How the Solar Industry Can Cut Stubborn Soft Costs With E-Commerce

In the rollicking solar industry of the past decade, change and upheaval have been the norm. There have been attacks on net metering, trade wars, technology developments, not to mention perpetual uncertainty about the federal Investment Tax Credit.

Yet through the turbulence there has been one constant: Prices for solar hardware have continued their steady trajectory downward. In February 2016, the U.S. Department of Energy reported that the average cost of solar panels had dropped 60 percent since the beginning of 2010. This consistent drop in module prices — one that is continuing apace —  has been accompanied by falling prices for inverters and trackers.   

While critical, the cost of hardware is only part of the story — arguably, it’s less than half of the story. According to the DOE, soft costs account for 64 percent of the total price of U.S. residential solar systems.   

Stubborn soft costs

The trends in soft costs — which refer to everything from customer acquisition and supply chain expenses to taxes, fees and labor — are not nearly as encouraging as cost trends in hardware. For example, a recent report from GTM Research, U.S. PV System Pricing H2: System Pricing, Breakdowns and Forecasts, found that customer acquisition costs actually grew by 10 percent in the second half of 2016.

This challenge is not a mystery to those in the industry. The DOE’s SunShot Initiative, for example, has a multi-pronged program designed at lowering soft costs. One strategy SunShot employs is supporting business-model and technology innovators able to cut through some of the inefficiencies that add costs to solar.

Both SunShot and venture capitalists have provided funding for entrepreneurs who have utilized software and e-commerce as a weapon in the battle against soft costs. Companies like EnergySage and Geostellar, which both use online platforms to reduce customer acquisition costs, have attracted millions in funding.

Another SunShot grant recipient, EnergyBin, is also harnessing the power of software and e-commerce to create an online business-to-business marketplace that could further reduce soft costs and improve the economics of solar companies.

The concept behind EnergyBin is straightforward: to create a B2B centralized members-only online marketplace where industry players — everyone from large manufacturers and developers to small installers — can buy and sell new and used components quickly and easily.

From IT to solar

The concept behind EnergyBin has already succeeded in the IT world. EnergyBin’s parent company, Broker Exchange, and sister company, BrokerBin, were founded in 2002 as a centralized marketplace where companies big and small can buy and sell routers, servers, motherboards and other computer hardware.

Moving from IT to solar felt like a natural evolution. “We were looking for an early-stage market, rapid growth, [one that is] scalable, and most importantly…the emergence of a B2B broker market for new, excess, used, refurbished and vintage components,” said Doug Westra, EnergyBin’s CFO.

Although BrokerBin has 3,500 member companies in 63 countries and more than 12 million items for sale today, “We see the renewable and solar marketplace opportunity as big, if not bigger, than the IT side,” added Westra.

The solar industry suffers from some expensive supply chain and communication inefficiencies that a centralized marketplace could help address. “What I saw happening in the industry was project estimators and procurement teams spending large amounts of time working their network to obtain what they believed to be the best possible component price for their estimates,” said Keith Bluford, senior vice president of business development at EnergyBin, who previously worked for solar developer Sunora Energy Solutions.

“They believed they were getting the best pricing, but were they, based on having limited vision into the overall supply chain?” he said. “There was no real way for organizations to efficiently and cost-effectively communicate with anyone other than those in their siloed network to buy or sell solar components.”

Promoting transparency and a second life

With a centralized marketplace that includes a critical mass of stakeholders in the solar supply chain, transparency around pricing, location and availability becomes possible and information silos can be broken down. When the marketplace is made up of both industry behemoths and mom-and-pop installers, a centralized platform means all members, no matter their size, should benefit from the visibility and access to the entire solar supply chain.

There are other reasons that a quickly growing — yet still very young — solar industry can benefit from a more efficient supply chain and communication channel. The dramatic decline of solar hardware costs has led to a global building binge of new solar projects. But as the industry ages, there will be a large market for used equipment.

“From utility to residential, there is a developing marketplace for what happens with the second life of components,” said Bluford. Given the volatility of the solar market, the issue of the second life is complicated by companies that have gone out of business. Plenty of installers chose equipment from companies that no longer exist, and a marketplace that connects them to suppliers of used equipment can be a big benefit. That’s especially true when those used components come with added value.

“Like in other markets, when you have equipment that is coming back for a second life, there is going to be a refurbished marketplace and vendors that will provide warranties around that equipment,” said Bluford.

A tool that can evolve

EnergyBin’s first priority after launch was to ensure easy community-wide communication between buyers and sellers, such as being able to create a list of components that you are looking to buy or sell and easily broadcast it to the entire community. Now the focus is on more advanced searches and keeping information current.

“We know those are keys to the platform and the success of the community,” Bluford said. “People want to know when they’re looking for something that the inventory is current, and people want to know they can easily upload and manage inventory that they are looking to monetize. The tool has to be intuitive and easy to use.”

But just as the solar industry is quickly evolving, Bluford insists that EnergyBin will be every bit as nimble — thanks in large part to the lessons learned at BrokerBin as well as the guidance and assistance of EnergyBin’s solar industry advisory board and flagship member companies.

Other features are ready to be deployed. At the moment, the company is concentrating resources and attention on improving the platform's technical specification library, market intelligence database and reporting.

Another coming feature is called “part history,” which has proven to be very valuable on BrokerBin. “You can click on an icon or graph…[to] pop up the history of that part from 30, 60, 90 days out, detailing the supply and demand for that specific part as well as the pricing and how many people have searched for it,” said Renee Kuehl, EnergyBin’s vice president of sales and marketing. Other coming features could include geolocation and enhanced mobile capabilities.

The EnergyBin platform is positioning itself to be part of a larger evolution in the solar marketplace toward increased sophistication, efficiency and stronger connections. As that happens, soft costs should move downward, more in parallel with the costs of modules and inverters.

“It’s a paradigm shift in how the industry is doing business today, which is in silos,” said Bluford. “This is a shift to having a centralized community and a platform that provides the tools necessary for all members of the supply chain to communicate directly with each other. It’s really about bringing the solar supply chain together under one network and changing how they’re doing business today, which will ultimately affect how efficient they are and push down the soft costs in a number of areas.”

from GTM Solar https://www.greentechmedia.com/articles/read/how-the-solar-industry-can-cut-soft-costs-with-ecommerce

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