You’re constantly wondering: Will this keep up? Will some new innovation totally change everything and leave me out in the cold? Am I at risk of some bigger provider eating my lunch? Is there some construction management technology or tool out there I don’t know about that could help me position my business better?
Just what does the future hold?
Globally, solar power capacity has increased to 305 gigawatts (GW), compared to just 50 GW in 2010 and nearly zero back in 2000.
I don’t have a crystal ball, but I have dug into the numbers, and I’ve identified five key trends you can expect to emerge—or continue to grow—in the next few years. Let’s get right to them.
1. Solar will become faster to install and way more efficient
The trend line in the solar industry is heading toward more modular and streamlined solutions, and that’s going to have a big impact on the future of your business, whether you’re prepared for it or not.
Your customers will expect you to be able to quickly and easily install solar panels, and do it for a lower price than you would have charged in the past.
Fortunately, innovations in the solar industry will help you to meet that demand. High-performance systems with minimal components are becoming more common. As the years go by, solar panels will continue to become more efficient and more cost-effective, as they shrink in size but produce and store more power.
In addition, you won’t be limited to installing solar panels on roofs anymore, which could open you up to new clients who wouldn’t have been in the market before. New solutions, such as virtual net metering, will enable you to set up solar panels offsite and let clients tap into the energy source. You’ll have to build and maintain them, but it could open up a new pipeline of income.
2. The price of solar will continue to plunge
As solar becomes more efficient, less costly, and easier to install, the price of solar will continue to plunge to unprecedented lows. In 2015, the installed price of solar dropped by 5-12%, and the trend line continues to point downward.
As we mentioned above, a large part of price drop is due to the solar industry simply getting better at making solar panels and producing them more cheaply, while at the same time making them more powerful and finding easier ways to install them.
Unfortunately, that also means that solar power is increasingly becoming more like a utility. As the industry becomes more crowded and competitive, customers begin choosing suppliers based on price, and that results in commodification and a race to the bottom when it comes to prices.
We’re not quite there yet, but we’re slowly headed in that direction. That could be bad news for construction managers, who will face shrinking profit margins on new solar construction projects.
3. Industry consolidation could be coming
A drop in prices could help push the industry toward consolidation, which makes things more difficult for solar panel providers and construction companies.
The MAC Global Solar Energy Index, which is made up of solar stocks, got hammered in 2016 and fell 45%. Some big companies, such as SunPower and First Solar, fell 50-75%.
It’s not just a dip in solar panel pricing that’s driving this. There has also been a decline in installations in China over tariffs and higher inventories in the United States, and Chinese demand could continue to fall.
But there’s some good news for the little guys: Independent solar power producers will start gobbling up market share as the larger solar providers struggle to meet benchmarks. So, if you’re an independent solar construction company, market conditions are more favorable to you for the time being.
4. Regulation uncertainty will persist
Regulation is also a major area of concern for the solar industry. A change in U.S. presidential administrations creates uncertainty about the future of energy regulations that were enacted under the previous administration, according to Forbes, simply because certain policies may or may not be reversed—no one knows for sure.
It’s also possible that the U.S. government will begin to target tax credits that have played a large role in fueling investment in the growth of the solar industry in the last decade or so. The Trump administration’s fiscal 2018 budget plan would cut certain energy programs that currently fund solar energy.
And with the current administration’s plans to get out of climate change policies and agreements previously enacted or entered into, that could further muddy the waters for the solar industry’s future growth.
What does this mean for your solar construction business? It depends. If you rely on green energy incentives, you could see a direct cut to your profits in the future. Changes in climate policy could result in less foreign investment in solar, so if that’s something you depend on, it will impact your bottom line.
5. Growth will surge again
Despite some of the negative trend lines, it’s not all doom and gloom. In fact, solar remains a strong and growing industry, and a healthy surge is likely coming soon to the industry, one firm says.
Solar industry marketing research company Greentech Media predicts a cumulative average growth rate of 8% over the next five years, and that the market will swell to 109 GW by 2021.