Residential solar has had a rough couple of years. In 2024, the market contracted 31% and major companies like Sunpower and Titan went bankrupt. Now, only halfway through 2025, Sunnova and Mosaic have filed for bankruptcy, too. The market has suffered from low demand, high interest rates, and major policy changes like California’s cuts to net metering.
So now that the One Big Beautiful Bill phases out key tax credits, what’s next for the battered industry?
In this episode, Shayle talks with Julien Dumoulin-Smith, who leads equity research for power, utilities, and clean energy at Jefferies. Shayle and Julien cover topics like:
- Why the IRA eased — but didn’t solve — the troubled market’s key challenges, like high interest rates, tax equity challenges, and intense competition
- How debt prevented companies from weathering rising input costs
- How the final version of the One Big Beautiful Bill avoided the worst case scenarios for residential solar
- Whether the bill will impact utility or residential solar more
- How the shift toward leasing will benefit larger companies over small, local installers
- The impact of rising electricity prices
Resources
- Latitude Media: Sunnova’s debt problem
- Latitude Media: Is residential solar poised for a comeback?
- Open Circuit: Does residential solar have a bad product?
- Catalyst: Could VPPs save rooftop solar?
- Latitude Media: SunPower is bankrupt. Competitors see opportunity
Credits: Hosted by Shayle Kann. Produced and edited by Daniel Woldorff. Original music and engineering by Sean Marquand. Stephen Lacey is our executive editor.
Catalyst is brought to you by Anza, a solar and energy storage development and procurement platform helping clients make optimal decisions, saving significant time, money, and reducing risk. Subscribers instantly access pricing, product, and supplier data. Learn more at go.anzarenewables.com/latitude.
Catalyst is brought to you by EnergyHub. EnergyHub helps utilities build next-generation virtual power plants that unlock reliable flexibility at every level of the grid. See how EnergyHub helps unlock the power of flexibility at scale, and deliver more value through cross-DER dispatch with their leading Edge DERMS platform by visiting energyhub.com.
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Transcript
Tag: Latitude Media: Covering the new frontiers of the energy transition.
Shayle Kann: I’m Shayle Kann, and this is Catalyst.
Julien Dumoulin-Smith: What I would argue is it was somewhat counterintuitive post-IRA. It was almost like the best day was day one after IRA, and after that there was just an ongoing train of challenges — whether it was the wider trade narrative or frankly, as you put your finger on a second ago, the NEM 3.0 changes in California and how much that pulled back participation.
Shayle Kann: Coming up: the murky future of residential solar.
I’m Shayle Kann. I invest in early-stage companies at Energy Impact Partners. Welcome.
So it has been kind of a rough run for residential solar dating back well before Trump’s recent budget bill. Actually, we’ve seen bankruptcies from major players like Sunnova and Mosaic, and many smaller players have exited the market as well. This also extends to equipment suppliers like Enphase, whose shares are down 40% this year as of this recording. Not everyone is quite as battered, though. Sunrun, for example — the market leader — is actually up year to date in the public markets after taking more of a beating in 2024.
Anyway, it was clearly already an industry in somewhat choppy waters. And then the one big beautiful bill hit. So what’s the outlook now?
I decided for this one to bring on my favorite watcher of public markets in this space: Julien Dumoulin-Smith of Jefferies. He’s been covering all the public resi solar companies and has a clear view of the world they’ve been navigating.
Also, before we begin, we’re going to do another Ask Me Anything episode where I attempt to answer whatever questions you have about these markets, these technologies, these companies, investing in them, juggling — whatever you want. Just email us if you have a question at catalyst@latitudemedia.com.
And in the meantime, here’s Julien.
Shayle Kann: Julien, welcome.
Julien Dumoulin-Smith: Thank you very much for having me.
Shayle Kann: All right, let’s talk about residential solar, which has been a market that has experienced a lot of tumult, I would say, over the past couple of years. I want to start by having you walk me through the state of the market and the major players in the market prior to the budget bill that recently passed. So talk me through what’s been happening in that market over the past, I dunno, year or two.
