How to Start a Solar Panel Business: A Comprehensive Guide
How to Start a Solar Panel Business: A Comprehensive Guide
In the past decades, the solar panel business industry has witnessed remarkable growth. People are becoming more and more aware of environmental pollution issues and prefer environmentally friendly energy alternatives. Solar power panels are a perfect solution for them as they are environmentally friendly electricity resources as well as are cost-effective in the long run. Solar panels are producer of clean energy, with minimum carbon footprint. Installing solar panels may be a bit costly with battery costs, inverter costs and installation costs, but solar panels pay off this early investmentnt very easily and swiftly. Moreover, technological advancements have made installing and managing solar panels so easy.
Due to this increasing trend of environment friendly energy sources, the solar panels market is evolving rapidly. It has a lot of potential and opportunities for new entrepreneurs. Solar companies are offering the services of manufacturing, installation and maintenance of solar panels for residential, commercial, and industrial applications. Moreover, governments are also implementing policies to promote solar energy adoption. All of these perks make the solar panels industry an attractive opportunity for investment and business. Sustained profitability in solar panel industry makes it an attractive business opportunity. This article provides foundational knowledge about solar business opportunities and how to start a solar power business?.
Why You Should Start a Solar Panel Business?
As the demand for clean energy rises, the solar panel industry offers lucrative opportunities for entrepreneurs to start their businesses in this market. The world is switching toward renewable energy systems. It is the right time to enter this market.
Market Stats
Solar photovoltaic is one of the fastest-growing sectors in renewable energy. Solar panel sales are soaring as more residential and commercial builders integrate solar solutions into new constructions to meet modern energy standards and appeal to eco-conscious consumers. According to an estimate, the solar industry has witnessed growth of 22% in the last decade. According to the report by the Solar Energy Industries Association (SEIA), in the year 2022, 135,700 megawatts (MW) of energy was produced by solar solution, which is equivalent to the energy requirements of 24 million houses. Along with that, according to research by MarketWatch, by year 2030, more than 1 in 7 U.S. homes will have solar panels.
Government Incentives
Many governments, especially tier 1 countries, are encouraging their public to implement solar panels. For this reason, they are offering incentives. These incentives help reduce the capital cost and initial investment outlay for home owners, making the solar panel setup more manageable. UK is offering a Home Upgrade Scheme (HUG2) grant, according to which the UK is awarding £10,000 to low-income households to install solar systems and for other energy-efficient home improvement projects. Along with that, the UK government is offering the Home Energy Scotland Grant and Loan scheme, in which every homeowner is eligible to receive interest interest-free loans for solar panels and sustainable energy solutions.
Along with that Zero VAT schemes offer zero VAT for solar panels and other energy efficient solutions for all residents of Wale, Scotland and England. Additionally, US government is offering tax credit to install solar panels. Moreover, new government is about to lauch a program “SOLAR FOR ALL” that has $7billion grant. US goverment is offering multiple grants and loans offers to setup solar installation projects.
Increase Environmental Awareness
In this century, people are becoming more and more aware of environmental issues. They are preferring greener alternatives for everything. Typical electricity is produced from non renewable energy sources that come with dangerous elements as a residue for the environment. Thus have an adverse environmental impact. Media and organizations are constantly making people aware of climate change and the hazards that can come if they do not become environmentally active. They are choosing environmentally friendly options even if they are more expensive as compared to traditional ones. According to research, more than 70% of people have started searching for environmentally friendly, sustainable product options in a short span of 5 years. Similarly, they are more interested in green energy as compared to tradition electricity solutions. Solar panels have very minor carbon footprint and have a positive impact on environment.
Energy Costs
Energy market prices are growing all around the world. According to research, if the energy mix remains unchanged, energy costs are expected to rise to 75% by 2025. There is insufficient supply of crude oil and natural gas to generate electricity. Energy consumption is increasing day by day but there are not enough resources for energy production. The recent war between Russia and Ukraine is also a reason for high energy costs, as Russia has a great reserve of energy resources, and the price of that fuel has increased due to the situation. High energy cost is one of the primary reasons people are switching to solar energy solutions to cut off some energy costs. While one the other hand, investing in solar energy for companies not only reduces operational costs but also enhances their sustainability credentials in the competitive market.
