US solar giant SunPower intends to use Australia as a beach-head for developing and perfecting a new “energy services” business model, which it then plans to export to other markets around the world.
SunPower will use the Australian renewable-based “gentailer” Diamond Energy as the vehicle to test its proposition that solar companies will graduate from being just manufacturers and/or project developers, to providing an energy service to the customer – crossing into the domain traditionally dominated by utilities.
“Australia is a big deal for us,” Tom Werner, the CEO of the $4 billion company told RenewEconomy at the company headquarters in San Jose, in the heart of Silicon Valley. “What we would hope to do is use Australia as a place to sell energy and get very good at it, and export that – both the policy and the business approach – to other parts of the world.”
The proposition from SunPower is that the traditional model of stringing a line to a customer from a centralised power station is being challenged by the plunging costs of solar, the growth of distributed energy, and the emergence of storage and load management systems as viable technologies.
This is creating a new generation of “pro-sumers,” both at household and the business level, and in turn opening up a $2 trillion a year global electricity market – left largely untouched by significant new entrants for the past few decades – to new business models that combine clean energy sources, software and customer service.
The complexity of these new systems will be beyond the capabilities or the interest most consumers – and this is where the opportunity arises. Indeed, Stanford University’s Tony Seba, the author of “Solar Trillions”, says utilities are ill-prepared for this because it treats users as rate-payers rather than consumers.
“It’s not just about solar panels and a battery – that’s just the beginning of the conversation,” Seba told RenewEconomy in a separate interview. Because other companies are better equipped to handle that challenge, he says the utilities of today will not be the utilities of tomorrow.
Werner certainly sees opportunities for the solar industry, given that they are the makers of the modules and understand the technology. “Leading edge (solar) companies doing two things – they are getting costs down and they are transitioning to be an energy solutions company,” Werner says. “Those are the two forward-looking trends that I think will win.”
Werner says Australia is a perfect place to test that theory, because it has a combination of excellent solar resources, high electricity costs, supportive policies and deregulated markets.
SunPower bought a 42 per cent stake in Diamond Energy last year. The goal seems to be to extend the “zero down” solar leasing model that has proven popular in the US, and combine that with a “gentailer” utility that generates its own renewable energy, and acts as a retailer.
“Where we going conceptually with diamond is this,” Werner says. “You came to California to see things (large-scale solar plants) you can’t see in Australia. We are going to Australia to see things you can’t see in the rest of the world, and that is a gentailer model where you are able to put the cost of the system into the utility bill.
“The utility bill tends to be pretty sticky. That makes it more financeable and then, by virtue of being a gentailer, if there is excess electricity you can sell that to another customer. You can build a ground-mount system and sell the electricity to multiple customers. This is a model that we’d actually like to replicate in other parts of the world. We think it’s a sustainable, long-term model. To be fair you need some policy, but in time as costs come down, you don’t need policy. ”
This way, SunPower says, customers with rooftop solar can have a single bill and not have to worry about the complexity of managing the solar installation, dealing with the issues of exports and variable tariffs, and eventually battery storage and load management. And they will receive 100 per cent green energy – generated on their own rooftop and elsewhere by Diamond (presumably through larger SunPower solar projects), at a cost that Werner says will be comparable or cheaper than current grid prices.
“Diamond is a natural precursor to this energy solutions model,” Werner says. “You’re saying I’ll take care of your energy – you don’t have to worry about how much solar you are producing or where you getting it from, you’re getting enough energy when you need it. If you are the energy provider you like solar. If you are the customer and you get it economically, you like solar, and if you are a gentailer like Diamond you can make the economics work better.”
SunPower also believes is it inevitable that storage and other home management systems will be included, possibly even extending to electric vehicles. How that all fits together remains to be seen, and will likely vary between regions and markets, depending on local policies, incentives, market design and solar resources.
“What we are not saying is here is the model, you have a house , solar, and storage, and home energy management and we’ve solved it,” Werner says. “What we are saying is that those are things that we likely to offer in combinations that are not defined yet.”
The biggest challenge in Australia could be in sourcing third-party finance for the leasing component. In the US, it is commonplace now and more than $1 billion has been provided by mainstream banks for solar leasing. In Australia though, banks have not yet embraced this.
So, given the fact that the old “hub and spoke” model will be disrupted by the new technologies, the empowerment, quite literally, of the customer, and the emergence of new consumer offerings, how does Werner expect the utilities to respond?
“Capitalism works,” Werner says. “ And so we are going to see the utility response, we are going to see new entrants – people doing energy management, and people doing energy efficiency – they are all going to want to expand and be a solutions company as well. The two trillion-dollar opportunity is going to attract a hell of a lot of competition.”
As for Australia, Werner expects it to grow substantially in the next few years and account for around 10 per cent of its global business. It is currently looking at large ground-mounted solar projects – both with its modules and its new C7 solar concentrator technology. Werner was not giving out details of those yet, but presumably they could be used to grow Diamond’s portfolio of distributed and utility-scale power sources that will enable it to grow its retail offering.
Note: On Monday, we will have more from the Werner interview, including on solar costs and the solar market, and the competition between utility and distributed generation.