Informed Conversations for Growth

Here Comes the Sun – Why more U.S. households are setting their sights on solar

More U.S. households are interested in solar than ever before. Why? Its no surprise that reducing costs on electric bills and a desire to “go green” are the top two motivators. Of course, the 30 percent federal tax credit included in the Inflation Reduction Act (IRA) — is also a definite accelerator. The impact of multiple incentives drives breakthrough results: It’s clear that rooftop solar is a solid growth story. But it’s not the whole story. The brutal lesson learned, is that during severe weather events — including wildfires, hurricanes or weather-related outages — rooftop solar will not keep the lights on when the grid fails. After all, most rooftop solar installations function through a grid connection… rather than battery storage and advanced inverters. So, when the grid goes down, rooftop solar panels lose their voltage source. Rapid shutdown — a requirement of the National Electrical Code — is designed to protect crews working on downed lines. In contrast, “microgrids” rely on their own energy resources to operate during a grid shutdown. Intelligent software controls sense the pending voltage disruption. And, accordingly, can automatically decouple a structure from the grid. Microgrid customers maintain power, even when those around them are in the dark. Microgrids are not new Microgrids traditionally have been installed “100 percent off-grid” to provide constant, reliable power to isolated outposts… islands, military installations, mining sites, or insular ranches located “at the end of the transmission line.” In remote locations, solar PV microgrids are the cleaner and cheaper alternative to diesel power plants. Yet, amid worsening climate patterns during the past 10 years, the appeal of microgrids has grown significantly — together with technological advances — including solar PV systems, battery storage and fuel cells. The Solar Energy Industries Association (SEPA) reports that in the six-year timeframe from 2015-2021 there were 184 bills focused on microgrid legislative action proposed or enacted across 24 states and D.C. Today, traditional microgrids still operate, but the application of microgrids has expanded. The data are compiled by the DOE and published in their Microgrid Installation Database. It’s clear: as climate change and storms may intensify… microgrids are becoming more viable, to provide community energy resilience. Industry experts promote the following approaches to accelerate microgrid growth. Innovative Ownership and Operational Business Models To minimize upfront capital investment and risk, industry experts often recommend outsourcing via models such as “EaaS” (Energy as a Service) or “RaaS” (Resiliency as a Service). EaaS /RaaS provide the engineering, permitting, construction and system maintenance over the term of a contract. Organizations pay for the engineering design and deployment service, operational support and energy consumed. Modular System Development The design principle for microgrids historically has been 100 percent customization… as each microgrid is uniquely configured to meet specific application needs. Intense customization is a big advantage, yet the absence of a modular design also introduces significant deployment and operational costs. Guidehouse Insights, provider of market intelligence for emerging technology sectors, identifies North America as the market leader for modular microgrids with a projected 23.2 percent compounded annual growth rate for new capacity by 2029. The modular microgrid market is anticipated to grow to more than $5 billion in annual implementation spending by 2029. Stakeholder Collaborations: Developer, Utility, Regulator and Consumer Cuyahoga County Electric Utility Cuyahoga County is the geographic and economic core of the Greater Cleveland Metropolitan Area with more than 1.2 million residents. In September 2021, the County Council established a County Utility Division within the County government that has authority to circumvent and bypass barriers created by existing electric distribution utilities. The County Utility envisions becoming a microgrid industry hub in the U.S. — pairing industry leaders with research institutions such as NASA Glenn Research Center, and academic institutions such as Case Western and Cleveland State University. By partnering with these entities to advance clean energy and microgrid technologies, the County aims to: “Our ability to pull electricity both from the grid and independently attracts businesses who are weighing the risks of locating in places where there’s doubt that today’s grids can keep up with demand. It gets risky to locate where the norm will become 120 days of weather with temperatures higher than 900. We are now evaluating proposals from operators to run the microgrid. Then we will hire developers to build it. Local business and manufacturers are interested in participating. We have signed formal letters of agreement.” ~ Mike Foley Director Department of Sustainability Cuyahoga County TECO BlockEnergy Neighborhood Microgrid Energy Tech describes a key residential microgrid program approved by the Florida Public Service Commission and launched by Tampa Electric (TECO) in June 2021.The objective of the four-year pilot is to demonstrate how neighborhood microgrids help utilities organize distributed energy resources (DERS) to optimize service to their customers. TECO has purchased and installed Emera Technologies’ BlockEnergy microgrid platform at the 37 homes that comprise Southshore Bay residential development. The BlockBox communicates via the neighborhood distribution network and shares energy as, and when, needed within the community. A central energy park connects to the electric utility power grid. The system is maintained and operated by TECO. Austin Energy Resilience Hubs and Virtual Power Plants (VPPs) Resilience Hubs in Austin are envisioned to be an integrated system of Community Solar and microgrids. The hubs will serve subscribers — 50 percent of whom are residents in low-income communities — who are impacted by grid outages. Schools, rec centers, libraries and other facilities already familiar and trustworthy to community members are proposed hub sites. So, how do Resilience Hubs work? Day-to-day, solar feeds into the Austin Energy Community Solar portfolio, and the energy stored can be dispatched by the utility by hub or aggregated with other hub microgrids. The solar/energy storage system can also provide backup power… operating as a microgrid when the grid goes down. Resilience Hubs ultimately could be aggregated to form a Virtual Power Plant (VPP). VPPs are a means to aggregate grid-tied microgrids… so the utility can control them as a single unit while the grid is on. This creates a “value