Julien Dumoulin-Smith: Yeah, look, if I were to step back and talk about residential solar at the highest level, it’s been a fairly tumultuous backdrop already. You’ve seen a lot of shift in market share, a lot of shift in technology. Fundamentally, solar is a technology sector — whether it’s the electrical equipment or the panels themselves — and frankly, even the financing piece of it has been evolving too. So ups and downs in the years going into this to be sure. But I think at a highest level, post-enactment of IRA, you all of a sudden opened yourself up to a lot of different positive angles, right? Principally, the domestic content adder, the ability to tap energy communities as supplemental adders to the core ITC. That really was a watershed moment to try to enable real profitability to the space.
I think that is at its core what transpired in ‘22 onward. Now, look — it’s not lost on me, and probably you, that you also had a lot of tumult and exits across residential solar in the run-up to IRA. And frankly, IRA never got reformed, and yet you still had a number of bankruptcies in the last couple of years. So don’t get me wrong — it has not been a panacea, and I don’t want to characterize it as such. That’s why I say in some respects, many people turn this into the “solar coaster.” I think the example of the solar coaster is residential solar in many different ways.
Shayle Kann: You sort of made a good point there, right? The IRA passed and that provided a bunch of tailwinds for resi solar, amongst a bunch of other sectors. You said the energy communities and domestic content bonus means that some projects could get 40–50% tax credit, etc. And yet, even prior to this budget bill getting passed, it had actually been a pretty tough ride for a lot of the companies, and we had seen some bankruptcies. What was driving that?
I can name at the really high level two things that seemed like they were fundamental drivers: basically interest rates rose — and that seems to have a pretty meaningful impact on adoption of residential solar or possibly profitability of the companies — and net metering changes, particularly in California, just making it less lucrative. Was it a thing where all of a sudden companies couldn’t sell profitably? Was it that consumer demand started to dry up? Was it that they were financially mismanaged? What was going on there?
Julien Dumoulin-Smith: I mean, I think at its core — to be honest with you — it’s competition. That’s probably the single best way to summarize it. I don’t mean that to be a cop-out, per se. Your initial response is right: interest rates going up — of course. This is an incredibly interest-rate-sensitive product. Interest rates go up, that’s the principal driver of raising prices.
Now look, you talk about competition. In theory, if it was less of a competitive space, you would say: interest rates go up, the cost of solar goes up to homeowners, and it’s just passed along. We talk a lot about inflation in the current environment and say, “Hey, well, consumers are just going to take it.” Not so much, as it turns out.
Shayle Kann: That sort of relates to one question I wanted to ask you, which is: Is — or was — the financial structure of the major players, the public players in the market (companies like Sunrun and Sunnova and so on), how are they structured financially? And when things happen — I dunno, tax equity becoming more expensive, interest rates going up — how does that flow through to the economics of those businesses?
Julien Dumoulin-Smith: Look, to be fair, I mean, I think you hit on another core point. If you had to focus on the existing large companies that are public — I mean, look, I think a lot of the story there was just leverage. How they finance themselves gave them much less latitude when things went against them, right? Let’s call a spade a spade. This is true across any sector we cover. I mean, you and I have talked over the years — you’ve seen a lot of these different permutations. Leverage is a real killer over the years, and look, to be honest with you, I think that is definitely a contributing factor as we saw here yet again in recent months.
I mean to cut to the chase, one should have had more of an equity structure given the volatility. And again, you could talk about the volatility. You’re like, “What are you talking about? Customers sign up for a 20-plus-year term. Volatility?” I mean, that doesn’t resonate. Yeah. My point to you is you don’t necessarily know how many customers are going to be signing up. You don’t know the discrete terms that you’re going to sign up that next customer. The volatility of the business that we just described — whether it’s interest rates or otherwise — that’s where there’s the ambiguity in the business model.
