What the Downturn Means for Solar Contractors

You know times are hard for the solar industry when big time players like SunPower Corp are reporting quarterly net losses. Yet that is exactly what happened in April as SunPower and other solar companies prepare for a bleak year. On the silicon side of things, major manufacturer MEMC posted a slight profit in the quarter, but sales slid 57 percent nonetheless.

Historical Growth Hits Rough Patch

What does all this mean for the solar contractors out there eagerly awaiting projects to come? That the solar industry is a part of the economy like every other industry and that hard times mean hard times, even for an industry that has been growing by an average of about 40% over the last several years. That is not to say that all is lost, however. Solar contractors, and their industry as a whole, is by all measures in a relatively good spot.

Photo Credit: greenforall.org

Lost Demand, Surplus Supply, and High Up-Front Costs

Lost demand affects everyone in the industry, from manufacturers to installers, but so do federal tax incentives and funding for renewable energy. Furthermore, the sudden surplus in supply of solar equipment is likely to have a beneficial impact on the industry in the long term. For contractors, one of the hardest parts of the job is convincing customers that $25,000 is a worthy up-front investment. At this point, even the banks need convincing of that.

Yet lower panel production costs, and therefore lower costs out of the box for homeowners, makes that job a little easier. Combine that with lucrative state and federal incentives, the invaluable pride of going green, and volatile energy costs. What you end up with is a winning hand, albeit one that may not be ready to play just yet.

Solar Set for Take-Off

Solar may have a down year this year, but I would expect it to play as well or better than other industries. The U.S. solar industry is finally poised for takeoff, awaiting eagerly a turn of the tide. The integral ingredients are almost all there (a national feed-in tariff might just blow the lid off this thing) and the industry is predicted to double or better in the next few years.

That may not help struggling contractors this year, but bear in mind that federal tax incentives are already in place — cap free — stimulus money should help states struggling with funding their own incentive programs and summer is on the way.

Posted on May 5th in Solar Contractors by Dan.