Today's acquisition ofsolarinstaller Astrum Solar for $54 million by energy services company Direct Energy (a subsidiary of Centrica) is another sign of the solar industry's health and dynamism. GTM Research expects the U.S. residential PV market to exceed 1 gigawatt for the first time in 2014.
This U.S. industry is in an extended period of strong growth -- and while leaders have emerged, the space remains volatile, with players jockeying for position via acquisition, vertical integration and establishing new channels. And as the industry grows, it gains attention from larger players looking to join this multi-billion-dollar market.
With this acquisition, Direct Energy's energy services group gains another product it can offer its customers, while the processes of scaling up and winning customers just got drastically accelerated for Astrum.
What did Direct Energy buy for $54 million?
Founded in 2008, Astrum Solar has installed approximately 4,000 residential solar systems in the Northeast U.S., California and Arizona. Astrum took off in 2011 after an investment from Constellation Energy gave this East Coast installer a guaranteed SREC offtaker in certain markets and allowed it to begin offering a solar lease in six of its twelve active state markets, according to GTM Research.
As per the GTM Research Solar Leaderboard, Astrum was the No. 8 solar installer in the U.S. in 2013 with a 1.3 percent market share (the same as Roof Diagnostics). Astrum was No. 9 in Q1 2014 with 1 percent. In March of this year, NRG Energy acquired Roof Diagnostics, the eighth-largest solar installer in the U.S., for an undisclosed price.
Hudson Clean Energy recently announced a $100 million financing facility with Astrum.
A contact in the solar industry suggested that $54 million was "a really cheap price."
How does Astrum Solar benefit?
Direct Energy's "deep relationships with over 6 million residential customers will be a winning combination in the growing U.S. residential solar market." said Vadim Polikov, president of Astrum. Direct Energy has customers in 46 states plus Washington, D.C., as well as ten provinces in Canada.
Cory Byzewski, vice president of home services at Direct Energy, told GTM that this is "an obvious and fantastic partnership," adding that it creates "a strong new player in the residential solar space -- a combination of Astrum plus the reach and scale of Direct Energy." He said there is a "great cultural fit...[because] both companies want the customer to gain control of their energy usage."
The VP noted that the energy services piece of the company enters millions of homes every year. While conceding that "solar is young," he noted that Direct Energy already offers "more mature services such as HVAC and plumbing" and understands how to acquire and service these clients at a low cost and "cross-sell solar services."
Byzewski suggests that he sees "incredible growth in the future" for the combined entity, which he believes will pose a "real threat to companies in this space."
SolarCity and Direct Energy have created an investment fund to finance $124 million in commercial and industrial solar projects with $50 million from Direct Energy. Direct Energy is working with SolarCity on a single-bill option and does not see a conflict between its arrangement with SolarCity and its ownership of Astrum.
Which downstream solar company gets acquired next?
There is a consolidation of sorts happening in the residential solar installer market, with SolarCity and Vivint actually extending their market share lead over a long tail of smaller players.
Shayle Kann, VP of GTM Research, sums it up: "It makes a lot of sense. Astrum is strongest in markets that have competitive retail electricity -- markets where Direct Energy can operate."
Kann adds, "This is the biggest move in an ongoing trend of competitive retailers getting into solar. See also CPF/North American Power, SolarCity/Direct Energy and Viridian, Choose Energy/OneRoof, and Astrum/Ethical Electric (though that one's probably over now). But this is the first acquisition -- and maybe not the last."