What to make of the declining share of "top 3" solar integrators?

“Top 3” (i.e., Tesla/SolarCity, SunRun, Vivint) share of total residential solar installations has fallen dramatically in just a few years.  Is this a sign of a transitioning industry or just one company’s troubles?  We have thoughts…

Listen in on an investor call at Tesla and you’ll hear a story about changing emphasis from growth to profitability.  This is true, in a way.  Managing cost is critical in an industry of extreme competition and pricing pressure. Life was good in the glory days of 25% p.a. declines in module costs (e.g. 2010-2017).  However, commoditization of an industry, reduced emphasis on PPAs, and an ITC sunset has brought scrutiny on soft costs.  

So what is going on at Tesla? Share of new installations has fallen from over thirty percent in 2015 to less than ten percent so far in 2018. Quarterly rooftop solar installations fell 42% between 2016 and 2017.  Reports of closing over a dozen sales facilities are a troubling harbinger of declining future share. 

Residential Installer Market Share

MW AC Installations, 2015-2018Q1

Chart residential PV top firms declining share Enovation Partners.png

However, larger themes are at work in the national integrator landscape.  One would expect SolarCity’s loss to be another’s gain.  Only SunRun can boast positive sales growth over the period at six percent per quarter, on average. Vivint saw its sales rise 50% only to fall right back to where it started in 2015. 

Yet we remain bullish on growth for residential solar, at least in the near-term. Who will benefit most?  We expect small and medium-sized integrators share growth and increasingly regionalized installer businesses.  Local installers have absorbed best practices of national integrators – often having started their careers with national players – and benefit from lobbying efforts.  Other potentially disruptive new entrants are home builders who are poised to benefit from California’s new mandates for residential solar. 

The industry ripple effect will grow.  Some business models will be advantaged, while others may become obsolete.  What does it mean for you?