It’s not in the discrete decision of like, “Hey, a customer is signing up for 20 years, that’s contracted cash flow.” Cool. That’s great. That’s the core tenet of the business model. But the supplementary piece of holding leverage at the parent company is really what we’re talking about here — having a company that goes out and effectively finances and develops residential solar that has a certain limitation on the amount of leverage it can take. And making sure that you’re very diligent to keep the maturity profile and give yourself a lot of latitude is truly important.
I think that’s really what ended up being a critical factor for at least a couple of the major bankruptcies in the last few years — just diligence in rolling debt, at its core. Now, you could also go back to it and say like, “Wait a second. Leverage? Come on now. You can’t blame leverage.” No, you’re right. You can’t just blame leverage naively. The ability to refinance, the ability to roll forward your debt — if I have a maturity, if I have a home or whatever, I’m just going to roll it forward. The problem here was that you couldn’t necessarily, when you needed to.
You needed a proactive roll for your debt. And more to the point, the economics of the business — ergo, go back to that core mantra of competition — wasn’t necessarily working in your favor. You had a number of new entrants, right? Think about this. If you want to talk about probably the unsung story of what’s going on in residential solar in the last couple years, it’s been: You have a number of different novel competitors out there. You’ve got this NextEra subsidiary. You’ve got various private folks from abroad coming in with their own equipment, tethering leasing terms to that equipment. Lots of — and I would call that innovation. I would call that, look, in a world of solar and understanding that it’s sort of like up to consumers to select — I get it, I really do.
But again, I would also emphasize: It’s been brutally competitive at times. And I think in many ways, that’s the culmination of what we’ve seen out there in the inability to pass along in a linear fashion pricing. And I could argue — even from today, regardless of what’s happening with OBBB — is that, frankly, the competitive landscape could get worse. I mean, you could see a declining volume environment in the next years against the backdrop of having still a landscape of different solar vendors. And frankly, the prospects there become a little bit more of a knife fight in the sense that, yeah, we’re competing over a greater number of customers. How does that evolve? How do other players fall out of this market? That’s the open question. But we can talk about that — there’s a lot to unpack there, frankly.
Shayle Kann: What do we know about consumer adoption and, I guess, demand elasticity? One of the things that I don’t really have a clear handle on is — obviously, at the margin, if solar becomes more expensive because we have import tariffs, because interest rates go higher, whatever it is — obviously at the margin, that should impact customer demand and volumes.
But I don’t really have a sense of — back in the day when I was paying more attention to residential solar, there was some magic point you had to hit, where you had to offer a 20-year lease or PPA with a 3% escalator that gave you 15% year-one savings, or whatever the number was. Something like that.
Do we have evidence of how much demand elasticity there is? In other words, do small changes in price to the consumer really drive meaningful demand changes? Or is the market less elastic than that — and what’s actually happening here is more about the profitability of the individual unit for the supplier, for the installer?
Julien Dumoulin-Smith: Yeah, I mean, look — I’m not going to try to argue that this is a truly competitive landscape. What I would argue is — you’re right — there’s a lot of different inputs that are going against companies, and their inability to, in a linear fashion, pass those along to customers has been unfortunate.
Not to rehash too much from the last second — and frankly, we’ve seen a lot of different oscillations in the last years. It has been striking. I think what I would argue is: it was somewhat counterintuitive to the cumulative challenges that we’ve seen post-IRA. It was almost like the best day was day one after IRA, and after that, there was just an ongoing train of challenges — whether it was the wider trade narrative or, frankly, as you put your finger on a second ago, the NEM 3.0 changes in California and how much that pulled back participation in California.
And that was a big volumetric impact that really cascaded not just across the actual lessors and installers, but also across equipment manufacturers. That really challenged the system, just from a volumetric perspective, for quite some time. And I think we were just coming out of that last year — and then we started talking about, “Oh, and now we’ve got this IRA question.” And I think that’s really what is in front of us now. How you think about what is to come is really going to be dictated by all variety of interpretations — not just under OBBB, but really where this administration wants to go in terms of interpreting policies. That’s so critical here, as far as I’m concerned.
