The solar industry in Australia has undergone a substantial change in the past 10 years. The explosive boom that has occurred over the last decade has seen an unprecedented amount of growth and change in the industry.
In the wake of the boom, competition is high and consumer’s expectations are demanding. As governmental incentives are disappearing from the market, consumer motivation and drivers for uptake of solar related products are changing.
For those enterprises continuing to do business in this landscape, fundamentally understanding the customer becomes an essential requirement to successfully respond to a dynamic market. Accurate market segmentation facilitates effective messaging and communications to customers to utilise the solar businesses’ already stretched resources most efficiently.
This post is a summary of a more comprehensive analysis conducted as part of my role in the marketing team. For the purposes of confidentiality, the specific sources of market intelligence are not named. Please contact me directly for further information.
The purpose of this study is to establish some quantifiable metrics with which to back up some qualitative assumptions about the consumer solar market in Australia. Qualitatively, a general picture of the market demographics and segmentation distinctions can be painted in broad strokes, however detailed numbers are required to accurately establish the boundaries of the landscape. Comprehensive quantitative data will help to justify assumptions, develop statistical models and guide the overall marketing strategy of the business.
The strategy for collecting specific quantifiable data was to draw from existing sources of information possessed by other organisations, such as industry partners, colleagues, and associates. Insights into general market demographics were in the form of customer lists, feedback forms, or other records of end consumer touch points. Only anonymous information was used to draw conclusions about market segments.
Various survey data was obtained from industry partners willing to share for the purposes of this study. The sample sizes satisfied the set requirements for statistical significance and were representative of typical Australian solar consumers. The survey data was in varying states analysis ranging from completely raw to processed.
It is recognised that the use of secondary data has inherent limitations. Intended initial purpose, collection methodology, and primary source credentials should be qualified and taken into account when drawing final conclusions.
Built-in errors and sample biases are acknowledged.
Data search guidelines
In order to provide a framework to guide the information gathering process, an outline was created and delivered to the potential information partners.
This study hoped to find standard market demographics of solar consumers such as:
- income / employment status / employment demographic
- family demographic
- dwelling size
- media consumption
- consumer habits
- technology use
Additionally, this study sought to find measurable data to help gain understanding for:
- “Pain Points” of solar – top complaints.
- “Gain Creators” – top comments.
- Purchaser vs. User stats. (Are they the same person?)
- Is there a Proximity effect – at a neighbourhood level (if your neighbour buys solar – how likely are you to then buy?)
- Complement product purchases?
- Correlation to other product purchases?
- Level of awareness / concern with Rebate schemes?
- Level of interaction / connection / engagement / with solar system?
Initial investigation into the existing academic research literature found that specific studies into demographic segmentation of rooftop solar PV users in Australia to be somewhat limited. While there was extensive reporting into overall uptake rates and the growth of the industry, the investigative focus on the end user’s motivations was lacking. Additionally, documentation of changing consumer trends as the generous governmental schemes, rebates and FiT’s wind down is not widely available.
A few studies were sourced, however, and despite their publication dates being a few years old, they can provide some useful information to establish a baseline in this exercise.
Domestic Drivers (2013)
Drivers of Domestic PV Uptake published by ARENA in 2013 was intended to assist ARENA and stakeholders to understand drivers of uptake of PV systems by Australian households. Using data sources such as ATO, ABS, Clean Energy Regulator, and APVI, this study attempted to find correlations of PV uptake (at the post code level) to basic demographics such as age, income, education, dwelling types etc.
The results of this study are as follows:
- The strongest correlation for PV uptake is whether the occupants own the house.
- PV uptake is higher where dwellings have a higher number of bedrooms, on average – greater than 3 rooms.
- There is positive correlation where there is a higher proportion of people in a postcode that are over 53 years of age.
- While various measures of household income do have a statistically significant effect on PV uptake, this effect is relatively modest.
- PV uptake is lower where higher proportions of householders were at the same address five years ago – possibly suggesting that people are more likely to install PV when they move to a new location.
- Income from Australian Government pensions was also positively correlated with PV uptake. However, income from self-funded sources of retirement income was not found to have a statistically significant effect.
- Higher numbers of children below the age of 15 living in the household were associated with lower levels of PV uptake.
