Palmetto —Disrupting the Disruptors
ArcTern’s recent investment in Palmetto, a residential solar and energy services platform, is about a whole lot more than putting more panels on more rooftops. Palmetto is well-placed to further accelerate a global wave of disruption aimed squarely at the largest energy incumbents — utilities, fossil fuel majors and traditional solar companies. Tether a nimble, flexible software platform that supports local installers and sellers with the relentless downward pressure of solar and EV technology cost curves and you’ve got a recipe for an energy services play suited for the 21st century: a low-cost, distributed, solid-state energy system centred on the home.
No policy nor incumbent could prevent, or even slow, prior tech disruptions like the industrialization of agriculture, automation of manufacturing or digitization of communications. Global energy systems are today going through a similarly inevitable and deep disruption, driven by innovation and steep cost reductions in renewables and electric vehicles (EVs). The threat these technologies pose to the status quo is based on (largely western) innovations brought to industrial scale by an aggressive Chinese state. Neither the pace of innovation nor scale of production show any signs of slowing. Indeed, the opposite is true. So far, the Sunruns of the world have successfully leveraged these trends to build a decent, if slim-margin, business.
The challenge for venture-backed energy innovators today is to extend value and increase margin by linking these larger trends of cost compression and increasing performance to a more nimble and cost-effective business model. Palmetto CEO Chris Kemper’s original insight was to understand solar is a local phenomenon: people trust and rely on installers and sellers within their community when they make a decision like putting stuff on their roof. The result is a platform that combines the flexibility of a local gig economy on the demand side with a dynamic marketplace of energy services, financing and products on the supply side.
“Homeowners want new, cleaner energy options”, said Chris Kemper, CEO of Palmetto “Our success in scaling low-cost, locally-provided clean energy solutions shows people are ready to be part of a climate solution. And solar is just the start.”
As Uber disrupted taxis, Palmetto will disrupt — not just the large utilities and fossil fuel giants, but — traditional solar installers like Sunrun. As they do, homes will become ever-more-active participants in an accelerating clean energy revolution: solar, EV’s, two-way chargers, ultra-efficient heat pumps — all installed and supported by well-paid local contractors. And backed by the kind of low-cost pricing and financing available only to the largest national players. Lowering our collective carbon footprint never felt so profitable!
What kills incumbent industries is not a lack of innovation, but inertia. Kodak invented the very digital camera that killed them. Exxon holds many of the original solar patents, but never derived any value from them. Sunrun’s national model means high ongoing customer acquisition costs . Dominant market players will try to defend and extend the status quo. That strategy works well — until it doesn’t. It will take longer for cleantech to disrupt incumbent energy systems than it took Uber to disrupt taxis or mobile phones landlines. But change will be faster and more unreasonable than we think.
We’re not alone in seeing this value, and are proud to join Evergy Ventures, Shell Ventures, Greycroft, Lerer Hippeau, Box Group, Falkon Ventures and others in supporting Palmetto’s continued growth.
[1] Palmetto’s US$29m B-Round closed in August 2020.
