Turn Your
Service Department Into A Revenue Driver
How to Build a Technology-Based Operations and Maintenance Program
Solar is now the number one new energy source added to the grid each year.
Even before this point, solar’s ubiquity was growing over the last decade. That means many Contractors now have installed megawatts worth of systems. Some have also gone out of business during the ups and downs of the industry, leaving many systems orphaned. In fact, there’s been a 746% surge in fraud complaints including the words “solar panels” since 2018, highlighting how many fly-by-night Contractors have left site owners in the dust.
The sustained popularity of solar and rise in orphaned systems leads to both an issue and opportunity for operations and maintenance (O&M).
Once a solar contractor energizes an array, there’s a 20 to 30 year asset lifetime to potentially engage with customers. Many contractors don’t charge for O&M, seeing it more as a reputation management expense and, ultimately, a cost center. In the vast majority of cases, Contractors with O&M departments also known as “Service” departments report pulling Installers from net-new jobs in order to address urgent maintenance problems. Running an O&M department this way may have served some Contractors in the past, but it simply isn’t sustainable in the coming decade when more systems than ever will be installed and require maintenance.
With the right business model, Contractors can make money from O&M services. This concept works in some parts mainly because home and property owners are already accustomed to paying for regular maintenance on long-term hardware such as HVAC systems, boilers, and more.
To succeed in the future, Contractors need to reconsider what O&M means to them. Simply put, in many cases, solar is not a maintenance-free solution — and maintenance does not need to continue being a considerable expense for Contractors.
In this ebook, find out how and why you can launch an O&M program, and how to outfit your team with the tools and accessories to do the job.
It took 70 years to build the first terrawatt of solar; it will only take three years to build the next one. This kind of explosive growth in solar means there are going to be a lot of aging systems, plus a significant number of new ones — in other words, a lot of arrays that might need maintenance, repair, or even replacement.
Why Contractors Should Act Now
1. Aging Arrays Create an O&M Revenue Opportunity
Solar has been in high demand for years. A typical Contractor may have already installed thousands of systems, many with nearly decade-old parts (e.g. inverters) that could break down or fail. Whether you feel obligated to repair arrays for the sake of reputation, warranty or something else, this basic service — maintaining technology and hardware — is something you can monetize.
The growth of orphaned systems expands the opportunity. A lot of contractors have unfortunately gone bankrupt. Many other Contractors all but abandon their customers once the check clears. With this behavior, it’s no wonder there’s been a 746% surge in fraud complaints involving the words “solar panels” since 2018. This is an opportunity some Contractors already know about; 72.7% of long-standing Scanifly Contractors who have an O&M program already say they either passively or actively seek out orphaned systems as a way to get new customers.
Increasingly aggressive weather is also an issue. Solar arrays may need significant maintenance or repairs as storms have become stronger and last longer. For instance, hail storms from the Midwest to Texas can easily damage panels, while coastal regions face risks of trees falling on arrays.
This is all happening now; Contractors who build a proper O&M program today will be ahead of the curve.
2. O&M Relationships Create Upsell and
Cross-Sell Opportunities
Most local and regional solar contractors obtain the majority of their business from word of mouth; when you have a solid O&M program in place, your customers will tell their neighbors and friends. In contrast, they will also happily share negative stories if you’re unable to help them. It’s not always fair, but it’s true — a great O&M program is not just about protecting reputation, but driving referrals for new business.
Another reason for a high-quality O&M program is the chance for more customer face time. The more you talk to customers, the greater opportunity to pitch future products like EV chargers, batteries, and heat pumps. And if your company does other things — e.g. many solar contractors also provide electrification solutions — keeping the relationship for years could turn you into a trusted call for other things.
In addition to your direct customer base, you can also become a trusted local third-party contractor for other solar companies, including national or sales-focused Contractors, meaning more business beyond the arrays you install.
3. An O&M Offering Can Smooth Seasonal Business and Optimize Talent
Maintenance is currently a cost center that draws technical resources; 31.8% of Scanifly Contractors with reported O&M departments routinely pull Installation Technicians away from new jobs in order to take care of maintenance issues. But installation work is also seasonal for many parts of the world — often due to weather or customer buying cycles — which means more new installs in the summer and less in the winter or early spring.
