Interview: Inside Sungevity’s expansion Down Under

After expanding Sungevity in the U.S., why are you now taking on Australia?

Australia has surprised everyone, including myself, by taking on the gold medal for the 2012 period at least in residential solar. There’s now almost twice as much residential solar in Australia as there in the U.S. These are smaller systems – we all know – but with almost 10% of households having solar-electric solutions on them, it just means that there’s an adoption cycle and maturity in that market that’s different from most of the rest of the world.

And then there’s the fact that electricity costs have gone up a lot in Australia over the last few years, even without the carbon tax or without any of that costs imposed, just the fact that utilities have underinvested in distribution networks for the last couple of decades, they are now reaping the cost of that and that’s now being borne by the rate payers and the consumers. So electricity prices in the Sydney suburbs are now so high that solar is such a great option. It’s mass adoption of PV.

BOS costs have also been rapidly reduced for residential installations in Australia also, haven’t they?

There’s clearly that happening just because of that level of penetration in the market and a lot of experience. There is also a lot of great installers, a lot of maturity in terms of the processes and procurement side. It’s a big business in Australia now and that brings efficiencies of scale, so again something to work with.

Does Sungevity intend to partner with local installers?

It will be the same as our model in the U.S. We’ve centralized what can be centralized, the sales, the marketing, the financing, the customer service pieces. The actual installation we’ll outsource, to a local contractor and partner. But the actual customer relationship stays with us over the lifetime of the system. So what we want to do in Australia, as with the U.S., is to offer a ‘pay as you go’ model for electricity, where the customer is signing up to a solar project to get their juice from the sun instead of from the grid. We haven’t yet pioneered that in Australia and are just really building up a business now and getting all the systems right, including the remote solar design piece and our software solution.

But Australian’s love to invest in their homes, and therefore are more inclined the pay upfront to install PV. Does that undercut the leasing model?

I think there is that culture, as well as the fact that the systems tend to be smaller because the loads from houses tend to be smaller. We sell 5kW systems so the upfront capital cost is a bigger barrier in the U.S. context, whereas Australian’s may look at that differently and spend that chunk of investment, or they might borrow against that home equity with a loan product, than a lease per say. But it’s not only the finance structure behind an installation, it’s making it easy to do and affordable and that’s the advantage that Sungevity represents. We meet a customers needs – they want electricity, they want it for less, they want it clean and better.

We’ve got that solution and in different markets it may be a lease or it may be a cash sale. In the states we still do about 10% cash business because some people do have the money up front and do want to own it outright and that’s fine. Whatever works for their circumstance, instead of saying that’s all one solution from the outset.

What is the roadmap for Sungevity in Australia?

We’ve actually tested the systems and the website and the key for our business is being able to size and design the systems accurately, without actually going to the site. Building up the contractor network and getting the project financed. So we’ve actually gone through two of those three steps and we’re looking forward to launching in a bigger way soon.

What are the initial things you’re hearing about Sungevity’s model in Oz?

It has been received very favorably in different parts of the market – particularly the online piece. Just having an easier thing than having a contractor come to your home and going through that process to get an accurately engineered system. When we design them remotely it’s ‘as built’ and it’s important to people to have that convenience factor and they’re getting used to internet-based commerce and the same thing in the Netherlands, same in the States, that’s one of the advantages of our platform. We can make it as easy as ordering Netflix or downloading a book on Amazon.

Australian’s tend to be early adopters of new technology as well…

Well the PV market surprised us with how quickly it’s gone to the heroic numbers that we hear about, and that’s going to continue. There are still millions of homes to do and we want to be a part of that snowball. It’s customer acceptance, social proof, and almost peer pressure that builds the market.

With 2.2 GW expected to be the cumulative capacity in Australia by the end of the year the growth has been remarkable. But it has been FIT driven; do the financials stack up post-FIT?

They clearly do because the electricity rates are sufficiently high to justify it. The 23c/kWh marks the threshold that it works, and so long as you can get some value for that and the Renewable Energy Credits continue, the economics can stack up in a lot of markets in Australia.

There is however quite some controversy surrounding the Renewable Energy Targets – of roughly 20% of renewable energy nationally by 2020 – and they are under review. There is also the "death spiral" for utilities that has been spoken about in Australia: where more people reduce consumption and install PV because of high electricity prices, which then causes the price for others to increase and so on. Is there possibility for more pushback against PV from the power industry?

I think there will be both pushback and an attempt by the utilities to capture some of that value, I think that ‘death spiral’ that you’ve identified where peak price electricity gets the utilities their best margin, but they’re losing that because their customers are going solar, they try to raise the rates to make up for the shortfall and then more people go solar. That negative circle can’t continue for them.

Smart utilities are trying to get into the game and try and do this themselves: Origin Energy and AGL for example. That’s some of the future as well, along with some pushback. It is a contested territory, but the bottom line is we provide our customers choice, we provide them savings on their electricity costs and we provide them independence, in some sense, of power over their own fate. People like that stuff. We generate all of these advantages as an industry and Sungevity wants to be at the forefront of that. Utilities are going to have to get onboard the bus or get run over by it.

Do you see the debate over Australia’s energy future being more widely discussed in the future?

Absolutely, I think one of the advantages is that with the penetration of PV, people’s understanding of energy has increased and literacy of electricity has increased. There’s simply more conversations about where it comes from, it’s not out of sight out of mind – over the hills in Lithgow or wherever it used to come from, it’s now above your head. And consumers are now realizing, ‘hey I can control that, harvest it free from the sky’, instead of allowing someone to dig up coal and burn sunlight from 200 million years ago and use solar energy that way.

I think that conversation increases, energy costs go up, and the pain is felt in the back pocket, more people will go solar as they get familiar with it. It’s really why I wrote my book, to try and increase the literacy of average folk about electricity.

Well your book Rooftop Revolution, is your personal mission on that level. Is it also a personal thing for you, to bring the Sungevity model back to your home market of Australia?

I’m really proud of Australia already having pushed the envelope a lot, with the number of homes that have gone solar to date, and I think that with the Sungevity model and ease and the Online Sunshine and a solar lease, we can get it to even more people.

I think we’re in the throws of one of the biggest transformations of the global economy in over a century and Australia can either try and hang onto the past and pretend like coal is going to be king forever, or get with the program and move forward. And I think that people are voting with their roofs. The rate of growth in Australia, over 2% of power capacity in Australia is now PV. And that’s doubled in nine months. When you do the exponential curve, you double every nine months and you go from one to two percent in the last nine months, two to four percent in the next nine months, four to eight, eight to sixteen – all of a sudden you’re at a point where one third of electricity can be produced by PV; it just shows you how quickly things can change. The same way that cell phones have changed telephony. It’s going to be a pretty fast curve.

To see that exponential growth, there will have to market-segment diversity, what future is there for the Australian commercial and industrial rooftop space?

I think in Australia you’re absolutely right and I think that there’s a great opportunity for the Australian industry and commercial space. 99% of the Australian PV market has been residential to date. So for Sungevity we see a huge opportunity in just fulfilling the residential customer, it is millions of units and we’ve only done single-digit thousands, so there’s almost no ceiling to our businesses growth potential. We want to focus on being great at customer service for that market segment. But you’re observation is correct, there will be a diversity of rooftops that will go solar with this revolution and there will be an enormous boon for the businesses that do that as well. So that’s the exciting news, there is an economic opportunity to be had as solar spreads throughout society.

Danny Kennedy’s book Rooftop Revolution: How solar can save our economy – and our planet – from dirty energy was published in September. It is available in both electronic and print versions.