With diminishing utility-scale site availability and rapidly increasing tracker competition, the C&I segment seems poised for exponential growth in tracking technology, on advances in marketing with models like community solar, and advances in financing and technology.
“There is tremendous opportunity in commercial and industrial tracker growth, especially in the sub 1 MW range. Our team size is up 60% over the last two years to meet it,” says Derek Noble, the Senior National Sales Director for SunPower’s Commercial Channel business unit. “We are also finding great success in the 10 to 20 MW range with agriculture, factories, carports, and even car lots,” he says.
SunPower’s third-generation Oasis modular power plant is the product most in demand for the segment, with an ROI of as little as three years, says Kyle Cobb, the company’s Senior Product Manager for trackers.
While GTM Research’s Q3 2017 U.S. Solar Market Insight report suggests that C&I solar will expand by 9% next year, Goldman Sachs, which has recently made substantial investments in the segment, suggests an even higher growth figure of 11% as more likely, Noble notes.
Smaller size, greater profits?
C&I projects may be smaller in scale than utility projects, but the potential for profit margins in C&I are much larger. The U.S. National Renewable Energy Laboratory’s Q1 2017 PV cost study calculated that the installed cost for single-axis tracker PV in utility-scale systems was $1.11/W, compared with $1.85/W for commercial systems, and $2.80/W for residential systems. As international bidding on utility-scale trackers heads for a hard landing on break-even returns, C&I opportunities may soon look more attractive than in the recent past.
Mid-scale solar, which NREL defines as behind-the-meter solar PV between 50 kW and 2 MW correlates with much of the C&I market, representing academic, community, non-profit, and other customer classes.
“Although only 26% of the total rooftop area on U.S. small buildings – those with a footprint smaller than 5,000 square feet – is suitable for PV deployment, the sheer number of buildings in this class gives small buildings the greatest technical potential,” according to a 2016 NREL study. Small building rooftops could accommodate 731 GW of PV capacity, while medium buildings – 5,000 to 25,000 square feet – have a potential of 154 GW, and large buildings – over 25,000 square feet – have a total installed capacity potential of 232 GW, according to NREL estimates.
Balancing the equation
The mid-scale segment faces a number of challenges, including difficulties in securing local contracting, the mismatch in interests between leaseholders and PV financing terms, high transaction costs relative to project size, and inefficiencies in matching prospective projects with capital, NREL says.
Installation problems are one of the perceived problems with trackers in the C&I space. “C&I projects can be more problematic, but Solar FlexRack’s best-in-class services offering – including geotech, pull testing, full pier and racking design, installation, etc. – enables us to execute these projects flawlessly,” says Steve Daniel, Solar FlexRack’s Executive Vice President of Sales & Marketing. “Many of the EPCs doing these projects don’t have the level of engineering and field services expertise we offer, so they very much value what our team brings to the table to make sure projects are executed cleanly.”
“I would estimate that we are 35% C&I, and 65% utility-scale with trackers. We have had significant growth this year in the C&I space, especially with our TDP single-axis trackers. This is proving to be an excellent solution for the C&I market, due to its ease of installation and the added output offered by the trackers.” Sub-contractor training is another way that tracker installation problems can be minimized, according to Solar FlexRack’s Daniel. “In some instances, when we’re not fully engaged on the installation, issues can arise. However, we will go to great lengths to ensure that we train the installation teams involved in these projects. So we do whatever we can to ensure 100% project success – whether or not we’re taking on the installation of the project.”
Strategic BOS suppliers
One way to help reduce both the cost of labor and the frequency of installation problems is to standardize the balance of systems (BOS) components as much as possible. Utilizing components supplied by a strategic partner facilitates speed of installation, simplifies logistics, and reduces other cost components. This BOS partner must be highly focused on reliability, notes Dean Solon, CEO of Shoals Technologies Group. “We talk to our customers about reliability, reliability, and reliability – then we talk about cost.”