Low Cost and Better Quality of Solar Panels
In recent years, the quality of solar panels has improved, thanks to lots of research and manufacturers’s competition in China. And their prices have decreased drastically. They are more affordable and reliable now. Large-scale production of solar panels aided with automation has made solar panels more cost-effective. High-end research has resulted in more durable and reliable solar technologies. This enhancement in the quality of solar panels comes with strong warranties and workmanship warranty options that protect consumers, adding significant value to their investment.
According to a research module price for solar panels has dropped to 80% since 2010. As solar panels are becoming more affordable and reliable, governments are also offering initiatives to support energy-efficient solutions. Customers are often motivated by the financial return they can achieve through energy savings and financial incentives. Solar panel installation has one more perk. By contracting with energy distributors, consumers can sell extra electricity produced by their solar panels to the grid, and it is a good way to recover their investment in solar panels setup.
All these factors combined show that there is huge potential in solar panel business. Demand is increasingly continuouly and product quality and life span is getting better day by day. New entrepreneurs can get in the market and place their mark in solar power industry.
Types of Solar Panels for Business Purposes
Before we move forward toward discussing how to start a solar panels business, let’s explore the types of solar panels. Understanding the types of solar panels will help you to pick the type that you may consider for your business. Choosing the right type of solar panels for your business is crucial. Each solar panel type has its own characteristics and applications. They have different prices and efficiencies. Here are some main types of solar options that you may consider for your business.
Monocrystalline Solar Panels
Monocrystalline solar panels are made from a single silicon crystal structure. This makes them the most efficient type of solar panels. They have the highest efficiency and longest lifespan. The lifespan for monocrystalline solar panels is 25 to 40 years. They also come in sleek designs and give a decent look. Due to high efficiency, they are preferred in office buildings and commercial buildings, where energy requirements are high, but space is limited. They are also feasible for urban domestic use as homes may not require a very large number of solar panels, and they, too, have limited space to install them. But on the other hand, the drawback is that they have high installation and setup costs.
Polycrystalline Solar Panels
Polycrystalline solar panels are composed of multiple crystal structures. Due to multiple crystals, the current does not flow smoothly, hence resulting in lower efficiency. But they are significantly cheaper than monocrystalline solar panels. The life span for polycrystalline solar panels is 20 to 30 years. They are suitable for businesses and industries that have sufficient space to install a large number of solar panels, and initial cost is a major factor. Polycrystalline solar panels are ideal for agricultural settings and solar farms. The drawback is that these are not as efficient as monocrystalline solar panels and have a comparatively small lifespan, too.
Thin-Film Solar Panels
Thin film solar panels are made of noncrystalline silicon. They are made by depositing photovoltaic material onto a substrate. These solar panels are lightweight and flexible. They have low efficiency as compared to monocrystalline and polycrystalline solar panels. They have a lifespan of 10 to 20 years. These solar panels are available as thin films that make them suitable for non-traditional structures such as building facades, curved surfaces, or portable solar devices. These are cost-effective and have an aesthetic appearance when installed. They are mostly used for portable devices such as backpacks and mobile chargers. Thin film solar panels are also useful for residential and commercial applications with large spaces but require lightweight, flexible solar panels.
Now, to start your solar panels business, you can either target all 3 types of solar panels and their potential customers or one type of solar panels. You can also target a specific niche like business or home. That’s up to your choice and handling.
Name of Solar Panel | Advantage | Disadvantage | Lifespan | Mostly Used |
Monocrystalline | High efficiency, long lifespan, sleek design, suitable for limited space. | High installation and setup costs. | 25 to 40 years | Commercial usage with high energy needs, urban domestic use with limited space. |
Polycrystalline | Lower cost compared to monocrystalline, suitable for installations requiring large numbers of panels. | Lower efficiency, shorter lifespan. | 20 to 30 years | Businesses, industries, agricultural settings, and solar farms with sufficient space. |
Thin-Film | Lightweight, flexible, cost-effective, aesthetic appearance, suitable for non-traditional structures. | Low efficiency, shorter lifespan. | 10 to 20 years | Portable devices (backpacks, mobile chargers), residential and commercial applications requiring lightweight flexible panels. |
Types of Solar Panel Businesses
From manufacturing to planning and installation, you can start your solar panel business as per your skills and expertise. Below are some types of solar business ideas related to solar panels that you can choose from.
