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Awaking from COVID-19 'hibernation,' US solar installers face new realities


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Awaking from COVID-19 'hibernation,' US solar installers face new realities

One month ago, Jeanine Cotter woke up to a new reality. The president and CEO of San Francisco-based rooftop solar installer Luminalt Energy Corp. was suddenly back in business after a seven-week hiatus imposed by safety orders and work restrictions aimed at curbing the global coronavirus pandemic. But operating in the new, post-pandemic world would be very different from business as usual.

"We are just like any small business in San Francisco or anywhere else," Cotter said in an interview. "We have had to completely transform how we operate."

That includes putting up plastic barriers at job sites, disinfecting everything installers touch, assigning separate tools and vehicles to individual workers, maintaining safe distance between workers and customers, and navigating new online permitting and virtual inspection protocols. Luminalt first rolled out the new procedures at three multifamily housing sites where installers were able to continue working during the initial stay-at-home rules.

"We spent the time in hibernation figuring out best practices," Cotter said. "It's important to get the economy going but we also must be clear that in order to do it right, it is a lot more costly."

While work restrictions on solar projects have now lapsed across most of the country, Cotter is not sure when normalcy will return for the tens of thousands of installers who make up the bulk of the U.S. solar workforce, raising questions about how one of the fastest growing segments of the economy in recent years will emerge from the crisis.

"I don't think any of us know," said Cotter, who founded Luminalt with her husband Noel Cotter, the company's chief technology officer, in 2004. "It is possible we will have a resurgence [of infections]. It's completely feasible we will be forced to shut down again."

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

Not out of the woods

Across the country in Yardley, Pa., about 30 miles north of Philadelphia on the New Jersey border, Dara Bortman finds herself facing similar uncertainty.

"I don't anticipate it going back to normal any time soon," said Bortman, who manages installer Exact Solar, also known as Flowermark LLC, with her husband Mark Bortman.

Although the company has instituted extensive safety protocols, some jobs are still too risky to take on, in Bortman's view.

"I don't want to send my team to a house where they've been sick inside," she said. Exact Solar also is avoiding jobs that require access inside homes. "They'll just have to wait."

Both Luminalt and Exact Solar received small business loans offered by the federal government, through the $2 trillion Coronavirus Aid, Relief and Economic Security Act.

Exact Solar has been able to navigate the crisis without losing any of its 12-person team, while Luminalt is back up to 42 workers, two shy of its pre-crisis staff. Neither company is out of the woods, however.

The CARES Act loan "was really helpful but it doesn't even come close to mitigating the impact," said Cotter.

"The [payroll protection] plan was well-intentioned, but the problem was, when we got the money, we weren't able to work yet," added Bortman. Under the law, businesses have to use the money they receive within 8 weeks or risk having to pay it back. But many small solar companies who received loans were still restricted from working when they first received them, or were hampered by local permitting and inspection delays.

"It's taking longer to ramp back up," she said.

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5 years lost

As a whole, the solar industry is on pace to shed five years' worth of job growth by the end of June, according to the Solar Energy Industries Association. The trade group, in an analysis released May 18, said U.S. solar employment was on track to plummet to 188,000 at the end of the second quarter, a level not seen since 2014 and 114,000 fewer workers, mostly installers, than expected before the crisis began.

Through April, the U.S. had lost nearly 600,000 clean energy jobs, with the solar industry absorbing most of the renewable energy job losses, SEIA said.

The trade group expects installers to add 3,000 MW in the second quarter, 37% less capacity than anticipated before COVID-19 slammed the brakes on the U.S. economy in mid-March, representing an estimated $3.2 billion in lost investment, but still up from 2,100 MW added in last year's second quarter.

Small companies like Exact Solar and Luminalt, as well as their hard-hit larger counterparts, including Sunrun Inc., Sunnova Energy International Inc. and Vivint Solar Inc., have all seen a falloff in new orders. Several companies have cited potential 30% to 50% drops in new orders in the second quarter, though most expect sales to pick up in the third quarter.

To help the industry recover, SEIA reiterated its call for federal aid, including an extension of the federal investment tax credit, or ITC, and ability to take cash grants in lieu of tax credits.

An extension is reasonable, installers argue, because the incentive, currently at 26% of project cost, is declining annually at a time when they are losing months of work. After dropping from 30% to 26% in 2020, the tax credit is scheduled to fall to 22% in 2021, and to 10% for business tax filers in 2022 while zeroing out for individuals.

"We could lose four to six months this year," said Exact Solar's Bortman ahead of a May 13 meeting with Pennsylvania Sen. Pat Toomey. "To help residential solar installers, to create jobs, Congress should extend the ITC at 26% for another year."

While the U.S. Treasury Department agreed to extend a "safe harbor" deadline that allows developers to qualify projects for higher ITC levels when they make investments in advance of groundbreaking, that does not help small businesses like Exact Solar, Bortman said.

SNL Image

Exact Solar President Mark Bortman at a solar installation in Jamison, Pa., before the COVID-19 crisis.
The company is uncertain when normalcy will return for the industry.
Source: Nina Svahn/Finnish Broadcasting Co.

'Salvaging 2020'

Some renewable energy executives and analysts believe the unprecedented challenges that companies are facing may trigger a wave of failures, mergers and acquisitions.

So far, however, small residential solar companies have managed to avoid collapse, according to Chuck Norris, a California-based strategic account manager at Gexpro Asia Pte Ltd., a supplier of solar and other electrical equipment.

"I see a lot of smaller businesses essentially taking a vacation, going on pause, laying off their workforce and try to come back later," Norris said May 19 during a Roth Capital Partners webinar on residential solar. "I see medium[-sized] organizations succeeding in picking up sales people that were laid off from larger and smaller [companies], so I see growth in the medium sector ... So it will be interesting to see what the consolidation looks like on the other end."

After weathering major impacts already, small solar businesses are hopeful they and the industry will emerge stronger, even if altered in many ways.

"Solar will succeed in the end. It's just a matter of salvaging 2020," said Bortman.

Cotter believes that demand for battery-backed solar arrays in the San Francisco Bay area, heightened because of Pacific Gas and Electric Co.'s precautionary blackouts to prevent wildfires, will help local installers stage a comeback this summer. But as the nation's unemployment numbers reach their highest peak in generations, the federal government should do more to help solar installers to put people back to work, she added.

"We learned in the Great Depression that you work your way out of a cataclysmic economic situation by investing in yourselves," Cotter said.