Array Technologies forged a strategic supplier agreement with Shoals in July, with plans to collaborate on structural and electrical BOS solutions. “Together, as BOS leaders in the market, we are in a unique position to innovate and advance unrivaled, integrated system solutions. We see tremendous opportunity to bring cost effective, optimized, and reliable collaborative offerings to the market. Our customers will greatly benefit from a new standard of seamless BOS solutions,” said Ron Corio, CEO of Array, in the July announcement.
Since many C&I customers are sensitive to time-of-use and peak charges for electricity, trackers are increasingly being paired with battery-based energy storage to flatten out price curves. One early mover in this space is NEXTracker, which in December launched its NEXTracker Energy Storage Solutions, a portfolio of products that includes NX Drive, based on lithium-ion batteries, and NX Flow, based on vanadium flow batteries. NX Drive is a standardized battery enclosure system for generation-plus-storage or standalone storage applications. NX Flow is a modular, integrated solution designed for long duration solar-plus-storage applications.
Strategic non-solar partners
One approach to the strategy of supplying trackers to your clients’ C&I customers is to partner with a large supplier of traditional non-solar power plants. Mechatron has recently forged such a relationship with an as-yet unnamed supplier of gas-fired generators, and is helping mutual clients in various industries on and off-grid to understand the value of a solar energy generation component in the portfolio asset mix, says Michael Fakukakis, CEO of the company. Mechatron’s M18KD dual-axis tracker has met with great success in the agriculture industry, in particular, he says.
Working with EPCs is the obvious channel for tracker growth, although not all EPCs focus on the C&I segment – yet. “We are providing our products and solutions to select strategic clients. If they are going to pursue the C&I market we will certainly follow, with products, solutions, and services adjusted to the requirements of C&I,” says Karsten Weltzien, the head of products and technology at Mounting Systems.
Community solar, critical demand
Tracker-based community solar projects are one solution to buildings that have characteristics that do not make them good candidates for rooftop installations. Typically, a community solar project will include both residential customers and one or more C&I customers that serve as the anchor tenants for the project.
A 2015 NREL study found that shared solar has the potential to double the commercial market by offering PV to the 48% of businesses that are unable to host a PV system on-site. The study, “Shared Solar: Current Landscape, Market Potential, and the Impact of Federal Securities Regulation,” also estimates that shared solar could represent 32% to 49% of the distributed PV market in 2020, increasing cumulative installations by 5.5 GW to
Targeted C&I finance
While utility-scale projects may involve a host of bankers and lawyers, C&I finance for trackers is becoming easier to obtain with specialized lenders who use software screening criteria to identify risk-worthy customers. Sustainable Capital Finance, for example, is a boutique solar financier that targets C&I projects as small as
100 kW. SCF provides on-the-spot decisions for potential solar customers, and provides developers with a computer-based method to auto-populate counterparty agreements such as term sheets, PPAs, and EPC agreements.
Smaller C&I financiers may find investors for projects directly, or tap into larger fund managers like True Green Capital Management that target the C&I segment. The company describes itself as “currently focused on the approximately $2 trillion distributed power generation market with an emphasis on the sub utility-scale solar power segment.” The company in August closed its third C&I solar-focused fund, with $350 million in commitments, and expects to raise its next fund in mid-2018.
Assessing C&I risk for financing is becoming much easier for such C&I financiers, thanks to national credit assessors like Moody’s that provide products like its RiskCalc to help assess relative risk for a solar project.
Trackers for rooftops
One substantial limitation to greater tracker adoption in the C&I segment is the inability of a standard rooftop to support the extra weight of most tracker designs. A solution to this problem is Edisun Microgrids’s lightweight dual-axis tracker, which spins around a circular tube base. The company recently installed its first 1 MW rooftop array in the Los Angeles area, and more are in the pipeline.
“The C&I solar market has an almost infinite growth potential,” says Bill Gross, CEO of Edisun. “California alone presents an opportunity of 7 billion square feet of uncovered commercial rooftop space, with just half of that representing a 55 GW potential. It’s a crazy opportunity,” he says.
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