Commercial and industrial (C&I) solar development is not for the faint of heart, and not only because you’re way up on the roof. It is one of the most challenging environments economically for building a solar business because so many incentives and traditional business models are scaled to smaller and larger projects.

Moreover, the characteristics of the C&I solar space can make it difficult to find working capital. Michael Horwitz, managing director of the clean technology investment group at Robert W. Baird Inc., has the view that the investment market is still working its way through the nuances of the residential market, which has more of a consumer feel and scale and has business models that investors are more comfortable with.

“I’ve always had a view that C&I solar made a lot of sense,” Horwitz says. “What we were never able to discover is a company that could scale profitably in C&I.”

At the other end of the scale, companies specializing in large-scale solar power plants for utilities also have a familiar look and feel to any large-scale engineering and construction enterprise and, thus, have been able to attract capital.

The C&I space, caught between two worlds - consumer and infrastructure - is more of a free-fire zone. At the same time, many solar businesses, such as EnterSolar (see “Commercial Solar Success: A Little Ballast And A Lot Of Business Sense,”), Solect Energy and Borrego (for both, see “Projects & Contracts,”), have charted out this landscape with all its perils.

Both investors and solar developers say the uncertainty in this segment of the market can be daunting. Within C&I, you are dealing with a business-to-business sale, and it is all about the economics. And you are dealing with lots of one-off projects.

At the same time, Horwitz says that if you dig a little deeper, the vast potential of the C&I solar business becomes clear. Not only are there a lot of flat warehouse roofs and parking lots out there, but smart players see the rooftop array and the solar carport canopy as the first step in a business relationship that has the potential to span decades.

“I’m getting private equity folks that find C&I to be interesting because you can go ahead and view solar as your entre into that customer,” Horwitz says. “And then you can layer on energy efficiency and energy management. There is so much work to do around commercial and industrial building as it relates to energy management.” R