Building an O&M program with regular checks during the winter, for example, smooths out your employees’ schedules a bit while delivering incremental revenue in the off season.
The three notable opportunities — new revenue, upsells, and talent utilization — are already beginning; nearly 40% of long-standing Scanifly Contractors with O&M departments, are figuring out how to move from a reactive to a preventative maintenance strategy. A lot of business will be captured by Contractors willing to act early.
Why Can’t Solar Be Like Other Industries?
Most Solar Contractors already do some form of maintenance over the life of a solar project; few have turned it into a revenue generator. When asked, Contractors often say they don’t believe customers will pay for solar O&M; some Contractors concur solar is “maintenance free.”
The data suggest otherwise. Just over one quarter (28.6%) of Scanifly Contractors who do O&M already have a “preventative” philosophy about maintenance, implying their customers are aware that solar arrays may need small fixes to avoid large problems. A further 38.1% of Contractors are working to evolve their philosophy from reactive to preventative, suggesting this trend is only growing.
(Where Charging for O&M is the Norm)
Customer actions seem to confirm this hypothesis when it comes to long-term technology. For instance, homeowners who want solar arrays often already have multiple pieces of hardware in their homes, such as an HVAC system, water heater, or boiler. All of these machines are expected to work efficiently for years, and most do. However, homeowners still pay either for routine maintenance check ups or at the very least for ad hoc and necessary repairs to keep the system running; if the machine is working properly after a regular checkup, that’s considered a good thing.
Can you imagine someone demanding a technician fix a broken boiler for free, simply because the homeowner paid for the boiler 10 years ago? Or someone demanding a refund on their annual HVAC checkup because it revealed the system was not in working order?
The same applies to solar; a site owner purchased a complex piece of technology with the expectation that it will function properly for years. However, achieving that decades-long lifespan requires maintenance, whether that’s ongoing checkups, one-off fixes, or both. And it’s not unreasonable to charge for this work, just as it’s not unreasonable for a plumber to charge for pipe repairs or an HVAC company to charge for a yearly checkup.
When it comes to charging for O&M, the biggest challenge for Contractors is the expectations that customers develop when learning about solar. Unfortunately, solar is often sold as a “maintenance free” solution, which is typically not the case over the systems life.
Under normal conditions, panels will be fine, but wear-and-tear over time combined with inclement weather can easily cause damage. Active monitoring and routine maintenance will spot these issues when they are small, but at the very least site owners should know that problems can (and likely will) arise over the 20-25 year lifespan of the array.
In particular, three types of issues can occur:
Isolated issues: Compounding smaller issues (e.g. leaves getting stuck under the array for months)
or larger problems (e.g. a hail storm or a tree branch falling on the array).Location factors: Like any outdoor hardware, trivial issues can happen (e.g. panels being covered in grime or bird droppings) that reduce efficiency over time.
Useful life: While panels are meant to last for 20-25 years, many parts typically only last for about 10 years before they need to be repaired or replaced.
People already understand paying for maintenance when it comes to long-term systems and solar should
be no different. When owners understand (a) potential issues and (b) the reliability limitations of their systems, Contractors can and should be forthcoming about maintenance offerings. In most cases, this should not hurt closing the sale. Alternatively, this topic can be discussed later in the sales cycle or as the system is being installed.
Solar Is Not A Maintenance-Free Solution
How To Structure An O&M Department
Building a service department into a revenue stream requires a strategy. Here are four business models and our recommendations for how to pick the right one.
(And Get Customers)
1. O&M Subscription
As the name suggests, a subscription model is when your customer pays on a regular basis for routine service.
During a system health checkup, site Technicians would inspect the key elements of the solar array for damage, wear and tear, or risks of breakdowns. Anything identified can be fixed either immediately (for a small issue) or at a later time (for anything bigger).
2. Diagnostic or Insurance-Focused O&M
Some customers won’t subscribe to any preventative maintenance and will only reach out if there’s a major issue. That’s fine, and you can be ready for them.
By focusing on the two largest issues system owners will face — (1) diagnosing an unknown issue causing a production loss or (2) assessing known damage for an insurance claim — you can still build a thriving O&M business.
