Who wants seven swans a-swimming or six geese a-laying when you could instead have a growing and profitable solar industry? At least, that’s our attitude this year. 2023 has been a challenging year for solar. As one solar installer put it to us: “We’re just focused on staying in the game.”
Between high interest rates, bad actors, and more, it’s enough to turn any solar professional into a grinch. More seriously, it’s enough to make anyone nervous about what 2024 will bring and whether there’s any relief for the industry in sight.
But while solar is still facing some key challenges, we’re cautiously optimistic for what’s next. That’s why we’re throwing out the window our previous predictions (12 days of Solar Christmas) and starting anew. This year, our 12 predictions can be broken down into 4 big themes for the industry: Relief, maturing, collective action, and the fruits of investment.
Relief
Prediction 1: We move past the extremes and focus on execution.
Political extremism, economic swings, record breaking performances in sports and entertainment have made record-breaking and extreme positions seem normal. We’re now numb to phrases like “hottest year on record” and “Solar is the cheapest form of new electricity generation.” No matter how true these statements are, they’ve lost their original motivating punch.
Extremes are now passé. It’s time to stop letting these superlatives be the headline and instead center the work. From residential to utility scale, our industry just needs to deliver. Yes, we’ve already been doing this for years, but this work has been overshadowed by the emphasis on extremes.
Getting things done “as fast as possible” or “as cheaply as possible” has given cover for many to doubt the wisdom of revving up a manufacturing sector, reforming the regulatory and policy framework, and bringing collective investment to this energy transition. This Christmas we ask all to consider that these things are not the extreme — it’s just us doing what needs to be done.
Prediction 2: We’ll see stable to declining interest rates.
Some of us in the industry remember the early 1980s — mixed memories for sure. Among them were high interest rates, even higher than the rates today.
We’re not economists here at Bodhi, but we do take this piece of history to heart. The fact is, the solar industry has pulled through this situation before, and we have since proven that rates alone do not dictate our actions or our performance.
Of course, the steep interest rate incline over the last year has greatly impacted the residential solar sector. But consumers, if history speaks, don’t sit still forever. The fundamental value proposition of solar and storage is more relevant now than ever. From our experience, residential solar customers are comfortable making decisions informed by signals rather than impulses. A signal that rates are stabilizing will edge out indecision. While the days of zero cost capital are gone, consumers will come to terms with the fact that “free is not free” and continue to take action to solve their energy ambitions.
Prediction 3: The assault on net metering policies will end.
NEM 3.0 and its immediate effect on the residential industry is not new, but it is validation that the utility death spiral (which was just theoretical 15 years ago) is now firmly underway. NEM 3.0 was a dying gasp of a dying structure.
The utilities do maintain infrastructure whose cost is communal. The same infrastructure has been the source of fires (California) and whose inherent fragility (Texas) exposed the masses to icy risks. What this proves is that the risk is communal as well. And when the utilities fail, as they have done so publicly, it is the community who has the power for change.
To-date, only a minority of utilities have embraced distributed energy technologies through continued investment or even enterprise activities under their own roof. As NEM 3.0 proved, the majority of utilities preferred to be reactionary. However, the tide is changing.
Residential solar customers crave energy stability, and they’re becoming more vocal about their desire to invest in and move to clean energy. These consumers now represent more than a fringe outlier or early adopter. And as a growing majority themselves, residential solar customers will force utilities to co-evolve and embrace rate structures and interconnection policies that favor solar.
Maturing
Prediction 4: There will be newly-evolved and responsive financial products for resi solar
The recent high interest rates struck the solar lending community a near mortal blow. The low cost of capital encouraged the design and implementation of financial products ill equipped to deal with higher rates. The correction was swift and saw a 20% decline in the residential sector last year.
The good news is that recently a handful of new actors, credit unions among them, are entering directly into the market. These new players are offering better rates, lower dealer fees, and overall a more sensible approach to underwriting. This may not offer the high octane thrust of very cheap capital, but new financial products offer choices — and give solar consumers more pathways into solar.
Prediction 5: Solar companies will return to fundamentals and focus on exemplary customer experience
At our recent webinar on the state of residential solar, our poll of attendees demonstrated a promising and clear position:
Despite the headwinds over the last year, solar companies true to their mission are doubling down on the fundamentals. They’re leaning into their operations, increasing their customer engagement, and sharpening their financial acumen. By focusing on these core business functions, they know they can deliver an incredible customer experience that will help them differentiate and yield a meaningful margin.
