Insights: Residential Solar Professional Data
There’s no two ways about it, 2023 was a challenging year for residential solar. We often talk about headwinds and tailwinds, and in 2023 the headwinds were strong. But even in this challenging year, the sun still peeked out from behind the clouds.
And solar professionals seem to recognize that you can’t hold solar down for long. After such a challenging year, you might expect those in the industry to be hunkering down and biding their time until things turn around. In fact, we could argue that the opposite is true.
Given the rough waters of 2023 and the beginning of 2024, we were especially surprised by one piece of data: Two-thirds (66%) of professionals surveyed indicated that they increased in size over the past year.
That doesn’t speak to an industry in decline. It speaks to an industry that’s gearing up for positive times ahead. What’s giving them this optimism?
One of the areas where we saw the most improvement was the supply chain. In last year’s study, 28% of professionals indicated that “supply chain issues” were their biggest challenge in meeting solar demand. In this year’s study that number dropped to 9%.
What challenges stepped up? Where are the new opportunities? Let’s take a look.
Q1 2023
of solar professionals surveyed indicated that their organization increased in size over the past year.
Q1 2024
of solar professionals surveyed indicated that their organization increased in size over the past year.
What’s Driving Demand?
Solar + Storage
Add solar batteries to the list of technologies that follow the old adage, “Necessity is the mother of invention.” In this case, though, it may be more apt to say, “Necessity is the mother of adoption.”
With battery costs continuing to fall, trends in net metering that decrease what the utility will pay for excess energy, and electricity rate increases, the ROI case for battery storage continues to improve — and that’s in addition to the already strong case of energy independence and resilience.
In 2022, demand for battery backup was already growing, with 82% of professionals seeing increased interest in energy storage plus solar. The trend continued in 2023, with almost three-quarters of professionals seeing the same trend. While that number is down slightly, when we take it in the context of a market that grew more slowly, it’s still encouraging.
We also have to acknowledge a developing use case: self-consumption. Batteries have traditionally been viewed as a backup plan, a much cleaner, more efficient generator. But, consider that net billing and time-of-use plans often:
- Set solar export values during the day — when panels are producing energy — near $.00 per kWh
- Have peak use rates — in the evening, past peak solar generation time — that can be over $.75 per kWh
This means that storing excess solar energy in a battery during daylight hours to consume later, when electric rates are high, can make real financial sense. This relatively new model requires lots of homeowner education, but is a promising way to increase storage attachment rates.
EVs
Electric vehicles (EVs) continue their upward trajectory. 1.2 million EVs were sold in the U.S. in 2023, a 50% increase from 2022, when over 800,000 were sold. That, in turn, was almost double 2021’s numbers (which nearly doubled 2020’s).
It didn’t come as a huge surprise, then, that in 2022 almost 80% of solar professionals said EV adoption often led to interest in solar. In 2023 it was more of the same, with 78% citing that EV adoption was leading to interest in solar.
This is a huge opportunity for solar professionals to demonstrate how solar installations can defray home charging costs, making EVs even more beneficial.
This connection promises to increase as time goes on for a few reasons. First, as utilities continue to find ways to increase prices, EV owners will continue to try to find ways to mitigate those costs. Another interesting aspect is the “EV as home battery” use case. As more manufacturers tout bidirectional charging, more homeowners will see their EV as a type of battery backup.
These encouraging trends in EVs, batteries, and other home electrification efforts will require larger PV system sizes, which come with higher costs to adopt — a big homeowner objection we saw earlier in this report.
Therefore, solar professionals need to educate homeowners on the payback period and time to ROI. There will be a larger upfront cost for a larger system, but if the customer can increase production to fuel their EV, or mitigate high peak time-of-use rates with a battery, they could see a similar or even improved payback period and total return on their investment.
Inflation Reduction Act
Last year’s study showed that more than 45% of solar professionals had seen increased interest in solar thanks to the IRA, and another 40% expected to see increased interest at some point.
This year’s data backed that thinking up. Two-thirds of professionals say they have already seen an impact from the IRA, with another 25% expecting to see increased interest in the future.
So, it’s clear: This is one tailwind we can expect to keep blowing for the foreseeable future. Solar professionals would be wise to continue educating potential customers on the IRA’s many benefits, including new clarifications and guidance. A big example last year was the IRS allowing the 30% Investment Tax Credit (ITC) to be paid directly to tax-exempt organizations. Now, most organizations and entities are eligible for tax incentives between 30-50% of a project's cost (depending on where it is and how much of the hardware is produced in the U.S.).
How solar professionals say the Inflation Reduction Act has increased interest in solar
Source: Qualtrics Residential Solar Professionals Survey
What’s Holding You Back?
Even clocking this as a challenging year for solar, still 85% of professionals reported having trouble meeting solar demand, compared to 90% in last year’s study.
The top reasons they struggled shifted significantly, however. While in 2022 supply chain issues were still at the front of the line at 28%, in 2023 they were cited by only 9% of respondents.
In a big change, the main problem in 2023 was homeowners being reluctant to commit to quotes, at 38%. This is not only a huge jump from the previous year’s 22%, but is almost four times higher than the second most popular issue, struggling to find enough qualified employees (10%).
Top reasons homeowners backed out of committing to a solar project
- Overall project costs
- Poor return on investment
- Concerns over moving or selling property
Where There’s Still Work to Do
With such a large percentage of the challenges to meeting demand focused on homeowners’ reluctance to sign on the dotted line, let’s click in one level deeper and see why they’re so reluctant.
Similar to last year’s findings, overall project costs were the main reason homeowners backed out of committing to a solar project, with almost 40% again selecting it. The second most common reason also related to costs: poor return on investment (12%). And, once again, a high portion of the professionals that selected the “other” option indicated high interest rates and lack of financing.
This highlights the need, again, for market education. It’s up to professionals to make sure homeowners are aware of all the incentives, all the financing options available, and all the potential paths to real ROI.