The challenge for any startup company is convincing investors that you have a sound business plan and you're ready to disrupt the marketplace. As if that wasn't enough, a select group of entrepreneurs compressed their pitches down to 10 minutes or less and delivered them last week at a live competition in front of North America's largest solar industry gathering, Solar Power International.
Led by the runaway winner, an e-commerce venture for solar photovoltaic (PV) system design and engineering called Greenlancer, the competition showcased how young companies aim to reduce soft costs, such as customer acquisition and permitting, line items that weigh heavily on project developers as solar panels and other installation components have gotten cheaper.
Driving down soft costs has been a hot topic in the solar industry this year. Sunrun Inc. recently announced funding support from the US Department of Energy's SunShot Initiative for its automated design and engineering program. In August, SolarCity Corp. acquired one of its channel partners, Paramount Solar, a direct marketing and virtual sales company, in a deal worth $120 million.
Other solar installation and energy service providers may have found a solution to their soft cost problems among the featured start-ups at Solar Power International. During the competition, six of the nine finalists said they had picked up new customers at the show in Chicago's McCormick Place convention center.
Head of the class
Business concepts that won the most praise from judges of the start-up contest, including SunEdison founder and former CEO Jigar Shah and Enphase Energy's co-founder and vice president Raghu Belur, adapt tried-and-true cloud-based business practices for the solar industry.
Greenlancer, at its core, functions like a solar-specific version of the 14-year-old online staffing platform Elance. Without access to this type of service, engineering is a bottleneck in the PV project pipeline, one with high overhead costs and no scalability for developers. Greenlancer CEO Michael Sharber views the existing mass of in-house and freelance PV system designers and engineers as competition, but only for now. “We look at this competition as 'cooperatition,'” he says.
Greenlancer uses social media to identify talent and then qualify members of its network based on accreditation, education and experience. Once qualified, freelance engineers can support Greenlancer's four-step program that includes a feasibility study, concept design, financial analysis and permitting. Sharber and chief technology officer Patrick McCabe pay tribute to Henry Ford as an influence on the company's culture. Ford's automotive assembly line launched in Detroit 100 years before Greenlancer set to work on its Detroit-based virtual assembly line.
Best of the rest
Oakland, Calif.-based kWh Analytics, which finished second in the start-up competition, plans to harness the power of Big Data so investors can understand solar as an asset class instead of a smattering of small and unique assets.
CEO and managing director Richard Matsui, a McKinsey & Co. alum, says the company's database has over 10,000 PV systems representing 1 gigawatt of generating capacity. Assuming a 10 percent cost of capital, which is conservative, Matsui says, Big Data presents an opportunity to reduce capital costs by 40 percent.
“That's 40 cents per watt. That's two inverters,” he said.
A key question about the kWh Analytics' business plan centers on ownership of its data. Will PV system owners share data on kWh's terms? Matsui acknowledged during the competition that it's important to grow the data set quickly, and he said a close relationship with the stock-listed data firm CoreLogic will help kWh address legal issues surrounding data ownership.
“First mover matters a lot in this space,” Matsui said.
Third place in the contest went to Santa Clara, Calif.-based Ultrasolar Technology, the only start-up finalist attempting to boost PV system output. Ultrasolar is developing a product that increases direct current at the module level. Ultrasolar says its product, called Quantum Booster, creates an electric charge from heat. The product applies the electric charge to the module's cells, releasing electrons and holes that get trapped within the cell material and thereby increasing cell and module efficiency.
Other solar start-ups identified soft costs as an element in their business plans. Faze1, a data mining and analytics firm, claims it can boost a solar company's prospects of identifying willing and able customers by a factor of 12. SolarExchange.com, a trading platform that aspires to become the "eBay of solar," says that 16 percent of PV system costs relate to average costs of simply passing products through the supply chain.
Taken together, soft costs are the reason why PV system owners are paying $3 to $4 per watt for installations while the system components including modules, inverters and mounting systems can be had for a total of $1.50 to $2 per watt.
Any company that can significantly drive down soft costs not only will make a lot of money for itself but bring the solar industry closer to parity with nonrenewable sources of electricity.
Image of sunrise over city by Dudarev Mikhail via Shutterstock