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U.S. Residential Solar Distribution: Lessons from Mature Industries

Posted on November 1, 2011 by Josh Lutton

Note:  A version of this post appears in the May 2012 issue of Solar Industry magazine.

The U.S. residential solar market has grown substantially over the past several years. Companies such as SolarCity, Sungevity, and SunRun have brought innovative business models and scale to the business. However, the market is still served by a very large number of dealer-installers. As solar increasingly becomes a mainstream business, we thought it would make sense to look at how mature industries with similarities to solar distribute and sell their products to find hints about the business models that will be successful in the future.

To do this, we identified industries whose products are, like solar, sold to consumers or installed in single family homes, related to energy, professionally installed, and that have long expected lives. We also looked for products that have an aesthetic aspect and that cost $10,000 or more. In the end, we studied the sales channels for circuit breaker boxes, hot water heaters, flooring materials, roofing materials, central air conditioners, backup generators, and windows.

[Read more…]

Solar Distribution: Lessons from Residential Construction, Energy, and Infrastructure-Related Products

Posted on June 9, 2011 by Josh Lutton and Iain Drummond

Woodlawn recently examined the go-to-market approaches of industries such as residential load centers (“fuse boxes”), hot water heaters, roofing materials, flooring materials, standby generator sets, windows, and central air conditioning to see what lessons they might teach us about solar distribution as the market grows and distribution matures.

Here are some of our key findings:

  • In industries with “complex” sales, such as generators, windows, and air conditioning, dealers are a significant part of the channel
  • In these industries, dealers tend to buy directly from manufacturers or from exclusive distributors
  • Industries with more commoditized products, such as roofing, load centers, and hot water heaters, tend to rely more on wholesalers
  • Wholesalers are rarely good at market development.  Their value is in inventory, terms, and bundling of related products from different manufacturers
  • Where sales are made indirectly, producers often have sales and marketing teams that “skip” levels of the distribution chain to generate goodwill, familiarity, and assist downstream partners with marketing and unusually large contracts.

Download a detailed summary of our findings here.  Also, see a slightly updated version that appeared in Solar Industry.

Solar Sales Channels: Current Status and Likely Evolution of Residential Solar Sales in the U.S.

Posted on April 14, 2011 by Josh Lutton

Woodlawn Associates recently interviewed more than 20 solar dealers and other experts to understand what they want from manufacturers of solar modules and inverters and to help dealer-installers understand how the sales channel is likely to evolve.

In summary, we found SunPower and SMA had highest consideration rates for solar modules and inverters, respectively.  We also found that Mitsubishi, Schott, Sanyo, and Trina could gain market share in PV if they execute well.  These manufacturers had consideration rates considerably above their current market shares.

Installers told us product availability, commercial terms, and customer sales leads are among the most important purchase drivers, although the supply shortages that were endemic over the past year appear to have eased.

Leases and PPAs have become hugely important in the market, now accounting for nearly half of residential sales in some states.  The rise of such financing potentially reduces the importance of manufacturer brands, as the risk of non-performance is placed on the lease provider, not the consumer.

Many people in the industry find Sungevity’s and SunRun’s business models to be highly novel and risky, but based on our experience in other industries, they are much less so than many people think.  On the other hand, we find that solar franchising is missing some of the ingredients common in other successfully franchised industries.

Finally, since the residential sales market is highly fragmented, we think it is unlikely manufacturers will integrate downstream.

Download a complete report here.

Blown Away: The Approaching Consolidation of the Wind Turbine Industry

Posted on January 20, 2011 by Josh Lutton and Adrian LaTrace

In the years leading up to 2008, the utility-scale wind power industry grew rapidly.  Globally, newly installed wind generating capacity expanded at an annual rate of 33% from 2004 to 2008.  The market’s growth enticed existing players (many of which were European) to expand globally, especially in large, rapidly expanding markets such as the U.S. and China, and many new firms entered the business or announced their intention to do so.  For example, the number of utility-scale wind turbine manufacturers with sales in the U.S. market increased from five in 2005 to ten in 2009, and 80 to 90 companies attempted to sell turbines in China.

The industry’s fortunes began to turn, however, with the global financial crisis of 2008.  In 2010, new wind installations decreased about 50% in the United States, which had previously been the world’s largest market.  U.S. market leader GE saw wind turbine revenue fall by more than 30%.  Global market share leader Vestas announced the layoffs of 3,000 people, mostly in northern Europe, to realign capacity with expected demand.  Although the Chinese market has continued to grow, large domestic suppliers now dominate there, dampening hopes of both foreign vendors and Chinese upstarts.

With a larger number of suppliers chasing a considerably less robust global market, it is reasonable to ask whether everyone now in the market can be successful.  Equally important is how participants can optimize their chances of success and shareholder value.  Through analysis of economic principles and comparisons with other industries, we attempt to answer these questions in this paper.  In brief, our findings are as follows:

  • The global wind turbine industry will grow at a much slower rate of 6% to 8% annually.  The U.S. is unlikely to exceed the level of demand seen in 2009 for some time.  The Chinese market will continue to see robust capacity growth, but the rate of increase will be much lower.
  • The wind turbine industry shares several characteristics with other industries that are much more concentrated, such as gas turbines.   Considering both this and the slower market growth, we believe there will fewer turbine suppliers a few years from now.
  • Opportunities abound for OEMs to combine in ways that strengthen their chance of success.   Leading firms can acquire manufacturing or technology assets; mid-size competitors can merge and eliminate duplicated resources; cross-border mergers could increase market access.
  • The scale provided by their home market will give leading Chinese turbine manufacturers a leg up in their quest for global competitiveness.
  • Suppliers to wind turbine OEMs should evaluate how likely their current customers are to be among the industry’s long term survivors and work to diversify their customer base.

[Read more…]

Multiple Device Data Plans for Wireless Operators

Posted on January 3, 2011 by Josh Lutton and Iain Drummond

The growth in data traffic on wireless networks over the past several years has been truly astonishing.  The trend is likely to continue, too, as faster data speeds, reduced latency, more capable devices, and lower cost encourage customers to connect more types of devices to the network and use them more heavily.  It is not surprising, therefore, that many operators believe wireless data services are the key to maintaining or growing average revenue per user.

However, while individuals, families, and businesses are likely to use more data, they are unlikely to tolerate separate, full-priced data plans for each device.  Very soon, one individual could conceivably want wireless internet access for a laptop, home computer, smartphone, tablet computer, camera, video camera, gaming device, e-reader, automobile, and numerous “smart” appliances.  Therefore, operators need to develop offers that give customers a simple and affordable way to connect multiple devices while growing revenues at least as fast as costs.

In addition to driving revenue, multiple-device data plans have the potential to significantly reduce churn.  Customers with a large investment in devices are unlikely to switch carriers if doing so requires upgrading their entire device collection.  One little-recognized implication of this is that operators able to get compatible radios embedded in more consumer products will have considerable advantage in attracting customers and minimizing churn.

[Read more…]

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