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Tesla, Please Don’t Give Solar a Black Eye

Tesla, Please Don’t Give Solar a Black Eye

I was very excited to see Tesla provide more details on their Solar Roof. A bunch of smart people have already started to dig into the details to try and figure out the true cost, including GTM and PickMySolar.

I have been skeptical of this product – so many have tried and failed. But, the same could be said of EVs, so I’m certainly rooting for Tesla, and will always give them the benefit of the doubt. There seems to be tons of technical risk here, but if they can deliver, even at the prices they are showing on their website which seem to be substantially higher than “regular” solar, then that is going to be a win for everyone. It’s great to see product differentiation in solar – not every consumer wants the same thing, and some people are willing to pay a lot for aesthetics and other less quantitative values. As is true in most every product category.

I’m not worried about the product being a failure. Even if it is, the industry will survive and move on. What I am worried about is a political failure. Specifically, a black eye for solar with the Treasury Department regarding the ITC, which many of us worked so hard to get extended. Is Tesla going to try to claim the Investment Tax Credit on the full cost of the roof? Which, by the analysis linked above, looks like it comes in at about $10 per watt? If they try to do that, then Tesla Solar Roof purchasers will get a $3/W rebate, versus a $1/W rebate for everyone else. For a 6kW system, that’s an extra $12,000. And for producing the same (at least, we hope) amount of solar energy as the sucker who bought the standard solar panels for their asphalt shingle roof. Even if they split out the cost of the non-solar tiles and the solar tiles, and only apply for a tax credit on the solar, it would still be substantially more credit than the rest of us get.

As a taxpayer, I don’t think Tesla or their customers should get a larger tax credit for buying a really cool roof. As someone working in the solar industry, I don’t think they should get more. This is the kind of action that got SolarCity and many other developers in trouble awhile back – marking up their cost basis and capturing a larger tax credit. And I guarantee that the enemies of solar will take this opportunity to paint solar incentives as a give-away to the rich, who don’t need it, at the expense of coal workers.

Let’s hope Tesla steps up and proactively does the right thing here.

The One Day Business Case

The One Day Business Case

As an engineer, I had the typical mild level of disdain for “business people” – marketers, MBAs, people with fuzzy backgrounds that appeared so confident, despite not knowing the basic laws of physics. I took pride in my engineering-ness. I huddled with my fellow engineers, quietly smirking after the business people left the room, telling ourselves their input was less valuable than ours.

Then I somehow ended up at a Venture Capital firm, ostensibly to help them with technical due-diligence on complex clean technology start-ups trying to innovate in solar, energy storage, fuel cells, electric vehicles, biofuels, and even nuclear energy. I found myself listening to hundreds of start-up pitches. I discovered that the “other stuff” in these pitches – market research, strategy, competitive analysis, SWOT, TAM, SAM, ASP, COGS, Opex, Capex – were interesting. And important. And uncertain, but not as “fuzzy” as I once thought. I saw good pitches and awful pitches. And I learned that technical success was only one small ingredient in overall success. And, I wanted to be successful, so I poured myself into learning how these “business people” thought and worked.

Fast forward to today. Realization Ventures gets involved in launching many new products and services at both big companies and startups. And, I’m always surprised at how few of these organizations have built a basic “business case” for their new thing.

A business case is simply a collection of facts and hypotheses that form the rational for why you should do this new thing. How big is the market? how many customers can I get? how much will they pay for it? how much will it cost to produce? how many people and how much equipment will I need? And how will all those things change over time? A business case is much more than just a spreadsheet or document – a good business case provides a testable hypothesis on which to start building a business.

By separating fact from hypothesis, you can develop a set of low-cost “tests” of your business case, to validate that you know what you are doing. You can prototype a business just like you prototype a product – the business case is your design. And it is not a static thing – it should change over time as your hypothesis are validated (or not). It allows business people to utilize the scientific method I was so proud of as an engineer.

Launching a new product, service, or business without a business case is like going hiking without a map. If there are signs on the trail, you can follow them, and hike the same path everyone else has. But, if there aren’t signs (which there usually aren’t), or the signs lead to dead-ends, you are just going to get lost.

