U.S. C&I solar segment remains highly fragmented

In contrast to residential solar, the U.S. commercial and industrial (C&I) market remains highly fragmented, according to the latest report by GTM Research. The U.S. Commercial Solar Landscape 2016-2020 finds that the top 10 installers accounted for only 42% of the roughly 1 GW of solar PV installed in this sector in 2015, whereas in the residential market the top three companies accounted for nearly half of all installations.

"The fragmented commercial developer landscape is largely the result of bottlenecks in the customer origination process that make it difficult for any individual player to consistently grow," notes GTM Research Senior Solar Analyst Nicole Litvak, the author of the report. In the report, GTM Research looks at commercial, industrial, non-profit and government installations as one category.

The leading player is the same in both the residential and C&I markets. SolarCity accounts for more than 1/3 of all residential installations, and also is the largest installer of C&I systems, with a 14% market share. However, after this the landscape becomes very different. SunPower has the #2 market share in the C&I space, with 7% of installations, and Borrego Solar comes in #3 with 5%.

GTM Research says that these and other leading commercial developers have emphasized originating large deals with Fortune 500 customers, often have a captive source of low-cost capital, and frequently offer additional services such as energy storage.

Another significant different between the two markets is that while residential remains dominated by national companies such as SolarCity and Sunrun, regional installers have a much larger share of the C&I market. GTM Research says that this is due to local market knowledge.

However, even though the leading third-party solar companies are not as active in C&I installation does not mean that this business model is not attractive. Third-party owned solar represented nearly 2/3 of all capacity installed in 2015, and GTM Research expects this share to increase to roughly 3/4 by 2020.

One of the issues giving the third-party model an advantage may be difficulties in financing C&I solar. “The commercial market has struggled to efficiently match individual projects with financing,” explains Litvak. “Furthermore, there is almost a complete lack of tax equity financing available for systems with non-creditworthy customers.”

Despite these barriers, GTM Research expects the U.S. C&I market to grow 30% this year to over 1.3 GW, and to reach 3 GW annually in 2020. Due to falling system costs the company predicts that total market value will be only US$3.8 billion.