How Trends in Solar Energy… Impacts Our Building Channel

The recent passage of the Inflation Reduction Act is a big win for solar energy… and the industry that supports it. The bill enables an extension of the 30 percent federal tax credit for the cost of installed solar equipment until 2032. Importantly, the 30 percent credit also applies to solar energy storage… whether it’s co-located or installed as standalone energy storage. This allows a battery to be retrofitted to a solar array while taking advantage of the credit. “With the passage of the Inflation Reduction Act, solar and storage companies are one step closer to having the business certainty they need to make the long-term investments that decarbonize the electric grid and create millions of new career opportunities in cities and towns across the country,” said Abigail Ross Hopper, president and CEO of SEIA (Solar Energies Industries Association). Solar installers and distributors assert that the industry now will be more willing to invest in expansion. Despite stabilization, headwinds prevail. Specifically, three challenges will impact near term growth. Component shortage.Supply chains remain constrained due to the pandemic combined with extreme weather events. Quarantined production facilities in China, tariffs and the Forced Labor Act all play a part in constricting photo voltaic (PV) panel availability. On the microchip side, competition is intense. Interesting, both solar power and electric vehicles use the same semiconductor chips. And in a limited supply situation, automakers such as GM and Ford tend to get the chips, rather than the manufacturers producing the inverters integral to PV solar systems. Lack of master electricians.Installers in momentum regions led by California, Texas and Florida — and even emerging markets such as Ohio — agree that there simply aren’t enough licensed electricians. Without enough master electricians — to make the connections with the power grid — the number of residential installations that can be completed is limited. Proposed changes to net metering rules in multiple states.Industry watchers are paying close attention to what is happening in California with NEM 3.0. The final version of the new rate structure is expected to be released later this year. Anticipated reductions in net metering credits — and increased grid participation charges — will spur installers to market and offer solar roof and storage bundles. Instead of “selling back” unused power to the utility at reduced credits, homeowners will be able to store excess power for later use. SEIA foresees that by 2025, more than 29 percent of all new behind-the-meter solar systems will be paired with storage… compared to under 11 percent in 2021. Demand Side of the Equation is the Sustaining Game-Changer Installers’ ability to generate sales might be hindered due to component shortage and labor constraints. Yet, consumer demand is expected to surge. The motivation to “go green” is strong… and the shift to renewable energy is undeniable. Many experts forecast double-digit growth in the next five years. Some industry watchers project that traction up to 30 percent. Millennials Expect High Performance Home Features On March 15, 2022,® commissioned a survey of 655 American adult homeowners to gauge their knowledge of solar panel costs and government incentives. Notably, millennial homeowners were almost six times more likely to own solar panels (29 percent) than baby boomers (5 percent). And were three times more likely to own them than Generation X homeowners (10 percent). Millennials make up the largest share of homebuyers today… and of course, their influence is growing. Leading installers were asked to report on key attributes of customers who “go solar”: Forward Momentum Solar continues to gain ground. First Solar, a top U.S. solar panel manufacturer, will invest up to $1.2B to build its fourth factory. Responding to the shifts in homeowner demand, the new plant will bring First Solar’s total investment in U.S. manufacturing to approximately $4 billion. With more than 10 gigawatts (GW) of annual capacity by 2025. GAF Energy envisions a future where every roof generates energy. “There’s no better time to go solar than when you are installing a roof,” says Rey Holmes, vice president of Services and Product for GAF Energy. “For homeowners, it’s a better solution to integrate solar into the roofing system — it delivers big and immediate value.” To capture more of the roofing replacement market, GAF Energy launched Timberline Solar in January 2022 as an alternative to PV panels. Each shingle is a solar panel designed to look, feel and lay flush to the roof… just like an asphalt composition shingle. The product carries a 50-year warranty against leaks, and is installed with a nail gun. The first Timberline Solar plant is up and running in San Jose, California. And GAF Energy broke ground on a second plant in July. Located In Georgetown, Texas, the 450,000 square foot facility will increase capacity by 500 percent and bring total production of solar shingles to 300 megawatts annually… making GAF Energy the largest producer of solar roofing in the world. High Performance Builders Get Onboard The economics of installing rooftop solar — as a standalone installation, or as part of a roof replacement — is compelling for homes built before 2000. These residences (which number more than 100 million) typically use twice the energy as a new home. That said, the opportunity for solar is radically different in new construction. Why? New homes are built to be energy efficient. Solar, in new construction, is driven by future-proofing a house… so that its owners can seamlessly transition to Net Zero or Zero-Energy Living. High performance builders can get ahead of the mainstream by driving Electrification and Net Zero Readiness in new home construction. To prepare builders for the increased uptick in solar adoption, the National Association of Home Builders (NAHB) has created a helpful Solar Toolkit for Builders. Other Considerations The push toward Electrification and Net Zero Readiness is not solely under the control of the builder, however. The International Energy Conservation Code (IECC) plays a crucial role. The 2024 version of IECC is expected to be published in the second half of 2023. And considers for the first time… an expansion of scope to

