The commercial solar industry has seen noticeably slower growth over the last year than have the booming residential and utility-scale solar sectors. The impending reduction of the federal Investment Tax Credit at the end of 2016 is creating additional market uncertainty.
The near-term outlook looks bright, however, with commercial solar installations expected to increase 40 percent over the 2014 total this year. A new survey commissioned by the financial services firm Wiser Capital helps to explain the drivers of this market rebound, which the firm believes could lay the foundation for strong and sustained growth in the commercial solar segment to 2020.
More than 60 percent of corporate investors surveyed said they plan to make investments in solar a priority in the next five years. Another 20 percent said they have already invested in solar this year, for a total of 83 percent of investors expressing strong interest in going solar.
One-third of investors surveyed said they will invest in solar for the first time this year. Nearly another third said they will invest in solar for the first time in the next two to five years. Only 3 percent said they will invest less in solar this year than they did in 2014.
The expectation of strong returns on investment was listed as a key driver of commercial solar activity for 63 percent of corporate investors. Confidence that solar will soon become mainstream was a driver for 55 percent of investors.
The market leadership of major companies like Google, Apple and Tesla was another motivating factor, with 46 percent of investors pointing to other corporate-level activity as inspiration for their own solar investments. However, the most common reason why corporate investors said they’re getting into solar is to “support a cleaner energy future.”
High interest in creating a clean energy future is indicative of how comfortable investors have become with solar, said Megan Birney, director of strategic affairs for Wiser Capital. As investors have become more confident in the market fundamentals, “They desire to have their investment dollars working to do more than make money. They want to make money doing something they feel is right,” she said.
Nearly half of survey respondents said a lack of industry standardization and uncertainty around net metering and other policies have been barriers to solar investment. For 43 percent of respondents, difficulty assessing the risks of making a solar investment has been a challenge. And nearly one in three corporate investors said that the difficulties of financing a solar project on their own, without a partner, have been an obstacle.
The a strong majority of respondents, 69 percent, said they would be more likely to invest in solar this year if they had better tools for assessing risk. More than half said they would invest if it was easier to find investment partners.
“I think, in general, people are becoming more comfortable with the idea of solar. The technology has been around for decades, but we’ve just seen it become mainstream,” Birney said. “Additionally, there are now solutions to help assess risk and streamline the process.”
Birney pointed to Wiser’s project analytics, financial modeling services and risk-rating platform as some of the available tools.
The scheduled drop in the ITC from 30 percent to 10 percent at the end of 2016 is another challenge for corporate investors, because it will reduce their overall economic returns.
Wiser and others are trying to jump-start the commercial solar sector "so that it’s a robust enough sector to stand on its own legs without the ITC, or [with] a decreased ITC," said Birney.
The "2015 Solar Investment Index" survey was conducted on behalf of Wiser Capital by the research firm OnePoll. It includes responses from 100 managerial staff members at large companies (100-500 employees) who have input on investment decisions.