But look, I want to make sure I’m answering your question directly.
Shayle Kann: Yeah, I mean, you alluded to the key thing of the moment, which is the budget bill — OBBB, as you called it. All right, so let’s dive into that a little bit. Can you just walk through what that bill does to and for residential solar relative to status quo beforehand?
Julien Dumoulin-Smith: The best way to frame what’s happening under this bill now is not just in a linear sense — okay, yeah, they’ve shortened and accelerated the phase-out of IRA, right? Okay, sure, I got it.
And in fact, in many ways, where that ended up at the end of last week was actually, frankly, at the better end of the spectrum of what fears were. Again, everyone understood at the outset that there was going to be some pain to be taken — and frankly, when you saw the House Freedom Caucus come out a few weeks ago, it was like, “Oh, they are really taking a hatchet to the residential solar space in particular.”
So you’ve seen a lot of major gyrations in the space that aren’t over yet — and we will get to that in a moment. But I really would emphasize that literally a month ago, you were staring at this being like, “Wow, you could see a precipitous decline in residential solar as of next year.” I mean, whoa, okay.
But really what’s transpired is: No, actually, leasing companies are going to be eligible to continue to participate through 2027. Residential storage is, in theory, extended to the full life of IRA — as you saw folks chiming in saying, “Look, firm capacity deserves to get the full IRA benefits.” Got it.
And then ultimately, look, the biggest dynamic for residential solar we’re looking at right now is really consumer solar in the context of this 25D piece — to the extent to which consumers can no longer qualify themselves for the tax credits. That’s a game changer.
I mean, if you want to talk about being pro-consumer or not — I mean, the nuance here is like, look, you’re going to only limit the ability to tap tax credits to corporate entities and commercial entities, and you’re going to take it away from consumers directly. Again, not exactly intuitive — but has major changes for the underlying landscape that we’re looking at here.
And I think that’s the most important point. As you roll forward to 2026, when you have this requirement go into effect, the open question is: Will leasing companies effectively take over this market?
Now, again, broad strokes — you’ve got a two-to-one ratio already of leasing companies versus folks doing loans already and doing their own financing. So again, I think the backdrop and the trend was already going toward leasing arrangements — that shouldn’t be lost on people.
But if you think about rolling forward next year, you’re basically going to have two options: You can buy this thing outright, but realistically you’re going to forego the tax credits. Or B: you can continue to use leasing companies, and they can qualify for the tax credits — and they can indirectly flow that back to you in the form of a lower offtake arrangement and offtake price.
So that’s really where the industry model’s going. And the question is: How much demand erosion are you going to see writ large on the back of that? How much of that one-third-ish of the industry are you going to say, “Well, look, that’s just demand that evaporates,” versus simply saying, “Look, they’re just going to pivot to a different financing structure,” and now you’re going to have effectively market share capture by a variety of the incumbents, principally, as far as I’m concerned.
And how are the installers themselves going to pivot to adapt to that new reality?
So for as much as we’ve seen a lot of gyrations, 2026 is going to be — again, I would call it extraordinarily dynamic in a market which, you could argue, the market itself is going to decline in absolute terms. And yet for the incumbent leasing companies, arguably, their volumes on a discrete basis are going to go higher — because they’re going to capture the market share that they didn’t previously have, that was going directly to consumers.
That’s one of the single most important dynamics as you roll forward.
Julien Dumoulin-Smith: Then, if you’ll permit me, the other important piece here that you’ve got to talk to is: Wait a second — that’s only 2026 and 2027. In theory, the tax credit — the ITC — rolls off at the end of 2027 under the deal cut with the House Freedom Caucus and Lisa Murkowski and all that across the House and the Senate.
And then there’s this nuance of like, “Wait, wait, wait — it’s not technically the end of 2027.” This so-called thing called the safe harbor, right? You have this dynamic where, in theory, if you commence construction — and again, that “commence construction” is a really technical legal term — in theory, you can buy equipment in some permutation and effectively extend out the life and the eligibility of that ITC beyond that 2027 cliff, if you will.
