Name: SolarCity CEO on the challenges of conquering America's rooftops
Uploaded: 2020-01-03
Duration: 18 min 32 s
Description: Lyndon Rive says the revolution is just beginning.

SolarCity CEO on the challenges of conquering America's rooftops

Leadership

Lyndon Rive says the revolution is just beginning.

Welcome back from the break, everybody, Um I've got a very special guest today, Uh, someone I've known for a few years now and written about. And he's one of the stars of the renewable energy field. And I'd like to introduce, uh, Linden drive when didn't come on out. Linden Before we get into the nitty gritty, uh, I understand that you just came back from you're underwater hockey tournament. And could you tell us how it went? And maybe you could even tell us what is underwater hockey? Yeah. Just came back from the Pacific Coast championships in Hawaii. They're 10 teams competing. Became for it wasn't a great tournament. Competed against Australia, New Zealand, Canada. But you pay the mosque. Good on. Hold your breath, players. You can approximate of lead. It won the pool. Um, before you run out of air, you get the fuck your buddy go up, get some air. Six pairs aside in the water. Four subs attempt 10 players inside and you do because it's easier than running a solar company. That's actually a little lock in the sport in running a solar company. So learn how to hold my breath. Ah, I learned that you, uh, in Seoul industry that you may think you can come up for air. You're not going to come up for air. It is a lot of things that you can apply to the solar industry and things like you pushing things in one of the things that a lot of things Well, you've had a remarkable journey. I mean, I love the story about how you came up with the idea for solar city. Um, you were with your cousin neon musk, and you're going to burning, man. And you're in an R V. And you just, uh, get sold a successful tech company, right? And you said to him was like that scene, the graduates, like what? Dough I d'oh. And he just looked at you and he said solar, that was it. And then you're and they have a $4 billion market cap. Um, and you're the largest solar installer by far in the country. Correct? Correct. Okay. So lately, um, I mean, I know the entire stock market's down in the energy sector in general is down, but the solar companies have been getting hit pretty hard in the last few weeks. What What's going on? Why is in Wall Street in love with solar? You know this. It is a few reasons that I think the case, But if you step back well, so it should be in love with the fundamentals. Every thing of it is improving. The industry is growing at 50%. That entire industry is growing at a foster a historic around 80 80 to 90 and the cost is coming down. So when your competitive cost is going up, traditional sources of energy retail energy is going up, our quest is coming down and consumers want the product. You think all the fundamentals are working. Every single aspect of the vitamins are working. But I've taken why that the stocks have taken a beating a few reasons. One will come down. People associate solar with energy will. There's no correlation at all. In fact, well could be free and one have an impact on your cost of electricity. Listen, live in Hawaii, but ah, it will almost have very impacting the cost of electricity. The other is thinking the investment community is realizing that long term revenue streams are are the solar companies won't be able to raise capital to the little bit of center on there being a bit of a blood bought on the coast. Um, and that ripple dove into, ah into our stock performance. Um, but I think it's just gonna phase out, because if you know that the cost is coming down, you know that consumer demand is that industry is a growth rate of 50% off a big number in the sole industrial right aside and exit. Come on. The heart of the problem with Walter imagine is that you know, like a startup and you're more than a startup now, obviously, but you're investing for the future. And so you're not reporting profits. You're investing, uh, everything you're making back into the company. And you told me earlier that basically, if you'd stop if he stopped investing today, you'd be profitable. That's today. Yes. When you look at business models like ours, you make a capital investment, and then you get a 20 or 30 years recurring revenue stream on that capital investment. But in terms of your gas financials, it looks like you have a big loss. But if you do the NPC net present value of that cash flow, the solar companies actually making a good profit on those on those on his assets. You're looking at 11 Clint Returns with very good in ages. Pretty amazing, right? But there's a lot of skepticism to that that that income stream over 20 years is going to be maintained. That Wall Street saying whether a lot of unknowns that there and in part of it, may be based on customers renewing their leases 20 years? What will they do that and will the income streams? So, um, so that I'm not different dressed that way, spent a fair amount of time specifically with the rating agencies and another radiant. He's going through a phase where they had to be super super conservative after the mortgage crisis. So to get anything positive rating agency that that's not an easy left. Now we've done four securitizations have done it four times with the rating agencies and all this stress