Sungevity's Australian aspirations

US solar retailer Sungevity has entered the Australian market and in an interview, one of its founders explains why the company believes its solar leasing offer will help expand our solar market.

Last week I got to catch up with Danny Kennedy and his team from Sungevity.

Kennedy founded Sungevity, a game changing US solar PV retailer which recently launched in Australia, and I was keen to learn more about their plans here, led by Nick Lake.

Nigel Morris: Sungevity has become very successful in the US. What would you say are the three main keys to your success?

Danny Kennedy: Sungevity was one of the first companies to really make Solar Leasing work for consumers, so that’s a core part of our offer. Secondly, we built every aspect of the company’s operations around the ethos of awesome customer service – we call it the insane customer experience. And finally, we chose technologies (operationally and in field) that deliver on the insane customer experience and have built a brand that embodies it.

An example of this is one of our key internal KPI’s which is the Net Promoter Score; the referral level. Our customer experience means that our customer acquisition costs are excellent and helps spread the word through the solar snowball, and we build on it through social media and other community based work.

This is a salient point that translates directly in Australia. A referral is always a better sales lead than a new lead because trust already exists if the experience was good. Many of the well-tuned in solar companies I work with in Australia make reference to this point and in some cases can survive and grow on referrals alone. I call this ‘milking the cow’.

NM: The Sungevity name is well established in the US and was recently launched in Australia. Have you had to adapt your strategies significantly for Australia and has the market reacted as you expected?

DK: Yes and no. The finance market is very different to the US so adapting our leasing models has been a huge challenge. Apart from not having the tax equity element available that is a crucial part of our US offer, Australian financiers just don’t have the experience or appetite for solar that US financiers do. But we have found great partners and are ready.

Now that we have launched however, the reaction from the market has been fantastic. It’s early days but we know our offer makes the pie bigger; we are opening up new channels, finding new types of customers and we engage the market in a different way.

NM: Your local launch was in partnership with Earth Hour. Did you get the response you expected from the market from the launch?

DK: Our support for Earth Hour gave us a National launch platform and was a great way to get up and running and people love that that the impediments to getting solar are reducing. Working with community groups, local councils and giving something back to the community, rather than just taking sales, is part of how we do business and who we are.

(Kennedy’s comments reminded about consumer research I was involved in some years ago, that bore out his point. In a number of projects I was involved in we looked at customers who hadn’t bought solar and asked ‘why?’. Avoiding confusion, ease of access to trustworthy information and simplicity of the experience were all key themes.)

NM: A key element of your offer is long-term finance. How have you found the response from the Australian investment community, compared to the US investment community?

DK: Tough! There are different laws in Australia and building a PPA offer with financial institutions has required some adaption. Our Roof Juice contract was the first offer in Australia to really get this model rolling, but all our local models are going to use more debt and less tax equity compared to the US, and that does add some cost.

We are experimenting around the world with all sorts of financial products; crowd funding, securitisation and so on, but it is still a new asset class to many. A key difference is that in the US we don’t often have to use debt to finance our offers.

NM: Solar finance has very high uptake levels in the US. Do you think Australians will take up solar finance at similar rates to the US?

DK: Solar leasing didn’t really exist in the US five years ago and today around 70 per cent of the market uses some type of finance offer. Part of this story is about how the demographics of the market is changing too; just a few years ago it was mostly the wealthy middle to upper class who were buying solar but solar leasing has helped us make solar more accessible. We jumped across the US405 highway which is a boundary between classes near us, proof that solar leasing makes the pie bigger.

Australia is in a slightly different place because you have already have a market made up largely of the less wealthy. What our offer will do is bring an all new customer experience that is as easy to use as iTunes and a more mature financial offer that hasn’t been seen here, at scale, until now. So, yes, we see the market potential for solar leasing products as enormous here.

NM: Australian solar consumers are similar but different to US solar consumers. What are the key differences that you are having to take into account?

DK: The awareness of solar in Australian consumers’ minds is much higher so that makes life easier; it’s a more mature market in many ways. We aren’t dealing with early adopters here so the demographic needs a great customer experience to get them over the line. But we know solar leasing revolutionised the size of the US market and the types of customers we could access and we believe this will be major change here. It will take some time and our models need to be tweaked, but it will happen.

NM: You have a good market share in the US. Do you have an aspirational goal for market share in Australia?

DK: We want to have a leading market share here and are building partnerships that will give us the same low customer acquisition costs. But there is plenty of market here for everyone; we also believe our offer will expand the opportunity.

NM: A core is your finance offer. Do you think every solar company in Australia needs to have a finance offer to be competitive?

DK: No. In the US we still do a lot of cash business and also were the first company to offer other mechanisms like PACE (PACE financing effectively allows property owners to borrow money from a local government to pay for renewable-energy systems and/or energy-efficiency improvement). We also offer other financial products; the key is offering choice for solar customers not necessarily just pay as you go options; it’s what every solar dealer here should consider, especially as the customer demographic changes.

Having said that one of the great things that solar leases bring is faith; because performance guarantees and ownership can help make customers feel more comfortable.

NM: The US solar market has some unique incentives and support mechanisms. How are they different to Australia and how would you compare their relative effectiveness?

DK: Australia has clearly done some things that have worked with its rebates and incentives but the uncertainty in this market is very different. The standout in the US is the California Solar Initiative for example. The Californian rebate program reduced from $4/W to $0.25c/W but it was reduced in a methodical and consistent way, keeping pace with the economics of solar rather than the whims of current political forces.

The policies have followed industry and created jobs and been done in a way that creates business certainty; we can build our business with investor certainty but you don’t have that certainty here. The proof of this is the nervousness from finance providers; uncertainty creates risk and risk adds cost.

NM: The Australian solar industry has many thousands of diverse companies who are active. How would you compare the competitive environment here, to what you are used to in the US?

DK: It’s much tougher here; a lower installed price, lots of innovative companies and strong consumer knowledge makes the competitive market more aggressive. So establishing a brand that stands out is challenging. But what we bring in our offer should stand us out.

NM: The market in Australia has been pretty volatile lately. Based on your experience so far, do you expect the market to grow this year and what are the biggest barriers you see?

DK: I read a lot from analysts like SolarBusinessServices who are projecting a contraction this year but we really believe that our offer will make the pie bigger and we can replicate the experience we had in the US. 

We are going to create new opportunities here; removing the ‘zero down’ barrier works and expand the market across a wider range of demographics.

NM: The US market is very commercial PV focused, although you are residentially focused. Where do you foresee the Australian market will head, given your US experience?

DK: That’s true although it is changing too; the US residential market is growing. All we do in the US is residential but here, we have a different approach. Our offer will translate into commercial very readily and there is a huge opportunity, although we obviously have fantastic strengths in residential.

We see ways to align our offers and make it easy whether it’s residential or commercial here and in Australia, commercial lending is more straightforward and readily accepted.  For us it’s a about building a decentralised, democratised energy network right across the community

NM: You are, heaven forbid, stuck in a lift with Julia Gillard and Tony Abbott. What would you try to convince them to change to help grow solar in Australia?

DK: Australia should stick with what’s working, and solar is working. You have more than a million home owners with solar on their roofs already. You have employed tens of thousands of people in new jobs that didn’t exist five or 10 years ago. You have demonstrated to the world that decentralised energy can work, and that householders will pay to build it. You have reduced your emissions substantially and changed the entire demand profile of the national electricity grid. And so, rather than backing away; embrace what you have achieved and double down. Embrace it and simply more forward.

Nigel Morris is the director of Solar Business Services.

This article was originally published by SolarBusinessServices. Republished with permission.