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What market research is telling utilities about consumers and solar, Part 1

By Bill LeBlanc

It’s not exactly news that fast-changing technology and consumer expectations are pushing utilities to change their approach to marketing and customer relations — and to develop their own solar programs. But during a recent webinar sponsored by the Solar Electric Power Association (SEPA), two top industry market research experts offered some fresh and incisive ideas for charting the way forward.

This two-part series will provide edited excerpts of new research findings and insights from the webinar, starting this week with the presentation of Bill LeBlanc, Chief Instigation Agent at E Source in Boulder. Part 2, next week, will cover the presentation from Suzanne Shelton, President and CEO of the Shelton Group in Knoxville.

A full recording of the webinar — Utilities of the Future: Understanding customers and leveraging solar — and the accompanying slide deck are available on the SEPA website here.

The residential market: The changing demographics of solar

Almost half of all consumers in a recent Nielsen survey would want more products and services to help them cut their energy use, if their utilities were given a grant to improve some aspect of their business. Another quarter — 26 percent — would want their utilities to use the money for clean power.

And when asked what kind of clean power they would want, the largest portion, 40 percent, chose solar.
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These figures come from E Source’s Residential Customer Insights Center, a database which draws on five years of Nielsen U.S. residential customer data. This article will also look at the first phase of an E Source market research survey on attitudes toward solar and distributed generation among a cross section of mid- to large-sized business customers.

The overarching message to utilities from both: get close to your customers and get in the solar game.

The residential market: The changing demographics of solar

Conducted annually for the past five years, the Nielsen survey looks at a range of energy-related issues, such as usage patterns, the kinds of appliances and other equipment consumers own and their participation in energy-saving programs.

The survey also provides insights on geographic and other demographic differences. For example, on the clean energy question, 50 percent of consumers in California said they would want solar.

On net metering, a subgroup of survey participants who have solar installed on their homes were asked what level of compensation they should receive for excess energy they feed into the grid: retail rates, below retail or above it, even if other customers had to subsidize the higher rate.

A full third, 34 percent, went for above-retail compensation subsidized by other customers, while 41 percent would be satisfied with the regular retail rate. Younger customers across the board went for the above-retail rate — 56 percent of the 25-34 year old demographic and 47 percent of both the 18-24 and 35-44 year olds.

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Consumers who had yet to install solar were asked what kind of incentive they would need to buy a system. Tax incentives were favored by 47 percent versus 23 percent who want a solar financing or loan program.

For more ideas about how utilities can prepare for the future, check out SEPA’s 51st State website here.

The demographic breakdown here is predictable; the preference for tax incentives rises and falls with yearly income. At above $100,000 per year, 62 percent favored tax incentives; among those earning $25,000 or less per year, the figure was 29 percent.

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A final, telling question looked at what actions consumers had taken so far toward purchasing solar, from reading a few articles or looking for prices and options online to actually talking with a few vendors and exploring specific installation and financing plans.

While the vast majority, 63 percent, had taken no action, 6 percent of consumers nationwide had at least reached the stage of talking with vendors about pricing. Predictable outliers on this question included California, where 11 percent of consumers had made first calls, and Hawaii, where 20 percent had picked up the phone.

But the main predictor for whether consumers might actively explore solar options was whether they had already made energy efficient improvements on their homes. The survey found that 16 percent of such “energy efficiency achievers” had already reached the phone-call stage on solar.

The business market: Looking for solutions and details

E Source has undertaken a survey of mid- to large-size commercial and industrial customers aims to identify the motivations, drivers and barriers in this sector for photovoltaic (PV) solar and other forms of distributed generation.

The goal here is to figure out what the timing of solar adoption is going to be over the next 10 years and create a road map so that utilities or vendors can better understand this market from a sales standpoint.

Quantitative data from the survey — including online surveys completed by 800 businesses — is still being analyzed. What follows are some of the insights culled from initial results and interviews with 30 decision makers.

Another reason for looking at business perceptions of utilities’ solar strategies was to answer some pressing questions. Should utilities be panicked or worried about solar in this market? Is it time to develop robust plans?

It’s not quite time to panic, but we’re getting there. In California, Arizona and Hawaii, it’s probably past panic time, but they know that already. The rest of the country has a few months or years to prepare.

Which means — yes, it’s time to worry because business customers are interested in solar. Utilities need to develop robust solar strategies that can respond to a variety of future scenarios, taking into account price variations and the impact of natural gas prices and environmental regulations.

Which utilities are already ahead of the solar curve? Check out SEPA’s Utility Solar Top 10 here.

One critical finding is that, with the exception of California, businesses do not, in general, see utilities as primary players in solar.

At the same time, businesses are sensing that solar PV is much more likely to catch on than traditional distributed generation, specifically natural gas. But they are waiting for prices to come down, and they want to be surer of the technology.

Another key insight is the role of the sustainability and environmental goals that an increasing number of businesses are adopting. Their customers want them to be green, as do their shareholders. They are also anticipating environmental regulations that will require them to become greener.

Plenty of caveats still exist. The decision makers interviewed said solar is going to have to meet every investment threshold their companies have. It has to compete on a level playing field against other investments, and environmental factors may not have much influence.

A company’s decision-making structure will also have an impact on solar investments. Those with streamlined decision-making structures — such as private companies where one or two executives can move ahead with an initial solar purchase — are the ones that have most likely invested in solar to date. On the other hand, government and institutional organizations can be slower, with more layers of approvals to move through to get to a decision to purchase and install.

Many public agencies have, however, been receptive to adopting energy efficiency measures, and the pattern could repeat itself with solar. Once the necessary protocols are in place, solar decision making in the public and institutional sectors could become quicker and easier.

An underlying driver here is that government and institutional payback requirements are longer, five to 10 years, whereas private businesses are looking for paybacks of two to three years.

Finally, for all their interest, businesses still see many barriers to solar adoption, from pricing and contract terms to concerns about the technology, whether they have a physical location to install panels and how these installations will be maintained and problems fixed.

While all these issues are seen as significant, businesses are willing to listen to solutions that provide the specific information they need to cut risks and concerns. They are waiting for someone to come and make them an offer that has the requisite level of detail.

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