Video: Opportunities in the commercial solar market | Power Forward!
As the residential solar market has faced challenges recently, now might be the perfect time for installers to consider commercial solar. However, before diving into the C&I space, it’s important to know the market trends and policy changes driving the market, which could mean the difference between sinking or swimming. On this episode of Power Forward, John Serron, Director of Sales for CCI Solar & Energy Storage at BayWa r.e., explains the opportunities in the commercial solar market and what installers need to know before jumping in.
- 00:55 How the commercial market is evolving
- 03:40 Identifying successful commercial installers
- 06:46 Policy changes and safe harbor rules
- 09:58 Most attractive regions and market segments for C&I solar
- 13:07 Advice for new C&I solar installers
Evolving C&I market and opportunities for residential installers
Kramer: Can you talk about how the commercial market is evolving as residential demand softens and energy storage adoption accelerates?
Serron: What we’re seeing a lot of is that traditionally residential installers are expanding into C&I. At Baywa, we call these “resi-mercial” installers, and this is really to offset slowing residential demand. While residential solar is expected to have several down years, commercial solar will be steadily growing, either manageably or significantly. And what we’re seeing even further is that success is increasingly dependent on delivering integrated energy solutions, not just simply PV. And what I mean by that mainly is energy storage. And in particular, energy storage is becoming a primary value driver in these projects, to the extent that where we used to say solar + storage in the industry, where now the nomenclature is shifting to storage + solar. …
Because storage is becoming such a primary value driver in these projects, the economics are shifting beyond simple electricity savings. You have installers that now need to understand your dollar per kilowatt demand charges and how energy storage can address demand charges, whether or not a customer is eligible for time of use, rate arbitrage, and whether or not they’re in an area where they can participate in either good services or VPP programs. All of these cool value streams that energy storage can capture, installers are now having to be at least marginally proficient on if they want to be competitive.
ID’ing successful commercial solar installers
Kramer: What separates the most successful commercial solar organizations from those that struggle to scale?
Serron: It’s really those that are putting a focus on deepening their expertise in energy storage. I mentioned the value streams that storage can capture in different markets. These will change by state or region. There’s also state level incentive programs that you need to be proficient on in the states where you’re operating. And then we alluded to utility programs that are related to energy storage. All of these things allow storage to be attractive for customers and being able to communicate this multi-tier value proposition as a commercial installer is really important. Additionally, the most successful installers are building repeatable commercial processes. This includes standardized engineering, procurement, financing, and project execution. And if they’re not building these capabilities in-house, they’re investing in strategic partnerships. This is with financiers, developers, service organizations, and also distributors. For installers that aren’t necessarily building these capabilities in-house, they can use BayWa to be the glue for these different types of partners. We can connect you to solid financiers, developer partners, service organizations. We have those relationships. And so we’re able to help these resi-mercial contractors grow into full-fledged commercial organizations.
Additionally, the best and brightest commercial companies are leading with customer outcomes,. It’s not selling to the problem that you think the customer has. It’s really selling with curiosity, digging into the core problems that the customer has by getting curious and understanding their pain. And in doing so, you can then tailor your solution to their ideal outcome. This leads to larger projects and more satisfied customers.
Last but not least, the best and brightest maintain discipline pipeline qualification. This is really important, shifting from residential to commercial projects. With residential, it’s anywhere from a one- to six-month project lifecycle, but usually about a three-month project lifecycle. Commercial is anywhere from three months to two or three years, depending on a variety of factors. So companies really need to maintain consistent pipeline qualification, where they’re having cadence with their customers on their projects, and they’re making sure that they’re doing the right things at the right time to ensure ideal outcomes, and potentially most importantly that the cash is coming into them at the right time so that they can pay the people that they need to. Ideally, consistent and disciplined pipeline qualification allows you to focus on your high probability scalable opportunities.
Impacts from policy changes and safe harbor activity
Kramer: How do you see policy changes and safe harbor activity reshaping the competitive landscape through 2030?
Serron: This is really important, and it relates to relates to project pipeline for sure. July 4th was the deadline for the the commercial solar safe harbor. What we saw at BayWa was a a large number of partners of ours safe harboring their projects, locking in the ITC by buying equipment to the tune of 5% of their project costs, and they’re now allowed to deploy these projects between 2028 and 2030. They only need to meet the kind of the FEOC or DCA thresholds that are in place as of 2026. That’s the safe harbor. That was really big. What we’re seeing now that we’re past the safe harbor deadline is installers are still entitled to the ITC through the end of 2027 as long as they PTO their projects by the end of 2027. …
While I mentioned that 2026 and 2027 will be softer years for solar, we’re still going to see a steady drumbeat of projects come in because we have partners that have safe harbored all this pipeline for 2028, through 2030. And now they’re really focused on driving projects to close for the end of 2027. What this means overall is that the percentages related to FEOC requirements and domestic content requirements are going to continue to be really important and influence supply chain and sourcing decisions through 2030. You have both on the FEOC and the DCA side, these percentages are stepping up, sometimes on an annual basis with FEOC, sometimes once with with DCA and then remaining constant. But I mean, it’s kind of the only thing that we know for certain is that both policy and guidance will change maybe slightly, maybe significantly. And so again, it’s companies that can navigate this type of complexity and develop these proficiencies in-house that are going to be the ones who are most successful as we move through 2030 and beyond.
On the storage side, what we’re seeing is that there’s actually ITC certainty through 2032. So this is, again, a driver of energy storage viability, and it’s a reason that there’s a focus on energy storage through 2032 and beyond. And it’s going to support long-term investment. It also means that we will continue to see states and utilities roll out state-level incentives and wholesale market/VPP programs between now and past 2032 as storage continues to play a primary role in these renewable energy projects and it becomes more viable in the future.
Watch the full interview above or at the Solar Builder YouTube Channel. You can watch previous episodes of the Power Forward! series at solarbuildermag.com/power-forward.
