Small distributed solar companies are taking over the industry. here’s why


Powerhouse is a solar startup incubator in Oakland. The effort was founded by industry veterans Emily Kirsch and Danny Kennedy, both of whom have gone through the many ups and downs of the solar industry over the past decade. Of course, like any good incubator, they needed a few gifts to share with visiting dignitaries. Given their history in space, it’s no surprise, then, that Emily came up with coasters to share, calling them “solar coasters.”

Famous ups and downs in the solar industry are often the result of booms and downturns in supply and demand, followed by a boost in the profit margins of module suppliers, project developers and installers. But the solar roller coaster ride has other important implications.

One is currently being played out in the American residential space. While much will be written about a potential decline in the global solar market this year, the real action will be residential solar rooftops. Solar power at the utility and business level is likely to experience a decline this year. However, residential installations will continue to increase. This is due to nationwide diversified demand, ever lower prices, and state policies favorable to solar energy.

The other big factor that keeps residential solar on track is the increasing simplicity of financing. Over the past decade, companies like SolarCity, lively and Sunrun Helped bring solar power to millions of Americans through the innovations of power purchase agreements (PPAs) based on tax fairness. Mainly because of the need to aggregate very large amounts of tax fairness, these new models of third party ownership have favored large consolidated companies such as those mentioned above.

During the period 2010-2014, we witnessed what looked like an inexorable march towards a market forever dominated by a few third-party players, with no place for so-called the “long tailBest articulated by Chris Anderson. The long tail in solar power is made up of the vast array of thousands of small solar installers across the country. This long tail system from suppliers you trust as neighbors , friends and local businesses is prevalent in most aspects of the service industry – from electricians to plumbers to contractors.

We are now on the verge of witnessing a reversal of this consolidation and entering what I call “the revenge of the long tail”. The long tail of the solar industry has lost ground over the past decade. Now he’s coming back – with a vengeance. Here’s why.

Funding is democratizing again

After nearly a decade of needing complex financial structures to run the economy, solar power is so inexpensive that we can go back to basics in the world of solar finance. PPAs and complex leases are no longer necessary and, therefore, aggregate tax fairness is no longer necessary.

Companies like Mosaic (one of the first Powerhouse companies) and to notice (two companies in Obvious Ventures’ portfolio) are stepping in with solutions to help small installers jump on these simple financing mechanisms. For these next-generation solar service providers, expensive overheads, thousands of employees, and nationwide grids are unnecessary. They just serve the network that already exists in the form of the long tail.

Solar solutions become commodities

Physical equipment and professional platforms used for sales have also advanced over the past decade. Panels, inverters and system balance hardware can now all be purchased in kits at previously dreamed costs, even in small volumes. Additionally, companies like Sighten offer modern toolsets of software as a single sign-on service that can help installers of small businesses across the country compete at the highest level.

Solar finance is simplified

This removal of the need for a large supplier with Wall Street’s fiscal fairness capabilities once again level the playing field. Additionally, with solar becoming more mainstream and technically standardized, the need to know- doing specialized has been reduced. It is more likely than not that if you are in the top 10 solar markets, your trusted local electrician, roofer or contractor has some experience with solar energy.

As the graph above from GTM Research shows, the revenge of the long tail is upon us. This is great news for solar energy consumers and small businesses across the country. This is especially exciting for states that weren’t seen as large enough markets to deserve the attention of major industry players. Dominant domestic players will need to prove their ability to adapt to lower margin loans, and possibly get rid of vertically integrated corporate structures. In addition, they will have to work with emerging software vendors who are already proving to be more agile than these big players.

The next great battlefield

The biggest players will also have to show that they can improve their customer acquisition costs. Recently, the news has not been good. As the prices of solar equipment collapse, the cost of acquiring new customers increases for the biggest players. Bottom Line: Loans are a better solution for most clients, and working with local providers just makes more sense. This brings the competition back to the local level for national players.

As the solar roller coaster continues and you read about the inevitable woes of the main cast, don’t forget the little guy. This long-tail group is precisely what we need to create a more resilient, dynamic and customer-centric industry.


Andrew Beebe is the Managing Director of Obvious Ventures. This room was originally posted on Medium and has been republished with permission. To follow André and Obvious businesses on Medium.


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