Cheap Solar Panels Aren’t Enough to Make Solar Installers Profitable

In a struggling solar industry, solar installation companies have been the one bright spot. Record low solar panel prices have lowered their costs, and various incentives and innovative business models are propelling fast growth. But installers are still finding it hard to make a profit—if a recent IPO filing from Solar City is any indication.

To some extent, business looks good for Solar City. According to the documents, which were originally filed this spring but only made public on Friday, Solar City has been growing quickly in terms of both its revenues and total installations (see “Why SolarCity is Succeeding in a Difficult Solar Industry”). But as the company seeks to grow its business, its operating expenses are increasing and keeping the company from being profitable. It reported net losses of $47 million in 2010—it lost more than that in the first 6 months of this year alone.

Solar City has pioneered a leasing program that allows customers to have solar on their roofs at no cost—the solar panels are paid for over time by selling the power they produce to utilities (see, “Leasing Solar Power”). To become profitable, the company says it needs to entice more customers.It also needs to get better rates on the funds it uses to finance solar panel installations. And even though solar panels are relatively cheap now, the cost of those and other components needs to come down.