Thoughts on Solar

We don’t often announce our latest projects, but one this week really stands out, and that is our upcoming project for Chandler School here in Pasadena. (Indeed, it is just down the street from where I once lived!)  The 44.8 kW system will be installed this summer, in time for the 2015-16 school year.

Chandler is a special place that puts great emphasis on challenging its students.  As they note in their Mission Statement:

Chandler students gain a love of learning, a means of thinking independently and an ability to work collaboratively. A Chandler education seeks to develop good character, self-reliance and a commitment to community in students as a foundation for academic and personal success.

What a lovely roof for solar!

It will come as no surprise to readers of this blog that we at Run on Sun have a soft spot for non-profits, and we take great pride in working with schools and churches to expand their mission while making the world a greener, cleaner place.  We understand the process involved, with its many twists and turns, and we have found that our collaborative, information-intensive brand of “selling” solar meshes well with the non-profit world.

In the case of Chandler School, the process actually moved quite quickly - spurred on, at least in part, by the rebate step down announced by Pasadena Water and Power for May 1.  Once the decision was made, the design team at Run on Sun was able to move quickly and get the rebate application completed and filed in time to meet the deadline.

As noted by John Finch, Chandler’s Head of School:

As an independent school in Pasadena we have a public purpose to make our environment cleaner by reducing our dependency on fossil fuels and limiting our carbon footprint.

If we want our students to be stewards of the environment in the future, schools need to be examples of best practices. The  installation of solar panels on our gym roof is a best practice. I am looking forward to the learning opportunities that the project will give to our students.

We are excited to be working with this renowned Pasadena institution, and we look forward to providing the Chandler community with a wonderful asset that will both save money, and enhance the educational experience of its 450 students.

We are really excited to announce our first ever intern at Run on Sun, the incomparable Kendra Hubbard!

As many of you know, Kendra has been involved with solar marketing and social media (@kendra_hubbard) for many years, but she has longed to “get her hands dirty” and see more of the business, particularly from the perspective of a well-respected local installer.  We at Run on Sun have long admired Kendra’s insights into the solar industry but have never had the chance before to lure her to our fair city.  When this opportunity arose, we jumped at the chance.

Kendra, of course, wasted no time in getting to work, as you can see in this picture of Kendra working with us on our latest installation: a very cool mix of raised seem metal roof (S-5 clamps and Everest racking) plus ballasted (PolarClaw).

In the coming weeks and months we are looking forward to Kendra’s contributions to a vast swath of what we do, from sales and prospecting, to organizational efficiency (and yes, even some marketing!).  So please take a moment to welcome Kendra - one of the true Solar Women Stars - to the Run on Sun team!

There is a fair amount of talk lately (in nerd circles) about a graph being circulated by the utilities and the California Independent System Operator ( CALISO, the entity that manages the electric grid in the state).  Known as the “Duck graph,” it is being presented as a dire prediction of impending grid instability due to the increasing role of renewable energy sources. But where some see doom and gloom, others see opportunity.  Here’s our take. (H/T John Farrell at REWorld.)

Here’s the graph (credit, CALISO):

As recently as 2012, this wasn’t a duck at all as net load had two peaks, one in the morning and one late in the evening.

But look at the center of the graph: as more and more renewable sources come online, the demand during the middle of the day falls dramatically, so much so that the utilities are complaining that there will be a risk of “over generation” - producing more energy than is needed and cutting into the baseline production (from power plants like coal and nuclear that need to operate continuously to be efficient.)

Also predicted is a rather steep increase in evening demand between now and 2020.

The net result is a curve shaped much like a duck, apparently a fowl predictor of grid chaos.

Frankly, we look at that graph and see progress and opportunity.  Progress in that renewables, which not so long ago were sneered at as being a, “tiny amount of energy that will never amount to anything serious,” are now completely rewriting the load curve in the nation’s most populous state.  Talk about coming a long way, baby!

The opportunity, of course, is right there as well.  While adding large amounts of smart storage to the grid is an obvious fix for this “problem", as we noted just the other day (see Can Renewables Power the US?), we can handle this evolving energy future in a relatively simple manner—it just requires changing how we approach the problem.  Here’s the video:

We can, and will, teach this Duck to fly. 

Solar Power World, which recently quoted Run on Sun Founder & CEO Jim Jenal at length in a news article, has just announced their annual listing of the Top 250 Solar Contractors in the United States and Run on Sun made the list, coming in at number 234.

From Solar Power World’s editorial announcing the list:

These companies have the vision to succeed in an industry dismissed by so many around the world. These companies — these visionaries — are poised to take full advantage of the near-term solar boom that none other than researcher Shayle Kann has predicted for the U.S. industry.

It is these businesses that have fueled the three-year growth of this industry of 227%. The Solar Power World’s Top 250 employ 73,068 people and installed 3 GW in 2012 alone. They have installed 7.8 GW overall. They represent the best across all three segments — utility, commercial and residential — that make this industry so vibrant. In an industry now valued at $11.5 billion, these are the companies that have built it.