The shift from early adopter to mainstream
Between 2007 and 2013, the Australian solar industry went from having 0.001% installed capacity to over 15%. As the PV market went from early adopters to mainstream market penetration, consumer motivations shifted from “environmental” to “financial” as governmental incentives facilitated PV uptake. This data of this trend can be observed by comparing the results of the following studies:
Conducted in 2007 by the ATA, The Solar Experience Report intended to capture PV users experience and motivations for uptake. Relevant findings of the study revealed that:
- 78% of its respondents were motivated by environmental drivers
- Only 40% of users viewed their investment in PV as good value for their money
- 61% of respondents mentioned an increase in their awareness of their household energy consumption
A CSIRO report, Australian householders’ interest in the distributed energy market from 2013 found that the primary motivators for the uptake of rooftop PV were as follows:
- 70.4 % – Save money
- 11.7% – environmental
- 10.5% – government rebates
- 3.7% – independence from energy retailers
- 3.7% – other
Segmentation by State and incentives
Across Australia, there are different levels of incentives for promoting PV uptake that are changing with time. Consequently, segmentation can be drawn according to the different incentive programs. As such, a user who is collecting a generous Feed in Tariff payment will be motivated very differently than one who is not. The following diagram attempts to simply the complex landscape of the various schemes across the country, and to identify the changing nature of these segments as the incentives are reduced and/or vanish.
Did Not purchase solar
One set of data obtained was from consumers who did NOT purchase solar. These respondents had initially contacted the source with the intention of seeking pricing for new solar systems, however chose not to pursue the purchase. A follow up questionnaire collected feedback in the form of an open comment section as to why they did not choose to purchase solar.
This sample was adjusted by filtering out those consumers who may actually purchase solar but did not at this time due to timing issues, site suitability, or other unrelated conditions. While this reduced the overall sample size, the results still remained statistically significant (99% CI / 4% error), and offer a more refined look at the de-motivations of the solar consumer.
While it is recognised that this data does not specifically relate to the segments of solar users, it does provide insights into general consumer sentiment toward the industry. Cost is most definitely a consideration for many consumers, indicating the influence of pure economics as a key driver for the uptake of solar. As such a significant group in the survey, this could represent an opportunity for financial / funding models to fill this gap in the market.
Of note is the distinction between the “too expensive” and the “poor payback” group, where consumers may have the necessary funds for the initial investment, but fail to see the value in the return. This could represent an opportunity to create value by demonstrating the ROI of a solar investment.
The general interest in battery technology is conspicuous as batteries were the second most mentioned subject among these (filtered) respondents.
Of particular interest were the two categories that when combined represented poor consumer experience (“confused” and “overwhelmed”). As this combined group was one of the largest categories, special attention should be paid to ensure that marketing, sales and other customer touch points are positive, accessible and reassuring.
Additional raw data and survey data was obtained to form the basis for analysis of solar users. When analysing the data from these surveys, the data was at times filtered to correct for potential skewing such as age ranges, FiT grouping, and state locations. In general, the subsets of data closely matched that of the complete sample. For the purpose of this report, the general data that has been presented here will reflect the entire sample set unless otherwise noted.
With respect to location breakdown, sample data varied slightly from what APVI reports, with slightly higher respondents in WA and less in QLD.
The survey found that the overall distribution by location to be 54% in a capital city of each state. The individual state breakdown is as follows:
The general demographics results of solar users are in line with the other research mentioned earlier in this report:
- Average age – 61.2 years
- Male – 67%
- Female – 33%
- Avg Income – $70,000
- Home Ownership – 95%
- Dwelling Type – 90% detached home
The average age of the sample data skewed slightly older than other reported average age of solar users, which could be a result of retirees simply having more time to fill out surveys. For many categories filtering by age does not significantly alter the data outcomes. However as expected, employment status (working vs retired), and number of children in living in the household changes when controlling for skewed age grouping.
The political makeup of the sample group favoured the Greens and Labour parties.
A large number of respondents reported that they did not use social media at all, which is not unexpected, considering the older age demographic of the sample size. When the older age ranges were filtered out, the level of social media engagement increased.
The average system size reported was 3.7 kW with an average cost of $10,200 to install. The date ranges of the when the systems were installed clearly coincide with the recent boom and slow down of the industry.
The majority of respondents report that their systems have already, or will be paid off in the future since the majority were installed in the previous 3 -10 years, and would have been able to take advantage of the government incentives.