Every time Realization Ventures starts working on a new product, we encourage our clients to do what we call the “One Day Business Case”. The idea is to bring all the relevant disciplines into a room for a day – marketing, sales, engineering, operations, etc. – free from distractions, and with all their facts and assumptions at hand, and build a business case as a team.  We not only build the business case, but define the tests we need to validate our hypotheses. It’s not easy, and often requires a neutral facilitator. It’s messy but fun. It allows everyone to think about the big picture, and how their piece interacts with the whole. It is a great team building exercise. People leave feeling aligned.

If you are working on something new – I encourage you build a business case. And don’t send an analyst off in a corner to build it – consider the One Day Business Case.  If you want any help, Realization Ventures is here for you.

 

Where are the big brands in solar?

Where are the big brands in solar?

In 2006, I was working at design firm IDEO on a research project for newly-IPO’d First Solar, who was interested in getting into the residential solar market. We talked to early adopters, tech luddites, installers, and everyone in between, to understand how they felt about home solar. Few people understood, and fewer cared – it was ugly, confusing, and niche. The market was measured in thousands of homes – it was by any definition, a cottage industry.  First Solar went on to invest in SolarCity, but never really participated in the sector.

Fast forward a decade:  In 2016, the industry installed nearly 3 gigawatts of residential solar in the US, many hundreds of thousands of homes, representing nearly $10 billion in market value. Most of these systems were built by companies that did not exist in 2006. The industry has grown up quite a bit, and today solar is one of the fastest growing parts of the economy. Recognizable brands are starting to emerge, financing has become commonplace, marketing is more sophisticated, and as in every other industry, software is eating the world.

So, why are there no big consumer brands in residential solar? With $10B up for grabs, the commodification of hardware, and prices down by at least a factor of three since 2006, where are the home services providers and product companies? AT&T? Comcast? Google? Apple? Amazon? Anyone? Even the consumer companies that produce solar panels – LG, Panasonic, and Sharp — have not really gotten “in” to solar. Their efforts are isolated manufacturing businesses within global conglomerates, with little ties to their strong consumer brands.

There are plenty of good reasons for the leading consumer brands to be interested in residential solar.

  1. It’s big
  2. It’s profitable (if you are not in the commodity business)
  3. They have an unfair advantage that today’s biggest solar companies do not: customers.

These companies have already acquired millions of customers who are buying things, consuming content, and signing up for long-term services. They have deep data on those customers, have been in their homes and wallets for a long time. They have effective, nationwide sales, marketing, logistics, service, and operations teams. They could potentially slash the biggest remaining cost in residential solar – customer acquisition. And, today’s solar companies represent an emerging threat to them – everyone wants to own the home.

It’s not easy… Some have tried – sort of. Comcast has played in energy retailing, and has a smart home energy offering. And they have partnered with SunRun to deliver solar to their customers, in what appears to be straight lead-generation. Vivint has a thriving solar business, but it is decoupled from their very successful and larger alarm business (I am a Vivint alarm customer, and have never been approached by a Vivint Solar salesperson!). AT&T has partnered with SunPower and DirectTV with SolarCity (again, lead-gen). Google has SunRoof. I can buy solar panels on Amazon.

Many would argue that home solar is not conducive to a national strategy, and is destined to be a regional, long-tail industry. I believe that is true, as long as solar is delivered to homeowners as a construction project, and not a product. But, solar doesn’t have to be a project. And, the battle is ultimately going to come down to customer acquisition.

The real opportunity for the big brands lies in an integrated offering – another line-item on my bill, a quadruple- or quintuple-play. But, this time, an offer that saves, rather than costs me money.

There are two significant technology trends that have now made it possible for these companies to participate at scale, if they choose to:

The “productization” of solar – Microinverters and AC Modules have nearly succeeded in turning solar from a project into a productmaking it possible to standardize offerings, and safe and easy for non-specialists to design and install a system. SunPower has moved much of their residential business to AC Modules because of these benefits. This is really the only way to scale the industry from hundreds of thousands of homes a year, to many millions.

Software-enabled solar – the tools to do remote evaluation, design, financing, and closing of solar deals have never been better. A decade ago, the state-of-the-art was an elaborate Excel spreadsheet. Today, you can go end-to-end in the cloud with offerings from Aurora Solar, Enact, Sighten, Helioscope and others. Technology from companies like Google and Geostellar avoid the need to get on the roof to quote. And, drones are coming.

So, the market is big, the timing is right, and the technology is there.

But, I’m not seeing much movement. And, I’d love to know why.