by Emma Foehringer Merchant
May 26, 2020

After weeks of sheltering in place, climbing infection rates and halted business, many in the U.S. see the country headed into the next phase of the coronavirus crisis.

States are reopening gradually (or quickly), many hospitals have more capacity and infections are slowing overall. The U.S. is beginning to experiment with what the future might look like.

For the distributed solar industry, is the worst over? 

All but one of the country's major publicly traded residential solar companies has pulled its 2020 financial guidance. Nearly all of the biggest players logged losses in the first quarter, and the January to March period only partially overlapped with the health crisis, meaning second-quarter results may have an even harder edge. 

Still, a sense of cautious optimism is returning, and industry executives say that the crushing sales declines and delayed installations seen at the height of the crisis may now be letting up.

A solar demand rebound?

Many public solar companies were riding high in late 2019.

Vivint Solar was seeing historic growth up through the company's fourth-quarter earnings call, held on March 10, said CEO David Bywater. The coronavirus pandemic arrested that progress. “Within a few days of that call, our world changed rapidly,” Bywater said on Vivint's Q1 earnings call this month.

Some in the residential solar industry now expect 2020 installations could fall as much as 60 percent this year. Wood Mackenzie analysts believe the decline could be about 50 percent. The industry has already lost 60,000 jobs with more losses expected, according to an analysis published this month by the Solar Energy Industries Association.

Vivint, Sunnova, Sunrun and SunPower all reported first-quarter losses even as they grew in terms of customers and installations. Tesla, the only solar company that turned a profit, saw its solar installations fall despite its head start in the switch to online sales. And the large national companies should have had an easier time than the industry’s long tail of smaller, more localized installers.

PetersenDean, a huge roofing company that also sells solar and storage, reported a “dramatic drop” in demand from March to April, nearing 70 percent. Craig Rickabaugh, the company’s national director of purchasing, told Greentech Media that the company does expect that to turn around in the “near future,” particularly in California.

The impacts have been geographically diverse. In some areas, virus cases are still climbing. Several of the residential solar industry’s largest markets are in states most impacted by the crisis, such as New York, New Jersey and California. 

Will the shift to digital sales pay off?

Those states are now restarting solar builds where they were halted. And some “leading indicators,” as the industry likes to call them, suggest early actions may have blunted lasting impacts for the industry’s leaders.

Within weeks if not days, most installers transitioned to digital-only sales, a change many were already working toward and that may reduce customer-acquisition costs in the long run. For some, including Sunrun, that meant deploying digital tools for in-house sales crews.

“Our teams have compressed what may have been months or even years of evolution into weeks,” said Sunrun CEO Lynn Jurich on the company’s recent earnings call. “COVID simply provided a powerful catalyst.”

Vivint Solar, the company most reliant on door-to-door sales, says it expects to resume canvassing when allowed, but it will also continue digital sales.

"Pent-up demand" during summer boom season

For some companies, at least, a turnaround appears to be in the offing.

Several public companies have noted recently that tax equity seems accessible. Sunrun said its orders reached an all-time single-day high at the end of April. Sunrun and Vivint are beginning to bring back furloughed installation crews.

“We think there’s going to be pent-up demand,” said PetersenDean’s Rickabaugh.

Sunnova CEO John Berger told GTM that the company’s April 2020 roughly matched the same month last year, with year-over-year growth resuming in May. SunPower CEO Tom Werner told GTM that sales look to be creeping back to pre-COVID levels.

The summer will be another test. Alongside the potential for new waves of the virus, which could cause the market to crash again, the season is integral for the industry.

“Normally, at this time of year, you’d expect much higher sales than your February volume,” said Michelle Davis, a senior solar analyst at Wood Mackenzie Power & Renewables. “Spring and summer are a very high time for solar sales.”

The lingering economic question

While many companies said they expect an uptick in Q3, much relies on the economic picture.

Sunnova and Sunrun have pitched their product as “countercyclical” to a wider economic downturn. Solar contracts are designed to save customers money, and with new offerings on the market — including a $0 down solar lease and $1 per month contract from Sunrun and a similar offering from SunPower — deals are out there.

But the highest U.S. unemployment rates since the Great Depression and a devastating economic crisis have hit even the relatively high-credit-score customers who generally buy solar.

“It’s really uncertain what the consumer appetite is going to look like not just over the next couple of months…but over the next six to 12 months,” said WoodMac’s Davis. “There’s just a lot of uncertainty around where sales might be over the long term, given how the economic implications actually play out.”

And based on how the crisis has so far impacted the residential industry, analysts are skeptical of the "countercyclical" claims. “Sales being down and solar companies laying off installation crews inherently demonstrates to us that it’s not completely countercyclical,” said Davis.

Though solar companies filled earnings calls with buzzwords like "confidence," "optimism" and "growth," the industry remains at the mercy of the virus and its trajectory. A U.S. recession is all but guaranteed, and it will be the residential solar sector's first as a mature industry.