SALT LAKE CITY — This year’s Solar Power International has one clear theme eclipsing all others: pushing an extension of the federal Investment Tax Credit. Yes, the movement does have stickers.
But not all solar executives feel the same way about the ITC, or with the same level of intensity. In 2015, the last time the industry worked to secure an extension, John Berger, the founder and CEO of residential solar company Sunnova, wrote in a letter to lawmakers stating that the tax credit was not necessary to ensure the “continued health of the solar industry.”
Berger went further: "We firmly believe the ITC has served its purpose and that it is now time to allow it to step down as planned.”
But in an interview this week on the sideline of Solar Power International, Berger's view had shifted. Although the ITC is not Sunnova’s preferred method of growth, Berger said the solar industry must work within the energy system that exists today, at least until that system gets an overhaul.
“Our official view is…effectively to fight fire with fire, and if everybody's running around with subsidies, I guess we’ve got to get ours too,” said Berger.
“I guess if that's the best thing we have, let's just extend it and move on," he continued.
Berger went on to echo his previous calls for grid reform. “What's going to have to happen is that we're going to have to restructure the entire U.S. power industry,” he said. “We're growing very rapidly, and those rules need to be changed. […] But I don't see a lot of political leadership to be able to enable that.”
In light of that leadership vacuum, Berger accepts that an ITC extension may be the most viable political option to continue moving the industry forward. But the CEO cautioned against the industry leaning on incentives for too long. Berger said Sunnova favors a “consumer-choice driven” industry with an “open, level playing field.”
In July, Texas-based Sunnova became the first U.S. residential solar company to go public in four years, raising $170 million in an initial public offering.
Unlike competitors Sunrun and Vivint Solar that have large in-house installation teams, Sunnova relies on a network of dealers to sell and install its rooftop systems. The company ended the first half of 2019 with nearly 70,000 customers focused in New Jersey, California and Puerto Rico.
Standalone storage tax credit looks unlikely
The solar industry has made strides in advancing storage, evidenced by the numerous storage booths that cropped up this year at SPI, but Berger said the technology needs a few more years of price declines to appeal to a wider group of customers.
Sunnova stands among a growing contingent of solar companies, including SunPower, Tesla and Sunrun, in offering battery solutions alongside residential solar. The company now offers its SunSafe battery system to residents of 12 territories and states.
Earlier this month, Sunnova doubled down on its “consumer choice” message in announcing a shorter 10-year financing option for its solar-plus-storage systems.
The company is now seeing about 11 percent of customers choosing to add batteries (by comparison Sunrun has reported storage attachment rates at about 20 percent, but only in California). Berger said Sunnova’s storage penetration is at just about 2 percent among all of its customers, leaving a lot of room for growth.
“That's going to become increasingly important — what percentage of your customers have storage,” said Berger.
On its Q2 earnings call, the company said it was looking to grow that number through retrofit sales — which it offers in 10 states — as well as bringing on new customers. Berger told GTM this summer that he favors building up a “dense customer base” in the geographies Sunnova now serves rather than a diffuse market.
Its recent IPO gives Sunnova more money to play in the storage market. But when it comes to a possible storage tax credit, Berger doesn’t see passage as likely, in part because an ITC is “the path of least resistance.”
The lack of a distinct incentive (storage can, under certain qualifying criteria, take advantage of the ITC) didn’t stop Sunnova from introducing SunSafe into the market last year. And Berger said the industry needs to steer clear of getting “too far caught into the weeds of certain small topics.”
He sees the industry's embrace of storage as part of a larger "broad tent" strategy for a decentralized energy system.