Two of the most compelling stories in energy over the past few years have been the rapid growth of competitive electricity supply (“CES”) and rooftop solar. Although the two industries directly compete in some states, we have worked with executives in each industry who know relatively little about the other. However, we believe CES and solar businesses could help one another reduce customer acquisition costs and solar companies could help CES businesses stabilize cash flows over a longer period and increase customer lifetime value.
Both industries have enjoyed rapid growth in recent years. Eleven million consumers in 13 states plus the District of Columbia buy power generation services from competitive suppliers. (For the most part these consumers continue to buy electricity delivery services from a local monopoly utility.) The number of residential CES customers has grown at 16% annually since 2008 and more than half the consumers in some markets buy from a competitive supplier.
Meanwhile, the amount of residential solar capacity installed each year has grown at an annual rate of 56%. One of the key drivers of this growth has been the emergence of third-party-owner financing models, in which consumers spend little or no money up front but agree to host systems at their homes and buy the power produced for 15 to 20 years. Another has been a precipitous fall in the cost of solar equipment.