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Solar Companies: Cut Costs with eCommerce

How E-Commerce Will Help the Solar Industry Cut Stubborn Soft Costs

Is there a market for a B2B online marketplace in the solar industry?

Change and upheaval have become the rule in the burgeoning solar industry over the last decade. There have been assaults on net metering, trade wars, and technological advancements, not to mention the federal Investment Tax Credit's ever-present confusion.

Despite the turbulence, one thing has remained constant: solar hardware prices have continued their downward trend. The US Department of Energy announced in February 2016 that the average cost of solar panels had fallen by 60% since the beginning of 2010. This steady decline in module prices, which is continuing, has been followed by lower prices for inverters and trackers.

Hardware costs are important, but they are only a part of the story; in fact, they are less than half of the story. Soft costs account for 64% of the overall cost of residential solar systems in the United States, according to the DOE.

Soft costs that refuse to go away

Soft cost patterns, which include anything from consumer acquisition and supply chain expenses to taxes, fees, and labor, are not as promising as hardware cost trends. According to GTM Research's latest survey, U.S. PV System Pricing H2: System Pricing, Breakdowns, and Forecasts, consumer acquisition costs increased by 10% in the second half of 2016.

Those in the industry are well aware of the difficulty. For example, the DOE's SunShot Initiative has a multi-pronged approach to lowering soft costs. SunShot's plan includes assisting business-model and technology innovators who can eliminate some of the inefficiencies that drive up solar costs.

Entrepreneurs who have used tech and e-commerce as a tool in the fight against soft costs have received support from both SunShot and venture capitalists. EnergySage and Geostellar, both of which use online tools to lower consumer acquisition costs, have raised millions of dollars in funding.

Another SunShot grantee, EnergyBin, is using software and e-commerce to build an online business-to-business platform that could help solar companies minimize soft costs and increase their profitability.

EnergyBin's idea is simple: to build a B2B centralized members-only online marketplace where industry players — from large manufacturers and developers to small installers — can quickly and easily buy and sell new and used components.

Through information technology to renewable energy

EnergyBin's idea has already proven effective in the IT world. Broker Exchange, EnergyBin's parent company, and BrokerBin, its sister company, were established in 2002 as a centralized marketplace for companies of all sizes to buy and sell routers, servers, motherboards, and other computer hardware.

It felt easy to move from IT to solar. EnergyBin's CFO, Doug Westra, said, "We were looking for an early-stage industry, rapid growth, [one that is] scalable, and most importantly...the creation of a B2B broker market for fresh, excess, recycled, refurbished, and antique components."

Despite the fact that BrokerBin has 3,500 member companies in 63 countries and over 12 million products for sale, Westra added, "We see the renewable and solar marketplace opportunity as high, if not bigger, than the IT hand."

A consolidated marketplace may help the solar industry overcome some costly supply chain and communication inefficiencies. “What I saw in the industry was project estimators and sourcing teams spending a lot of time working their networks to get what they thought was the best possible component price for their estimates,” said Keith Bluford, senior vice president of business development at EnergyBin, who previously worked for Sunora Energy Solutions, a solar developer.

“They thought they were getting the best price, but were they, given their limited understanding of the overall supply chain?” he asked. “There was no real way for companies to purchase or sell solar components easily and cost-effectively with someone outside of their siloed network.”

Promoting accountability and giving things a second chance

Transparency around pricing, location, and availability becomes possible with a consolidated marketplace that involves a critical mass of stakeholders in the solar supply chain, and information silos can be broken down. When the marketplace includes both industry behemoths and mom-and-pop installers, a centralized network ensures that all members, regardless of scale, have exposure and access to the entire solar supply chain.

There are other explanations why a more productive supply chain and communication channel will support a rapidly developing – yet still very young – solar industry. The drastic drop in the cost of solar hardware has sparked a global construction frenzy of new solar projects. However, as the industry grows older, there will be a wide demand for used machinery.

“There is a growing marketplace for what happens with the second life of components, from utility to residential,” Bluford said. The problem of second life is complicated by companies that have gone out of business, given the uncertainty of the solar market. Many installers choose equipment from companies that have since gone out of business, so a marketplace that links them with suppliers of used equipment can be extremely beneficial. This is particularly true when the used parts have a higher value.

“When you have equipment that is coming back for a second life, there will be a refurbished marketplace and vendors that will have warranties around that equipment,” Bluford said.

A tool that can develop with you

After launching, EnergyBin's first goal was to ensure simple community-wide contact between buyers and sellers, such as the ability to generate a list of components you want to buy or sell and quickly broadcast it to the entire community. The focus now shifts to more sophisticated searches and keeping details up to date.

“We know those are critical to the platform's and community's success,” Bluford said. “When customers are shopping for something, they want to know that the inventory is current, and they want to know that they can easily upload and handle inventory that they want to monetize. The method must be simple and straightforward to use.”

But, just as the solar industry is rapidly changing, Bluford maintains that EnergyBin will be just as nimble, thanks in part to lessons learned at BrokerBin and the advice and assistance of EnergyBin's solar industry advisory board and flagship member companies.

The rest of the features are ready to go. The organization is currently focusing its efforts and resources on developing the platform's technical specification library, business analysis database, and reporting.

Another feature on the way is "part history," which has proven to be extremely useful on BrokerBin. Renee Kuehl, EnergyBin's vice president of sales and marketing, said, "You can click on an icon or pop up the history of that part from 30, 60, 90 days out, describing the supply and demand for that particular part, as well as the price and how many people have searched for it." Geolocation and improved mobile capabilities may be among the upcoming features.

The EnergyBin platform is positioned to be a part of a larger shift in the solar market toward greater complexity, performance, and connectivity. Soft costs could decrease as a result, more in line with the costs of modules and inverters.

“It's a paradigm change in the industry's current business model, which is based on silos,” Bluford said. “This is a shift toward a consolidated community and forum that provides all members of the supply chain with the resources they need to interact directly with one another. It's all about getting the solar supply chain together under one network and transforming how they do business today, which will influence their efficiency and drive down soft costs in a variety of areas.”

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