test, Um, today, but we sell a product we sell at roughly 15 to 20% below the cost off retail energy. So the only reason why a customer Defoe, is if they believe that or if retail energy is at a lower cost than our product. And so if you believe that retail and he's gonna drop by 20% when it's gone up with natural can gas going down, retail energy's still going up, then. Uh, I mean, that's a highly highly unlikely, even if that would incur, um, we still wouldn't have people. You just have to address the pricing with the customers. You could do reduction and extend this idea that customers are gonna default and pay more for dirty energy. We're just not seeing it happen. We got nine years of experience and take the accumulated default 90.5%. It's been than any acid plus ever. So where are you on pricing right now? Compared to other forms of electric electricity, gas, coal and give it give us the numbers with subsidies and without the most of the states we operate today, there is no state based centuries, most of them little. Some district markets in the East Coast, and when we price the price, the cost off retailed energy. So in California, and obviously not a unique we do six pricing every customer pays, saying we believe some of the commodity we gonna sell electricity. We fix the price. Some customers will have lower production, higher production, but they've paid a sample. The energy. So in California, we sell for 15 cents. The retail rate is 22 28 cents an hour wearing a big saving. That's with subsidies. That sort of the retail rate of the retail turning left the current retail right. I'm in the 15 cents reflects. It does reflect the the 30% tax credit that's available today and that you are on the East Coast. Uh, we will sell for between 12 and 15 cents, depending on which utility you in. Um, but the design is to show the customers saving the most part. It's around 15 to 20 in savings off their current retail radio of energy. Okay, so you're competitive now. We talked a lot in this conference about the subsidies. I don't want to go into too deeply, but are you optimistic they're going to get renewed? Were talking earlier. There were rumors of this deal going around in Washington that maybe if Congress, uh, allows oil exports than the trade off would be thio, uh, renew the solar subsidies. I mean, are you optimistic about that? Yes. So the my point in the subsidies is you got to do one of two things. Either have to tax those who are polluting when centralized, who does over providing clean energy. So if you contact those were polluting an incentivised. Those providing king energy, you have to do one of those two things conscious continues, possibly on right now. I think things will be okay. You can't do that. Um, well, planning for internal business is we were planning that there won't be any extension. That would be a bad outcome in policy, but that's what we're planning for you. If there's no extension, it will have an impact on the solar industry For those who cannot get the cost target done blow to 50 or what it's gonna be, really, it'll be a shake out in the industry. It's goingto 17 will be a bloodbath. And it would be a shame because the country's invested so much into building the amazing industry and growing doing really well in providing a clean source of energy, competing against another source of energy that's been highly subsidized for 80 years. The argument I hear over windows solar survivors out of, like, really hypocritical stance to take. You have to say, when will all energy survive without incident? And we know that the other incentives are impossible to remove. You cannot get out. They are therefore in perpetuity. So if you cannot get out of the system and continue running, uh, subsidizing or keeping things that equal playing field for those who are killing sounds like you need lobbyists as good as the oil industry has. That's right. What you working on that? But the one thing that we do have going for us consumers, don't you realize humans have done to realize that, uh, the way energy is produced right now has to change. The transformation is a current like, if we look at some of our states, that's the most hostile states. Like if you take Arizona, we have massive classes with utilities and the existing possible industry on in that state where every says always gonna die. We have, ah, highest adoption rate, highest closure consumers get. But the Arizona public, until he's backed down on there, they wanted to put a big fee on bare bones that Solarz, and they put a much lower fee on and they met Mita Ring. They kept right, basically, but you don't have to battle state by state that they were gonna have to do that. And nothing did. It's unfortunate, but I think ideal these scenarios gonna look at. It's changing the way Hope Policy Works will have the regular state commissioners. The PC works with utility Right now, the programs in place is designed for us to head by. There is no solution. It's like there's this pie and every dollar we take is a dollar. They don't make right. Very simple math. Um ah. So if you change it to where they can actually make money off another person's infrastructure, create a competitive infrastructure landscape, that infrastructure, Reducto cost calms down. It'll make money, and the consumer will pay less for energy. That's the landscape we're looking at now. You started to see movements. New York is taking leadership