The industry will gain strength after a volatile period resulting from the real estate collapse
Los Angeles, CA (PRWEB) January 06, 2013
The Solar Water Heater Installation industry had an erratic past five years. The industry's saving grace was an assortment of both federal and state solar investment tax credits (ITCs), which subsidized the cost of solar water heater installations. Demand for solar water heater installations was hurt, however, by a collapsing real estate market, a tepid recovery and commercial customers not having the funds available to justify solar upgrades. Overall, IBISWorld expects industry revenue to grow at an annualized rate of 0.7% during the five years to 2013, with revenue anticipated to increase 1.1% to $145.3 million in 2013 alone. “Solar water heater installations experience the strongest growth when federal incentives are increased,” says IBISWorld industry analyst Nima Samadi. “The Energy Policy Act of 2005 granted a 30.0% ITC for the cost of residential and commercial solar systems. In 2006, when the ITC came into effect, it resulted in a 165.8% increase in industry revenue.” The Emergency Economic Stabilization Act of 2008 extended this credit to the end of 2016. The cap on the amount of the federal ITC a residential customer could receive was removed, and combined, these factors resulted in a 52.6% increase in industry revenue in 2008.
Nearly 80.0% of Solar Water Heater Installation industry revenue comes from residential installations; therefore, the health of the residential housing market plays a large part in determining the fate of solar water heater installers. “The solar water heater installation industry was hurt by a decline in the number of housing starts and falling renovation rates during the past five years,” adds Samadi. “The reduction in new homes resulted in fewer opportunities for solar water heaters to be installed in new construction projects and discouraged existing homeowners from investing in solar thermal upgrades.” Extremely low barriers to entry make the industry a highly fragmented one, with a low level of concentration. IBISWorld estimates that the overwhelming majority of firms are independently owned and operate over small geographic areas. Solar water heater systems may be installed by a single person, meaning that nonemployer firms are able to compete effectively in the industry as well. Moving forward, the industry is expected to become even more fragmented as an increasing number of general construction firms enter the industry and learn the required skills to market and install solar water heater systems.
Through 2018, revenue growth is forecast to strengthen. Industry growth could be higher, but the regulatory policies that have been so favorable for the industry remain uncertain in light of an unresolved federal budgetary deficit. Still, the revival of the corporate sector is anticipated to create the most demand for solar thermal installations as corporate profit continues to recover from recessionary lows, technological advances continue to make solar water heaters more economical when compared with natural gas, and companies seek to present themselves as environmentally friendly. For more information, visit IBISWorld’s Solar Water Heater Installation in the US industry report page.
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IBISWorld industry Report Key Topics
Firms in this industry install solar water heater systems as part of general residential and commercial contracting services. These firms are contracted either directly by the customer or by solar marketing firms that arrange a buyer for solar thermal systems and contract an industry firm to carry out the work.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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