Solar energy companies begin reporting earnings next week, just as the industry finds itself in a bit of a shakeup. Sunrun acquired REC Solar in a deal that makes another big competitor to SolarCity (SCTY.DL) in the residential solar space.

Here's more on that and the rest of the industry this week.

SolarCity workers installing a rooftop solar system. They could have more competition now that Sunrun has acquired REC Solar. Image courtesy SolarCity.

A new solar powerhouse
The residential solar industry in the U.S. is still very young, and so far, SolarCity has expanded almost unencumbered. The company's success has now brought new competitors, as Vivint has moved from home security into solar, and now Sunrun has expanded vertically with its acquisition of the fourth largest residential solar installer, REC Solar.  

This isn't just a normal acquisition in solar; it's a shift in the strategy that's dominant in the industry. Until now, financing firms such as Sunrun, Clean Power Finance, and SunPower (SPWR -8.41%) have worked with regional companies to install solar, choosing to focus on a smaller portion of the supply chain. But this acquisition means three of the top four installers are vertically integrated, and No. 5, RGS Energy, is working in that direction after offering a commercial leasing deal.

Consolidation was expected in the fragmented residential solar market, and now SolarCity has some real competition in its efforts to grow. Watch installation growth rates and retained value per watt to see if the company's financials will be affected.

Richard Branson is going solar
The cutting edge of solar installations and solar storage won't come from homes in Southern California; it'll come from places like Necker Island, Richard Branson's island in the British Virgin Islands. This week, NRG Energy (NRG 1.89%) announced that it will build a "renewables-driven micro-grid for the entire island."  

They're targeting 75% of the island's power from wind and solar technologies and will build storage systems as well. This is an early test system for NRG in what could be a big growth market in the Caribbean. Island countries generally have far more expensive electricity generated from diesel or other fossil fuels, and renewable energy will eventually be able to lower costs, increase energy security, and reduce carbon emissions.

Look for island systems to be a huge growth market for solar companies, something I would expect NRG, SolarCity, and SunPower to all participate in.

A residential solar community built by SunPower. Image: SunPower.

News and notes
Here are some more news items that may not have hit the headlines this week.

  • Germany's Fraunhofer Institute for Solar Energy Systems recently released a study that says rooftop solar energy in the southern parts of Germany is already as cheap as 0.08 euros per kW-hr and will soon be as cheap as power from coal. Germany isn't a particularly sunny country, so it won't be long until areas like the southwestern U.S. and Caribbean will be at this cost or lower, and the economics will continue to drive growth in solar installations.  
  • Canadian Solar (CSIQ 1.37%) sold a fourth Canadian utility-scale project to a fund managed by BlackRock. The 10 MW project is another high margin-sale for Canadian Solar, which has driven margins up over the past year.  
  • SolarCity announced homebuilder Taylor Morrison will offer solar systems to all of its Phoenix area communities. These will be the same $0-down solar leases that have driven SolarCity's growth and is another important homebuilder partnership for the company.

Earnings season begins on Wednesday, when SunPower reports earnings, so check back to fool.com for my takeaway from that report and what to expect this quarter.