3. Be The Trusted O&M Third Party
The previous two business models were most applicable to existing customers and seeking out orphan systems. However, another option is to become the go-to third party Contractor used for outsourced O&M.
In larger markets that have multiple local, regional, and national Contractors, being a trusted third-party O&M Contractor allows you to pick up new revenue without cannibalizing your core business.
4. Off-Season O&M Program
Over 70% of Scanifly Contractors with O&M departments report pulling Installers from new build jobs to help with reactive O&M visits; this has typically meant underutilizing talent. However, solar can be a seasonal business in many locations, depending on the geography, even for Contractors willing to operate year-round. This seasonality creates a business model opportunity. If you’re going to start a preventative maintenance program, one solution is to have it operate primarily during a slower season. This helps you avoid urgent fixes or emergencies during the high season that would pull Installers away from net-new arrays.
The following are situations where you can experiment with business models:
For all recently installed jobs, offer an off-season check up or a subscription package.
How To Choose A Business Model
The aforementioned scenarios might look different for every contractor.
As you try different experiments, document the results in terms of:
Effort and cost to set up
Time to implement
A description of the results (e.g. you got X reach outs and Y customers)
Financial implications
Once you have the results documented, you can make an informed decision about how to move forward.
Necessary Tools To Build an O&M Program
Building a revenue-generating O&M program requires the right tools and technology.
O&M can become very technical, so it’s important to have the right degree of expertise. That said, the level of technical proficiency required depends on your offerings. For example, if you’re selling a package promising on-the-spot fixes, you’ll need someone with significant technical know-how and the right tools to handle any situation. However, a diagnostic-only service may not need someone with as much experience.
When Charging For O&M Might
Not Make Sense
While an O&M program can be a great revenue driver, there are instances that require a second thought.
Here are two examples:
1. Small residential projects
A core value proposition of O&M is that the cost of a maintenance program will be more than offset by increased or maintained solar production. These numbers may not fully work out with smaller systems; it depends on the contract.
How charging for O&M could still work with small residential projects:
If someone has a smaller system that’s in a more damage-prone area (e.g. an area with frequent hail storms that can cause significant damage to panels), paying for O&M could easily be worth the cost.
If you have multiple customers with smaller arrays in the same area (e.g. a dense suburb), you could distribute the cost of a truck roll and complete multiple O&M checks per trip. That way, each customer pays less than they otherwise would.
2. Small Contractors
Even with a paid O&M program, new installs are typically more profitable; this makes it hard to staff an O&M offering if you have a very small team.
How charging for O&M could still work for smaller Contractors: You can outsource monitoring to a company or a services business that operates regionally or nationally. This way, the outsourced team (paid for with revenue from your O&M program) weeds out small issues. When larger issues happen, you can more effectively prioritize team resources.
Don’t write off O&M just yet
In both cases, it might be difficult to justify the resources of an O&M program at first. However, your customer will often be paying attention to their solar production over time. If things go wrong, they will likely still call you.
Even if you don’t want to invest in a whole program, you should think about how you might approach O&M more strategically to avoid it becoming a spiraling cost problem or reputational damage issue.
Better Technology, Better Business
The ebbs and flows of the solar industry aren’t slowing down.
In the past, many Contractors sought to install as many systems in their territory. A number of them cut corners. Looking forward, long term, there are no signs of Contractors reducing their objective to scale or any sign of consumer demand slowing. With millions of systems already cumulatively installed and hundreds of thousands of new arrays coming each year, there’s more opportunity than ever for quality-focused companies.
The first step is to figure out if an O&M program is right for you. From there, you need to identify the specifics of who will be on the team, what tools they need, and if you need to hire any additional employees for this new venture. Concurrently, think about which business model is best for your geography, reputation, and customer base. Finally, start experimenting, documenting results, and expanding from there.
The next decade in solar will truly be a test of Contractor resiliency and character. With continued demand and existing systems, O&M is here to stay as the industry matures and grows. That’s why it’s such a big opportunity for forward-looking, quality-focused Contractors. Those who act now will reap the greatest benefit in the years to come.
