HeatSpring Solar Startup Guide

Version 2

Published - December 1st, 2014

Revised May 2016
Author: Chris Williams
Guide structure:

1. THREE TYPES OF BUSINESSES in the solar installation

supply chain
2. FOUR TYPES OF SOLAR BUSINESS SCENARIOS and
research focus areas, skills that one might need to acquire, and
research material
3. MATERIAL NOT COVERED in this guide

Before you read…

 Remember to keep your current skill set in the back of your

mind to find the most useful content.
 Try to identify your goal before exploring the content.

1. THREE TYPES OF BUSINESSES in the solar installation supply

chain
When looking at installing solar, there are three main parts of the supply
chain that are actively installing equipment.

• Developers
• EPCs
• Subcontractors

Other primary players in the supply chain, not discussed in this

article:
 • Support services: accountants, lawyers, and supporting
engineers, especially in commercial solar
• Manufacturers: manufacturers of all the installed solar equipment
• Distributors: provide low volumes of equipment and support
services, mainly to the residential and light commercial market.

A Solar Developer

A solar developer is typically responsible for all elements of a project

except for designing and building the array. This can include finding
land, getting site control, identifying investors, identifying and finding
an EPC (Engineer, Procure and Construct), negotiating and signing a
PPA (Power Purchase Agreement) with the off-taker and the investor.

A developer makes money on the spread between the cost per watt that
an investor buys the cost per watt for an EPC to build the project. If a
developer can sell a 1MW project to an investor for $2.00 and they can
have an EPC build it for $1.70, they make $0.30 per watt.

However, developers take on a lot of risk early in the life of a project.

They’re responsible for completing feasibility studies that the utility may
require, gaining site control, and performing initial engineering work to
finalize the interconnection.
The word “developer” tends to be used only for commercial and utility
projects. In residential projects, you’re simply selling to a residential
homeowner.

A developer must be well versed in:

• Investor relationships. The developer tends to be the point person

bringing all of the parties together to make a project happen. This
is heavily dependent on identifying and getting project investors
interested in buying projects.
• Local solar policy and legal aspects. Local incentive structures
and legal rulings can have a significant impact on the ability to
develop solar projects. A solar developer must be extremely
knowledgeable about policies and precedents in their region.
• Interconnection policy and land access laws. Getting site control
and grid interconnection are two of the most important aspect of
developing a solar project.
• Communication, negotiation, and planning. A large component
of a developer’s job is simply communicating and managing all of
the parties involved in the transaction.

A Solar Engineering, Procurement and Construction Firm (EPC)

A solar EPC is responsible for designing, building, and commissioning

an array. It’s common for a developer to sign a contract with an EPC to
build their array. The relationship between EPCs and developers can
also be somewhat vague. EPCs often want to start developing projects;
developers will also occasionally offer EPC services.

EPC firms should seek to develop the following skills for residential,
commercial, and utility projects.

• Bidding. EPC firms must be able to win bids effectively and

deliver project profitably.
• Engineering. EPC firms are typically responsible for designing a
project. This can include the structural or civil engineering,
electrical engineering, and equipment selection.
• Project Management. When the project begins, the EPC is
responsible for construction project management. Project
management is critical in solar construction.
• Construction. The EPC firm is responsible for the construction of
a project. Some EPCs have their own installation staff of
electricians and contractors, others will bid, design, and manage
the project while subcontracting the labor.
• Commissioning. The EPC is responsible for proper
commissioning of a project.

Subcontractor

A subcontracting firm performs a portion of the construction

work needed to complete a solar job.
Subcontractors are commonly responsible for providing labor to build
the project, should the EPC not do this.

The skills required by a subcontractor:

• Bidding. A subcontractor must be skilled at creating effective,

competitive bids. Most jobs from EPCs will be put out to bid.
• High-quality, code-compliant work. A subcontractor must be
able to work quickly but perform high-quality and code-compliant
work.

2. FOUR TYPES OF SOLAR BUSINESS SCENARIOS and

research focus areas, skills that one might need to acquire, and
research material

For those planning to start a solar business, it will be assumed that your
current background and skills are what will be leveraged and used in
your new venture.

Scenario 1. You own an existing contracting business focused on

residential clients.

This includes electrical, general, and roofing contractors. You want to

start selling solar to your existing customers. This can be one of the
easiest ways to enter the solar industry.
Step 1. Decide- will you be selling to property owners or other
contractors?