Mid-Year Trend Report – Millennials and First Time Homebuyers

The tug-of-war between factors that increase demand for housing and issues that restrict home purchase… has never been more intense. In this environment, it is increasingly difficult for builders to profit from demand accelerators — while at the same time — avoiding cost and regulation impediments. Two Factors Unambiguously Propel Demand for Single Family Housing Over the past year and a half, there’s been a remarkable rebound in household formation by younger adults moving out of their parents’ homes to live independently, or with roommates. Notably, over half of adult householders under age 25 now live alone or with non-family members. This shift has been a significant, and often overlooked contributor… to the dramatic increase in housing demand for both owner-occupied and rental units. The growing number of millennials entering into their 30s — during the same 2020-2022 timeframe — is the second factor fueling housing demand. As Jessica Lautz, Vice President of Demographics and Behavioral Insights at the National Association of Realtors, remarks: “Millennials are faulted with killing off a myriad of things: department stores, paper napkins, ironing, even doorbells. But homeownership and the dream of homeownership? Well, that’s not one of them.” After peaking as “apartment dwellers” in 2018-19, millennials now make up the largest share of homebuyers… some 37 percent. Although the homeownership rate for those under the age of 35 is lower than past generations at the same age, millennials are still very active in the housing market. But not all of them are first-time homebuyers. While 82 percent of millennials aged 22 to 30 are indeed buying a home for the first time, the majority (52 percent) of older millennials aged 31-40 are actually repeat buyers. So, what’s driving millennials in their home purchasing decisions? Impediments to Home Ownership The aspiration to own a home remains strong. Yet, these millennials and other first-time buyers face multiple challenges to home ownership. Jerry Kantor, President of the National Association of Home Builders (NAHB), sums it up as a “crisis in affordability.” In the face of elevated home prices, climbing mortgage rates and an uncertain economic future… new homebuyers have pulled back. And according to the Mortgage Bankers Association, mortgage applications dropped to the lowest level at the end of June 2022. Marking the biggest slump in 22 years. Consider that: As a rebound in household formation meets an affordability crisis… builders are struck in the middle. And, they’re becoming frustrated. The NAHB’s housing-market index — which gauges the single-family housing market — fell to 55 in July from 67 in June. Reaching its lowest level since May 2020. But don’t forget … a number above 50 still indicates that more builders view conditions as “good” rather than “poor”. D.R. Horton, the number one homebuilder in the country, recently reported that nearly a quarter of their contracts fell through from April to June 2022. The cancellation rate of 24 percent was up about 7 percent from 2021. To counter the slowdown, homebuilders are offering more incentives to prospective buyers… while reducing production. Many are expanding their participation in multifamily. And in the Build-To-Rent(BTR) sector. Sonny Patel, Director of Land Acquisition at Taylor Morrison and champion of BTR development, explains: “We are bullish on the new rental concept. We see a shift in consumer behavior. Consumers want more flexibility than what they get with a 30-year fixed mortgage. In Texas, we expanded Taylor Morrison’s customer base to include a segment of consumers who seek maintenance-free peace of mind without sacrificing the lifestyle of a single-family community. There is a huge demand for this product among Gen Z, millennials and baby boomers.” Another example comes from Scottsdale, Arizona… where Toll Brothers teamed up in 2018 with BTR brand BB Living to start developing land in the Sun Belt. In this model, Toll Brothers develops and retains ownership of its BTR properties. And BB Living maintains them. A win-win for both. In 2021, Toll Brothers reported: “We believe that residents in our BTR communities want suburban single-family home living, so they are specifically choosing this rather than multifamily rentals. It is a different experience and lifestyle with all the attractions of low-density suburban living. For some residents who might currently be living in and outgrowing a one- to two-bedroom rental in one of our multifamily Toll Brothers Apartment Living properties, this is an ideal next step product offering.” To most industry analysts, Build-To-Rent is an interesting — yet still early in formation — option. Adam Perdue, an economist at the Texas Real Estate Research Center, credits “Wall Street money” with funding many BTR developments. And recognizes increased media attention… for creating visibility and legitimacy for the sector. As such, BTR is still unproven as a long-term development option. Growth may be large, but — he asserts — the base is extremely small. In fact, the NAHB estimates that the BTR sector represents a mere 2 percent of multifamily… and reminds us that multifamily is only 5 percent of total housing. Bob Tancula, President of Senex, Researcher and Forecasting Expert to Home Building Brands, remarks: “I’m sure that some of the surge in multifamily is due to entry level people being priced out of the market. But the multifamily segment operates differently from single family… by being more influenced by interest rates on the investments in these projects. I think those influencers and decision-makers, (banks, investment firms, large contractors) have seen that the internal rate-of-return on multifamily projects will be better in the coming quarters. And so, they moved up projects to take advantage of lower interest rates in first half of 2022… anticipating the higher rates that we see now. Yes, much better financials for investors — is driving growth in multifamily — while single-family is slowing.” Recourse to Market Instability: More Than Builder Fixes Of course, there’s no silver bullet for solving current market instability. Yet, leadership at NAHB has identified three structural factors that they suggest must be addressed, before markets stabilize: To fulfill the housing needs of all Americans, solutions must address housing challenges on a coordinated

