The commercial and industrial segment (C+I) of the solar market holds the biggest opportunity for growth. However, according to Solar Power Europe, this segment has grown slower than residential and utility #PV in recent years, representing 40% of all installations in 2020 and only 33% in 2023. This may sound surprising given the growing need for clean power in C+I, but there are good reasons for the lagging growth.
In the past, just putting PV on an industrial roof was often enough to satisfy a C+I customer. Perceived innovativeness, environmental aspects and financial return were key motives for installing #solarPV. Needs have changed and the key driver now is own consumption of solar PV energy and energy cost savings. But that doesn’t automatically open up the market.
Here are some thoughts to start you off:
1️⃣ C+I solutions are more complex technically. Every system is different. If you don’t build for large retail chains, which seem to have chosen their EPC partners for the long run, variety and complexity in system planning and design are higher.
2️⃣ C+I customers are often less sophisticated in understanding their energy profiles than one would expect. In the past, energy was one (albeit key) item of purchased service. Thinking in consumption and own production profiles requires a new level of understanding, measuring and planning inside these companies.
3️⃣ Understanding the commercial case: As a #developer, you now need to understand the integration of on-site PV into the customer’s energy load profile, ideally linking it to heating, cooling, process media and storage. Most importantly, the customer wants to understand and have confidence in the commercial case of solar power. Complexity and required competence grow. Not many developers have kept up.
4️⃣ Permitting, planning and project management are more challenging in C+I.
5️⃣ More parties involved: Often, the owner of the roof is not the user of the electricity. This adds complexity as the interests of building owner and user of the electricity are not aligned and agreements need to be reached (incl. typically financial compensation).
6️⃣ A Commercial „as-a-service“ PV portfolio could be highly attractive, but is missing „First-of-a-kind“ (#FOAK) #funding to build out the asset class. Investors have trouble understanding risk for such new portfolios and pricing them. For example: in comparison to retail solar, customers are now companies and not house owners – a different credit risk profile.
In the following 3 parts of this series, we will address the #customer perspective, the viewpoint of developers/#EPC ’s and the #investor angle of C+I. Our goal is to share our perspectives on how to grow the segment and how to be successful as a market participant and investor in the space. Follow us for more and don’t forget to comment and add your views.
by •Tobias Schütt and Christian Langen