Larger home installers add average of 10 percent to cost, but their longevity appeal to some consumers
Jeremy Papasso, Daily CameraCustom Solar’s Houston Sherer works to install solar panels on a home on May 10 , 2016 in Boulder.
When it comes to getting the best deal on a residential rooftop solar array, the size of the installer matters — but bigger isn’t necessarily better, according to a study from the National Renewable Energy Laboratory in Golden.
NREL found that about 70 percent of the time, the largest players, defined as those installing 1,000 or more solar systems a year, quoted consumers a higher price than smaller competitors.
The premium for going with the brand name on systems purchased for cash was 10 percent on average. That works out to about $3,000 to $5,000 of the typical residential system that can run $30,000 to $50,000 before tax credits.
The largest 1 percent of installers put in about 60 percent of all systems, and the largest 10 percent accounted for 90 percent of the systems, NREL said. But thousands of smaller and lesser known vendors are also available to put in solar power arrays.
“Price can vary a lot. Consumers should shop around,” said Vikram Aggarwal, CEO and founder of EnergySage, an online site that allows consumers to obtain competing quotes on solar systems.
Much of the price information used in the NREL study came from EnergySage, which handled $1 billion in quote requests last year and bills itself as a solar panel world equivalent of the travel comparison website Kayak.
Typically, economies of scale allow a larger vendor to offer bigger discounts and win more business. But when consumers are unfamiliar with a product and prices are difficult to compare, that competitive pattern can be disrupted.
Marketing and customer acquisition expenses can run as high as a quarter of the total cost of a solar-array system at some of the larger players, who are often under pressure to keep a steady flow of new customers coming in, Aggarwal said.
Large firms will spend money to have salespeople cold-calling and knocking on doors to explain the potential advantages of solar power, something most smaller firms don’t have the budget for.
“We would never go door-to-door knocking. We don’t have any marketing plan and we don’t do any advertising. Everything we do is word-of-mouth,” said Whitney Painter, owner of Buglet Solar Electric Installation in Golden.
Painter said her firm beats much larger competitors by keeping its overhead costs low and entering into the bidding process with what she called “a different flexibility.”
Photovoltaic panels, racking systems and inverters continue to drop in cost and improve in efficiency and ease of installation. Another obstacle that’s fading is the growing number of lenders that are comfortable financing loans on solar arrays.
Still, fewer than 1 percent of homes in the country and in Colorado have photovoltaic solar systems, leaving a huge potential market.
Given the big reductions in hardware costs in recent years, the next frontier will come in reducing soft costs, things like acquiring customers and permitting, said Rebecca Cantwell, executive director of the Colorado Solar Energy Industries Association.
NREL’s study doesn’t disparage large firms. Some consumers prefer to go with a brand name they believe will have a better chance of surviving for the long haul and standing behind systems that can last 20 or 30 years.
“At Sunrun, we are committed to providing our customers the most accurate pricing quotes from the onset,” said Michael Grasso, chief marketing officer at Sunrun, a leading installation firm that’s been around since 2007. “We are able to accommodate these quotes through years of experience and proprietary pricing technology.”
Aggarwal argues that pricing transparency will make what is currently an inefficient system easier for consumers to navigate, boosting adoption.
“It is a dynamic and changing marketplace. The takeaway is that consumers who want to go solar should talk to several companies,” Cantwell advised.