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SolarCity CEO: The path to one million solar customers will take education

Despite the solar industry’s dramatic growth in the U.S., it’s still surprisingly difficult to sell solar panels to homeowners. Why?

SolarCity CEO Lyndon Rive explained at Fortune’s Brainstorm E conference on Tuesday that one of his biggest challenges is educating potential customers about solar’s value. SolarCity offers customers solar panels on their rooftops at little or no cost, and then bills them for electricity at a lower rate than they can get from their local utility.

Saving money by buying clean energy might seem like an obvious sell, but it’s still tricky, says Rive. There’s a persistent misperception that solar panels still require a large upfront investment. Rive joked that even his own friends still ask him what the pay back time is for solar panels.

How solar panels are sold will be a key way for solar companies to differentiate and compete. The solar installation and financing industry in the U.S. is becoming increasingly consolidated and cutthroat.

Solar sales reps at Home Depot (HD), for example, have a high success rate in selling panels to homeowners, notes Rive. A human touch is required to explain the process and the value.

This reality will guide both investments and acquisitions in the industry. Earlier this year clean energy giant SunEdison (SUNE) bought Vivint Solar for $2.2 billion, partly as a way to acquire Vivint’s door-to-door sales force.

Other companies are investing in software and data tools to find better and cheaper ways to find potential solar customers online. For example, two years ago SolarCity (SCTY) bought a marketing and sales company called Paramount Solar for $120 million.

Reducing the costs of selling solar panels will lower the overall costs of solar. Customer acquisition costs are more than the cost of the solar panel itself, Sunrun co-founder and co-CEO Lynn Jurich noted during another session on Tuesday.

Rive’s plan is to quadruple the number of its solar customers from 250,000 to one million by the end of 2018. Educating customers will be critical to achieve his goal.

Click here for more coverage of Fortune’s Brainstorm E conference.

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