5 Takeaways for Solar Installers from 2022

2022 was truly a year of change in the solar industry, with many new trends coming and going.

For many years at Ipsun Solar, we joked about how we were going to build a “conveyer belt” that allows the company to run on its own. Of course, we knew at the same time that we were in this business because we were trying to advance a nascent technology that could be adopted by the masses.

This was not going to happen overnight, and it would require a significant investment of time and effort.

Today, the joke is that if the solar industry ever gets too boring, we’re leaving to start a box factory (for all the Simpsons fans out there).

Here are our main 2022 takeaways from our experience running Ipsun Solar and the industry writ large.

1) No Profit, No Mission - No, We Really Mean It!

We have a saying that we echo across the company over and over: “No Profit, No Mission”. This reminds everyone that our mission (fighting climate change), comes first and foremost. But also that, as a for-profit company, we cannot effectively fight and grow our mission if we do not make a profit. This is true across the board, as you will not see mass adoption of solar if it’s not profitable; that’s just the baseline capitalist paradigm.

This year, we saw the normal sturm und drang of the typical solar seesaw monthly profits and losses, but with exceptional volatility. We know we have a profitable business, but reducing the volatility in cashflow is always a challenge. Never less so than in a year where module prices went up 20% overnight, and had to be applied to many projects that were sold at a lower price. Ouch! Add that to wage inflation, and you’ve got a recipe for a profitless year. Add that to the fact that the percentage of our residential projects financed by our third-party lender went from our normal 30% to 60% in the course of about 60 days, and you’ve got a cashflow nightmare. That’s exactly what happened.

In the first, half of the year, we saw record profits. In the subsequent 5 months, we saw record losses, as our COGS increased and we failed to realize revenue on financed projects that don’t disburse fully until 3 weeks post-PTO. Getting anxious yet?

Fortunately, we have an amazing leadership team who saw the writing on the wall and made a miraculous fourth quarter rally to bring in the most revenue in a single month in the history of the company. We landed with our normal modest but reasonable profit (~5%), to help continue growing our mission of fight climate change further.

But why do we really mean it? Because profit isn’t just a number in the black that makes you feel warm and fuzzy. It has real business implications (beyond exiting, selling or finding further investment). The reason we were able to switch to another solar financier for our residential customers, who will disburse 50% upon contract signing and 50% upon passed inspection (a disbursement schedule roughly equal or better than our cash schedule) is because we are running profitably year-over-year. That was a precondition for receiving such a generous disbursement schedule. Now, as we enter 2023, we have a formula that starts to bring that old conveyer belt back into focus. Nothing will do that better than having a loan and cash schedule that are roughly similar.

2) Know Your Value, and Own It.

We’ve written before about knowing what kind of company you want to be and leaning into it. Boy oh boy did we ever learn that in 2022. We tried for far too long to have our cake and eat it too, by offering top-tier service, quality, and materials, while also offering the most competitive price. Well nothing will make you more skeptical about that strategy than the highest rate of inflation in 40 years and the aforementioned cashflow volatility.

We made a decision as a leadership team to lean into the fact that we are a premium offering:

• (a) the only Certified B-Corp solar installer in our area
• (b) an Amicus Solar Cooperative installer
• (c) providing made-in-America modules with panel level optimization; and (d) white-glove, dedicate project managers for all of our residential customers
• (e) offering generous pay, benefits, holidays, and parental leave for our team members (the list goes on and on).

So if we are going to do all the things we believe in, we need to communicate to our prospective customers that we are not the cheapest game in town - and that’s a good thing. When you’re putting a power plant on your roof, you really do not want Two Chucks in a Truck with the Taillight Guarantee. Especially when you’re going to get 30% credited back to you in the form of the ITC. There are an infinite number of cut-rate, bargain basement, Big Box, MacGyver-style solar installers. If someone calls us and price is their main motivation, they will have no problem finding someone else.

But if someone calls us because they want a company that is going to answer the phone and provide ongoing service and maintenance and use the most novel technology, and get out of bed every day to work in a vertically-integrated solar company because they believe in a mission, well then we’re the company they are going to choose (and our conversion rates show that clearly).

Once you know your value, your price becomes much more elastic.

3) Don’t Put All Your (Storage) Eggs in One Basket.

