An interview with Jigar Shah, CEO, SunEdison
SunEdison was founded with the goal of making solar power accessible and affordable for businesses. It has done just that.
Traditionally, an investment in solar energy was complex, requiring a company to acquire new skills and make significant capital investments with uncertain returns. For solar marketers, such deals – with so many inherent barriers to overcome – are complex to message, let alone to explain. Quite simply, how can companies be convinced to invest in solar energy when such an investment is not core to their business?
SunEdison pioneered a way that makes it possible. Through its model, SunEdison finances, installs and maintains solar cells for businesses in exchange for a long-term commitment to purchase the energy at a competitive rate. For SunEdison, such installations break even in 7-10 years, and provide a low risk annuity for the company and its investors thereafter.
Recently, Marketing Green caught up with Jigar Shah, SunEdison’s Founder and CEO. Here is what he had to say:
MG: You are considered by most to be the pioneer of the “solar energy services” model. When SunEdison launched this model, it represented a clear shift in the way solar energy was financed and marketed. What was the impetus for the change? How has this model evolved over time? How successful has it been?
JS: Deploying solar has always been complex. It still is. For many years there were significant disincentives that deterred commercial, government and utility customers from turning to solar energy. No one could justify the upfront capital outlays or the lengthy periods required to recognize a return on investment, and no one wanted to manage the complex transactions.
So that was the impetus: By moving from a manufacturing-based product model to a turn-key services model, SunEdison was able to absorb the upfront costs of building a solar system at the customer premise. Most important, we have simplified the entire process for the customer.
The model is evolving. We’re becoming more refined and looking at our solar services model in terms of a complete service. For example, while our primary offer is renewable power services, we also offer complementary services such as power usage monitoring for internal recordkeeping. We expect to continue to evolve in that direction because the services model has been very successful. It’s has been adopted by high profile users such as Xcel Energy, the State of California and Staples.
MG: What is SunEdison’s brand promise? How does your company fulfill on this promise each day?
JS: Our brand promise is that we simplify solar and deliver predictable pricing of renewable energy services that meet our customers’ energy requirements at or below current retail utility rates.
At the end of the day, we sell electricity, not just solar equipment. Unlike a traditional product vendor, who might sell you an installation of solar panels and then walk away, we go in under the promise of selling the customer electricity that we generate at their facility. If we don’t generate it, they don’t pay for it. Because we own the solar energy systems, we have a strong, built-in check to maintain our brand with the customer. We only make money when our systems actually produce energy.
MG: Selling solar services must require a high touch sales process with along sales cycle. What role does marketing play throughout this process? What channels are used – both online and offline – and how are they leveraged?
JS: It does indeed require a high touch sales process. That said, the sales cycles aren’t necessarily as long as you would expect. We’ve removed many of the barriers that would slow down other offers: financing, installation, maintenance, etc. For our customers, if it makes business sense the decision becomes a no-brainer. Solar is really becoming a mainstream component for commercial, government and utility entities. People are more comfortable with it. They see the opportunity costs of traditional solutions and there are coming to the point now of saying, “Why not solar?”
From a marketing standpoint, I’ve never been in a space where there was such pent up demand for a service as I’ve seen in this industry.
The real marketing challenge is how to position us relative to other vendors in the industry. For us, this is clear: We are a solar energy service provider. We’re the first and largest solar company to offer solar electricity as a service, so we’re in a pretty good spot in terms of differentiation.
Most of our customers come to us through references. We cover a lot of national accounts that provide good revenue and new development opportunities. Plus, we also pursue a lot of channels in government and the utilities sectors. We stay acutely aware of the government environment through extensive research – whether it be RFPs or other funding vehicles.
MG: What are the key factors that influence your customers’ decision-making process? Does the decision to sign a solar energy contract have more to do with the underlying ethos of their brand or is it simply based on cost-saving considerations?
JS: First, none of them want to own a power plants – it’s just not core to their business. But they want solar power to lower energy costs through predictable pricing, and to improve the state of their environment. They want a solution with little or no disruption to their existing business. An example is Whole Foods. We offered a contract that locked in electricity rates for ten to twenty years. That removes volatility from their utility bills and provides a hedge against increasing rates in the electricity market. So that’s a strong business rationale. There is literally no other solution on the market where you can lock in part of your electric utility costs for that length of time.
So, it’s got to be cost-effective or people won’t make the decision. In addition, renewable energy provides a lot of supporting messages that ultimately are emotional triggers for decision makers, which helps them justify the proposition. Those supporting measures are everything from global warming to a keen desire, especially in the U.S., to break away from our current dependency on foreign oil.
MG: How will this model be scaled in the coming “solar decade?” What are the key barriers in doing so?
JS: From a scalability standpoint, the industry confronts a number of challenges. One is straight forward logistics; we’ve got to have trained and qualified installers – people who can install systems in such a way that they’ll last for 20 to 30 years – and second, we’ve got to have the supply chain built out sufficiently for the demand. Manufacturers are doing that now but we’re not there yet.
The third major challenge is that we’ve got to look at the industry in a broader sweep. Solar vendors have tended to look at their systems as isolated energy generation systems, but they’re really all inter-networked through the connectivity of the grid. There is a tremendous untapped network effect that’s not being accounted for by most players in the market. That is, the ability to monitor, control, and dispatch energy or shed load onto or from the public grid in a highly centralized manner from thousands of distributed energy assets. That will be incredibly valuable. Right now the industry lacks some key standards that will really enable that market and that function, but those standards are being worked on and as they evolve the effect will be knock down those barriers.
MG: Can this model be extended to the residential market? If so, how will the way it’s marketed be different than it is today?
JS: It doesn’t really for work for our business model just yet. The economies of scale really don’t come into play when you’re dealing with thousands of small power plants at each home. Having said that, I think the right way to look at this is to recall the way in which the PC and the networked PC model evolved. What kind of computing power was available to the average homeowner in 1975? There were really no PC’s, and nobody was buying a mainframe or mini-computers for their home use. The switch really didn’t happen for another five to ten years. Broad scale adoption will probably happen in a similar manner in this market as well.