Internet of Things: Examples of Initial Industry Successes

There’s no question, IoT has, and will, reshape the way businesses work. Industries are steadily moving towards an “always connected” paradigm. But, IoT is a double-edged sword. Although IoT has the potential to deliver an unprecedentedly rich data stream, it can also produce data overload and noise. Most organizations are in the beginning stages of trying to understand this trade-off. We have found two early applications where IoT is deployed in a way that improves overall operational efficiency and avoids the pitfalls of data overload. Smart equipment manufacturers, for one, have been able to intelligently process masses of operational inputs and deliver a service to equipment owners that improves fleet management and increases machine uptime. Smart equipment manufacturers realized early on that they can: Caterpillar is a good example. They are re-writing their digital strategy to provide real-time predictive tools and diagnostics to equipment site managers. Their smart service is a subscription-based online or mobile app called Vision-Link. It allows Caterpillar equipment owners to remotely access real-time data regarding mobile assets functioning anywhere in the world. At first the service was limited to specific construction equipment; now it is being rolled-out more broadly to include equipment such as generators. The second example of early innovation in the IoT space is consumer appliance manufacturers. In the past, data-streams from smart appliances have informed manufacturers about how appliances are used by consumers: favorite settings, run-time, and wear conditions. The data is monitored by manufacturers’ product development and service call centers. In the next phase of IoT development, consumers track their own appliances and sequence the operations of their appliances via smartphones and social platforms. How do you use IoT to improve your competitiveness and what early wins have you experienced? October 11, 2017 · Christine Luzar Over the last few quarters, Frohman and Associates has been engaged by several clients to determine the impact of Internet of Things (IoT) in their industry and how they can use IoT to improve their overall competitiveness. Here is a summary of initial IoT success.

New Perspective on Customer Experience Mapping Research

What if companies stopped defining their customers in generational terms and instead used generation titles to define a type of customer experience?   I think everyone is familiar with the generational titles, Baby Boomer, GenX, Millennials (Generation Y) and Generation Z. Based on birth dates, these people were born between 1945 and 2010. Many companies use these titles to define their customer segments. In theory, a Baby Boomer and a Millennial have different likes, dislikes, and attributes; they have different collective expectations regarding how they purchase products and services as well as what determines satisfaction in the purchase journey. For example, one group may require more touch points in the purchase journey while another may require less or, one group may be tech-savvy while another group may be tech-challenged. Most companies devote precious time and money trying to provide the best experience for a wide group of customers. How would different generational customer experience models be defined?How would a company move from one customer experience model to another?Do customer satisfaction levels differ between customer experience models? Customer Experience Models: Boomer, Generation X, Millennial, Generation ZWhat customer experiences characterize these generational titles? Boomer Customer Experience GenX Customer Experience Millennial Customer Experience GenZ Customer Experience Customer Experience Model Change? So, what happens when the Boomer, GenX or Millennial Businesses create: Best-in-Class products and services with the right set of technology enhancements leading to loyal customers? They add a “Z” to their title. Boomer changes to BoomerZ, GenX changes to GenXZ and Millennial changes to MillennialZ. Know any Z Businesses? An example of a BoomerZ business may be Bantam Bagels featured on the TV show Shark Tank. Lori Greiner invested in the couple who were clearly a Boomer business; technology enhancements including an ecommerce site were created and business is booming! How about Amazon as a MillennialZ business? Which ZBusinesses are your favorite? November 26, 2016 · Ann Debelack