And so yes, technically the two-year period — 2026, 2027 — is going to be dominated by leasing companies. But the question thereafter is really going to be dominated by: Well, how does this administration seek to change those safe harbor rules? Because the day after — I mean, almost literally the day after, as in we’re literally staring at Monday, July 7th — days after this thing was formally signed on July 4th, the administration comes out immediately and issues an executive order and says, “Actually, we’re going to rethink how we’re doing this commenced construction and safe harbor.”
And that’s a big question mark here — on what this means for residential solar in 2028 and 2029 and 2030. And that’s unresolved, if you catch yourself up to the story today. And that’s the single biggest “sitting at the edge of our chairs” question mark for enabling and giving some degree of visibility — because these business models want visibility. I’m building a business with two years of visibility on solar, and then I’m going to sort of roll the dice on how this evolves further.
Shayle Kann: Correct me if I’m wrong, though — the degree to which the commence construction rule, and any changes Treasury might try to make to it, affects huge business decisions today… it feels to me more significant, more dire, for utility-scale than it does for resi.
For resi — because this 2027 placed-in-service rule, which exists if you don’t successfully start construction by mid-2026 — that’s really, really hard to hit in utility-scale, because you’re subject to interconnection timelines and all this other stuff. Whereas in resi, you’re just kind of rolling, doing installations. Not that it’s not important, and as you said, it affects the 2028–2029 volumes — but it feels to me like if you’re in utility-scale, your eye is glued to the Treasury process. All that matters. Less so in resi. Am I wrong?
Julien Dumoulin-Smith: Look — point, counterpoint, right? Your point’s made. But I’ll give you the counterpoint on that.
Look, utility-scale solar — the reality is that market is principally driven by C&I demand: commercial and industrial demand. What is that? Effectively, it amounts to tech companies, data center demand, right?
Am I really worried, substantively, that someone’s not going to step in and want to enter the utility-scale market to buy renewables in the future? We’ve already got a clear deficit of supply to meet what effectively is tech and C&I demand out there. So if I were to summarize it this way: The ability to pass along the inflation ex-tax credits in that market — which is the bulk of the renewable market — is fairly transparent. It’s going to be there.
In fact, that’s what makes this IRA reform conversation so readily happening — is that there’s a growing implicit acknowledgement of, “If these IRA credits are going to tech companies, why do we need this?” That’s the tension at its core of how this came to be today.
Shayle Kann: You’re arguing that the ITC/PTC is more existential for residential than it is for utility-scale, and thus… yeah. Because whether you get it in 2029 matters.
Julien Dumoulin-Smith: Yeah. Well, let’s put it this way — I wouldn’t use the word “existential.” I would say it this way: It’s much more transparent to me, sitting here today in 2025, that I’ve got a buyer — a.k.a. a supposed future data center company or the like — who is keen to procure that at not any price, but at a price. Rather than saying, “Look, I’m going to jack the price up of residential solar by X percent in 2028 or 2029, depending on exactly how safe harbor plays out, and depending on whether they buy storage with it.”
And there’s sort of an uncertain elasticity on pricing that you’re walking into. Clearly, there’s a market for solar — for residential and for utility-scale — ex-tax credits. And without knowing who that buyer is transparently, there’s a much greater degree of uncertainty on the residential side, given how much more meaningful — on a relative basis — the value is of that tax credit in residential solar versus utility-scale.
On a percent basis, the tax credit is more valuable.
Shayle Kann: Right, fair enough. So I want to go back and unpack for a minute just some of the other dynamics that you laid out there. So basically what the bill does is it says: If you are doing homeowner ownership of residential solar — whether through direct purchase or a loan, which is the two ways that you do that — you are not going to get the tax credit after the end of this year. So it kind of ends tax credits at the end of 2025 for anything that is owned by the homeowner.
And then meanwhile, it allows the tax credits to continue in the same manner as you get for utility-scale if it is third-party-owned, which is where you’re saying the leasing companies — in theory, PPAs as well — would qualify in the same manner.
