Decarbonization — Residential Solar

For many in the solar industry, we’ve witnessed the sharp decrease in costs. The focus in the beginning of last decade was on the hardware cost, and solar module prices dropped from almost $2 per watt in 2010 to almost $0.3 per watt currently. One of the primary reasons for this decline has been scale — ~7x growth in manufacturing capacity in the same period. Scale also has been one of the key drivers of lower and lower bids (far outstripping analyst forecasts) for the large scale solar projects. The winning bid for a 1.5GW project in Abu Dhabi in April 2020 was 1.35 cents per kwh (!).

Scale is one of the reasons why the announcement of Sunrun acquiring Vivint Solar is important for increased adoption of solar in the residential segment. It combines #1 and #3 players in the sector with a combined customer base of almost half a million customers. While both of these companies have been growing at >25% y/y, they have complementary channel strategy and different underlying cost structure.

In the Q1’20, Sunrun had installed costs of $3.09 per watt and Sales and Marketing costs of $0.76 per watt. On the other hand, Vivint’s costs for the same period were $3.80 and $1.41 per watt, respectively. For the combined entity, we can expect even lower costs due to scale and higher adoption of digital tools, to push the installed cost to sub $3 per watt. This ought to further result in increased adoption of solar by homeowners. In the US, with almost 75 million households, the adoption of solar is at about 3%. As a result, electricity generation, which is ~30% of CO2 emissions in the US, can be transitioned towards cleaner, decarbonized solutions. In fact, the combined entity will own almost 3GW of solar assets over half a million rooftops.

An analogous story is playing out in li-ion batteries, where like solar modules, the battery prices have declined by almost 90% over the past decade. This coupled with higher incidences of blackouts and consumers desire for access to clean energy, like with solar, will result in increased adoption of storage by the homeowners. In fact, Sunrun reported that 1 in 5 customers chose storage option with solar.

Ultimately, we need all the solutions for significant reduction in carbon emissions to have a realistic goal of staying within 2C temperature rise by 2100. The development in the residential solar today is promising for the planet and will offer customers better products and services.