in this role. No, it's gonna not my pain and become one of the best poster Children. We had Richard Kaufman on here earlier, talking about what he's doing, exactly what they didn't tremendous things and trying to move ahead. And since he creates the true smart grid. Right now, the good is only one way. Communication only pushes out energy. On the grid of the future is where every home is a partial and a parent and needed. So its share it communicates with the good. You still have centralized generation, but you will have capacity of energy from the hunt. And you'll have that thousands across. We just, uh, recently won. Uh, what it anarchy on the East Coast for thousands of homes is smart home where you have a smart chemist, that story solar all combined and providing capacity that that's what we see it going. California is gonna move that way too. Why is gonna move that way too? So we started to see ST take leadership and understand that we have to turn for my energy infrastructure, right? How do we do it in the most cost effective way and and make it a three part. What? Now? It's not as good as the old business model for the Italy, but it's not a death spiral. Anything like that, right? Right. How is the storage finger you offer consumers now storage for their homes with their solar systems? Is that gaining traction. It's pretty expensive is an add on yet, right? So the It's still very new. The product has been using Tesla's better using test about, in fact, possible. It's a great great deal from you cousin, uh, deal that everything gets and get the deal. But there's a story there. Welcome. Tell you push him to buy a chiseler on. Hey, can I get a special deal? Actually, go the way you get one. Call the family deal, buddy, get, uh, I get the family deal in the battery pack. The but no, it's, um it's amazing. Better pack. And but the primary product we sell today is back up, which is like heaven, a massive performance car. But you're only driving came out on our right. And so the backup is only Pakistan of the functionality of the battery. The 95% is all good related. Hey, So our strategy is to deploy the back and then have thousands of homes with back up what you can then enable grid related service sport utility. Right. And then you can have instant capacity, instant reactive power, instant voltage control. You can have a look available. You're going to allow the policy to accept. And then then you create a revenue source for the homeowner and then on our situation will have to. Customers will have the homeowners. The customer. Uh, we'll have utility as a customer's well would be stunning. Capacity service is of good related to the right. We have time for just one or two questions here. This time's coming by really quickly. Anyone have a question for Ah, Linden here. Your hand in the back. Right here. Kate. The question is soft costs. So that's what 2/3 the cost of a solar job now, basically, in the highest, uh, single Costas customer acquisition. If you're gonna make it, the EITC goes away. You have to cut your cost pretty dramatically. That's what you're focusing. Yeah, the acquisition cost definitely. But I think you may be referencing more in the permitting cost or yes. So the acquisition part way, quite frankly, struggled with this one. It stayed around 50 to 60 cents for a while. Now we're working at getting it down. But the biggest challenge that we have is really getting consumers educated on the value proposition. It's mind blowing to me when even I communicated my own friends who are thinking of getting solar asked me, What's the paper? I like being at this business for almost 10 years ago, asking us to pay back. There's no payback. You don't make any investment. You just pay less for the teen energy. And when my own friends don't know that and, uh, it it takes a while to get the message out. And when we have a ah sail draft in the Home Depot and you catch somebody them and explained the value proposition, the adoption rate time and often the follow up is why isn't everybody doing? But there is a stigma that solar has a payback, that there's a capital investment which, if you would buy it, it does, but in most cases, 7% of the market today, you just pay for the energy, pay less energy than you get from the. But in terms of like permitting Sasquatch working with state legislation to make things change, we just passed a bull in California to streamline the permitting process for any system under under 10 kilowatts, and we'll have to do this state by state of building the pardon. But boning department to streamline the permitting process. Um, back to the incentive. In California, there's four things you don't need a permit for. That thing Poole said an awning and it will Derek. So that's not incentive. So last point here. Linden. How many roofs have you installed? Solar on as of today. And by the end of the decade, How many rooms do you have? So we, um uh what, exactly? 20? What a number now, versus about Communicated two months ago. Should have months ago. Three. Exactly. Remember, that number called it a 250,000 on the, uh, but by 2018 by the end of 2018 the goals have a 1,000,000 customers a 1,000,000 from 254 times. Yeah, well, that's fast growth. Hope you make that. My growth would have to decrease dramatic todo on a pretty sure bet. It's always we feel confident about it. All right, We'll get that right. Let's hear it for Linda Reid. Thank you.