Can the Groupon Model Help Scale Solar?

San Francisco is betting that the group-purchasing mania that's driven the revenue growth of Groupon may help solar installations blossom on commercial roofs.

In what an analyst called the "Groupon" model for solar, San Francisco is trying to roll up at least 20 property owners who will agree to purchase photovoltaic panels through the services company Solar City. Grouping the owners could cut costs by up to 15 percent and save even more money in fees and time in installation, the World Resources Institute estimates.

The larger point here is that as solar panel prices have fallen, the competitive action has moved largely to the business side. SolarCity, SunRun, and other companies have been coming up with all kinds of ways to get scale and cut costs. In fact, this is exactly what you'd expect from an industry as it scales up. Domestic shipments of solar modules has increased more than an order of magnitude. And with all those new installations, solar installers are innovating like crazy. They've come up with new financing and leasing models, battled local red tape, and come up with ways of streamlining logistics.

All that's led to some amazing growth. SolarCity has over 1,000 employees and is still hiring up. When solar is a massive industry (as I'm almost sure it will be), we'll remember these days as the precise moment when the solar businesses figured out how to play their cards. In deploying massive amounts of solar, they'll keep the virtuous technological cycle of scaling up running.

Lower prices --> expansion of market opportunity --> larger, better companies reduce costs/prices --> more units sold --> greater demand for panels --> more R&D investment --> lower prices --> start again

That's been the dream since the 1970s, but it's only over the next few years that the numbers will get big enough for solar photovoltaics to really start making a difference in the national energy picture.

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