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Using Residential Solar Photovoltaic Quote Data to Analyze the Relationship Between Installer Pricing and Firm Size

A new NREL report takes an innovative look at the role of firm size in photovoltaic (PV) installer pricing. The analysis takes a novel approach to assessing pricing behavior by looking at paired quotes as opposed to installed prices across similar customers.

The vast majority of U.S. residential PV installers are small local firms, yet PV sales are relatively concentrated in a few large firms; in 2015, the largest 10% of installers accounted for nearly 90% of residential systems installed and the largest 1% of installers accounted for more than 60% of systems. This report analyzes the effects of this market concentration to assess whether large installers achieve economies of scale (lower costs with increasing volume) and offer lower prices to customers or if large installers can use their size to exercise market power and charge higher prices.

Previous studies of the relationship between PV pricing and installer size have relied on installed system prices from a limited number of data sets. These studies control for price-determining factors, such as system size and module efficiency. However, owing to data limitations, they do not control for customer-level factors, such as roof characteristics and customer preferences.

As an alternative, this report’s approach does not use installed-price data. Rather, it uses 1,588 residential PV quotes from the third-party quote provider EnergySage to study the effects of installer size on price behavior. It analyzes the “paired differences” between price quotes made to the same customers by large and non-large installers. The advantage of this method is that customer and site characteristics remain constant across multiple quotes made to the same customer, so it can effectively control for otherwise unobservable customer- and site-level differences.

The report finds that large installers (those that installed more than 1,000 PV systems in any year from 2013 to 2015) quote prices that are $0.33 per watt (about 10%) higher, on average, than non-large installer quotes offered to the same customer. The difference falls to about $0.21 per watt after controlling for systematic differences between large and non-large installer quotes, but it remains statistically significant. The report offers several hypotheses for what may be driving this difference.

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This research is supported by the U.S. Department of Energy Solar Energy Technologies Office.