WOOD MACKENZIE: US RESIDENTIAL PHOTOVOLTAIC LOAN MARKET GREW BY 59% YEAR ON YEAR
The report points out that the number of new customers and installed capacity in the US residential PV market in the second quarter of this year have set a record for five consecutive quarters. In the inflationary market environment, the unstable retail price is driving the residential photovoltaic demand in the field of third-party ownership (TPO) and customer ownership to a new level. Although loans play a leading role in the development of photovoltaic industry, the passage of the Inflation Reduction Act and the continuous rise of interest rates will affect the development of this trend.
Wood Mackenzie's latest report "Financial Update of American Residential PV" explores the latest development. The report highlights trends and forecasts in the market for third party ownership (leasing and power purchase agreements) and customer ownership (cash and loan purchases).
Loans in US residential PV market will increase by 37% year on year in 2022
The loan market will continue to drive the US residential PV market to a record level in the short term. Although the rise in interest rates has led to a rise in the price of residential solar systems, compared with customers' electricity bills, the increase in retail prices still makes loans attractive. This will help the loan sector reach a record market share, which is expected to reach 68% in 2022.
The third party ownership (TPO) market also has a significant growth in the first half of 2022, with a year-on-year growth of 28%. However, the loan scale increased by 59% year on year, more than twice this growth rate, which shows the popularity of loans. As the loan continues to exceed the growth rate of TPO, the market share of TPO in the second quarter of 2022 will be 19%.
The loan scale will continue to grow in the short term, but TPO department will gain more market share from 2023
With the implementation of California NEM3.0 plan (the next iteration of net energy measurement reform), the U.S. residential photovoltaic market is expected to be impacted in 2023. According to the prediction of Wood Mackenzie, assuming that the California Public Utilities Commission will implement the NEM3.0 plan from December 2021, this will reduce the size of the U.S. residential photovoltaic market by 5%. Although this plan is unlikely to be implemented, Wood Mackenzie's prediction may also be the development trend of residential photovoltaic market in California. Under this assumption, the loan scale of the US residential photovoltaic market will decrease by 6%, and the TPO market will decrease by 3%.
Due to the extension of the investment tax credit through the Inflation Reduction Act, the third-party ownership (TPO) pricing in the California market will have advantages in 2023
This pricing advantage will partially offset the contraction of TPO market. The share of TPO will begin to grow in 2023. Once TPO suppliers make better use of investment tax credits, the strongest growth will occur from 2024 to 2026.
In the first half of 2022, GoodLeap will continue to maintain its position as the largest financing and loan provider, accounting for 28% of the PV residential market and 41% of the loan market
GoodLeap's business volume in the first half of 2022 increased by 65% year on year, improving its market share and maintaining its position as the largest financing and loan provider. Sunrun maintained its position as the largest TPO supplier, with its sales volume increasing by 12%. Sunrun Company occupied 61% of TPO market share in the first half of 2022, which is only slightly lower than that in the first half of 2021.
In general, the financing pattern of residential solar system in the United States continued to consolidate. In the first half of 2022, the top five loan providers provided 73% of financing for the U.S. housing market, up from 69% in the first half of 2021. In the first half of 2022, the top five loan providers (GoodLeap, Mosaic and Sunlight Financia) accounted for 76% of the loan market, while the top two TPO providers (Sunrun and Sunnova) accounted for 77% of the TPO market.
For the loan market segment, the market share of small loan institutions will decline again in the first half of 2022, due to the record growth of large loan institutions.
Rising interest rates and electricity bills are affecting the loan and TPO product supply in the U.S. residential photovoltaic market
With the rise of interest rates, many loan suppliers have removed zero interest rate and low interest rate products from their product lists this year, and increased dealer fees. Although many companies have raised their prices, the higher retail interest rate provides a buffer for customers to continue to save costs, and also promotes the development of the loan market.
Similarly, the prices of many TPO suppliers have risen many times this year due to rising interest rates and continued inflation. Sunnova, SunPower and Sunrun attributed their price increases without affecting demand to higher retail prices. With the expected growth in the TPO field, the rise in interest rates and dealer fees will pose challenges to the loan field. Wood Mackenzie expects that the increase in pricing will adversely affect customer ownership in the long term.
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