Excuse the triteness, but I’m sure you already know where I’m going with this. Diversity is strength for a reason. If you’re only selling one type of module or inverter, well there’s a good reason for that: it’s much harder to forecast and plan and stock and install multiple stuff. In fact, after years of providing multiple offerings, we now only provide one module and one inverter. But we are constantly surveying the market for new offerings, considering and reconsidering the real, empirical and tangible value of panel-level optimization, and performing R&D on new battery offerings.

We are also constantly working with new distributors and pitting them against one another on price and service, so as not to get too complacent with any one of them (or allow them to get complacent with us). But you know all this. Why did we really bring this up in the first place?

Because where you really have the potential to get burned by having all your eggs in one basket is with batteries. The technology is new (did you know that?). The software inside the technology is new. The dudes and gals trying to make it all work well and play nice are new. The investors trying to ramp it are sometimes new to this space. Consumers are new to the whole thing, and educating themselves on what they can and cannot reasonably backup. Salespeople are new to the technical sales that pale in comparison to solar sizing and configuration. If you’re going to be active in the battery game (and at this point, you might not have a choice), then you need to try a few and see what sticks for your team. Don’t assume that just because the company has a sky high market cap that they’re stuff is going to work or you’re going to get it delivered - because it might not, and you might not.

If you attended RE+ this year you know that there are plenty of fish in the sea. Go fishing. Install a few on your team members’ homes or find some other willing beta testers amongst your customers. Get creative and don’t stop until you find one you like, and a partner who can build mutual respect with. Because this battery thing is no hopscotch.

4) Your Brand is Everything, No Really It Is.

If you’re company is not a brand, then what is it? The brand is a heuristic for consumers to realize that they’re working with professionals who know what they’re doing, love what they’re doing, and doing it well. If someone else is trying to take your brand equity from you, they’re asking you to sacrifice the sovereignty of everything you’ve learned and built over your career, so that they can upsell the customer in the future, and they can monetize service, and they can turn them into a lifetime commodity.

But here’s the thing: all those guys trying to market to your customers for the 30 years after the system is online, don’t live in your community. They don’t necessarily share the same values, motivations or goals. They will never, ever meet eye-to-eye with your customer, and they are not the ones who stood on the roof, shook their hands, and taught them how to own their own clean energy.

How did we learn this? Well when our leads started trending downward as talks of “recession” filled the airwaves, we leaned into Sunvoy - hard. That means we started instructing our team members to make sure ever single one of our customers knows how to get into Sunvoy, and that it is the single place to refer friends and family, track their system performance, see their system details and project documents, open support tickets and see closed tickets, etc.

We showed the sales team how to sell on the value of Sunvoy so the customer has a single point of truth from the moment they sign the contract through the 30-year life of the system. We made Sunvoy the tool of record for the service team to triage problematic systems, and for our project managers to educate homeowners on how their systems are performing.

The result? Our leads and sales rebounded and we’re back on track, even though the word recession is still on everyone’s mind (as of January 2023, anyway). Now our cost of acquisition is falling with it.

Don’t let anyone take your brand equity from you, any more than you would let your neighbor move their fence over a few feet onto your property. This is our solar industry, and we’re the ones on the frontline.

5) Don’t Lose Faith, We’re Going to Win.

If you’ve worked as a solar installer for a day, a year, a decade, or a lifetime, you’ve probably had bouts of uncertainty. God knows that we have. It’s easy to question whether distributed solar makes sense when you have recessionary headwinds, you’re staring at roof after roof of maximum shade, you hear homeowners use their stock market returns as a benchmark for judging solar ROI, and you’re staring into a labor market shortage that seems like a potentially fatal bottleneck to deployment this amazing solar resource.

But the fact is that we have no choice but to prevail. The climate demands homeostasis for the survival of humankind, consumers demand choice where utilities have failed, and our labor force demands purpose and democratization in their work. Solar cannot lose, even if they day-to-day can sometimes feel demoralizing and tough.

Remember that the old model of centralized-only power generation is about as innovative as the Pony Express, and it simply cannot be the dominant paradigm going into the mid 21st century. It needs competition from us, and we need competition from it.

The price of solar will fall yet again, if not today or tomorrow, then soon enough. The demand for solar will rise yet again, especially as utility rates are skyrocketing. Solar and storage will become as ubiquitous as air conditioning, once the vulnerabilities of the grid become clear to everyone. The value of every square foot (and meter) of solar irradiance will become obvious to all humanity, once we do the hard work of educating our friends and neighbors.

These are our takeaways from the year, in our narrow slice of the world. What are yours?