latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/as-recession-looms-rooftop-solar-sector-faces-tough-couple-of-years-58127515 content esgSubNav
In This List

As recession looms, rooftop solar sector faces 'tough couple of years'

Blog

Middle East & Africa M&A by the Numbers: Q2 2021

Video

S&P Capital IQ Pro | Unrivaled Sector Coverage

Video

S&P Capital IQ Pro | Powering Your Edge

S&P Capital IQ Pro | Powered by Expert Insights


As recession looms, rooftop solar sector faces 'tough couple of years'

SNL Image
A residential solar system installed by Svea. Europe's rooftop solar sector is facing a period of reduced activity as households hold on to their money and installations are disrupted.
Source: Svea Renewable Solar AB

Developers of residential and commercial rooftop solar photovoltaic, or PV, systems in Europe are grappling with the effects of the coronavirus pandemic, as countrywide lockdowns and tighter household finances slow the rate of new sales.

Selling a rooftop PV system almost always involves assessing the property and negotiating the deal. While installation data can lag by a couple of months and it is too early to gauge the decline, the first signs of trouble are already showing. "We've heard anecdotally that a lot of installers have seen reduced inbound leads for new orders," said Tom Heggarty, a senior analyst at consultancy Wood Mackenzie, in an April 21 interview.

"It's a tricky situation for everyone," said Björn Lind, COO and founder at Svea Renewable Solar AB, one of Europe's largest residential solar developers. The company recently acquired U.K. developer Solarcentury's European residential solar business, expanding its presence into new markets.

While Lind sees continued interest in solar systems, "doing installations is tricky when you can't have a conversation," he said. The situation varies across markets, with Sweden — Svea's home market — and the Netherlands opting for more relaxed lockdown approaches, for example, while Belgium and Spain do not allow for site visits.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

Across its markets, Svea typically installs about 8,000 PV systems each year, or 660 per month, Lind said, and the company has seen a 20% reduction in sales since the crisis hit.

Even in situations where the panels can be set up as normal, there can be significant delays to connecting the system to the local grid network, Heggarty said. The few key workers still working on infrastructure projects are likely to be dispatched to projects connecting essential services such as hospitals, with residential solar far down the priority list. "You might only be able to get 95% of the way there," he said.

As a global recession looms large, "almost everybody will be concerned about their personal financial situation" and think twice about making large investments, Heggarty said. Government support schemes and subsidies for solar energy may take the edge off the blow, but Heggarty expects a "tough couple of years" for the sector.

Differing impacts across Europe

The impact on household spending and the openness to invite installers back into homes will vary across countries. While the U.K. has not yet started talking concretely about an exit strategy from its lockdown, Germany is already opening parts of its economy back up.

"The full impact of the COVID-19 crisis on the solar rooftop segment will depend on the duration of the lockdown measures and the subsequent requirements for the solar industry," a spokesperson for industry group SolarPower Europe said in an April 23 email.

Italy, one of the countries hit hardest by the coronavirus crisis, has already seen an impact on its residential solar sector. Industry group Italia Solare, which represents many small installers as well some larger developers, conducted a survey in March which found that three-quarters of businesses had observed a drop in orders by up to 40%, with some losing even losing up to 80% of business. "Over the next four months the scenario is not rosy," the organization said March 26.

The industry has asked the Italian government to intervene with dedicated financial support for solar, including increasing tax credits for solar companies and tax breaks for individuals who install rooftop PV systems.

Green spending prospect sparks hope

Compared with utility-scale solar developers, the residential sector consists of smaller players with limited financial headroom. While they can access government loans and furlough schemes in many countries, they are likely to be less well-placed to weather the storm in the long term. But hopes are pinned on the EU's Green Deal stimulus package and preferential recovery spending, which Wood Mackenzie's Heggarty said is a "bright spot on the horizon."

"It is essential to ensure a fast recovery, which will require some kind of EU stimulus package," the SolarPower Europe spokesperson said. The group is advocating for a pan-European solar rooftop program to be part of the EU Commission's upcoming "renovation wave" — an initiative within the EU's climate neutrality plan to upgrade the bloc's aging building stock.

SolarPower Europe is also looking at grants, loans or tax incentives for small- and medium-sized businesses, as well as at boosting commercial and industrial investment in solar, either through rooftop solar or power purchase agreements. A storage investment program benefiting solar is also being discussed.

For businesses like Svea, a green fiscal stimulus package would help provide a solid backdrop for growth after the crisis. "We really hope that we take this opportunity and push even harder for green energy," said Lind.

But further than that, the COO said the crisis will make more people value more the self-sufficiency of solar and its contribution to the climate cause. He is sensing that from some of his customers already. "The [coronavirus] situation and the environment are connected," he said.