Solar Panel Manufacturers:
Solar panel manufacturing may be the most cash-intensive option on the list, but it can also be the most profitable. These solar panel companies design and produce solar panels. They are themselves responsible for sourcing raw materials to dispatching the final product. Solar panel manufacturers focus on new research and development to improve solar panels. There are three major types of solar panels, as explained above. Each solar panel type has its own industry standards and certifications and manufacturers are responsible for acquiring these certificates for their products.
Solar Panel Distributors and Wholesalers
Solar panel distributors and wholesalers act as a middle person between manufacturers and the market. They purchase solar panels in bulk and sell them in the market to retailers or solar installers. Wholesalers are responsible for making deals about solar panels with manufacturers. They manage the inventory they have and then distribute solar panels.
Solar Panel Retailer
Retailers buy solar panels from distributors and wholesalers and sell them to end users such as homeowners, businesses or professional installers. These solar panel sellers are responsible for marketing and selling their products to end users. They may sell different types of solar panels to different customer segments. Or they may choose to target any specific end consumer. To buy a solar panel for their home, home owners may contact with these business personnel.
Solar Panel Installers
Solar installation is a service-based business. If a person has expertise in electric appliances and has skills to install solar panels, than this business type may be the best fit. A person can easily learn solar panel installing skills and start his solar installation company. You can also hire solar experts for services. It is, most probably, the safest job method as these businesses do not have any products to manage, nor do they keep track of any inventory and sell it. Panel installation business promote its services in its area and help homeowners to have their solar panels up and running.
Solar Energy Consultants
Solar energy consultants provide their consulting services to individuals and businesses willing to install solar panels. They guide them about solar energy solutions that may be most efficient and practical for their customers. Solar energy consultants determine the energy needs of their clients using software; along with that, they research what will be the most feasible way to fulfill these needs. Different states have different regulations. Consultants are required to consider those regulations too when suggesting their proposed solution to businesses.
Solar Financing Companies
Solar financing companies offer financial solutions like loans, leases and power purchase agreements (PPA). PPA is a type of agreement in which a business installs and maintains solar panels for its client. The client pays for solar electricity generated, and usually, this price is less than the traditional electricity unit’s price. These contracts are signed typically for 10 to 25 years. For all this duration, the installing business i.e., the financing business, is responsible for the maintenance of the solar panels system. After the agreement terms end, the client can either renew the contract or he can choose to buy the installed system. In other cases, if he decides not to buy or renew his contract, installing the business will remove the system. More or less, it seems like renting solar panels for use and charging for their use.
Solar Software Companies
Solar software companies are software companies that focus their expertise on the solar panel industry and make their software around it. They design different systems to track and assess solar panel performance. These software solutions also remind users about the maintenance schedule of the solar panels. Anyone with sound knwlege of programming and microcontroller can start this business.
Solar EPC (Engineering, Procurement, and Construction) Firms
Solar EPC firm is also a business option for someone interested in the solar energy business. This firm is responsible for everything in solar projects: assessing needs for solar panels, designing solar panel systems, contacting and buying solar equipment from the seller, and installing them. They start their work from ideation and hand over fully functioning solar panel systems to the owners.
How to Start a Solar Company? Steps by Steps Guide
Now that you know why you should start a solar panel business and what business variations that you can delve into, lets explore the steps to start a solar panel business.
Market Research and Picking One Idea
Solar panels are in huge demand. No one can deny that. But you need to explore your locality too for the product need. It goes without saying that solar panels are successful in areas with high energy costs, climate conditions, sufficient sunlight and supportive regulations. Moreover, you need to consider your resources and expertise in the research. Explore which type of solar panel business is highly in demand in your locality and decide on one idea for your business.
