#SPIconvention 2016
I have this week the privilege to attend the Solar Power Industry conference, the largest annual trade show for the solar industry, jointly hosted by SEPA and SEIA associations. Distractions of Las Vegas aside, the show has been an eye-opening introduction to the industry to an outsider like myself. I am capturing here for posterity a few thoughts, lessons, and impressions that were gained from both the educational sessions and trade show floor in the opening days. If you are an attendee and would like to discuss any of these points further in person please feel free to reach out, I’ll be in attendance for only one more day and can be reached on Twitter at @_NicT_.
My week opened with a workshop organized by the Department of Energy for purposes of the Sunshot initiative’s Community Solar Challenge pitch session. The Community Solar Challenge is meant to encourage entrepreneurial ventures with aims of facilitating increased access to solar generation and overcoming the corresponding financing challenges for lower income Americans or nonprofits, with the program including potential monetary rewards to participants. It is a common theme of distributed generation policy debates that lower income American’s are expected to bear an unfair increase in share of utility transmission system fixed costs as those consumers with the means to install solar reduce their exposure to utility variable rate charges. Challenges to solar access for the low income consumer include a higher prevalence of rental housing, lower credit scores providing barriers to financing, and transient living conditions. Nonprofits on the other hand may find solar programs less viable than other organizations as they lack access to tax credits short of some more complicated ownership schemes. While some states have more favorable regulatory regimes for these purposes in place today (such as those with net metering policies or those who allow access to third party ownership / leasing programs), the Community Solar Challenge is intended not to encourage the revision of state policy and regulation, but instead to find ways to circumvent existing policy with new business models to achieve these worthwhile aims. The session mostly served as an initial introduction to the program while facilitating brainstorming, networking, and soliciting community feedback for potential ventures. The workshop culminated in a series of participant presentations of concepts. While many in attendance had clearly put some considerable thought and polish into their ideas and presentations, there were a select few who had come into this session with limited knowledge of the program and their resulting pitches probably came off a little too vague or perhaps lacking any real novelty — nothing a little more sweat and tears couldn’t resolve though. For those interested in further exploration into the challenges associated with the program more information can be found here.
The opening session as expected included some worthwhile discussion from high profile executives in the industry. I found of particular interest the discussions involving the disconnect between market potential for distributed residential solar and current consumer appeal. The comparison was made between the market potential for solar with the cell phone industry of the 90's, with the notable difference being how even in the 90's cell phones elicited a common euphoria amongst consumers with primary barrier to adoption being product costs, while for solar installations of today there is not yet such a broad emotional appeal. It was further suggested that in order to achieve this kind of consumer appeal to reach potential would require transcending the most basic applications of reducing utility bills and actually enabling lifestyle features — things such as grid independence, automobile charging, or other concepts we remain to see. Borrowing a concept popularized by Geoffery Moore in his book Crossing the Chasm, the consumer grade solar panels of today would probably be considered as falling under the Early Majority phase of the technology adoption cycle, however these type of lifestyle enabling features have yet to “jump the chasm” from the early adopters. Until such time that is achieved, public company investors will maintain a muted enthusiasm for companies focusing on solar enabling features, as public company investors are known to prefer predicability over even exponential growth, preferring to invest ‘not to disappoint’ as opposed to investing ‘to impress,’ preferring job security over potential for promotion (an approach I personally disagree with, after all there will always be other employment opportunities, why not play the game with probabilities adjusted for payback weightings and aim high?).
Some may disagree that solar energy doesn’t enjoy broad consumer appeal, for it is true that solar adoption enjoys political support from voters in both parties. However this support remains more of a hypothetical variety, and until such time as the majority of consumers are actually ready to write a check, to put their money where their mouth is, it will remain so. Outside of novel enabling applications, even in its current form residential installations involve considerable complexity and uncertainty. The complexity of a home solar installation is present on both the equipment configuration side as well as the utility rate structures. A key enabler of a vendor's success will be their ability to reduce this consumer-facing complexity. I actually met today an industry insider who couldn’t say for sure whether his home state had a net metering policy in place — do we really expect consumers to be able to do better? And how can we expect consumers to invest without a regulatory certainty for existing installations over their life-cycle? It is one thing to strip a net metering policy for future installations, but to retroactively pull the program for consumers with existing installations as Nevada has done, to destroy their entire financial model for investment, damages not just the local market but consumer trust industry wide — we can only hope that the Nevada legislature comes to their senses and repeals this damaging change.
I am sure it is a challenge for utilities to adjust to this changing environment. Not unlike the banking sector, many of their software backbones were created ages ago in archaic software languages that we just don’t have coding talent to address cost effectively today. Short of a redesign of their metering practices from scratch, some utilities are left to temporary hacky solutions to address new policies, perhaps in some cases even processing net metering billings manually! I have written elsewhere about the crippling effect of a firm enjoying a monopoly status. For as tech-heavy an industry as the utility sector is, it just hasn’t seen the type of local competition that would force a more agile approach to innovation or the embracing of disruption. There is so much potential in our grid for innovation. The grid of the future could become what the Internet is today, with the transmission of kWh between generation sources and end users like that of digital bits between computers and data centers. Actually there was much worthwhile discussion to be found at this show about applying the lessons of the tech sector to our future smart grid. If the grid is like the Internet, then all of those same debates need to be had all over again. Should we have a grid neutrality comparable to net neutrality? Where should the automated routing start and stop — at the transmission and distribution level or all the way down to the residential “nanogrids”? And if we are really treating the grid as a network, why shouldn’t utilities step back from broad offerings to just providing a platform for 3rd parties (the App Store approach)? For the utilities, what has long been conditions of certainty, like the office worker drone collecting his regular paycheck with a defined set of duties and responsibilities, is now in a tremendous period of transition with uncertainty and doubt on multiple horizons. The good news is that coupled with that uncertainty lies tremendous opportunity, it’s just a matter of making the right bets and jumping out of their comfort zone.
*For further readings please check out my Table of Contents, Book Recommendations, and Music Recommendations.
Books that were referenced here or otherwise inspired this post:
Crossing the Chasm— Geoffrey Moore
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For further readings please check out my Table of Contents, Book Recommendations, and Music Recommendations.
