed for one-way power flow,” says Steven Coley, EPRI senior project manager and a GridEd liaison. “With the changes taking place on the grid, from distributed resources like solar and also energy storage, we need a workforce that understands the technologies and how to integrate them.”

The same need exists on the demand side, where growing interest in commercial and residential solar is sparking more interest from would-be product and service providers, and more scrutiny from watchdogs. That’s sparking a flurry of solar installation education programs offered by training specialists and industry associations, and growing demand for certification.

Kevin Charap, general manager of Seattle-based Northwest Wind & Solar, says solar installers are increasingly under the microscope. More new requirements, such as rapid shutdown capabilities in systems to protect first responders, translate to the need for proficiency.

“The NEC has new requirements on solar installations, cities are starting to increase regulations and requirements on installers and the permitting and inspection process have been getting harder,” he says. “Some of that has to do with new contractors getting into the business and inspectors seeing a wide range of installation quality.”

While the general response to the growing business prospects in solar has been to offer more and better training, it’s not unanimous. Andy Berg, executive director of the National Electrical Contractors Association chapter in San Diego, is conflicted about offering training, fearful that it could lead to a supplier glut, hurting everyone.

“Getting work is great, but it’s also important to make money,” he says.

About the Author

Tom Zind | Freelance Writer

Zind is a freelance writer based in Lee’s Summit, Mo. He can be reached at [email protected].

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