SolarCity (SCTY) is trying out a new approach to signing up customers in the increasingly competitive rooftopsolargame -- taking its offer to the online discount marketplace.
On Wednesday, the country’s leading residential solar financier and installer announced it was partnering with Groupon (GRPN) to test the appetite for discounted solar installations in 84 U.S. metropolitan areas. Under the limited-time offer, customers can earn a $400 discount on their SolarCity contract, equating to roughly three to four months of free electricity on top of a no-cost rooftop solar installation.
SolarCity is starting out small with the offer, which it describes as a first-of-a-kind approach in its field. “We’re going to roll this out to hundreds of customers” at first, company spokesman Jonathan Bass said in an interview this week, and evaluate the program’s success over the coming months.
Still, SolarCity’s deal with Groupon is worth watching, as part of a broadening push in its industry toward online customer acquisition. SolarCity and competitors like Sunrun, Sungevity, One Roof Solar and Vivint have seen customer acquisition arise as a key area for cost reduction and competitive differentiation, as highlighted in the GTM Research’s report, U.S. Residential Solar PV Customer Acquisition: Strategies, Costs and Vendors.
Third-party solar installers have seen per-customer costs fall from around $8,000 to around $3,000, or about 49 cents per watt for a typical 6-kilowatt residential solar system, according to GTM Research Solar Analyst Nicole Litvak. But that’s still high, compared to Germany’s average solar customer acquisition costs of about roughly 7 cents per watt equivalent. SolarCity CEO Lyndon Rive has said he’d like to see those acquisition costs fall to less than $100 per customer, an aggressive target.
SolarCity has been taking a multitude of approaches toward customer acquisition, including last year’s $120 million acquisition of Paramount Solar, a direct marketing and “virtual sales force” company. It’s also been selling solar panels through Home Depot stores since 2010 or so, and earlier this year launched sales via select Best Buy stores. Internally, it has been building up its database of customer energy characteristics to manage the installation and management of rooftop solar systems, energy efficiency offerings, and even backup battery systems via its residential energy storage pilot program.
Moving toward an online group discount approach hearkens back to SolarCity’s early days as a provider of community solar, Bass noted. That’s the model the it pioneered back in its mid-2006 startup days, but “we outgrew the community model in 2008-2009,” and working with Groupon “takes that model, puts it on an online platform and scales it across our footprint” in fifteen states, he said.
Right now the Groupon offer should be considered more as a form of cheap lead generation than as an online customer management platform, Litvak noted. It's likely that many customers who respond to the initial offer will end up being unsuited for a SolarCity lease or power purchase agreement, or won't be interested in a 20-year contract, she said.
Still, SolarCity is looking at ways to encourage more customers to manage their relationship with the company online, Bass said. While most of SolarCity’s customers still end up sealing the deal via the telephone, a small but growing number are going online to start the process, he noted. “The people who engage with us online want to keep the relationship online as much as possible” through the course of their contract, he said.
SolarCity is targeting a million rooftop solar customers by 2018 and nearly a gigawatt of installations in 2015, so it will need to continue growing sales across all these fronts to make that happen. It’s also facing stiff competition, from door-to-door home security and automation companies like Vivint to big utility providers like NRG Energy, which bought Roof Diagnostics Solar in March.
As for Groupon, turning to solar promotions is just one of the many new services it’s tackling in an attempt to prove its business model as a publicly traded company. Whether it’s enough to help bolster its flagging stock price is an open question, but it’s safe to assume that rooftop solar will remain a tiny fraction of its overall business.