Target Market
You need to decide who will be your target audience. Study market conditions in your locality. You can target potential client base from multiple niches but as a startup, it is recommended to not divide your resources to capture different customer segments and target one specific niche for marketing and selling your product. You can target home owners in your locality. Or you may pick commercial solar to sell to large entreprises. Start with a small-scale solar company and once it is established, you can expand it. So, once you are established in that niche, you can always expand to other potential market sectors. In solar sector, 3 primary customer segments are:
- Residential Customers: These are homeowners who are eager to reduce electricity bills and achieve energy independence.
- Commercial Customers: These are business owners that want to install solar panels to cut operational costs and improve their corporate social responsibility (CSR) profiles. Moreover, installing solar panels also made the eligible for government incentives.
- Industrial Customers: These customers require a very large amount of solar panels to benefit from significant cost savings. They are willing to adopt environmentally friendly solutions to reduce their carbon footprint.
Competitor Analysis
Once you have done market research and selected a business idea, it is time to keenly observe your competitors. Research solar panel businesses in your locality. Explore how they target the audience, and what are their sales strategy. Observe their marketing strategies and customer services. You need to identify the gap in the market and try to fill it out with your offerings. Conduct a thorough SWOT analysis. Evaluate pricing for the product by competitor analysis and identify their distribution channels. All these pieces of information will guide you to come up with your own sales and marketing strategy for your business.
Business Plan Development
It is time to develop a business plan for your business. A well-thought-out business plan lays the foundation for the long-term success of your business. A business plan outlines key aspects such as product offering, target markets, marketing strategies, and operational workflows, including sourcing and procurement of high-quality materials from reliable suppliers. It also includes all information about finance, i.e., the costs to run the business and funding required to run the business. Carefully consider all assets, liabilities in business planning. Mention all financing options and also mention where do you intend to spend this capital. Do not forget to mention details of your business structure. A business plan helps you to keep your business on the right track. Along with that it attracts investors to make investments in your business.
Legal and Regulatory Requirements
Now, you need to understand the permits you need for your business. Each type of solar business, i.e., manufacturing, wholesale and installation has their own regulations and permits. Make sure to acquire all permits and licenses required for your business. You need to ensure that the solar panels you are working with have compliance with international and local standards for solar panels, such as IEC (International Electrotechnical Commission) standards. Make sure your business gets aligned with environmental regulations. Be aware of government incentives like federal tax credits, grants and rebates, and you can use that information to encourage target customers to buy the product.
Sourcing and Procurement for a Solar Panel Business
To start your solar panel business, you need to source raw materials if you are going to start a manufacturing business. If you plan to start a wholesale or retail business, you need to source solar panels and make sure to choose quality equipment only. Research suppliers and only pick high quality solar panels supplier. Do not compromise on quality. You can find information about solar panel suppliers on websites like SolarReviews, SolarPowerWorld, and EnergySage.
If possible for you, visit China to find suppliers and assess their product quality, as China is the largest supplier of solar panels, and you can craft a solid deal with manufacturers. Check for supplier reputation and prefer suppliers with proven work record and positive market presence. Make sure the items you are buying are certified, e.g., ISO 9001 for quality management and IEC certifications for solar panels. Make sure to negotiate properly and come up with an agreement that works for both you and your supplier.
Operations Setup for a Solar Panel Business
You need an operational setup for the solar panel business. First, you need to sort out official buildings like an office and warehouse. Choose a location that is close to your primary customer base. Make sure the office is well-maintained and attractive. It must be located in a nice locality with easy transportation links. Make a proper setup for customers to visit and discuss their requirements. Along with that, you need to maintain a warehouse with an optimized inventory management system for day-to-day tasks. Be sure it is at a safe and easily accessible location. Optimize the layout for efficient loading and unloading of materials. Equip your office and warehouse with all the equipment needed for your business. Hire skilled professionals, the best engineers and staff for your office according to your business needs. You should have a strong sales and marketing team for strong customer acquisition.
