Q&A: Sungevity's Andrew Birch

Sungevity is the third largest solar PV retailer in the US household segment and is about to enter the Australian market via a joint venture with Nickel Energy. The interesting thing is that Sungevity is headed up by two people who were originally engaged in the solar sector in Australia but moved over to California because of a more conducive and supportive market environment for solar PV. So the fact that they are taking the plunge back into the Australian market is a positive sign.

Sungevity are one of the pioneers of a model for selling solar PV via a pay as you go leasing model that enables solar to be cash-flow positive for households from day one. This model of selling solar PV has had a dramatic impact, particularly in California where Sungevity are based. This was profiled in the Climate Spectator article, Solar's New Business Model, that we ran on April 12. It has opened up an entire new market of less affluent householders that previously had considered solar PV unaffordable. 

In this interview with Sungevity's CEO Andrew Birch, we discuss:

-- The impact of the solar leasing model;

-- Why the time is right to enter the Australian market; and

-- Where solar prices are heading.

TE: First of all, could you tell us a bit about Sungevity for those in Australia unfamiliar with your business?

AB: Sure. So, Sungevity was founded in 2007 by myself and two other guys. One is an Australian environmental activist Dan Kennedy, who had worked for Greenpeace for many years and (has been) a big proponent of solar for a few decades now, and the second guy is Alec Guettel who is a US entrepreneur, and then myself.  So, we started it in 2007 and the aim of the company was to create a customer-friendly, scalable solution for residential solar. We saw the opportunity while I was based in Australia working for BP Solar out at Homebush, and getting the post grad degree at University of NSW. It was to build a company that would work off the back of the big reductions in the price of solar that really focused on making it easy for customers to access the technology. 

So, Sungevity is now two hundred and thirty plus people based in California. We are about the third largest in the US residential solar PV market and the fastest growing. We employ a lease offer, where customers pay as you go, in the US market. That's been very successful. Also, we just switched on the Australian market with a pilot this month and we also just went live in The Netherlands.

TE: Can you tell us a little bit about the leasing model that you guys employ and what kind of impact that leasing model has had in the US market?

AB: Yes, sure. So, obviously one of the barriers to people going solar is they're effectively being asked to buy 20 plus years of electricity upfront. So by creating a lease solution, or pay-as-you-go solution, that allows the customer to pay monthly and with a zero down offer.  So, for no money down, our customers are typically saving 15 per cent on their electricity bill without paying any money upfront. So, it's a very affordable, cashflow positive money saving offer.  And the combination of that lease with our online web service – the fact that we make it very accessible and you can get a quote via the website without having to take time off work and get a site visit from an installer avoids a lot of hassle. The combination of an easy online service with the lease is really what's triggering our success in the US.

TE:  So, the key distinguishing characteristics for Sungevity have been a leasing model for selling solar systems and the over the internet quotation system?

AB: Exactly. It's better customer service combined with a lease. That's the key to our success.

TE: And can you tell us a little bit about your key metrics for the business other than the employees?  What's the revenue? The number of systems that you're installing?

AB: We don't disclose the revenue numbers, but we've installed over four thousand systems in the US household market. We're just adding our ninth state this month in the northeast. We're selling over four hundred systems a month at the end of last year just in the peak selling season in the late summer and we aim to do more than that this year.

TE: Now Danny Kennedy is originally from Australia and you have mentioned that you used to work for BP Solar in Australia, but both of you have chosen to set up a business in the US.  What made you decide to have another look at the Australian market via your joint venture with Nickel Energy?

AB: Well, for me, we really wanted to start in Australia because obviously we both had good history in the solar market there and we love the country and we wanted to rollout the idea of our business model in Australia. But the problem was there was no visibility in the market place with tariffs, electricity rates and the rebate structures, whereas in California they had, you know, five plus years of visibility on what we were going to be paid for the systems that we sold. So, that visibility or certainty over financial incentives allowed us and our investors to commit to building a business. 

It did mean that obviously we had to move our families and set up shop on the other side of the Pacific.  But what's changed now is with the increases in retail electricity prices in Australia, and the advent of our solar lease, and the combination of that with our low cost model, we think that now gives us the confidence to come back to Australia to set up shop.

TE: Right. And do you see any major differences in the nature of the Australian market versus the US market or some key things that you'll be bringing to the Australian market that will distinguish you from what is essentially quite a competitive space here?

AB: The thing that distinguishes us is the focus that we've built on customer service.  So, in the US we have the highest customer satisfaction scores of all of the solar companies. In fact, we have a higher customer satisfaction score than Apple.

That's down to the fact that we've developed tools and services and really a culture of customer service in our business here in the US, that we think will go down exceptionally well in Australia. We make it incredibly easy to access solar, plus we'll be introducing what we're calling Roof Juice as the solar lease in Australia and we provide a range of tools for customers to monitor their system's performance. 

TE: Have you got any targets or expectations about what you might be able to do in the Australian market?

AB: We'd like to be the number one player in the Australian market.

TE: With the leasing model, have you got a financing partner for that? I noticed that, for example, Citibank are one of the financing partners for you in the US. Are you using US financiers for the Australian market or are you using someone else?

AB: We haven't actually disclosed the exact providers, but it will be a combination. We'd love to have local finance provision as well as what we do in the US, but we'd also like to leverage the sorts of relationships that we've built on this side as well.

Making sure that you have access to lots of project capital is a big part of being able to scale the solar industry. We've spent five years figuring a lot of that out which should help.

TE: In Australia one of the things going in favour of solar is that we've got rising electricity prices. But at the same time it seems that we still have a chopping and changing policy support environment.  What makes you optimistic that this market has durability and will continue to be a healthy market for solar PV?

AB: So, the ultimate source of my optimism is the fact that the people want it. You know, survey after survey in Australia and in the US and everywhere else, everyone wants solutions. They want policy to support those solutions. So, fundamentally I'm optimistic because governments serve the people and the people want clean energy. Yes, there's a bit of risk, but ultimately we're getting very close to being at a point where we the technology can be deployed at scale without public support. So, really we're just betting on there being sufficient policy to bridge that gap over the next, you know, few years that gets us to the point where we can really scale this up on an unsubsidised basis.

TE: One last question… there's been an incredible amount of change or reductions in system costs in the last few years. Do you have any kind of line of sight on where you think system costs or module costs will go in the next three years?

AB: So, this is a subject I did a lot work on in my thesis at the University of New South Wales five years ago. I've long been a student of this and my belief is that it will continue to decrease gradually over time, following the same trend that we've seen in all other manufactured products, from cell phones to washing machines to cars. The cost reduction in the long-term with solar has been about 5 per cent per year.  Obviously it's been more extreme than that in recent years just with the massive growth of the industry. But I think we can expect less aggressive decreases than we've seen in the last couple of years, but certainly continued declines to the benefit of the consumer.

TE: Fantastic, Andrew. Is there anything else that you want to mention about Sungevity?

AB: We're really excited to work with Nickel Energy. We think they've done a fantastic job, a real focus on quality and customers in Australia. We've spent a lot of time looking for the right partner and we found that with Nickel.