Delivering Solar: Group Purchasing is Driving Down Costs for Customers

Claire Kreycik's picture

Homeowners, businesses, and public sector entities across America are realizing savings by joining together to buy solar power. Group purchasing campaigns are an innovative way for potential customers to save both on the sticker price of a solar photovoltaic system and on the time and expense of navigating the process. In the last few years, group purchasing has been pioneered and advanced by non-profits and community organizers, as well as by entrepreneurs.

In a nutshell, these models work because aggregating demand unlocks volume discounts from local solar installers. An added benefit of collective solar procurement is that transaction costs can be spread amongst a large group of customers and a larger total purchase. Finally, these campaigns can educate potential customers about going solar. This blog explores three different models: the 1BOG (One Block off the Grid) business model, local Solarize campaigns for homeowners, and collaborative purchasing by public or private entities.

1BOG

To introduce the concept, let’s look at the 1BOG business model. 1BOG is a for-profit company that acts as an intermediary between the solar installer and potential customers. By signing up customers in a regional campaign, 1BOG aggregates demand for solar installers and retailers, allowing them to provide group discounts. 1BOG also finds and vets installers on behalf of customers and advises them on all of their options.

1BOG’s business model is mutually beneficial for potential customers and solar installers. 1BOG’s roll in amassing demand is so important for their business that installers are willing to pay 1BOG a fee for service. Currently that fee is $0.25/W installed, which is built into the price that the solar installer charges customers. This adds approximately $1,250 to the price of a 5 kW system—an expense that is offset by the savings from volume purchasing. On their website, 1BOG reports that average individual customer cost savings are around 15% in its active campaigns.

Local Solarize Campaigns

In other regions of the country, local community organizers have played this intermediary role. In Oregon, California, and Minnesota, local campaigns have signed up hundreds of residents and have facilitated photovoltaic and solar hot water installations. For example, the first of such grassroots campaigns, Solarize Portland, resulted in over 500 solar installations in 2009 and 2010 and cost savings of up to 35% [1].

If you are interested in learning more about how to develop and execute a local campaign targeting homeowners, see the U.S. Department of Energy’s “Solarize Guidebook” [1]. The guidebook summarizes lessons learned and considerations from experiences in Oregon and California. Focusing mainly on the residential sector, the “Solarize Guidebook” walks community organizers through the process and describes creative options like integrating financing for participants with the group purchasing program or creating co-ops to manage the process [1].

Collaborative Purchasing

Group purchasing is not just for homeowners. Other organizations can collaborate and reduce development costs by purchasing in aggregate. The non-profit World Resources Institute (WRI) has been working on several pilot aggregate purchasing programs with California organizations since 2008.  These partners include Joint Ventures: Silicon Valley Network, Santa Clara county government agencies, and Northern California businesses [2]. 
 
WRI and Joint Ventures: Silicon Valley Network reported on two separate collaborative efforts in an April 2011 report titled “Purchasing Power: Best Practices Guide for Collaborative Solar Procurement.” The two projects included a partnership between several major national companies wit h facilities in California and a group purchasing campaign for several Santa Clara, California, governmental agencies.

One insight that came out of the Santa Clara public agency project is that strategic “bundling” can generate vendor interest, competition, and volume pricing. The project team grouped the installations into bundles of 6–15 locations each. The bundles were grouped by system size: large (1.4 MW on average), medium (300 kW on average), and small (80 kW on average) rooftop systems.  Creatively, the team allowed vendors to bid on one or more bundles. This encouraged participation by bidders who might be deterred if the entire contract was awarded to only one party.

The Santa Clara researchers found that collaborative procurement resulted in 10%–15% lower costs and savings of 75% of administrative time and fees. The report provides a detailed 12-step checklist for how to manage this process. Supplemental sample documents (e.g., participant questionnaires and requests for proposals) are available on their website [3].

The Environmental Protection Agency’s (EPA’s) Green Power Partnership has created a program on group purchasing, which is modeled in part on the Joint Venture/WRI procurement project. The EPA’s Clean Energy Procurement Initiative is helping government agencies in the Washington, D.C., metro area to go solar [4]. 

--
Group purchasing promises to reduce market barriers to solar by bringing down costs and informing consumers. A variety of programs can deliver solar systems to homeowners, businesses, and public entities at discount. By reducing costs and facilitating project implementation, group purchasing can help expand solar markets and accelerate deployment.

Citations:
[1] U.S. Department of Energy. (January 2011). “The Solarize Guidebook.” http://www.portlandonline.com/bps/index.cfm?&c=54114.

[2] World Resources Institute. (April 2011). “Best-Practice Guide to Collaborative Solar Purchasing.” http://www.wri.org/publication/purchasing-power.

[3]  Joint Venture: Silicon Valley Network. (2011). “SV-REP Documents and Resources.” http://www.jointventure.org/index.php?option=com_content&view=article&id=524&Itemid=287.

[4] U.S. Environmental Protection Agency. (2011). Clean Energy Collaborative Procurement Initiative. http://www.epa.gov/greenpower/initiatives/cecp/index.htm.

Additional Resources:
Bureau of Planning and Sustainability. “Solarize Portland.” http://www.portlandoregon.gov/bps/51902.
City of Pendleton, Oregon. “Solarize Pendleton.” http://www.pendleton.or.us/energy/solarize

Solar Beaverton. http://livelightenergy.com/solarbeaverton/.
Solarize Salem. http://solarizesalem.org/.