Solar Panel Installation Business Overview
Solar panel installation companies provide professional services for mounting and connecting photovoltaic (PV) systems on residential and commercial buildings.
The installation process involves multiple phases, including site assessment, system design, permitting, physical mounting of panels, and electrical connections. Installation companies must employ or contract with licensed electricians to handle electrical components and obtain necessary permits. Many companies also handle the paperwork for tax incentives and utility connections on behalf of their customers.
A few of the common business models in this industry include:
- Full-Service Installation: Companies handle every step, from consultation through installation and maintenance support
- Installation-Only Service: Businesses focus solely on installing panels supplied by manufacturers or solar leasing companies
- Subcontractor Model: Companies work under general contractors or larger solar providers to perform specialized installation work
Related: Checklist To Start A Business
How Do Solar Panel Installation Businesses Make Money?
Solar panel installation companies generate income through various installation and support services for residential and commercial customers.
The revenue streams for solar panel installation businesses come from different service offerings and customer segments. These can include:
- Installation Labor: Labor charges for installing solar panels make up the largest portion of revenue because installation requires skilled technicians and typically takes multiple days. Most companies charge per-watt pricing for installation work.
- System Design: Companies assess properties, create custom solar layouts, and develop electrical plans for each installation project.
- Equipment Sales: Businesses sell solar panels, inverters, mounting hardware, and other components needed for complete solar systems.
- Maintenance Services: Companies provide ongoing maintenance, repairs, and system monitoring after installation.
- Electrical Work: Installation businesses complete electrical connections, upgrades, and permitting for solar systems.
- Consultation Services: Companies offer site evaluations, energy assessments, and financial analysis for potential solar projects.
- Referral Partnerships: Businesses receive compensation for referring customers to solar financing companies and equipment manufacturers.
Industry Statistics
Solar panel installation businesses operate under NAICS code 238210: Electrical Contractors and Other Wiring Installation Contractors. This classification includes contractors that primarily install electrical and wiring systems in buildings and other structures.
Here are some statistics that highlight information about the solar installation industry:
Solar Panel Installation Industry Size & Growth: The solar panel installation industry generated $21.8 billion in revenue last year. The industry has shown strong performance, with a 7.9% annual growth rate over the previous five years. Growth projections remain positive due to expanded tax credits through 2032 and rising electricity costs driving consumer demand for alternative energy solutions (IBISWorld).
Number of Solar Panel Installation Businesses: The industry has 11,091 businesses, with no single company holding a dominant market position. The fragmented nature of the industry means installation companies tend to focus on specific geographic regions rather than pursuing nationwide operations (IBISWorld).
Solar Panel Installation Profit Margin: Installation companies maintain net profit margins averaging between 10-20%. Labor costs and equipment purchases represent the largest expenses for operators in this industry.
Startup Stories
Costs To Start a Solar Panel Installation Business
Starting a solar panel installation business could range from $50,000 to $125,000. The cost varies based on factors such as size, location, and equipment needs.
Here are some of the main costs to consider when starting a solar panel installation business:
Equipment and Tools: A complete set of installation equipment includes ladders, safety harnesses, power tools, testing equipment, and mounting hardware. The initial investment for basic equipment ranges from $15,000 to $30,000.
Licensing and Certifications: Solar installers need electrical licenses and specialized solar installation certifications. Staff training and certification programs cost between $5,000 and $10,000 per employee.
Insurance Coverage: Insurance policies for solar installation businesses include general liability, workers’ compensation, and professional liability coverage. Initial insurance costs range from $8,000 to $15,000.
Service Vehicles: A work truck or van equipped with racks and storage systems for transporting panels and equipment costs between $20,000 and $35,000.
Initial Inventory: Starting inventory of solar panels, inverters, and mounting systems for initial projects requires $10,000 to $25,000.
These estimates represent general ranges, and actual costs will vary.