Eight years ago, Tom Kelly, owner of the Neil Kelly Company in Portland, Oregon, diversified his business by acquiring another local company.
There is nothing remarkable about this. Many remodelers go out and acquire a handyman firm to complement their full-service or design-build business. Or they might launch a specialty contracting business by signing on with a home improvement dealer or franchise organization. But by purchasing Mr. Sun Solar, Kelly was venturing into very unusual remodeling terrain: a full-service solar design-build firm.
The context of Kelly’s acquisition is important to remember. Back in 2013, the country was still rebounding from the Great Recession. One key to the recovery for remodelers were funds made available through ARRA—the American Recovery and Reinvestment Act of 2009. Though the amounts may seem small in comparison to 2020’s $2 trillion CAREs Act, ARRA provided $5 billion for weatherizing homes. For example, there was $400 million for the Geothermal Technologies Program. In addition, ARRA authorized a 30 percent tax credit for investments in advanced energy manufacturing programs.
All of these incentives, including many offered at the state and local level, were layered on top of an existing 30 percent tax credit for the installation of residential and commercial solar panel systems as part of the 2005 Energy Policy Act. Today, that tax credit is phasing out. In March, the credit went from 30 percent of the cost of a solar system installation down to 26 percent. In 2021, it goes down to 22 percent before being phased out entirely.
It was into this environment in 2013 that Kelly purchased Mr. Sun Solar and merged it into his family’s industry-leading remodeling company, which was founded by his father in 1947. Direct mail and other lead-gen programs worked well for the company’s new solar division, helping Neil Kelly prosper during a time when other remodelers were chasing smaller jobs. The average cost of a photovoltaic residential solar system is in the range of $15,000 to $25,000 with a customary margin.
A Maturing Market for Services
Today, Neil Kelly’s solar division is managed by Jenn Harbick, who wears many hats with the company. Officially she is GM of the company’s handyman services division. The solar group is comprised of approximately a dozen staffers including a team of three design consultants and green building specialists. Importantly, the group includes the services of a full-time electrician.
According to Harbick and senior design consultant and green-building specialist Troy Zdzieblowski, the company’s solar business takes an approach that fully reflects the company’s remodeling heritage and remodeling process. Serious inquiries get scheduled for a needs-analysis appointment where potential clients provide information about all aspects of the home’s performance.
The right solution for a customer often requires energy-efficiency upgrades, such as new windows, air sealing and insulation, before the correct solar panel system can be designed for a given home. In addition, there are engineering calculations to ensure that the roof of the home can support the weight of the panels. Naturally, all aspects of this type of job are handled by the full range of staff within Neil Kelly.
Harbick cited the example of a 1907 vintage craftsman bungalow that underwent a complete energy upgrade from the company and is now featured in the Portland area’s net-zero tour of homes. Zdzieblowski, who sold and managed the project, said the solution was particularly interesting because the home represents a very common type of housing found in the city of Portland and because the home is 113 years old. The example showed what may ultimately be possible toward reducing the energy consumption of a region if repeated to thousands of other homes like it.
“We installed roofing and siding. We built a porch,” says Zdzieblowski, emphasizing the wide scope-of-work. “The owner had already upgraded the windows and had installed ductless heat pumps, so we sealed the home, put in a heat-pump water heater and removed a gas furnace. Then we upgraded the electrical system.
“So it’s a 1907 net-zero home, which we’re starting to achieve more and more as the solar panels get more robust. So, as the quality of efficiency upgrades improve, and we put those together with solar, we can pretty commonly design a lot of old bungalows to be essentially net zero, and they’re 120 years old.”
In 2019, the firm sold and installed approximately 27 solar projects, Harbick says; then, entering 2020, the division pushed hard to complete a rush of projects before the federal government’s March 31 deadline to take advantage of the full 30 percent tax credit, before it went down to 26 percent.
Talking with Zdzieblowski, who has eight years of experience designing and selling residential solar systems, is like speaking with a walking encyclopedia of solar knowledge. For the typical qualified remodeler, there’s already so much to know in order to be a successful general contractor. Layering on the required knowledge to be a licensed solar firm dramatically increases the complexity of offering solar services.
Zdzieblowski utilizes a popular solar sales-and-design software offered by Aurora Solar Inc. Today, a typical system will involve myriad considerations—from which direction a given roof faces, to decisions about offering battery backup and the best type of PV (photovoltaic) panels for a given set of conditions and client goals. There are selections to be made for everything from the best type of electrical inverters to use to the most efficient batteries to buy. In addition, there is an alphabet soup of solar acronyms that refer to a number of relevant codes and regulations.
Top Firms for Partnering
Trade magazine Solar Power World is a good place to start your search for a local, regional or national residential solar provider. They publish a list of the largest residential contractors in the solar space, complete with links to websites and contact information. You can go to solarpowerworldonline.com to search this list. You can also search by state, so the site is worth a visit if you are just getting started.
The key document in any solar proposal is the one that calculates payback over time. This solution offers an IRR better than most investments.
The top residential firms for 2020 in terms of DC kilowatts installed in 2019 are: Momentum Solar, based in New Jersey; Trinity Solar, also based in New Jersey; Titan Solar Power in Arizona; ACE Solar, based in Massachusetts; and Sunpro Solar, based in Louisiana.
In conversations with three solar residential contractors, two said they are open to relationships with remodeling contractors. One said they prefer to stick with their ‘owned’ lead sources. All agreed that most remodeling contractors should simply refer solar inquiries to a firm they can trust will be responsive. And it goes without saying that achieving the level of coordination achieved between the solar and remodeling divisions within the Neil Kelly company would take months, if not years.
Tesla’s SolarCity division made a big splash by launching three different types of PV solar shingles in the fall of 2018. When installed in conjunction with a Tesla Powerwall, the shingles offer a unique vision of solar energy powering homes and electric vehicles, like the ones built by the parent company. Yet for all the fanfare, market participants say the leaders in residential solar are mostly firms who have been at it for years, even decades, by continually improving the efficiency and output of the well-known rectangular photovoltaic panels.
For remodelers who still want to get a gauge on commonly used solar panels and batteries, Neil Kelly’s Zdzieblowski suggested a starter source list for further research against a wide universe of excellent providers.
Product-driven websites also offer a good solar education. These sites, all products used by Neil Kelly, each provide clear educational and specification information in order to gain familiarity and understanding.
A Sample of Solar Battery Manufacturers
Battery systems have gone from being an add-on just a few years ago to being a key component of a well-design residential solar solution, Zdzieblowski says. They can be designed to back up a single electrical circuit or to power a car, or to back up an entire house.
LG Chem is a leading battery maker by volume globally. The Neil Kelly Company typically installs the RESUH10 battery with Solar Edge inverters, Zdzieblowski says. www.lgchem.com/product
Blue Planet Energy is one of Zdzieblowski’s top panel providers. They are a U.S. company based in Hawaii, and “they have one of the best-performing battery systems,” he says. blueplanetenergy.com/products/blue-ion2
In terms of inverters, which are a critical part of any solar panel system, SolarEdge (solaredge.com/us) is one of many recommended manufacturers. An inverter is computer hardware device that converts DC power from the solar panels to AC power for use in American homes. QR