Residential solar is an industry that's been around for about 20 years, but it's still pretty confusing.
Some of this is due to regulatory changes — as happened in California last year, when policy changes gave homeowners more time to recoup their investments — but other effects stem from the peculiarities of the industry itself: it's a highly fragmented, labor-intensive business that's resistant to automation. The largest installer, publicly traded Sunrun, has just 13% market share.
“This is a solar coaster. It's crazier than a lot of other service industries,” Lee Keshesian, founder and CEO of Civic Renewables, told TechCrunch.
Residential solar panel installations are mostly done by small companies, leading to a mixed customer experience – some great, some not so great. To address quality and consistency issues, Civic Renewables is acquiring and consolidating smaller installers.
“Generally speaking, they're really good builders,” Keshesian said. But he added that they might not have very good bookkeeping practices or be sustaining their business with personal lines of credit. “We say, focus on what you're good at: you're a great electrician. Let's focus on that,” he said. “Now, let's bring those systems under this umbrella.”
Each company Civic Renewables acquires will keep its brand but add the name of its umbrella organization. Civic will provide the back-office support that such deals typically involve, such as human resources, finance and procurement, and training for new employees. For now, the business will focus on solar power equipment, but in the future, as the business expands, it may include things like heat pumps.
For Keshesian, a former vice president at Tesla and chief operating officer at Palmetto Solar, talent retention is a key part of the plan: “How do we enter markets that haven't traditionally been solar markets? The only way to make a difference in these places is to give people jobs.”
As a result, improving profitability is not a question of headcount, but of finding ways to grow each business faster while enjoying economies of scale.
Civic Renewables has acquired two installers so far, Green Luck Solar in Pittsburgh and Ipsun Solar in Fairfax, Virginia, and Keshesian said the company may acquire two more this year. For now, the company plans to keep its focus on the Mid-Atlantic and Midwest.
The startup is backed by GEF Capital Partners, a private equity firm focused on climate tech, environmental protection and sustainability. “We've invested a few million dollars just to get the business off the ground,” said managing partner Stuart Berkoff. The firm has set aside some capital to help Civic make further acquisitions but declined to say how much. Keshesian said he hopes Civic will be able to underwrite acquisitions on its own in the future.
GEF's plan is to grow Civic's EBITDA (earnings before interest, taxes, depreciation and amortization) to the equivalent of about $30 million. “This is a very attractive asset to many investors in the market,” Berkoff said.
Solar power has been around for a while, so Civic Renewables' business plan could point the way to at least some of the climate tech market. Much of the work involved in decarbonization requires skilled labor that can't be easily replaced. There may be a lot of talk about automation, but there's still plenty of capital and opportunity in the industry.