When NRG Energy acquired the eighth-largest U.S. residential solar installer last month, it had a very specific goal in mind: to start challenging big solar service providers like SolarCity.
"We’d love to give these guys a run for their money," said Tom Doyle, CEO of NRG Solar. "It is such an important space for our business."
Turns out, SolarCity had the same idea when it started buying up other solar companies and vertically integrating itself. It also wants to challenge independent power producers like NRG and other regulated utilities for their customer relationships.
"We’re an energy company," said Tanguy Serra, the chief operating officer of SolarCity, speaking about the firm's broader vision to be more than just a provider of solar.
The two executives were part of a panel at GTM's Solar Summit this week. The discussion centered on solar business models, competition between utilities and solar service providers, and what needs to happen in order for solar to be truly considered "mainstream."
Although few utilities have seen solar PV nudge out their existing fossil-based power plants, all the panelists agreed the technology is already impacting customer relationships and eroding demand.
Howard Wenger, head of SunPower's international power plant business, concurred with Serra's observation that solar firms are "migrating to become energy companies."
"There’s a battle -- a war, if you will -- between companies to grab the consumer’s twenty-year relationship," said Wenger.
In that "war" for the customer's money and attention, service providers that previously had nothing to do with each other are now clashing.
"Companies like Google, Comcast, AT&T; security companies, electricity companies, utilities: I think everybody wants that relationship, which is a dollar-per-month, long-term relationship to sell energy and energy services," said Wenger.
That's why independent power producer NRG, which has historically only been involved in building and acquiring large solar plants, has found its way into the residential solar market. It doesn't want SolarCity -- or any other service provider -- to erode the connection it has to its millions of customers.
"We have 3 million customers already, so the residential customer and the retail link just made a tremendous amount of sense," said NRG's Doyle.
Illustrating the continued overlap, NRG recently started working with Comcast to provide electricity services in Pennsylvania. Last year, Comcast created its own home energy management product to connect smart thermostats with its Xfinity platform. The company is also partnering with Osram Sylvania to offer controllable LED lighting products. Now that NRG is a residential solar installer and a service provider to Comcast, it's very likely that Comcast could start offering customers solar.
Meanwhile, SolarCity wants to turn its own twenty-year contracts with customers into something more. The company initially tried to build efficiency services into its model, but wasn't able to make money in that area. It now has an efficiency portal that allows customers to place "one-click" orders for services from outside efficiency contractors. More recently, SolarCity shifted its focus from efficiency to battery storage.
"Batteries are closer than people think to being mainstream," said Serra. "Our focus right now is putting as many megawatts [of solar] on as many rooftops as we can. Our second focus is how we can address power consumption between 6 p.m. and 10 p.m."
Batteries are a way for SolarCity to stretch the value of solar. That's good for the customer, but also presents additional revenue challenges for utilities. As GTM Research's Shayle Kann pointed out in a presentation at the Solar Summit, distributed solar has already cut load growth by half in California, New Jersey and Massachusetts. Adding storage would accelerate that trend.
For a regulated utility like New Jersey's PSEG -- a power company that has invested nearly $1 billion in distributed and centralized solar -- that's a cost liability when managing the grid.
Conversations within the utility are focused on how to support solar while managing fixed grid costs, said Diana Drysdale, president of PSEG Power Ventures, the utility's unregulated utility-scale solar power business.
"We still need the grid," said Drysdale. "We still need to be there and serve the customers."
Drysdale said PSEG was grappling with how to "deal with that inherent inequity" when consumers who can't afford solar are required to pay for more of the fixed costs on the electric system.
Dealing with that problem is a bigger worry for PSEG than is the prospect of losing customers entirely. Rather than become a direct competitor with SolarCity like NRG is attempting to do, PSEG believes its role as a regulated electricity provider can be as an integrator, not an installer.
"Servicing existing PV makes a lot of sense for us. Helping integrate it into the grid is still going to be necessary," said Drysdale. "There's a lot of opportunity. I don't think there's one clear path forward for us."
While there were disagreements about whether solar has truly become a mainstream energy source, the panelists all agreed the technology is going to be an influential part of the power mix and customer decision-making -- even as incentives start getting scaled down.
"We know it’s not going away," said Drysdale. "The technology is going to be more and more efficient and get less expensive."
SolarCity's Serra hoped that 2014 would become "the year of the gigawatt" as companies vertically integrate, get more sophisticated and reach customers in new ways.
"People think about solar typically in megawatts. I think hopefully by the end of 2014, we'll start using gigawatts," he said. "We’ll start thinking of 0.5 gigawatts as opposed to 500 megawatts. We’ll have companies that are doing gigawatts of volume."
And if NRG has its way, it won't just be the traditional solar companies installing those gigawatts.
"When we look at the distributed solar space...that's a market you are going to see us play more and more in," said NRG's Doyle.
Watch the entire panel discussion from GTM's 2014 Solar Summit below.