A persistent challenge solar contractors face is customer acquisition. Solar group purchasing programs present a unique opportunity to compete for a large collection of solar projects. These programs bring together groups of customers that have decided to go solar, and solicit proposals from contractors to install the PV systems for them.
Although these programs seek competitive bids for their participants in exchange for aggregating a large volume of PV capacity, they can be a great way for solar contractors to win sizable deals. Additionally, depending on the particular group purchasing program, it can also provide a rare opportunity to access markets that are typically difficult to reach.
The Community Purchasing Alliance, a member-owned cooperative serving nonprofits in the Washington, D.C. area, is one such program. Their solar program facilitates third-party owned commercial solar projects (PPAs) for nonprofits, such as schools, churches and synagogues, and other community organizations.
We spoke with Joe Naroditsky, Director, Solar & Operations at the Community Purchasing Alliance (CPA) to learn more about their solar group purchasing program. Our conversation highlights the benefits for solar contractors who engage in the program, and offers insight into some of the barriers nonprofits face to installing solar and how programs like CPA’s overcome them.
We’ve also compiled a list of resources for learning more about these kinds of programs, and highlighted a couple of other organizations doing similar work in other regions. (Note: CPA is also in the early stages of exploring possible expansion of their model to other cities.) In future articles, we’ll delve into other group purchasing program structures, including programs serving residential customers.
Gwen Brown, Aurora Solar: For those not familiar with the work of the Community Purchasing Alliance, what does your organization do?
Joe Naroditsky, Community Purchasing Alliance: An important thing to mention first is that we're a member-owned cooperative. We started as a co-op when 12 churches got together and realized that they were paying more on their electricity bills than on their pastors’ salaries and wanted to do something about that. One of our founders, Felipe Witchger, was working as a volunteer consultant for this group of faith communities and helped them organize.
They bought their electricity together and ended up saving nearly $100,000 that first year. A few months later, about 30 churches joined in, and then 100 churches, and so on. Our other programs are very much like that first initiative, and all of our programs exclusively serve nonprofits. We help folks get better deals on things like trash hauling, janitorial services, and security. We work with a lot of charter schools, and help them with their procurement.
Our solar program is very similar. D.C. is a great market for solar right now and nonprofits are interested in how solar can help them reduce their energy bills. We put a call out to our members to see who's interested. Those that are join a group and together we solicit bids for third-party owned solar projects from different contractors.
Gwen: What are some of the benefits to solar contractors who are selected to install the PV systems for these groups of nonprofits?
Joe: First, in aggregation comes volume. We aggregated over two megawatts of rooftop projects last year, and we've done over four megawatts in the last four years.
Additionally, the commercial-industrial space is the toughest nut to crack in solar and the nonprofit space is the toughest segment to crack within that sector. Probably the biggest benefit to contractors is an “in” to a very difficult space to access that can be very lucrative. Particularly here in the D.C. area, where SREC values are very high, these PPA deals are really good business.
We also help coordinate the ongoing communication with clients–facilitating meetings and check ins, providing project status updates, that sort of thing. So solar contractors that participate in CPA group purchasing programs also get the benefit of our support with these aspects of project management and customer satisfaction.
Related to that, because we organize and educate interested nonprofits, the sales process for participating contractors is a lot shorter than if they were selling to these nonprofits directly. One barrier that nonprofits can face when considering a solar purchase is that they typically have multi-tiered, multi-faceted decision making processes.
If you're selling a commercial solar installation to a company, you may be working with the CEO and have just one or two people that need to give their blessing before they sign off. In contrast, with a church or synagogue, there are a lot of folks involved, and it usually leads to much longer sales cycles than you have in a traditional commercial setting.
Typically solar contractors don't have the time and bandwidth to dedicate what could be 18 to 24 or more months to these small to mid-sized projects and so, a lot of times, they just pass on them. We take on a lot of that work–educating, facilitating the decision-making process, answering questions, going to board meetings, and just taking the time that’s needed. At the end of that process, we have very bought-in and educated clients who are ready to sign a contract.
"At the end of [our RFP] process, we have very bought-in and educated clients who are ready to sign a contract."
Gwen: What’s the typical size of solar deal that solar companies win through the Community Purchasing Alliance’s solar RFP process?
