With increasing interest in clean energy, a number of startups are introducing new solutions for the future. One of the more promising sectors involves the solar energy industry, which tends to enjoy widespread support. However, despite many homeowners adopting this new technology, costs remain prohibitive in many areas. As a result, the growth of residential solar energy has been slower than expected. But that doesn’t mean that those in the industry don’t still see potential. It also doesn’t mean that they’re not actively pursuing innovations that might solve some of these issues.
Residential solar energy installations involve much more than just putting panels on a roof. The overall process includes several steps ranging from design to the finished product. Likewise, companies that are able to leverage scale to create efficiencies and cost reduction enjoy clear advantages. (Check out our previous analysis on the solar energy industry in this Bold story.) Understanding this, there have been some recent moves in the solar energy industry that are noteworthy. While some companies look to be streamlining the overall installation process, others are expanding regionally. Both look to be key strategies for companies hoping to be leaders of the solar energy industry of tomorrow.
“With heightened awareness about climate change there will be more interest in ways to mitigate it…If you want to be the platform for a significant percentage of the energy capacity of the country… you gotta tool up.” – Sam Adeyemo, Co-founder and COO, Aurora Solar
Lowering Barriers to Residential Solar Energy Adoption
When it comes to installing residential solar energy systems, the overall process has several components. Data must be collected to determine whether solar systems make sense for an individual home. Similarly, the design of the actual panel placement must be constructed for optimal effect. If such a system looks feasible, then there are acquisition costs as well as the labor of installation. In total, these additional expenses comprise roughly half of the total price-tag. Thus, any way the solar power industry can reduce these costs increases the chance consumers will buy.
This is where Aurora Solar comes into the picture. Aurora Solar is a startup in the solar power industry that has received a great deal of attention lately. In essence, it simplified the design and cost-estimation aspects within the residential solar power field. Using satellite imagery, aerial lidar scans, light and power usage data, and sunlight pattern information, it quickly determines feasibility. Instead of manually measuring roofs and interpreting data, its proprietary software does it efficiently and thoroughly. And because time is money, this saves significant costs.
Through its initial 2 rounds of venture capital investments, the company received a whopping $70 million. But most recently, Aurora Solar got an even larger boost with $250 million in Series C funding. This seems like a great deal of money for a startup that’s essentially a software company. But it speaks more to the potential Aurora Solar has within the residential solar power market than anything. With plans to expand its platform beyond basic design assistance, investors believe the company has tremendous growth opportunities. Aurora Solar has already provided services to 5 million homes, of which 20 percent proceeded to build-outs. Investors believe this is just a small percentage of potential residential solar power users that exist.
“The next frontier [is] to make solar cost-competitive, and that’s where Aurora comes in. Every time we shave a few dollars off the price of an installation, it opens it up for new consumers.” – Chris Hopper, CEO and Co-founder, Aurora Solar
Scaling Up to Lead the Solar Power Industry
Aurora Sun’s co-founders have yet to reveal their next step, but it likely involves using funding to scale its software. In this regard, it’s not the only company within the solar power industry looking to take advantage of larger scale opportunities. Both Tesla and Sunrun, two market leaders, are also making such moves in the residential solar power market. This is notable because these two companies already account for 75 percent of new residential solar power installations. Advancing their size could potentially squeeze others out of the industry.
In 2014, Tesla acquired Solar City in a tremendous buyout worth $2.6 billion. In doing so, Tesla became the industry leader in residential solar power by far. But that’s no longer the case. Sunrun recently acquired Vivint Solar for $3.2 billion, surpassing Tesla as the industry’s top dog. In the process, Sunrun can now boast over 500,000 homes that operate on solar power. In addition, Sunrun also works with power companies to store excess energy within their power grids. (Dive deeper into renewable energy microgrids in this Bold story.) Tesla will continue to enjoy a strong position in the solar power industry. But Sunrun is clearly making its own statement regarding the future.
By acquiring Vivint Sun, Sunrun will be able to significantly reduce in its operating costs. In fact, estimates suggest it will save roughly $90 million in operational efficiencies as a result. Its larger size will also enable the company to have greater leverage with power companies. Negotiations should yield higher compensation for stored energy reserves in the process. Finally, their expanded outreach will have notable marketing advantages. As the solar power industry leader, Sunrun will gain visibility and increased clientele. In this specific instance, bigger looks to be definitely better.
“Americans want clean and resilient energy. Vivint Solar adds an important and high-quality sales channel that enables our combined company to reach more households and raise awareness about the benefits of home solar and batteries.” – Lynn Jurich, CEO and Founder of Sunrun
Growth Potential for Residential Solar Energy
The current penetration of residential solar power into the energy sector is only about 2-3 percent. As noted, some homes simply will not benefit from a solar panel system. In other instances, the price of installation deters use from a cost-benefit analysis. But as prices fall, growth opportunities will expand quickly. Both Aurora Solar and Sunrun appreciate this as do their investors. With a push for clean energy in vogue, and with bipartisan support, many experts believe the solar energy industry will boom in coming years. If that’s the case, then these companies scaling up now will be a great position to reap the benefits.
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