If you’ll be selling to property owners, there are two things you should
focus on:

• Do you have customers asking for solar right now in your current
business? If you already have customers asking about it but you’ve
turned people away, this is a great sign. If this is the case, skip to
question two around technical design. By understanding the
technical design of a system, you’ll have the knowledge to a quote
a system confidently.
• Have you surveyed your past customers? If you don’t have
customers asking about solar but you have an existing book of
business, you should survey. Ask folks if they’re interested in
lowering their electrical bill with solar, and gauge the interest of
your existing contacts.

If you’ll be selling to other contractors and firms in the supply chain,

you’ll need to build relationships with contractors, architects and/or
engineers that are selling solar and need to have work subcontracted.

• Find your Local SEIA (Solar Energy Industries Association)

chapter and go to meetings.
• Find your local USGBC (United States Green Building Council)
chapter and go to meetings.
Step 2: Assess- do you know how to design and install a solar array from
start to finish?

If you already have a technical understanding of solar, focus on Step 1

and Step 3 to get your business going.

If you don’t know how to perform a site visit, design or install a system,
you’ll need to invest in technical training. A technical understanding of
all of the equipment will be key to understanding how much a system
will cost to install, how much energy it will produce, and how much that
energy is worth. Those three elements are the foundation of selling
homeowners, quoting jobs, communicating the benefits of financing, or
hiring other technical folks within your business.

What elements should you understand about designing and installing

residential solar arrays?

• The equipment involved in an installation

• The price of equipment and what a good and bad deal look like
• How to perform a site visit and determine the best equipment for
the job
• Project management best practices
• The interconnection process
• Electrical code and how this impacts solar design
• What’s required to submit and complete a job
Step 3: Ask- do you know how to communicate and sell solar to
homeowners? Do you know the difference between solar leases, solar
loans, and cash sales, and can you sell them equally?

You’ll need to understand all of ways that residential solar is sold, even
if you don’t offer all of these options. While a cash sale was what drove
the solar industry before 2007, leases have dominated since then. Now,
the trend is moving toward solar loans.

You should be able to answer the following questions about solar sales:

1. How much solar can fit on a roof?

2. How much does it cost to install a solar array?
3. How much energy can an array produce?
4. How can we calculate the value of the energy that will be
produced?
5. What will the returns of a solar array for a cash investment look
like?
6. What are the returns after a solar loan sale and how can we
communicate that?
7. How can we communicate the benefits of a solar lease?

Free Reading Resources

Scenario 2. You’re looking to start a new business focused on
residential clients.

Since you will be “starting from scratch” here, focus on acquiring

new customers. You will still need to understand the technical side and
be able to install projects profitably.

Becoming very active in your community and introduce yourself as a

solar installer is a positive first step. By becoming active in parts of the
community that care about environmental issues, you’ll likely bump into
potential customers.

1. Join your local environmental group

2. Join your local 350.org chapter
3. Join your local Chamber of Commerce to get access to local
business owners.

There are a number of distributors that provide equipment and can also
help connect you with the installers who buy from them.

Scenario 3. You own an existing contracting or service-based business

focused on commercial clients and you want to enter and focus on
commercial clients.

Commercial solar finance, design, and installation can all prove more
difficult than with residential projects.
If you’re looking to expand into existing commercial business into solar,
there are a few things you need to focus on.

1. Know your trade and have access to customers.

2. If you’re selling directly to property owners, you’ll need to learn
about solar finance and how to communicate a large investment. If
you’re going to be a subcontractor, you won’t need to know much
about finance, but you’ll still need to have a firm grasp of the
technical side of the business.
3. If you’re going to be a subcontractor, you’ll need to be confident
bidding, designing, and installing commercial solar projects.

Step 1: Survey existing customers about interest in solar

If you are selling to property owners…

If you’ve found that customers are interested in going solar, start

investing in technical and financial training. By investing in technical
and financial training, you’ll have the skills to find and understand if a
potential site and client will be a good fit for solar or not.

If you want to become a subcontractor…

If your plan is to become a subcontractor to other solar providers, you

need to connect with these contractors and see if they need solar work
completed. If they do, you’ll need to heavily invest in training on solar
code, products, design, and NABCEP certification.
All solar jobs require a few key components. It’s rare for a single
organization to be able to complete all the necessary tasks, so it’s
common for companies to subcontract the work that they cannot do.

All solar projects require:

1. Electrical engineering and design

2. Structural design for roof-mounted projects
3. Civil engineering for ground mount projects
4. Roof installation for roof-mounted projects
5. Earth work for ground mount projects
6. Electrical work

If you already provide roof contracting, contact complementary solar

service providers to see if they need contractor partners to perform
roofing work. Do this if you provide electrical engineering services, as
well.