For a small, regional company like Run on Sun, it is a great honor to be listed among the biggest and best known solar companies in the country.  We are proud of our role in building this industry, and proud to be a voice for making the industry live up to its vision.  After all, you cannot claim to be part of building a sustainable future if you engage in shoddy business practices or stoop to unsavory marketing tricks.

So congrats to all our colleagues who made the list - here’s to continuing to grow an industry we all love!

Ok, listen up - you know who you are, you Outliers and Oddities - but now it is time for everyone else to learn your deep, dark secrets as we name names and tell all - at least all that can be told from the CSI data!  Grab your popcorn and let’s dive in, shall we?  (If you overlooked Part 1 of this series you might want to check it out to recall our Methodology.)

Outliers

In looking at Outliers we focus on the Residential market since there is greater potential for consumers in that space to be exploited.  After all, if you are building a 500 kW commercial project and you don’t do your homework, well, shame on you.  But folks in the Residential space are more likely to be exposed to high-pressure sales tactics and other forms of abuse.

Another reason for looking at Residential systems is that the size range is very narrow: from 1 kW to 10 kW.  That limits the amount of cost variance you would expect to find (and we found) if you were looking at larger systems.  So the data here consists of Residential projects, both purchased and leased, but excluding MASH and delisted projects.  This subset of the larger overall data set consists of 454 companies, 13,619 projects with a total capacity of 75.8 MW and an average cost of $5.84/W.

(Full disclosure, projects by Run on Sun came in at $4.78/W - proving that sometimes you can save money when you go with the best! But I digress…)

Companies in this subset varied between having just one project in the data (152 companies appear only once) to SolarCity which has a whopping 2,326 projects.

To make any meaningful comparisons we have limited the companies in this analysis to just the very largest players.  Whereas last year we made that cut at 500 kW installed or more, today that filter still includes too many companies to readily compare, so this year we set the bar at an even 1 MW.  Even at that threshold, we still have 15 companies on this list. Surely companies that large can afford to pass along their savings to their customers, right?

Here’s what we found:

Reducing our sample size in this way brought the number of projects down to 8,555 (62.8% of the total), total installed capacity to 45.6 MW (60.2%) and average cost down to $5.82/W.  This last point is news since in the past, the average cost for the largest group was actually greater than the overall average.  Not this year.

The next thing to notice is that SolarCity - the largest player in this field with 28.9% more projects than their closest competitor, Verengo - now is right smack on average at $5.82/W.  It would appear that at least for CSI purposes, their cost data is no longer an outlier (though it may still be Odd - more on that later).  However, their smaller competitor Verengo (at least as measured in this data) once again beat them on price.

On the low end of the scale, Petersen-Dean has snagged the crown from two-time low cost leader HelioPower - and they did it by far, being the only company to show a price below $5/W.  Nicely done!

True Outliers Strike Again

Which leaves us with the high end.  The first thing to note here is that the industry seems to have cleaned up its act a bit from what we had found last year and the year before.  According to the data, the highest price charged has dropped from $13.32 in 2011 (49% above the 2011 average of $8.91) to $10.50 in 2012 (45% above the average of $7.23) to our present $7.50 (29% above our average today of $5.82).  So the data has really flattened out and our extremes just aren’t as extreme any more.

And yet, if relatively tiny Run on Sun, with no economy of scale going for it, can bring our projects in at $4.78/W, what is the possible justification for charging, on average, and over hundreds of installs, a price that is more than 50% higher than ours?

CSI’s cost cap as of today is $7.10/W for the Residential program.  That means that two companies, GCI Solar and American Solar Direct, are averaging costs that exceed the CSI cap.  American Solar Direct is huge - they have 675 projects in the data (ranking them third) accounting for a capacity of 2.6 MW (ranking them fourth).  And yet with all of that size - more than twice as many projects as cost leader Petersen-Dean - they are still $1.29 above the average!

And what can we say of GCI Solar?  That is the DBA of Killion Energy, Inc. which happens to be located at 15261 Connector Lane in Huntington Beach.  But somehow that DBA seemed awfully familiar.  And guess what, adjacent to 15261 Connector Lane is 15262 Pipeline Lane which is the home of perennial outlier, Galkos Construction.  Could these be one and the same, just with a subtle name change?  In the end, it doesn’t really matter - bottom line, $7.50/W is just too much for a large company to be charging.

Caveat emptor.

Not So Fast

Solar companies can also be outliers in ways other than cost - most notoriously, how long do they take to complete their projects.  To take a look at that, we limited our data to Residential projects that also showed a First Completed Date in the data.  We then averaged the number of days to complete projects as measured by the difference between the First Completed Date and the First New Reservation Request Date.  Needless to say, that yields a smaller number of projects, so we lowered our threshold to 500 kW  installed for inclusion on our list.  Our new “time-to-complete” list includes seventeen companies, 4,865 projects and an installed capacity of 25.9 MW.  Surely these folks must have their operational act together, right?

