The demand for residential solar installations in the United States has increased by almost 50% during the past three years and the reason behind it is the leasing options that are available for the equipment. This growth is seen as an opportunity by Missouri based entity Sunedison Inc (NYSE:SUNE) to invest in the roof top solar business. Sunedison is preparing to close its deal of a $1.9 billion acquisition of Vivint Solar Inc (NYSE:VSLR) as early as possible before the demand growth is expected to slow down. The deal itself is embroiled in controversy with Vivint labeling the deal as a “distraction” that has slowed the demand for residential roof top solar installations in United States.
Key factors affecting the demand for roof top solar business-
It is expected that the demand for residential solar installations in the United States would climb by 39% by the end of 2016 with 2,160 megawatts of new systems expected to be installed. Nevertheless, this growth is not in tandem with that seen in the past couple of years. The factors that are affecting the growth in this industry include the following:
- Solar Leasing – The roof top solar installation growth is largely driven by solar leasing. Companies like Vivint install panels for customers who repay in small amounts or at times nothing as an upfront fee and agree to pay monthly payments under a long-term contract. This type of solar leasing is leading to lower utility bills leading to lower benefits for the company.
- Nevada Ruling – The second factor that is affecting the demand for roof top solar installation is the Nevada Ruling. Regulators in Nevada approved the new net-metering rules that increased the fees for homes with solar panels thereby cutting the amount of money that consumers can earn for reselling excess power back to the grid. This ruling has made the roof top power option less attractive to consumers and some companies were even forced to shut down their operations in the state.
- Sunedison Deal – The third factor that has emerged as a potential threat to the roof top soalr industry is the pending acquisition of Vivint by SunEdison with the deal facing criticism from the investors. These distractions or factors are the root cause with consumers looking to other competitors.