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Altus Power, which is expected to complete a merger with a SPAC and start trading this month, is attempting to solve a major question about solar power: Can anyone build a sustainable business placing solar panels on the roofs and parking lots of businesses and office buildings? So far, that has been a tough proposition.
There are three main segments of the U.S. solar power industry. Residential solar companies sell or rent panels to people who place them on their roofs or other structures. Utilities buy panels or the power they produce and then sell it to homeowners and businesses through the traditional grid.
And then there is commercial solar, a segment that sells panels to businesses or other nonresidential customers like municipalities that can produce power for themselves and even sell it to others.
The first two segments are well-established industries, with market-leading public companies that give investors a way in. In residential,
Sunrun
(ticker: RUN),
SunPower
(SPWR), Sunnova (NOVA), and others have developed financing and sales systems that have driven down the cost of solar. Investors can buy into the growth of utility solar by purchasing stocks of the utilities themselves, such as
NextEra Energy
(NEE) or buying manufacturers of solar panels focused on utility users, like
First Solar
(FSLR)
But commercial solar has been a trickier proposition, because the growth trajectory and margins of that segment haven’t been considered as promising. In fact, SunPower said earlier this year that it was considering options — which could include a sale — of its commercial and industrial business to focus on residential, which has been a more profitable area for the company.
One reason commercial solar has been harder to build is that it can be harder to assess credit risk for companies and to find customers in a way that is cost-effective. Residential solar has benefited from the word-of-mouth effect when one person on a block gets solar, and from increasingly sophisticated online sales techniques and retail partnerships.
Altus may have “cracked the code” of how to lower acquisition costs, though, according to Roth Capital Partners analyst Justin Clare, who thinks shares will be a buy. It’s teaming up with the
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