Marketing and Sales Strategy
Field of marketing and sales are the backbone of any business. You need to make people aware of your products and services and then lead them from potential customers to loyal ones. For this reason, you need to have a strong sales and marketing strategy. The marketing strategy for a solar panel business starts with a strong brand identity and highlighting a unique selling point(USP). Your business name should be compelling and simple enough to be remembered easily. It should be something related to your business. Create a professional logo.
Design your website with attractive colors and compelling visual elements. Implement SEO for your website. Invest in proper keyword research and content marketing. You must have a strong presence on social media platforms. You can also run paid ads. As you are offering services in the local market, make sure to get your solar power plant business listed on Google My Business.
Develop print material like flyers, brochures and business cards. Get involved in conferences, social events and club activities to promote your business. You can offer customized offers to the potential customers. The middle age population may be more interested in cutting the cost of energy bills. A strong return on investment can be a key selling point for these customers as they are mostly concerned with huge initial investments. On the other hand, young members of society are more inclined toward environmental causes. Target clients according to their pain points. Design your marketing campaign accordingly. You can also offer some discounts to loyal customers. Along with that, “Recommend a friend and get x% discount” can also be a good sales tactic. Ask customers for customer reviews and mention them as testimonials on your website. Remember,
“A Satisfied Customer is the Best Business Strategy of all”
Michael LeBoeuf
Customer happiness is key for a business success. Make sure your customer service is top-notch. Ensure customer satisfaction, receive feedback positively and implement the required changes in your business. Establish strong customer relationship management for your business.
Financial Management
In this fast-paced field, effective financial management plays a crucial role in the success of a solar panel business. You need to set up finance and accounting to manage your finances and keep record of all cash flow. Cash flow management is necessary to continue the daily operations of your business. Factor in cost elements like project cost, solar panel costs, storage costs, operating cost, logistics costs and additional costs. Keep track of your business performance using key performance indicators related to your industry. KPIs allow you to assess your company’s health.
Moreover, you can have a financial metric dashboard or financial model to have a record of each and every transaction at the press of a button. Maintaining a healthy profit margin is essential for the sustainability and growth of your solar panel business. Proper financial management guides you to optimize your business for high profit. A well-organized financial model also helps you to grab potential investors and acquire funding you need for your solar panel business.
Scaling and Growth
Once your business is established, you need to scale it. For this purpose, you can enter new markets by setting up your office in other cities. If initially, you were targeting any one segment of potential clients, you can expand your horizon to other customer segments too. Along with that, you can make joint ventures with other solar panel businesses. For example, if you are a solar panels retailer, you can make deals with the solar installation business, and together, you can work on mutual interests. Along with that, you can make deals with real estate developers, construction firms, roofing contractor, and energy providers. You can add more smart and efficient solutions to your business offerings. Additionally, you can socialize with industry experts and ask for their suggestion regarding business scaling and expansion.
Frequently Asked Questions
How does a solar photovoltaic system work?
A solar photovoltaic (PV) system converts sunlight into electricity using cells made of semiconductor materials. Sunlight excites electrons in these materials and creats electric current. This current is converted from direct current (DC) to alternating current (AC) by an inverter for use in homes or businesses.
Is there a difference between commercial and residential solar panels?
Yes, commercial solar panels are larger with higher power output to meet greater energy demands. While residential panels are smaller and tailored for household use. Commercial installations may also include advanced features like solar tracking systems.
Conclusion
Solar panel industry offers significant business opportunities due to the rising demand for clean energy and government incentives. Starting a solar business requires strategic planning, sound financial management, and innovative marketing strategies. As technology improves and becomes more affordable, those in the solar sector have a promising potential to thrive, contributing to environmental sustainability. By investing in solar energy, entrepreneurs commit to promoting renewable resources, aligning profitability with ecological responsibility. This venture not only represents a financial opportunity but also a step towards a sustainable future.Get the financial guidance your business needs with Oak Business Consultant. Take control of your finances and drive your business forward. Contact Oak Business Consultant today to get started on your path to success. Act now!