Some Builders May Finally Be Getting Wise On PV

Implications: Despite a horrendous housing market, solar powered installations on homes, especially new ones, are becoming a measurable market niche.  This trend is being noted in mainstream homebuilder publications like housingzone.com, which has until now treated solar as something way into the future.  It remains to be seen how many remaining builders will take advantage of a market that for new US residential construction alone, could reach $1 billion in the next year or so.

Analysis: When I visited the Studebaker Museum in South Bend, Indiana, I was struck by an observation made by the docent.  Studebaker was the only US horse carriage company that made a successful transition to horseless carriages in the 20th century.  Most horse carriage makers blew off the noisy, smoky motor car.  And most of the remaining ones that realized the future, realized it too late.  It was the same for most typewriter companies and the desktop computer, and fountain pen makers and the ballpoint.

"Green" has become a new byword in that stubborn community, the homebuilders, and even "solar" is grudgingly entering into their lexicon.  Mired by traditionalism and price tag paralysis, they have refused to incorporate solar for fear of a new technology, a lack of market confidence in justifying the extra cost (as opposed to pink marble bathroom suites) and inherent conservatism that mentioning solar power is an impingement of the eternal cornucopia of lots of cheap land, big, cheap houses and big, cheap cars.

The real estate and energy "crises" are starting to work their way into this paradigm.  The double whammy of high gasoline and home utility prices have made American homeowners and homebuyers more conscious of present and future energy costs.  Property value losses and foreclosures have been tended to be higher in areas where houses are large and more expensive to heat, cool and power and further away from transit and market centers.

Most of us, including homebuilders, tend to focus on the downdraft of misfortune.  Just like hybrid car sales are growing when the entire auto market is tanking, so are "green" homes, including those powered by solar, emerging as a market segment.  To be sure, there are many generic problems of financing as well as a tendency by many builders that they just have to "ride out" the problems and not bother with "green".  And home building, and their regulatory environment, is much more fragmented than the auto industry, and even slower to change.

Just as positive articles appear in mainstream home builder publications on solar, so does the solar market appear in the residential market.  According to the Interstate Renewable Energy Council, the number of photovoltaic grid connected homes broke 10,000 per year in 2007, with as many that were non-grid connected.  While exact numbers weren't readily available, a large percentage of these installations are on new homes.

As new construction drops well below one million starts a year, toward a half million, the number with solar are growing as a significant percentage, especially west of the Mississippi.  Besides a variety of incentives, other market forces are making photovoltaic systems more popular.  Chief among this is the realization that more builders and developers need something to stand out among the competition.  For the price of a premium kitchen upgrade, a photovoltaic system supplying nearly all the electricity of a reasonably built home can be compelling.

Systems are getting larger, over 4 kilowatts, or 400 or so square feet, and cheaper, installed at $8 or less per watt before incentives.  They are also beginning to benefit from better net metering and interconnection standards, where their more valuable peak and non polluting electricity attributes make them more cost effective.

Many companies like SunPower, Kyocera, Sharp and Open Energy are offering more integrated and attractive crystalline installations.  Thin film makers like Global Solar Energy and Energy Conversion Devices are offering integrated products for standing seam or shingled roofs.  Supply and customer chains are improving, and more developers and builders are making the change of offering the PV as standards and not options. 

The Center for American Progress estimates that 30% of new homes will have solar by 2030.  But even taking a near term approach (2010 or so) of a 10% penetration rate of only 500,000 new residential construction units a year at 4 kW each and an installed price at $6-7/watt before incentives, that translates to 200 megawatts per year, last year's entire US market, and $1.2-1.4 billion of revenue.

It remains to be seen which builders will really get with it and remain in business.  There is likely to be quite a few casualties piling up with the horse carriage and fountain pen makers.