Brought to you by: Innovate Arkansas
The INOV8 blog tracks the latest news and trends in technology and innovation throughout the world
Most Recent Posts
Tags
Acumen Holdings Arkansas Business Arkansas entrepreneurs Arkansas patents Arkansas startups Arkansas Venture Forum BiologicsMD entrepreneurs Facebook Google Innovate Arkansas innovation innovation in Arkansas Jeff Amerine Northwest Arkansas Entrepreneurship Alliance Silicon Solar Solutions startup opportunities startups techpreneurship Twitter University of Arkansas University of Arkansas startups venture capital venture capitalists Vertical StudioArchives
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- October 2008
- September 2008
- July 2008
- June 2008
- May 2008
- April 2008
Techpreneurship: Making the Home Solar Numbers Work
Jeff Amerine
Techpreneurship, with Jeff Amerine
(Jeff Amerine is an IA advisor, entrepreneurship educator, and officer with the University of Arkansas Technology Licensing Office. Each Thursday, his Techpreneurship blog will appear in INOV8. Drop him a line in comments.)
Time for some basic capital-budgeting math. What conclusion does any wise techpreneur come to when the payback period for a home solar-system capital purchase is 20-plus years and the expected useful system life is 10 to 12??
Does not compute even when using the greenest, most carbon-credit smelling, greatest social responsibility-driven, Al Gore-endorsed, math 2.0 you can atmospherically parameterize…
Sadly, even with the substantial federal and state subsidies, this is the dilemma faced in most parts of the country when considering the deployment of a home solar system. To say this gave me pause when considering a solar deployment at my house, would be an understatement. I really, really want to do something with a home solar and or a home wind system. I really like the idea on many different levels. But the math just doesn’t work in a traditional upfront capital investment scenario even with the fantastic subsidies.
Clearly, the math does change depending on a number of factors like the amount of annual sunny days in your region, the cost per kilowatt hour you pay your utility, and any special incentives your state might provide. Even so, in most areas the return on investment is still pretty ugly.
All is not lost. There is hope for those of us in four-season climates that don’t enjoy 300-plus days of sunshine per year.
Enterprising techpreneurs at SunRun have come up with some simple but needed financing solutions that change the math and remove this substantial friction point that dogs home solar deployment.
SunRun, a venture capital backed firm in California, provides a turnkey home-solar solution with an 18-20 year subscription model based on a negotiated cost per kilowatt hour. They take care of everything so those of us that have trouble with screwdrivers, wrenches, and electricity don’t have to attend Solar Tech U to go solar.
SunRun has blue chip VC backing from the likes of Sequoia Capital. It just raised another $55 million in VC funding to cover system purchases and geographic expansion. You guessed it, they aren’t in Arkansas yet but I hope they get here soon. Here’s more about SunRun in a recent Venture Wire release:
In financial terms this could be viewed as not a lot different than cable, satellite, or even traditional utility power or gas, except that the generating asset is distributed rather than centralized. Seems like a stupidly obvious solution (i.e. where I ask myself why didn’t I think of this first?) to a real pain point, doesn’t it?
In general, to expand market adoption, providing financing/leasing options that remove upfront capital investment and include needed recurring maintenance makes the sales cycle shorten and the probability of closing deals a whole lot better. I know, I know another “thank you Captain Obvious moment”…
For SunRun, ultimately the jury is out, as the discerning home solar consumer will still likely make the decision based on the comparative economics of the cost per kilowatt hour. Even so, SunRun and their VCs are making a smart bet that mass market economics will drive their cost basis down as the population of solar systems increase. Hard to argue with the idea that the same factors that commoditized computers and home electronics won’t be in play with solar eventually…
Alright greenies and green techpreneurs, shoot me a comment and let me know where I got it wrong.
Jeff,
I loved your comment: “Does not compute even when using the greenest, most carbon-credit smelling, greatest social responsibility-driven, Al Gore-endorsed, math 2.0 you can atmospherically parameterize…” particularly the Al Gore part.
I was curious though. How does a system that has a 20 year payback and a 10 year life all of a sudden become economical with financing and the assumption of maintenance risk? It just doesn’t add up unless there are some government grants.
I will admit that I didn’t go to their site, but I can’t get past the idea that financing and maintenance aren’t ADDING cost rather than reducing cost. It sounds like black magic. What am I missing?
PS: I may give you a call tomorrow, because I’m meeting with the city of Kingsport on Friday and want to pick your brain. Is there a good time?
Blessings,
Terry
Terry
Call any time. You raise the key point that will be a challenge for SunRun. Here is my speculation. Consumers will make a determination to go forward based on a per kwh comparison when looking at the SunRun offering. CAPEX will be gone from the consumer standpoint but unless the consumers are just zealots for all things green, a purchase gets done or not based on the comparative economics; i.e. the Utility per kwh price is $0.15 and the SunRun price for solar in your monthly bill is $0.XX.
Second, I think SunRun is banking on economies of scale improving, and solar system costs going down dramatically during the next 18-20 years as more systems are deployed. This would align with everything else that has occurred in the silicon universe in the past 40 years. When that occurs the useful life picture changes and the capital required for a replacement or upgrade becomes less of a hurdle, and the TCO goes down. This is to SunRun’s advantage because they have the consumer locked in for a long term arrangement on a per kwh basis. It will be interesting to see how often the consumer can renegotiate the rate, if at all.
Now that said, none of it works in my view from a financial standpoint for SunRun in the short term unless they get the benefit of all available Federal and state subsidies, incentives, and credits. Again, just speculating, but I suspect the credits and subsidies somehow get transferred to SunRun as part of the deal.