Here’s what we found:

The first thing we note is that, depressingly, the amount of time that it takes on average to get a project completed has gone up - from 157 days last year to 166 days now (a 5.7% increase).  We are getting bigger, but as a whole, we are getting slower - not a trend designed to please consumers.

But some companies have improved significantly - most dramatically, SolarCity, going from 212 days last year to just 157 now - a 26% improvement, and comfortably below the overall average.  Verengo, which actually has more completed projects in this data than does SolarCity, also improved from 134 days last year to 122 this year.  One surprise - GCI Solar, our most expensive installer, was also the fastest of any of these companies to complete a project, taking just 115 days on average.

And then there is Elite Electric.  Frankly we have no idea what is going on here but 320 days, on average, to complete a project is just plain crazy.

Last year we derived a somewhat novel metric for looking more closely at the impact of delay times in the overall industry.  We called it System-Years of Delay, or SYD, which is the product of the total number of systems installed by a company times their difference in average days to install compared to the overall average, divided by 365.  Thus companies that do better than average end up with a positive number, scaled by their impact on the industry in terms of the number of systems they installed, whereas laggards get a negative number, similarly scaled.  We see this as an indication of whether a company is propelling the industry forward, or dragging it backward.

Here are our results for the data from this year (some companies that are grouped around the average are omitted for clarity):

As it did last year, Verengo continues to pull the industry forward and by a wider margin this year than before (172 compared to 111).  Last year’s laggard, SolarCity, is now moving things in the right direction.  But Sungevity continues to impede progress as do Burke Electric and Elite Electric.

Looking at this another way, assume that a system will produce, on average, 5 kWh/day for every 1 kW installed.  Then the delay caused by these laggard companies ends up having real environmental impacts since we are missing out on their energy production for every day that they are completed beyond the overall average.  Collectively, that amounts to more than 3 GWh of clean energy that were not produced and an additional 997 tons of CO2 emitted into the atmosphere.

Oddities

Which brings us to the Oddities section of this post.

In the past two years we found something really odd in how SolarCity was pricing its systems, at least as it was reported in CSI data.  We had noted back in 2011 that SolarCity’s price for its leased systems was far, far beyond the price it was citing for purchased systems, and far beyond what its competitor, Verengo was reporting.  Then last year we discovered that the two competitors were now charging exactly the same thing for leased systems and that meant that SolarCity’s price had plummeted in just a short time.  Going back and looking at all projects across the state resulted in this, rather startling graph:

So now that SolarCity’s IPO has come and gone, what are they - and Verengo - charging for leased systems?  (We are excluding sold systems because they are really a de minimus share of either company’s business.) Here’s the cost data for installed, Residential projects, along with linear trend lines:

Interestingly, at the beginning of the year, SolarCity was actually reporting a lower cost than was Verengo.  But as the year has gone on, SolarCity’s cost has crept upward - not by a lot, but the trend upward is clear.  In contrast, Verengo’s costs have come down and their trend is equally clear.

Once again, Verengo follows a trajectory that mirrors the rest of the industry, while SolarCity pursues a course uniquely its own.  Perhaps that is no longer odd, but to be expected.

PsomasFMG Rules the Delist

Finally, we return to the strange case of that Ruler of the Delist - PsomasFMG.

In Part 1 we wrote about delisted projects. One company, PsomasFMG, LLC, had an astounding 79% of all of its projects end up being cancelled and thus ended up being “Delisted".  That’s 33 projects with a total capacity of 8.6 MW - or more than 260 kW apiece.  We thought that this was odd indeed and decided to look a little more closely at what was going on here.  (H/T Imogen!)

Of the 33 delisted projects, all of their rebate applications were submitted in a four day window between January 25 and 29, 2013.  All but one of those projects were submitted under rebate step 8b; the last one, on the 29th, missed the cutoff and fell to step 9b (it was later withdrawn). The 32 projects submitted under the higher rebate rate were apparently for Government entities in the cities of Pomona (29) and Diamond Bar (3).  (We have searched for news accounts announcing those projects but so far have turned up nothing.)

All 32 of these projects submitted under rebate step 8b were cancelled by SCE for failure to pay the CSI-mandated application fee by the due date.  Under the CSI Guidelines, non-residential projects that are larger than 10 kW are required to pay an application fee, based on the size of the project, to secure their rebate reservation (see section 4.4.1.1).  Thus, to secure rebate reservations for these 32 projects that PsomasFMG submitted, they or their customers would have had to pony up $250,000 within 30 days of submitting the initial application.  The rebate reservations at issue here were worth nearly $3.9 million - which sounds like a pretty good investment: pay out $250,000 to secure $3.9 million.  But it never happened, and the applications were all cancelled.

So while we know why the applications became delisted - failure to pay the rebate application fee by the deadline - we still do not know why the company was submitting so many applications in such a narrow window of time that all ended up being cancelled.  Odd indeed.