Residential solar companies have a unique opportunity to engage the energy efficiency market. Because a contractor is already talking to an energy-conscious consumer, a conversation about simple efficiency retrofits is a natural next step. It also doesn't make a lot of sense to slap solar panels onto an energy-inefficient house.
Since the solar services behemoth SolarCity moved into energy efficiency services in 2010, people are starting to ask if it represents a broader trend in the market.
Some programs, like the California Solar Initiative, require homeowners to get an energy efficiency audit before applying for solar. And while some solar companies are trying to tap the efficiency market through their existing sales channels, the crossover from solar to efficiency hasn't happened in a big way. (One notable move was Mid-Atlantic installer Standard Solar, which created an energy efficiency services arm in 2009. It plans to ramp up those services in 2013.)
The folks at SolarNexus, a California-based business management software company, believe that more companies will start offering efficiency services if they have the right sales tools. This week, SolarNexus launched new offerings designed to help contractors manage leads for a whole range of products, including energy efficiency, grey-water management, and electric vehicle charging stations. The company had initially focused on the solar PV and solar thermal market, but is now expanding its software to give small and mid-sized solar contractors a chance to branch out and model new types of services.
"The ability to manage these services in a fast, compelling way -- without eroding their solar business -- has not been available to the market at large," said Michael Palmquist, VP of Product Management at SolarNexus. "Now, these contractors can grow their offerings to clients, position themselves in a differentiated way from their competitors, and provide more compelling returns to their clients."
The software allows contractors to create cost estimates, quotes, manage contracts, and store any other type of documentation on a project. A company like SolarCity has its own internal project management tools for efficiency. The SolarNexus product is designed for the smaller companies that don't have the same capabilities.
One of SolarNexus' customers, California-based Allterra Solar, started offering energy efficiency services -- and then stopped. The company installed 460 kilowatts of solar in 2012 and projects sales at 1 megawatt in 2013. James Allen, CEO of Allterra, said that more than half of the company's customers are interested in efficiency. But the higher cost of site assessments, learning new rebate programs, and bringing in new skilled labor prevented the company from scaling up.
"We stopped offering it as a service because there was no way to quickly model the savings and sell the job," said Allen. "With something like this new energy efficiency modeling, we can add some simple efficiency work into our proposal."
As Allen pointed out, solar companies aren't necessarily equipped to move deeply into efficiency. The jobs require new skill sets that can drive up overhead costs for projects, thus slimming margins and making projects unattractive. Performing costly, invasive retrofits like insulation replacement or HVAC upgrades typically aren't the best options for a mid-sized solar company. The easiest option for a mid-level company like Allterra is to offer packages that include lighting, new thermostats, or appliance installation, said Allen.
"For energy-efficiency retrofit work, the full diagnostic test-in requires at least a half day onsite and a day in front of the computer. This makes the site assessment phase for EE [energy efficiency] a major investment for the contractor, and charging $1200 is a major turnoff for your typical homeowner," he said. "If we help a customer cut their usage by 15 percent through our basic efficiency package, it will make our solar proposal look that much better."
Allterra already used the SolarNexus software for solar projects. The company reported that the service added about $250,000 in extra revenue in one year due to increased business efficiencies.
For many solar companies, energy efficiency isn't an integrated part of the sales channel. While an effective installer may try to point a homeowner in the right direction, most companies aren't set up to do the efficiency upgrades themselves. Michael Palmquist of SolarNexus thinks that new tools to help manage projects can help solar companies modestly expand into the space without much added cost.
"Since most companies are doing so little efficiency, marketing these services is an afterthought. The cost of sale is higher for efficiency alone since there's more legwork involved in doing a thorough evaluation. Companies that can sell low-intensity EE upgrades along with PV don't need to put in the extra marketing effort and don’t need to conduct rigorous and time-consuming audits, nor do they experience much in the way of operational differences," said Palmquist.