Joe: Our RFPs average about two megawatts in aggregate project size. In terms of individual system size, it varies. The smaller churches and synagogues and other houses of worship are in the 50 kilowatt range, the larger schools are in the 300-400 kilowatt range. Because we’re aggregating megawatts, we're asking for offers that are better than what a standard, off-the-shelf offer would be–deals our participants would not be able to get on their own.
We make a concerted effort to be very clear that it takes more than just filling out the form to make somebody competitive. In a lot of ways, we see ourselves as a market maker. We’d like contractors understand how important it is to help some of these critical community institutions, which may mean approaching things differently than with a typically commercial client. These organizations run some of the most important work in our community, like after-school programs, homeless shelters, and community clinics–all types of cornerstone community services.
"In a lot of ways, we see ourselves as a market maker."
Gwen: You’ve highlighted some of the benefits of CPA’s programs for contractors. Can you talk a bit more about how your RFP process works?
Joe: Having been in the solar industry for going on 12, 13 years now, I do a lot of the pre-analysis and pre-qualification of certain sites. I get a sense for whether or not interested nonprofits are good candidates for solar, and get a general sense of system size and their roof and building conditions.
From there, our role is to facilitate that competitive bid process–putting together an RFP and putting it out to bid to many different solar contractors in the region. I facilitate site visits and walkthroughs of the different churches and schools, answer questions that contractors may have, and compile all the bids we receive. A lot of work goes into making sure that we put out an RFP that will yield apples-to-apples comparisons on all the proposals that we get.
When we get those proposals back, we evaluate, summarize, and synthesize them, and then share them with the participants. It's very much a group process–a lot of meetings, phone calls with organizations, folks sharing their different questions with each other, what their concerns are.
Really, I think the magic is in that group process. It’s where a lot of the trust gets built, folks know that they're not going into this alone, and they get their peers and different organizations’ perspective and ideas. One person's good idea has often become a great addition to the contract that we then negotiate with the winning solar company.
That's the process. It's not just about the pricing, it's also about the contracts–helping our members with collaborative negotiating of the contracts. We review contracts from the different vendors and our participants tell us what their red flags are in terms of legal terms.
After the RFP process, CPA remains involved as an accountability partner for our organizations. All the way throughout the design, development, installation, and commissioning process, we're there as needed as an advocate and accountability partner–and a guide for those that just need a little more help or assistance or hand holding.
|Are you a solar company serving the DC Metro area interested in learning more about how to get involved in CPA's programs? Joe Naroditsky, CPA's Director, Solar & Operations can be reached at joe(at)cpa.coop|
If you are interested in learning more about solar group purchasing programs, here are some resources for further learning–including information about solar group purchasing for other types of customers (municipalities, residential, etc.) and programs in other regions. Many of these focus on the customer perspective, but contractors can use them as a starting point for exploring opportunities for getting involved.General information:
- The U.S. Environmental Protection Agency’s Collaborative Procurement Initiative–"EPA seeks to replicate on a national level a regional collaborative model for clean energy procurement that was first pioneered in California....”
- Delivering Solar: Group Purchasing is Driving Down Costs for Customers–This (2011) blog post by NREL provides an overview of some of the group purchasing programs active at that time.
Programs for municipal/government customers:
- What Cities Learned From Their First-Ever Group Purchase of Community Solar–This article shares lessons learned from a solar group purchasing program in Minnesota specifically for municipalities to purchase community solar.
- A Model of Collaborative Solar Purchasing: The Alameda County Regional Renewable Energy Procurement Project–This case study shares lessons learned from a groundbreaking collaborative solar purchasing project among local public agencies across four counties, led by Alameda County, California.
- The Solarize Guidebook–A guidebook from a former NREL program called the Solarize program, which helped communities organize solar group purchasing programs for residents. (Although no longer active, this may provide insights for those looking to initiate similar programs.)
- Milwaukee Shines Group Purchasing Program Signs up More Homes Than Expected–This article provides an overview of a 2017 solar group purchasing program in Milwaukee, Wisconsin.
- Private-Sector Case Study: The Collaborative Solar Project–”This case study describes the first attempt to structure a collaborative, aggregate purchase for commercial solar PV installations in the United States,” led by the World Resources Institute.