Prediction 6: The solar service industry will rise as guardian of asset protection.
As the residential solar industry took shape in the late 2000s, many a sales pitch included something like the phrase: “The best part is that solar is that it’s maintenance free”.
Of course, today we know that’s not quite right. Solar is a valuable asset that needs to be maintained and is subject to myriad environmental events just like our cars, homes, and businesses. More leaders are realizing this, which is why the service side of our industry is poised to move from a reactive afterthought to an asset protection enterprise.
For large C&I and utility scales, this was always the case. However, historically it’s been difficult at the residential scale due to the hard costs of servicing many small distributed projects. A truck roll is expensive. But our industry is agile and clever, and business models, solar asset management software, and workforce development are building the muscles to take this on and provide value for homeowners and businesses alike.
Collective Action
Prediction 7: There will be a renewed call to action for national renewable energy deployment.
It’s a bit regrettable that we’re predicting a renewed sense of purpose for our collective efforts. However, given the headwinds we are in, the adjective seems justified.
The companies we interact with are each engaged in responding to the challenging conditions. Their heads are down, their focus is keen, and the efforts that we normally celebrate collectively as an industry struggle to get heard outside the walls of each business. However, as we enter an election cycle, media partners and government representatives will be incentivized to dig deeper to celebrate the industry’s victories and legislate in support of them.
Prediction 8: Solar will finally get some cultural kudos for being the cheapest form of new electricity.
The media was not kind to solar this year. From the ongoing fall-out from Pink Energy and others like them, to the various Time magazine pieces that trended within the industry, solar skepticism felt like it was at an all-time high.
However, as the industry matures, and our successes within solar become more indisputable, we foresee this changing. We’re not asking for (or predicting) a medal, but we do think the industry will receive some recognition around how amazing solar tech is.
EV sales are still the fastest growing segment of automotive sales. The residential solar industry is similar. Bad news is easy to print, but we predict that In 2024, the solar industry will finally get its well-deserved kudos.
Prediction 9: There will be a renewed commitment within the industry to consumer-friendly business practices.
As the media has pointed out, some solar companies have, in recent years, fallen victim to the adulation of growth by any means necessary.
However, in 2024 these bad actors won’t be allowed to continue en masse because homeowners are becoming savvy and quality businesses are organizing. Solar consumers have choices, and they’re starting to more carefully vet whether a solar company aligns with their sense of value and equity. At the same time, through voluntary Code of Ethics, industry standardized training, and basic market forces, the industry is maturing and self-regulating.
Return on Investment
Prediction 10: The steep drop in price/kWh of lithium will bring down home battery prices for consumers.
We all know storage is on the rise. For some markets, it’s simply a requirement. For other parts of the country, natural disasters have spiked storage attach rates. However, throughout this growing adoption rate, the cost of home batteries has been largely stable due to its dependency on the cost of lithium.
This is now set to change. In 2023, the price of lithium battery packs dropped 14% to $139/ kWh. Ultimately this price decrease needs to be realized for the residential consumer, and we think it will happen next year — making batteries an even easier decision for interested consumers.
Prediction 11: We’ll realize the benefits of onshore solar panel manufacturing.
The Inflation Reduction Act, in our opinion, has wisely taken signals from mixed opportunities during the Obama administration. In 2009, the ARRA stimulus package aimed to inject money into renewable projects across the country. Meanwhile China made massive investments in manufacturing capabilities. The solar industry has been buying equipment from China since.
But in 2024 that’s set to change. The onshoring incentives established by the IRA promises to offer real alternatives to consumers. The number of American manufacturing facilities in operation, being built, or at the very least planned, is north of 70. The incentives around an “American-made” product transcending just project development logistics and crossing into the realm of customer sentiment. While this alone does not solve a global supply chain challenge, it will give us protection against the inevitable shocks of geopolitics.
Prediction 12: There will be continued growth of EV models and market share.
One could argue this is less a prediction and more of a fact. Between the incentives for EVs baked into the IRA, and the fact that EVs are just a treat to drive, the growth of EVs is practically inevitable. Especially because as rooftop solar grows, it feeds the battery and EV market.
Consumers are very quick to see the natural synergy of generating their own power for the home and power for transportation. As the EV market grows, so does the awareness of this synergy. In addition, EVs are becoming the moving billboard for energy choices.
Do you agree with these 12 predictions, or do you think we’re a cotton-headed ninny muggins? Either way, we want to hear your predictions. Share this blog and let us know what you think we missed or will be proven wrong about. We welcome a friendly debate!
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