This article is part of a weeklong America 360 series on Oakland.
OAKLAND—There are no white lab coats at solar-service provider Sungevity’s Oakland headquarters. There are no hard hats, or equipment used for calibrating solar cells. Instead there are cubicles — some decorated with totally unnecessary leaf-shaped umbrellas — from which some 300 employees manipulate software and charm customers over the phone. Thirty miles north of the shuttered offices of solar-panel manufacturer Solyndra—which went bankrupt in 2011 after receiving $535 million in federal loan guarantees—Sungevity’s business has doubled its sales every year for the past three years.
“We all feel like we’ve been riding a rocket ship for the past five years, and we’re about to go faster,” says Sungevity cofounder Danny Kennedy. Kennedy’s Australian accent makes him sound laid back, even when he’s rattling off statistics about the solar sector’s rapid growth. The price of solar hardware is dropping “like crazy, precipitously, like nothing on Earth,” Kennedy says. The price of a solar panel—the key component in a home solar array—is one-fifth what it was when Sungevity got started in 2007, according to Kennedy.
Bay Area entrepreneurs are fond of calling their business ideas “disruptive.” But helping to spread distributed electricity generation actually is. If current trends continue, solar service providers like Sungevity and SolarCity could transform the utility business in the same way that cell-phone providers transformed the landline telephone industry.
Over the past decade, the price of solar hardware has plummeted, while conventional residential electricity has become more expensive. A recent Deutsche Bank report found that residential solar is already competitive with conventional electricity in 10 U.S. states — without additional state subsidies — and projected that 12 additional states will achieve parity in the next 18 months. Projections aren’t guarantees, but Sungevity is betting that pretty much everyone who puts a solar panel on their house will eventually save money.
The falling price of solar hardware helped put Solyndra out of business. But the drop has been great for service businesses like Sungevity, which make it cheaper and easier for homeowners to get a solar system. According to the Solar Energy Industries Association, a trade group, the U.S. is installing roughly one solar photovoltaic system every four minutes. The Solar Foundation, a nonprofit, calculates that the solar industry added more than 13,000 jobs in 2012, mostly in sales, finance, maintenance, and installation.
Although solar accounts for just 1 percent of the net electricity generated in the U.S., both residential and utility-scale projects are experiencing rapid growth. “This business will not go away. It’s here for the long term, and it will dramatically change, over time, the entire landscape here in terms of the electric-utility business,” says California Public Utilities Commission President Mark Peevey. In 2017, the 30 percent federal tax credit for rooftop solar systems will drop to 10 percent, but by that point it will be enough to keep solar competitive, he says.
Utilities in California are already complaining that rooftop solar users aren’t paying their fair share of grid maintenance costs. They’ll have much more to complain about in years to come, should battery-storage technology allow rooftop solar users to totally disconnect from the grid.
Cofounders Kennedy, Andrew Birch (known to all as “Birchy”), and Alec Guettel set up the first Sungevity office in a friend’s backyard shed. The three — a former Greenpeace activist, a financier, and a social entrepreneur, respectively — believed solar had a future as a nonpolluting alternative to fossil fuels, but they also knew that most homeowners weren’t willing to pay $30,000 up-front for a solar system.
So they started leasing panels as well as selling them. Homeowners pay no deposit for panels they lease through Sungevity. A California customer with a prior monthly electricity bill of, say, $150 will pay Sungevity $70 a month for the panel, and will pay the utility company a much lower bill—perhaps $50, as the solar panel will have cut the amount of power the home needs to pull from the grid, Kennedy says. Thirty dollars in monthly savings might seem small, but over a 20-year lease period, the customer could save over $10,000. To date, Sungevity has leased or sold more than 10,000 solar arrays.
A software-driven business model allowed the company to grow rapidly. Sungevity employees reach homeowners in nine U.S. states, Europe, and Australia without leaving their leaf-shaded cubes. Rather than traveling laboriously to and from homes to design rooftop systems and give customers a quote, Sungevity’s solar designers use satellite data from Google Maps, Bing, and elsewhere to calculate how much electricity a solar system of a certain design, on a certain customer’s home, would generate over the length of the lease. Rather than sending in a consultant to talk customers through their options, Sungevity’s employees talk to customers on the phone and provide them with a Web-based estimate of dollar and carbon savings. And rather than handing over a set of solar panels and leaving homeowners to deal with local permitting and maintenance, Sungevity’s project managers help customers through the permitting process and coordinate installation and maintenance performed by some 100 local contractors.
To spread the word about solar, Sungevity has partnered with home-improvement retailer Lowe’s and used social networks. Customers can share their Sungevity energy-savings data to Facebook, get a referral bonus when they persuade a friend to lease a panel, and track the energy and carbon savings caused by their referrals. Getting a panel turns a lot of customers into advocates. “They come in rationally, they go out emotionally,” Kennedy says.
Sungevity’s business model can only work in the 41 U.S. states that allow net metering—the sale of excess electricity generated by residential solar systems back to the electric grid. Utility companies can hobble the growth of rooftop solar by getting state legislators to limit net metering. Recently, a push to do just that failed in Sacramento.
But the potential market is enormous. Sungevity is hoping to develop a whole economic sector around solar power. To help grow the next generation of solar entrepreneurs, Sungevity hosts an on-site incubator and accelerator program. One start-up that leases office space in Sungevity’s Sfun Cube, Mosaic, allows individuals to invest in rooftop solar projects at schools, farms, and U.S. military bases. It’s a little like crowdfunding, except investors get an annual return of 4.5 percent or more.
Over time, Kennedy hopes, successful Sfunsters and other solar-service businesses will set up permanent offices near Sungevity in Oakland’s Jack London Square, creating a global campus for the solar economy. Oakland feels like a natural home base, he says — and not just because of the near year-round sunshine. For a company pushing for a clean electricity revolution, there’s probably no better place to be than in activist Oakland.
CORRECTION: An earlier version of this story misspelled the name of solar-service provider Sungevity.
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