In order to find existing contractors there are a few places you can go to
start your research:

• Local SEIA (Solar Energy Industries Association) chapter

• Local USGBC (United States Green Building Council) chapter
• Your local IBEW (International Brotherhood of Electrical Workes)
will do electrical solar work, but may need help with other aspects.
• Commercial Roofing Association
Step 2: Invest in technical information, product training, code training,
and NABCEP Certification

If you’re going to be selling and installing solar, technical training is

required. If you’re going to only be subcontracting work from other
contractor, you won’t need to know the finance details but you’ll still
need to know the technical aspects.

Product Training

• Inverter training. The inverter training will likely be the most

beneficial for larger projects.
• Racking training. If you’re going to focus on roof-mounted
projects, it’s very important that you and your team understand
how to integrate solar without breaching the roofing membrane.
• Local distributors offer training on a number of their products.

Certifications

• RISE Certification
• NABCEP Certification
• UL Solar Certification

Step 3. Invest in Solar Finance Education

If you’re going to be selling solar to property owners, you need to have a

deep understanding of financial analysis and the ability to effectively
communicate the financial implications of solar to both property owners
and investors.

If you are selling commercial solar in a cash sale, you’ll need to master:

• Local policy
• SREC pricing and pricing volatility
• Installation costs and the difference between gross and net installed
costs
• Pre-tax and post-tax returns
• Discounted cash flow analysis

If you plan on working with investors to offer PPAs, you’ll need to

know all of the above, in addition to:

• Setting the PPA price

• Selecting the best legal structure to use when setting up a solar
project
• Ways to identify project investors and communicate the returns to
them

Luckily, in the past few years, we’ve created a lot of excellent content
that can help you with research on financing commercial solar projects.
Scenario 4. You want to start a new business focused on commercial
clients.

It is quite difficult to start a new business focused exclusively on

commercial clients. Gaining access to decision makers of commercial
property poses a significant challenge, and commercial property owners
tend to be more difficult to get in front of. The technical design and
installation of commercial applications is (almost always) more
complex, and you’ll need more training on the financial aspects to sell
such a large investment. Because the size of the project is larger, there’s
also more risk in making an incorrect decision.

The technical and financial training you might need when starting a new
business focused on commercial solar is similar to that you would
complete before expanding a business. What’s different is that you
might not have the technical or financial background, which will take
you longer to learn.

Here are a few ideas for gaining access to commercial property owners:

• Start spending time with local property owners’ association.

• Make a list of the business owners that you know, and contact
them to see if they own the property and if they’re interested in
solar.
• If you know friends who are working on a business that leases
space, talk with them and get them name of the landlord.
In order to communicate and sell to commercial property owners you’ll
need a strong technical and financial background to gain their trust.

If your goal is to focus on commercial property owners, it will likely be

too time-consuming to learn the technical design, installation, and
commissioning components and the financial and sales components.

3. MATERIAL NOT COVERED in this guide

This guide is focused on providing readers with enough information on
the technical and financial aspects of solar to identify interested parties
and (hopefully) land your first job. We didn’t address all of the elements
required to go from a single job to dozens or hundreds per year.

There are a number of other elements that we didn’t talk about that are
important to creating a sustainable business.

1. Pricing
2. Getting access to customers in a standardized and repeatable
manner
3. Cash management
4. Hiring and paying sales people as you grow
5. How to structure your business to optimize efficiency and
productivity as you grow
 Additional Resources + Opportunities to Continue Learning
 Enroll in our Solar Executive MBA Training for 6 weeks of intensive,
hands on learning about solar finance, sales and marketing
 The totally free Financial Analysis of Solar Energy Projects course
will introduce you to the financial analysis of solar energy projects
using Village Power software
 Stay up to speed on everything happening in the world of renewable
energy with our friends at RenewableEnergyWorld.com
 Course: Financial Modeling for Solar PV Projects
 Heard of SREC’s (Solar Renewable Energy Credits)? Understand
them for free with our two week course
 Free Course: Commercial Solar PPAs 101
 Want to better understand PV energy, storage and megawatt design?
Check out our Advanced Solar + Storage course
 Check out SolarPro Magazine for all things solar design, installation,
operations, products and much more
 Course: Finance 101 for Renewable Energy Professionals

Thank you for reading. Let us know how we can improve this
guide and remember to check out our free and paid lectures,
trainings and tools at HeatSpring.com. For regular industry
content, expert instructor articles, company updates and much
more, check out HeatSpring Magazine.