US Residential PV market : advent of financing Path ahead for the installation industry

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1 Bringing the world to your roof US Residential PV market : advent of financing Path ahead for the installation industry Deep Chakraborty, President & CEO, Centrosolar America Inc. Deep.Chakraborty@centrosolar.com World Renewable Energy Forum May 17, 2012

2 Strong growth inspite of weak economy, implies bright future ahead US RESIDENTIAL PV SALES TRENDS MW 2011 US Highlights 45% CAGR ~50% of residential PV market is in CA: - 30k+ homes added in 2011 (total CA homes: ~8m!) - ~1000 installers Several new markets opening up in Eastern and South-Eastern USA Source: SEIA, Note : 2011 data is an estimate 1

3 Third-party ownership model for PV allows increased adoption CALIFORNIA: RESIDENTIAL PV SALES TREND % of third-party owned sales 2011 California Highlights 45% CAGR Third party PV ownership removes several adoption barriers like need for upfront capital and technology risk Third party PV ownership is enticing a new demographic fraction to adopt PV, vs. corresponding customer-owned fraction Source: CSI Energy Policy March 2012, Study in LA / Orange County 2

4 Hardware cost has dropped, but service cost is relatively stagnant TOTAL COST : HARDWARE VS. SERVICES $/W of installed cost of PV system in CA (6 kw size) The key challenge! Source: Centrosolar 3

5 Several steps for a residential installation makes the process complex PV SALES & INSTALLATION STEPS Final payment received Rebate Paid 12 Lead generation START 0 Sales process 1 Financing approval Rebate claim submitted 10 2 Site drawing & design Interconnection inspection 9 3 Rebate & Permit approval Timing of this step is often Not controlled by installer First payment received 8 Building inspection 7 6 Install execution 5 4 Schedule labor crews Procurement of materials 4

6 This requires installers to build internal overhead cost driver! PV SALES & INSTALLATION STEPS Timing of this step is often Not controlled by installer Rebate claim submitted Final payment received Interconnection inspection 10 9 First payment received 11 Rebate Paid Docs Admin Field Tech 8 Acctg Acctg Building inspection 12 Docs Admin 7 Field Tech Lead generation START Market Ing Install Install execution Sales PV Installer Resources 6 0 Sales process Project 1 Field Tech Field Tech Warehouse Project 4 5 Schedule labor crews 2 3 Financing approval Site drawing & design Rebate & Permit approval Procurement of materials Core installation task! 5

7 2011 acquisition costs on average was ~$5300 per customer PV CUSTOMER ACQUISITION COSTS Acquisition costs Range was $1,800 to $9,600 based on national study 55% of acquisition expense was in the sales function Source: Woodlawn Associates 6

8 SUMMARY: KEY CHALLENGES Installation process is complex, due to lack of industry standardization, and several process steps This often drives installers to add overhead costs internally PV end-customer acquisition costs are significant Therefore, overall cost of residential installing high : service costs are stagnant, which in turn limits more rapid market growth 7

9 THE SOLUTION? PV MODULE PRODUCTION COMPLETE SYSTEM DESIGN, ENGINEERING & DISTRIBUTION PV SYSTEM FINANCING, WARRANTY & MONITORING END-CUSTOMER SALES, INSTALLATION AND SERVICE The entire PV value chain needs to evolve to enable the right approach! 8

10 Producers focus on cost & technology rarely focus downstream RESIDENTIAL PV VALUE CHAIN PV MODULE PRODUCTION COMPLETE SYSTEM DESIGN, ENGINEERING & DISTRIBUTION PV SYSTEM FINANCING, WARRANTY & MONITORING END-CUSTOMER SALES, INSTALLATION AND SERVICE Manage cost / scale Manage technology changes Source globally for components Manage regulatory change e.g. trade tariff 9

11 Distributors manage inventory but few offer complete systems RESIDENTIAL PV VALUE CHAIN PV MODULE PRODUCTION COMPLETE SYSTEM DESIGN, ENGINEERING & DISTRIBUTION PV SYSTEM FINANCING, WARRANTY & MONITORING END-CUSTOMER SALES, INSTALLATION AND SERVICE Optimize system design Offer tools for system configuration to installers Manage inventory for complete system Distribute nationally to installers 10

12 Stand-alone financing companies seek long-term warranty commitment RESIDENTIAL PV VALUE CHAIN PV MODULE PRODUCTION COMPLETE SYSTEM DESIGN, ENGINEERING & DISTRIBUTION PV SYSTEM FINANCING, WARRANTY & MONITORING END-CUSTOMER SALES, INSTALLATION AND SERVICE Simplify quoting platforms to installers Offer lease and loan financing for installers Require long-term warranty on complete system Monitor performance for long-term aggregation 11

