The rooftop solar industry has slowed sharply this year as the sector moved from one of scrappy upstarts to a mature business.
Recent quarterly earnings reports from sector leaders SolarCity Corp, Vivint Solar Inc and SunPower Corp underscored the dramatic slowdown in growth, with SolarCity and Vivint reporting virtually flat installations for this year compared with 2015.
Overall, the sector is expected to grow 16.5 percent in 2016, down from a prior forecast that called for 23 percent expansion, according to research firm GTM Research. In 2015, the sector grew 71 percent.
The cooling off of the once-burgeoning sector comes as billionaire Elon Musk on Thursday will ask shareholders of SolarCity and Tesla Motors Inc to embrace his vision of a clean energy powerhouse by voting to combine the two companies. Musk is the largest shareholder in both companies.
Billed by many on Wall Street as a bailout of the nation's top residential solar installer, the $2.6 billion deal has made investors question how Tesla will absorb SolarCity's hefty debt-load, especially given the headwinds facing the industry.
"It's great for SolarCity. It doesn't look as great for Tesla shareholders at this point," said Angelo Zino, an analyst with CFRA Research.
The reasons for the downshift in rooftop solar are numerous, ranging from policy changes in key states like Nevada and California to consumer fatigue with the industry's aggressive marketing tactics. In addition, many of the most likely buyers - affluent, environmentally inclined homeowners in sunny places – already have rooftop systems, making winning new customers harder and costlier.
"We will never see residential solar grow at the rate it has over the last four years," said GTM Research analyst Cory Honeyman, adding that growth would likely be below 20 percent for years to come, a level that is still very robust.
Rooftop solar has seen some good news as well, including a dramatic drop in the cost of the technology and innovations such as home batteries that will enable homeowners to generate most of their own electricity and offer bigger savings. SolarCity, through its combination with Tesla, is poised to be at the forefront of those advances.
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