And so it really advantages anybody who can offer third-party-owned solar. And I guess this is my question for you: Does the dynamic of qualifying for the credits for a lease versus ownership probably result in an even bigger incumbency advantage? Do you have to be a big player to take advantage of those credits, rather than being a small local installer?
Julien Dumoulin-Smith: Look, let’s be honest, that trend toward consolidation has been going on for years. And look, I will firmly agree with your characterization — what we are poised to see, whether it’s 2025 into 2026 or 2026 going into 2028 — we are going to continue to see the consolidation.
Now, again, let’s be careful. Depends where you are in the value stack, right? In the financing terms and effectively who’s originating these leases? Sure, that’s going to continue to consolidate. That’s what the interesting question is — who’s going to win in that race and what is the innovation there? Is it just going to be a race to the bottom on cost of capital, for instance?
But look, I think separately and distinctly from that — as you frame it — it’s like, look, the individual installers who had been principally selling loans and had sidestepped this whole conversation to a large extent, that’s really going to continue to be phased out.
And in many ways, what I would argue to you is: when you look at the trend over the last years where you’ve seen residential solar companies take advantage of the IRA — which only authorized domestic content and only authorized energy communities for leasing companies — frankly, that already shifted the market share away from loans.
The higher interest rates themselves shifted people away from loans. That has been the story of consolidation for the last two years running, and that’s only going to be magnified here from what we can tell with the 25D piece phasing out at the end of the year.
Now look, there could be a pull-forward, there could be some dynamics where you see folks say, “Actually, I’m going to run in, I’m going to buy it while it’s hot. I’m going to get it before the end of the year.” Do you see a little bit of a pop? We’ve been asking ourselves that for a little while here.
Shayle Kann: Okay. Two other dynamics that I want to talk about with you. One is the effect of likely rising electricity prices. I mean, we’re already in an environment where retail electricity prices have been rising — more so in some places than others, but significantly.
And I think general expectations are that a variety of factors, including removing tax credits for utility-scale renewables, will probably cause electricity prices to rise even more in the future. How do you think about that in the context of residential solar?
Obviously the dynamic of the economics to a customer of residential solar are a function of how much does the solar cost versus how much does your grid electricity cost. So if electricity prices are inflationary across the board, presumably that’s a helpful signal for resi solar — but I don’t know how quickly that flows through to actual demand.
Julien Dumoulin-Smith: So yeah, look — if I were to answer the question directly, I would say: Look, we ran this math a month ago as we were looking at the prospects of OBBB phasing out the IRA incentives. We said: Utility rates are going up.
So when we ran our math, assuming that your starting point was an ITC that included some degree of domestic content and energy communities — the point is, if you’re talking roughly a 40% tax credit to begin with and you’ve rolled that off, you’re effectively talking about, ballpark, a 3-cent-per-kilowatt-hour increase in pricing.
So again, is that the end of the world? No, not necessarily. If I were to use a year-over-year bill increase, you’re talking about, call it, almost a 7% five-year trajectory — if you think about this phase-out happening cumulatively over a five-year period or something like that. You’re talking about a 7% per annum increase over five years.
So it’s not trivial. And are we expecting utility rates to increase at that rate? No. But I think the historical growth rate of utility rates — at 2 to 3% — could we expect that to increase relatively speaking? Sure. I think that’s certainly in the cards.
And I think a further nuance here, and a really important nuance, is: Is the cost structure going to come down on residential solar? That’s the other elephant in the room, right? To be honest with you guys — we talk about competition, and this may really not sit with people, because people are like, “What are you talking about?”
There is still a lot of value that is caught up at various points in the supply chain. And honestly, if you look internationally, you would ask, “Why is U.S. residential solar so expensive versus, say, Australia?”
We ask this a lot. And arguably, as we see the tax credits come out, you’re going to see that spread — that difference in how you price residential solar in the U.S. — start to come off. The dealer markups are going to start to come down.