13 The installer is the critical step as they close the deal with the customer RESIDENTIAL PV VALUE CHAIN PV MODULE PRODUCTION COMPLETE SYSTEM DESIGN, ENGINEERING & DISTRIBUTION PV SYSTEM FINANCING, WARRANTY & MONITORING END-CUSTOMER SALES, INSTALLATION AND SERVICE Manage end-customers Manage sales process complexity Manage cash-flow & construction projects Offer Long-term installation warranty and O&M 12

14 THE SOLUTION PV MODULE PRODUCTION COMPLETE SYSTEM DESIGN, ENGINEERING & DISTRIBUTION PV SYSTEM FINANCING, WARRANTY & MONITORING END-CUSTOMER SALES, INSTALLATION AND SERVICE PRODUCT + FINANCING + WARRANTY + DELIVERY 13

15 An integrated offer to the installer will help scale services faster FUTURE: OEM & INSTALLER ROLES PV MODULE PRODUCTION COMPLETE SYSTEM DESIGN, ENGINEERING & DISTRIBUTION PV SYSTEM LEASE & LOAN FINANCING, WARRANTY & MONITORING END-CUSTOMER SALES, INSTALLATION AND SERVICE INTEGRATED ROLE INSTALLER ROLE 14

16 An integrated offer to the installer will help scale services faster FUTURE: OEM & INSTALLER ROLES PV MODULE PRODUCTION COMPLETE SYSTEM DESIGN, ENGINEERING & DISTRIBUTION PV SYSTEM LEASE & LOAN FINANCING, WARRANTY & MONITORING END-CUSTOMER SALES, INSTALLATION AND SERVICE INTEGRATED ROLE INSTALLER ROLE In the long run, the mainstream PV end-customer will seek an integrated and OEM-backed offer from a certified installer, similar to their other purchases 15

17 Complete PV systems approach is key INSTALLATION SERVICE : COMPLETE SYSTEM IMPACT Pre-Engineered Standard Design or Site Tailored One Part Number = Complete System Warranty for Complete System (not just components) Performance standards optimized for complete system Streamlines entire operation for installer - Sales/quoting, Design/engineering, Supply chain, Logistics, Installation Standardized Components and Configurations (<20 kw) Reduce Procurement Time 1 Part/1 Vendor Reduced Warehouse Space Delivered to Job Site 16

18 Complete PV systems lead to reduction of installer service overheads INSTALLATION SERVICE : COMPLETE SYSTEM IMPACT High impact of standard / complete PV system Rebate claim submitted Final payment received Interconnection inspection 10 9 First payment received 11 Rebate Paid Docs Admin Field Tech 8 Acctg Acctg Building inspection 12 Docs Admin 7 Field Tech Lead generation START Market Ing Install Install execution Sales PV Installer Resources 6 0 Sales process Project 1 Field Tech Field Tech Warehouse Project 4 5 Schedule labor crews 2 3 Financing approval Site drawing & design Rebate & Permit approval Procurement of materials 17

19 Centrosolar offers PV roof solutions as well as components CENTROSOLAR : INTRODUCTION 18

20 Centrosolar offers complete PV systems with residential financing CENTROLEASE: OFFERED IN SELECT US STATES PV MODULE PRODUCTION COMPLETE SYSTEM DESIGN, ENGINEERING & DISTRIBUTION PV SYSTEM LEASE & LOAN FINANCING, WARRANTY & MONITORING CentroPack : standard PV system platform, distributed across the US Complete system 10 year product workmanship warranty to home-owner Best-in-class online real-time proposal generation by installers Significant reduction in working-capital needs for installers Sales training, marketing and lead generation support for installers to drive down cost of end-customer acquisition 19

21 Centrosolar offers complete PV systems with residential financing CENTROLEASE: OFFERED IN SELECT US STATES PV MODULE PRODUCTION COMPLETE SYSTEM DESIGN, ENGINEERING & DISTRIBUTION PV SYSTEM LEASE & LOAN FINANCING, WARRANTY & MONITORING CentroPack : standard PV system platform, distributed across the US Complete system 10 year product workmanship warranty to home-owner Best-in-class online real-time proposal generation by installers Significant reduction in working-capital needs for installers Sales training, marketing and lead generation support for installers to drive down cost of end-customer acquisition A simple and integrated PV financing offer for the homeowner! 20