Interest in batteries is high, however the majority of respondents did not express interest in going off the grid completely. There were no questions in the survey to determine the overall current level of battery uptake.
Self-reported information from surveys regarding the economics of user’s solar systems should be considered only as estimated values and not as highly accurate metrics. These values are more a reflection of the respondent’s sentiments toward the financial aspects of solar rather than actual data performance metrics.
As expected the values for bill reductions change somewhat when the higher FiT’s are filtered out, (however perhaps not as drastically as intuition would guess). This shift represents a pain point that more and more solar owners will be feeling as the bonus schemes are reduced. It also highlights an opportunity for solar monitoring to provide pain relief by helping minimising the shift.
The measures of “satisfaction” from surveys are self-reported answers and as such are subject to the typical validity problems commonly associated with this method of polling. These results should be considered as such.
With the generous bonus schemes enjoyed by many solar users, it is not surprising that consumer reported levels of satisfaction are high toward the financial aspects of their solar systems.
When filtering out those respondents who are currently on the higher FiT rates, the satisfaction levels do in fact change, as would be expected, especially with the level of financial returns gained from a solar investment. Interestingly, however, the satisfaction of bill reduction still remained relatively high, even for those on the lower FiT rates.
Perhaps one of the most relevant questions for this study is also one of the most difficult to interpret from the data. As is typical with using secondary data, the information does not specifically serve needs required here. Nevertheless, some analysis can still be conducted.
The respondents were given one of five responses to choose from when providing their “reason for installing solar.” While the majority of respondents fell into one of two predictable categories, a large portion of respondents answered with the “other” category, indicating a greater degree of complexity in understanding primary drivers for solar uptake.
While the balance between the “environmental” and the “financial” segments in the data samples shows the dominant driver is an economic one, the results indicate a stronger influence toward environmental motivations than this study would have initially assumed. These results suggest that environmental motivations are stronger drivers than proposed by the 2013 CSIRO study (12%).
Controlling for potential bias due to financial benefits by filtering out those respondents who are currently receiving high FiTs reveals that the environmental driver is still a strong motivator even when the user is not receiving generous returns from their system. Interestingly, in this filtered group, the “other” category is significantly reduced.
Again, measuring “satisfaction” will of course involve a certain level of error, ambiguity and variation in responses. Individually, the responses to these questions may not contain a great deal of specific valid data, but when grouped together they illustrate a general sentiment of this survey sample. To summarise – there appears to be a high level of satisfaction with solar.
The results of this study highlight several key insights, not the least of which is the need for a more specific, directed marketing research campaign. Clearly there is a gap in the industry in this respect, and at a time when the landscape is rapidly changing, detailed and accurate information regarding consumer behaviour would be invaluable to businesses as well as policy makers, advocacy groups and other interested parties. Future research efforts should include custom designed activities to collect relevant primary data.
Solar users represent a wide range of demographics, and the segmenting becomes more difficult, of course, as the industry matures. There are many ways to segment solar users, and consideration should be taken when delivering messaging and communications both in content and delivery.
Clearly, financial considerations are a primary driver, but environmental motivations are still a relevant factor, and should be considered a beneficial “gain creator” to be incorporated into messaging and communication.
The different incentive programs, overlayed by states create contrasting distinctions. The changing nature of these programs will become pain points for many users as financial benefits are reduced. This represents tremendous opportunity for organisations to provide “pain relief.”
Different age groups will be associated with varying behavioural patterns, employment status and family demographics in the home. Strategic targeting will be different across the age segment.
Additionally, with a large segment of older users, creating accessible interfaces for technologic access is important to ensure desired engagement levels.
From the sources presented here, it would appear that solar users are generally pleased with their systems and the economic advantages – even with those users on low FiTs. There is an apparent disconnect here between this sentiment and the feeling among the No-purchase group who thought the ROI was not adequate. This could represent an opportunity for increased conversion if this gap can be bridged.
There is an opportunity for differentiation to service the segment of consumers who may be “confused” or “overwhelmed” by the industry. By providing adequate support and guidance, businesses can better capture this segment.
The high levels of general satisfaction with solar systems could represent an opportunity to align marketing and sales messaging with the consumer sentiments. By leveraging off a potential emotional component, marketing activities could take advantage of powerful sentimental drivers to improve customer conversions. Australian’s, it would seem, love their solar.