After recently watching several members of the solar industry misinterpret Crossing The Chasm at InterSolar North America, I thought it might be helpful to: re-visit the foundation of the Crossing the Chasm framework, provide a rough first-look estimate of solar market penetration, and then offer a few suggestions about how to recognize the unique characteristics of solar market adoption.
Crossing The Chasm (CTC) is a theory that seeks to explain how, why, and at what rate disruptive or discontinuous ideas and technology spread. It is fundamentally a study of the psychological characteristics of buyers. The underlying thesis of Crossing The Chasm is that innovations are absorbed into any given user base in stages, corresponding to their psychological and social profiles.
Because adoption rates are based on psychological profiles — personality, values, opinions, attitudes, interests, and lifestyles – the exact point at which a technology penetrates a given group, or crosses the chasm, can be very difficult to measure. And it is important to recognize that Crossing the Chasm does not say that transitions from one group of buyers to the next are smooth or well defined.
Many organizations use a technology adoption curve (shown below) that indicates early adopters are on BOTH sides of the chasm. This is because exact buyer-transition points are nearly impossible to identify. So be careful when trying to pinpoint the specific date or timeframe in which a market chasm has been crossed.
An Initial Look At Solar Market Penetration
If you look at the breakpoints of a bell curve that is used to represent technology adoption, you will see that innovators represent 2.5% of an available market, early adopters represent 13.5% of an available market, and the early/late majority represents a whopping 68% of the available market. So it is sometimes possible to get a VERY ROUGH estimate of market penetration by using simple mathematics.
Let’s look at residential solar as an example. The U.S. Government Census says there are approximately 72 million single-family detached homes in the US, and NREL says 25% of those are “solar compatible” so the available market for residential solar in the US is around 18 million houses. An early market made up of innovators (2.5%) and early adopters (13.5%) represents 16% of the available market, so in rough numbers, once you pass 2.88 million residential solar installations (or 16% of 18 million), you can say you’ve probably crossed the chasm.
Unfortunately, it’s not quite that simple because the markets for residential solar are highly localized. For example, the same math exercise applied to Sacramento County, CA yields the following: there are approximately 310,000 detached single-family houses in the Sacramento area and if 25% of them are solar compatible, that means the available market in Sacramento County is roughly 77,500 houses. Brent Sloan at SMUD tells me there are approximately 14,000 single-family homes with solar in SMUD’s service territory, which means 18% of the available market has adopted solar. (Remember, innovators and early adopters represent only 16% of an available market) So our preliminary “first look” analysis indicates residential solar has crossed the chasm in the Sacramento area. However each location or area in the US must be analyzed separately.
Public Policy Blurs Solar Adoption
On top of the inherent difficulties in measuring localized, psychographic behavior, you must factor in the effect of public policy and incentives, which act to BLUR market dynamics. The psychographic sequence that is the foundation of Crossing The Chasm (innovator – early adopter – early majority – late majority) can be skewed by government or utility programs designed to encourage or accelerate the adoption of solar. A solar-friendly utility that satisfies a compelling reason to buy by offering a complete product — familiar buying experience, a standardized system, tax credits, credible references, attractive financing, streamlined permitting/interconnection, etc., etc. — will reduce risk in the eyes of a mainstream customer so that adoption occurs before it normally would in a purely commercial setting or market.
My colleagues — Steven Strong, Don Osborn, Don Aitken — and I first discovered this skewing of solar adoption when conducting a review of SMUD’s PV Pioneer Program in 1999. People who fit the psychographic description of the early and late majority were among the first to sign up for residential solar because the combined effect of SMUD’s multi-faceted solar program lowered risk so dramatically, it caused pragmatic buyers to adopt solar early, rather than late. (Keep in mind that SMUD’s PV Pioneer program was ten times more comprehensive than anything a utility offers today. So the reduction in perceived risk by the customer was truly unparalleled)
The bottom line is solar adoption is influenced by a unique set of artificial variables, making buyer-transition points even harder to recognize. And marketing solar requires an in-depth understanding of the Crossing the Chasm model, plus the willingness to adapt to skewed adoption patterns.
For those who supply or install residential solar products, you will need to analyze the local market(s) you serve, and gauge the impact of local policy initiatives, then adapt your product offering and marketing messages to match the local environment in a way that satisfies the needs and motivations of targeted buyers.
And of course a similar analysis can be done for utility-scale solar, which should start with some understanding of the “available market.”
If you have questions about Crossing The Chasm as it relates to solar, I would be happy to answer them.