Calculating the Total Addressable Market (TAM) and the Serviceable Addressable Market (SAM) is key to understanding how market size changes in relation to subsidy level, technology cost, and financing costs. This presentation provides an introduction to these measurements and uses evidence from Connecticut's Green Bank (CEFIA) to show how these calculations can impact product design and green bank planning.
2. Green banks use Total Addressable Market to define
goals
• A Total Addressable Market (TAM) describes a goal in
relation to a market
• Focus on a market permits identification of customers
• Market definition permits comparison of financing goals
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3. CT residential solar TAM measured by households,
energy
TAM is maximum technical potential of market
Total Addressable
Market
659,312 Households
6.51 GW of Capacity
Market Share Segment
4,500 Households
Penetration is 0.68% of TAM
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4. Serviceable Addressable Market economically viable
SAM is market for which solar makes economic sense
Serviceable
Addressable Market
506,714 Households
3.89 GW of Capacity
Market Share Segment
4,500 Households
Penetration increases
to 0.88% of SAM
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5. TAM and SAM analyses show green bank market
potential
• TAM – Total Addressable Market
– Total possible revenue, units, households, people in the market,
clean electricity potential
– Choosing the right metric is important - what is common unit of
measurement in this market?
• SAM – Serviceable Addressable Market
– Segment of the TAM that you will actually target
– Must select criteria of what makes market serviceable
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6. Residential solar TAM and SAM measure technical
potential and economic viability
• TAM for residential solar measured as:
– Total residential rooftop capacity that is technically possible,
irrespective of any economic constraints
– Could also be measured in terms of solar generation or number of
households
• SAM for residential solar measured as:
– Total residential rooftop capacity that is economically viable
– Viability defined by certain economic inputs and constraints
• For instance, only systems that achieve a positive payback in less than
15 years may be considered viable
– Various pieces of data must be collected and analyzed together to
assess viability
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8. Get SAM with filter for economic viability
This is the SAM for
Connecticut,
measured in % of
rooftops viable
and capacity.
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9. TAM and SAM put CEFIA goal in context
• Goal written by legislature is to install 30 MW of residential
solar over a ten-year period. But how big is that actually?
TAM in CT (Technical Potential)
SAM in CT (Economically Viable)
• The goal is only 0.77% of the SAM. If CEFIA actually took
10 years to deploy 30 MW, it would take nearly 1,300
years to reach today’s SAM!
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10. TAM also shows market structure and customer needs
• TAM helps green banks understand how market size
changes in relation to subsidy level, technology cost, and
financing costs
• Green bank can design a data-based plan to ramp-down
subsidies without reducing market size
• Green bank can use TAM data to make tailored financial
offerings to each customer, listing terms and savings that
demonstrate economic gains of clean energy
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11. TAM and SAM change as costs, subsidies change
• TAM and SAM are not static – what is technically possible
or economically viable today will change in the future
• TAM and SAM represent measurements at a point in time
As “Effective Price” (install cost – subsidies) of
solar goes down, economic viability goes up.
Solar becomes cost effective for more roofs
Payback period becomes shorter for roofs that were already viable
Savings of solar increase for all those who install
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12. SAM changes as “effective price,” maximum payback
period change
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13. Can calculate how much subsidies cost states
• CEFIA’s solar subsidy creates an effective price of $2.40/W
for Solarize customers, including $1.10/W subsidy
• If your payback threshold is 15 years, then approximately
60% of all rooftops in the state are viable at this level
• If every one of those customers actually chose solar and
took the subsidy, this would represent over 3GW of
capacity and cost the state over $3 billion
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14. Set meaningful, cost effective goals with TAM and
SAM
• For instance, the Solarize program in CT can achieve install
cost of $3.50/W before incentives
• If effective price is lowered to $3.00/W, 15% of households
are viable with a 15-year payback, representing 800 MW
• But a $0.50/W incentive to get to effective price of $3.00/W
would cost the state 800 MW x $0.50/W = $400 million!
• So what other tools or plans can be implemented to create an
effective price of $3.00/W in order to create a SAM of 800
MW?
– Can use REC’s, spread goal over time, ramp incentive from
$0.50/W down to zero over time to minimize cost
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15. Customer-specific data used to segment market, target
customers
• With TAM and SAM green bank can identify which
customers need least amount of subsidy, or have the
greatest economic gain from solar
– Green bank can specifically market to those customers first
• With customer-specific economic data, green bank can
create custom financial terms that ensure the offer is
economically viable
– Every customer in the state can receive an email telling them what
the financing offer is and how much money they would save
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16. First green bank step is define market
• TAM defines the clean energy market for the green bank
• Can set meaningful goals in context of market size
• Understand how market size changes, and how much
current programs will cost
• Plan sustainable financial support and target customers
more effectively
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18. Calculating technical potential (TAM) and economic
viability (SAM) requires multiple data sets
•
•
•
•
•
•
Rooftop size and energy potential
Estimated household energy usage
Installation cost of solar
Solar subsidy level
Current and expected price of grid electricity
Assumed discount factor
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19. “Economic Viability” means solar is cheaper than the
grid
What makes solar viable?
• System must be large enough
• Roof must receive enough sun
• Install cost must be low enough or subsidy high enough
• Price of the alternative, grid-power, must be high enough
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20. Compare utility electricity price to the implied cost of
solar power
• Implied cost of solar per kWh is the “levelized cost of
energy” or LCOE
• LCOE accounts for all lifetime costs of solar (almost all
upfront) and divides by total number of lifetime kWh
• Future expenses, kWhs discounted to present value
• If solar LCOE is lower than the utility rate, the customer is
economically viable and in the SAM
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