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News / Towards More Customer Friendly Community Solar Products
TOWARDS-MORE-CUSTOMER-FRIENDLY-COMMUNITY-SOLAR-PRODUCTS

Tom Hunt, VP of Strategic Initiatives at Pivot Energy, gives his perspective on the dynamic community solar market:

As community solar grows to a potential of 84 GW by 20301, it is imperative that contract terms become friendlier to customers. Current offers are largely restricted to investment grade commercial and governmental customers, and residential homeowners with FICO scores over 700; most contracts require a 20-year term with onerous early termination fees. Together, these requirements eliminate much of the customer base community solar was intended to serve and impede market growth.

Fortunately, the market has started to take early actions towards better customer products, providing real data and business decisions to bolster the case for continued evolution. There are clear business advantages to the project developers, customer service organizations, and financiers that move most rapidly to perfect next generation customer contracts. While no single group has pulled all of the pieces together yet, the speed, low cost, and efficiency such a product allow will give early movers access to rapidly expanding market share. Below are the key considerations for market participants to consider.

1. The trend is clear

a. Customer offers with no FICO score requirement, terms of one year or less, and low/no termination barriers are already on the market2.

b. Customers expect these offers from the other services they purchase – cell phones, Netflix, internet, etc.

c. Financiers have publicly stated willingness to finance shorter term and/or no FICO contracts.

2. The market cannot continue to support current terms

a. Customer acquisition costs for current terms run from at least $0.12/W to $0.25/W or more. As community solar compensation ratchets down in new markets, there is not room to support this level of cost.

b. The base of customers is very narrow – we are already pushing the limit of 700+ FICO homeowners in areas such as Orange and Rockland territory in New York.

3. The risk in short term contracts is less than appears

a. More customer friendly contracts are easier to support with positive customer service, leading to happier, more content customers.

b. Shorter term contracts can still have guaranteed savings against utility rates, meaning customers will be economically motivated to re-enroll year after year.

c. Market data is limited this far, but proprietary conversations indicate customer churn with short term contracts appears to be only 1-2% more than longer term contracts, and it is far easier to resubscribe short term contracts.

d. With short term contracts, it is much easier to maintain a customer waitlist/backlog, allowing for easier and faster replacement of departing customers.

e. Short term contracts allow customer service/acquisition organizations to more easily manage a standard product and reduce customer churn through mechanisms like targeted communications, a waitlist, and a cash reserve.

4. Current contract terms may in fact be riskier

a. Financiers have pushed long-term, FICO restricted contracts, believing them to be more secure. The reality is that state consumer protections often allow customers to terminate with relatively short notice periods, negating the value of a 20-year term.

b. Further, resubscription of new 20-year contracts is difficult and expensive, and will only become more so as the market for new projects shifts to more friendly terms.

c. The insistence on unfriendly terms leads to unhappy customers and prospects, further increasing the difficulty and costs of acquiring new and replacement customers.

d. By continuing to focus on such a limited customer base, community solar market participants are unnecessarily limiting their long-term growth, threatening business stability.

 

 

 

1Wood Mackenzie, “The Vision for U.S. Community Solar: A Roadmap to 2030”. July 2018. 

2https://www.greentechmedia.com/articles/read/shopping-for-community-solar-contract-terms-are-getting-friendlier#gs.jkK5zHo  

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