Battery storage systems are more than just home energy backup – they can also back up your solar installation business. David Dunlap, VP of product strategy with BayWa r.e. joins Power Forward! to explain how energy storage system (ESS) sales can create a more financially sustainable business model for solar installers –regardless of net metering policy. We discuss …
0:49 – Key updates in energy storage (ESS) product market
1:56 – Is NOT selling ESS risky for solar installers?
3:35 – How California solar installers adjusted to NEM 3.0 with ESS
5:32 – Design tools for NEM 3.0 solar + storage
7:13 – The financial case for selling ESS regardless of state and NEM policy
8:24 – Operational changes I’ll need to make to add ESS business
11:14 – Post-install? Build a service department as an income stream
12:19 – Does ESS brand power help?
13:50 – The change that’s coming for solar businesses
Watch the full episode right here, or read part of the transcript below.
Crowell: Would you say now, in 2023, that not selling energy storage — or at least not starting the process to sell energy storage and install battery systems — is maybe even riskier than standing pat with just so solar and avoiding it?
Dunlap: Long-term, yes, I do. One, if we’re not thinking about solar contractors evolving and becoming electrification contractors, we are going to miss the boat long-term.
But it’s interesting if you think back to the pioneer days and what solar was doing in the beginning, it was all about creating and consuming enough power for that building to be autonomous. The reason that we moved away from that ideology and the belief that you could use the grid as your storage was the all around pretty attractive retail rates and net metering. When we incentivized overproduction on the PV side and actually made that part of the financial payback of the system, we lost sight of that balance of ‘I can generate enough power to self-consume that power, and I may need to consume the power when the when the sun is down.’
So, that time of use (TOU), rather than thinking of it as an economic argument, if you just fundamentally look at ‘how much power do I need to consume?’ therefore I should generate and store it on site’ — that closed-loop cycle of building-level electrification I think is where we’re headed in the future, and I think all installers should be thinking about ‘how am I going to do that,’ and storage of course is that first step.
Crowell: In California installers essentially have no choice in this now thanks to NEM 3.0 and how it devalued the production of solar energy when exporting to the grid. I’m curious now that we’re firmly in NEM 3.0, have you talked to installers that maybe after crunching the numbers and getting fully into this new business model are actually excited about the potential going forward?
Dunlap: Definitely there are some, and I think the key was understanding the economics and being able to model it out.
But I want to go back to that comment about storage is required, just to state for the record that there’s nothing in the NEM 3.0 policies that say you have to do storage. It’s purely economic. If someone chooses to design a system that is close to zero export on a rolling annual basis, and they don’t really care about export rates versus the charges of time of use, it’s still feasible to do. We just know now that the economics are better because of the high cost of power at peak power times.
So, yes I think the key here was figuring out that sweet spot of enough battery storage and technology to do a time of use without a backup scenario because that keeps the price down. Coming up with that total system cost that’s not terribly expensive and that has an overall system payback of less than eight years has been exciting, and I think a lot of the installers who’ve cracked that nut and that are seeing some real traction with homeowners are loving it. And I think they didn’t believe that they could get to that price point with the technologies and the systems in years past.
Crowell: You make a good point about the differences of the solar + storage system in California to meet the very specific complex parameters of NEM 3.0 rate structures. Have there been advancements to help installers navigate this and design systems that are the most economical and provide better ROI?
Dunlap: The software design tools really have come a long way in the last six months. Particularly because of the NEM 3.0 changes, the utility rate structure is unbelievably complex. The matrix of rates every day, every hour broken down on this huge spreadsheet. But fortunately, yes, the software system companies have integrated that into their design tools.
I wanted to quickly share the names of five systems that CALSSA has vetted very deeply and believes are robust and will give some really accurate and good results. That would be Enact Systems, Energy Toolbase, Solar Nexus, Aurora and OpenSolar.
I believe there are some proprietary systems out there as well. Enphase acquired a software design tool company, and they have built all of that information in. So, if you’re an Enphase installer, and you’re thinking about taking advantage of that system, it’s proprietary. The other five I mentioned will work across all platforms.
Crowell: Regardless of where I am in the country – California, Florida, New York or god forbid Ohio [Editor’s note: J/K! All love fellow Ohioans!] — how will selling energy storage make my solar installation business more resilient or financially stable?
Dunlap: There’s two primary streams for that. One is the potential for repeat business. We all know that customer acquisition costs are very high, and if we can sell more than once to the same customer, we eliminate that customer acquisition from the margin stack in the second round.
The other one is just simply higher revenues. Even if you do it as a single sale, you’re basically putting in a more expensive system. You’ve got higher revenues with that single visit to the site or that single customer.
A third stream maybe is just more opportunities in the market. People who are really thinking about how to capitalize on the existing installed PV with retrofit storage — that’s a huge amount of addressable market that, if you were only selling PV, you would think was not part of your addressable market opportunity.
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