As the COVID-19 pandemic wears on in the United States, the hardest hit segment is likely to be commercial solar â€”Â projects built on businesses, schools, and government buildings.
Compared to its pre-pandemic forecast, Wood Mackenzie is forecasting a 32 percentÂ drop in commercial solar installations in 2020. Commercial businesses â€”Â hugely impacted by current economic conditionsÂ â€”Â will likely opt out of discretionary investments like installing solar this year.
But whatâ€™s the true potential of this market post-2020? Wood Mackenzie andÂ Station A, an AI-enabled clean energy marketplace, collaborated on a first-of-its-kind analysis to find out.
Historically, measuring commercial solar potential has been challenging due to a lack of reliable data. By combining Wood Mackenzieâ€™s project-level solar data with Station Aâ€™s building-level data*, WoodMacÂ was able to get an accurate bottom-up view of this market for the very first time.
The key findings wonâ€™t surprise anyone in the commercial solar industry:Â thereâ€™s massive market potential.
About 3.5 percentÂ of all commercial buildings have solar and another 1 percentÂ are attached to community solar subscriptions, where customers buy power from a solar project located in the same utility territory.
Not all buildings spend enough money on electricity to make solar a worthwhile investment. Once you account for those buildingsÂ â€” roughly 25 percentÂ of the building stockÂ â€”Â youâ€™re left with approximately 70 percentÂ of the commercial buildings as potential targets for solar installers.Â That equates to more thanÂ 600,000 sites and 145 gigawattsÂ of solar capacity potential.
Wood Mackenzieâ€™s outlook has the commercial solar market growing at roughly 2 gigwatts a year from 2021-2025, bringing the installed total to around 8 percent of the total addressable market.
But despite the enormous market potential, major challenges remain. Unlike residential solar that has standardized financing, or utility-scale solar that has the benefit of scale, commercial solar has neither.
Each commercial solar project has a high degree of customization and complexity. The work and expense involved in acquiring a customer and obtaining financing frequently kills deals. And the pandemic may temporarily exacerbate these problems by causing financiers to be more conservative.
These are tough challenges that depend on numerous financial and regulatory factors. And thereâ€™s a litany of innovative companies working hard to solve these problems. If they can be overcome, a massive addressable market awaits.
The new commercial solar market analysis with Wood Mackenzie and Station A is available here. Michelle Davis is a senior solar analyst at Wood Mackenzie.
*Station Aâ€™s AI-enabled platform includes the majority of commercial buildings in the US that have at least 10,000 square feet of roof space, roughly the equivalent of a 70 kW solar project.