I think that’s the principal variable here that you’re going to be looking toward. And that could actually mean that that 7% impact — or, you think about that 3-cent-per-kilowatt-hour — is blunted as it makes its way to consumer pricing.
And so you could make — as you kind of allude to — you could make a much more cogent argument saying, “Well look, utility rates: 2 to 3%. Not sure that’s really the case prospectively.” I’m not going to say it’s 5%+ by any means, to be sure. But I’m also not going to tell you that 7% is going to be going right to the consumer either.
I think as you look at it, you’re going to be parsing details. And yes, indeed — as I go back to initially — ex-tax credits, there is still clearly a market out there.
And the fact that the ongoing tax credit for the storage — which we haven’t even talked about separately — is still there only adds to that conviction.
Again, the question is: For a sector that has otherwise been a growth market — residential solar has been very much viewed as a growth sector writ large, which is difficult to stomach entirely in an infrastructure world — you’re like, “Wait a second. So it doesn’t appear to be a growth sector anymore?” It’s a sector in overall volumetric decline potentially for several years in a row. And how does the industry adapt around that?
That’s the new, bigger reality that we should be addressing and talking to here.
Shayle Kann: Okay, so you alluded to my last thing to talk about — which we maybe shouldn’t have saved to the end, but is super important — which is storage.
So obviously the storage credits will persist longer than the solar credits will, so there will be a particular incentive to continue to attach storage. I guess I’m curious about two things:
One, how central has storage already become for these residential solar companies? Is the attach rate so high now that we should actually be thinking of them as solar-plus-storage companies, or is it still kind of a side business for them?
And then, do you foresee a future wherein some of these companies at least pivot to a storage-only business, or at least significant storage-only installations? Is there a world for resi storage in the absence of resi solar? We have seen those deployments happen in some places already.
Julien Dumoulin-Smith: Yeah, lots to unpack there — but I’ll try to be concise.
Number one: storage. Look, I don’t necessarily think there’s a sizable storage standalone business — at least relative to the size and the scope of what we’re looking at today in solar and storage and solar-only. Obviously it’s there — it’s just, as a relative percentage of people who are going to do solar and solar-plus-storage, I think the storage-only market’s modest, A.
B, look — I think when you think about the business model, yeah, clearly the fact that you can still sell solar and storage, and then take a tax credit only on the storage piece (which conceivably also includes the power electronics, mind you — critically), that’s actually a real value proposition there.
So I think you’re going to see an evolution of sort of a cash sale plus a lease sale, or some sort of lease that effectively embeds the tax credit on the storage piece — but then also has an ongoing solar lease in there as well that just doesn’t have a tax credit in it.
So I think you’re going to see — again, we talk about the evolution of the business model — the leasing terms are going to evolve to encapsulate and effectively price up modestly, but keep embedded the implicit tax credit that stays with the inverter and the underlying power electronics to integrate the storage, as well as the storage solution itself.
And I don’t think that piece is going away. I think those folks are going to innovate to get there in the next couple of years. That’s where people are going to have to win.
And we see new and novel business models emerging around storage as well, and I’m sure you’ve seen some of these different anecdotes around Texas and how this is being sold to consumers.
So: stay tuned, is what I would offer — in terms of storage being the linchpin of how solar is sold and having imagination of how that can shift and create stickiness.
Shayle Kann: Well, “stay tuned” I would say is a good coda to this whole conversation — and a good way to end it. So Julien, thank you so much. As always, really fun to talk to you.
Julien Dumoulin-Smith: Thank you, sir. So very much appreciate the time.
Shayle Kann: Julien Dumoulin-Smith leads power, utilities, and clean energy equity research at Jefferies.
This show is a production of Latitude Media. You can head over to latitudemedia.com for links to today’s topics.
Latitude is supported by Prelude Ventures.
This episode was produced by Daniel Woldorff. Mixing and theme song by Sean Marquand. Stephen Lacey is our executive editor.
I’m Shayle Kann, and this is Catalyst.
