Sungevity founder: 4 key solar hurdles in 2012

Sungevity founder Danny Kennedy talks about what stood out at the Solar Power International show and where the industry is headed.
Written by Kirsten Korosec, Contributor

Contrary to the rumors about the U.S. solar industry's demise, Sungevity founder Danny Kennedy says it's doing just fine. By his estimation, the solar industry has had a banner year. So where is it headed?

I recently spoke to Kennedy about what he saw and heard at the Solar Power International 2011 show, which ended Thursday, and where he thinks the industry is going. Here's what stood out to this solar insider.

1. Jobs

At SPI and elsewhere, the big standout story in Kennedy's view is job growth in the solar industry.

"We have 100,000 jobs and we grew 7 percent in the past 12 months compared to the fossil fuel-based electricity generation industry, which lost 2 percent of their jobs," Kennedy told me in a phone interview this week. "It's a good news story throughout the country. These jobs that aren't offshore, but throughout the community and good quality jobs too."

Sungevity is a reflection of that growth," he added. The company has tripled in numbers, from 100 to 300 employees at its Oakland headquarters.

"It's a marketing game now because the focus has shifted downstream - that's where the margins are," he said. "It's now about how do you build a brand like Apple did?  We need to build solar as a social network, a brand that drives it's own adoption."

2. Falling solar costs

"This was the first year where you've really seen the effect of oversupply in the industry," Kennedy said.  "The reason there's so much stress on the manufacturing end is because there's more product than there is demand."

"It's the first time in years that suppliers are getting squeezed by margins, they're fighting for customers and on the flip side of that, the buyer, and the off-takers of their products are in the driving seat," he said. "And that's actually really good news for the planet, because it means these products are ever more affordable."

Kennedy says prices will continue to fall.

"The bottom line is we're producing electricity cheaper than coal fired power," he said. "If you can think of a coal-fired power plant being built today, by the time it's up and running five to eight years from now, it's juice is going to be more expensive than what we will provide in five to eight years from now."

Falling solar prices have put U.S. manufacturers under pressure. Kennedy didn't want to say much about the solar trade dispute between the U.S. and China. However, he did note the end goal is for low-cost solar and that the Chinese have delivered.

"The fact that they're putting money into solar shouldn't be perceived as a threat," he said. "It should be matched. Anyone who thinks they're going to get in the way of China or India putting in electricity for hundreds of millions of people, is kidding themselves. We can be left behind and complain about it, or try to catch up."

3. Third-party financing

Third-party financing such as leases and power purchase agreements is one of the greatest innovations in the industry in the past five years," Kennedy said.

"It's actually more important than any efficiency improvement or cell technology anywhere in terms of adoption," Kennedy said. And he expects more innovation within the financial products realm.

"What will be the next financial product that helps solar? he asked. "The lease model has its limits. It's got to be a homeowner, for example. Is it going to be virtual net metering, is going to be some other area?"

The big narrative in solar is a slow shift away from a fixation on hardware and more attention and investment towards the end user, he said.  That means more innovation in creating and designing products that make solar easy, simple and cheap to use and that harness the social network to drive adoption. Whatever company does that best, will win, Kennedy said.

He said third party financing has proven its worth as a new business model. More than 50 percent of systems sold in the last quarter were third-part financed.

"The customer has spoken," he said. "In our case, even if our customers have the cash and do the math and work out that they may be marginally ahead if they buy it, they prefer the lease. Because a lease on a solar system takes into account the total cost of ownership."

4. Grid integration

Kennedy also sees more innovation in how solar and other smart products within the home all connect with each other and into the grid.

"We're shifting to this lateral power scenario where electricity is not uni-directional but bi-directional," he said. "How do you wrap everything all together from your solar on the roof and smart appliances and maybe even make home a source of revenue for the family."

"Software and design integration: That's the exciting place in this industry," he said. "And again a place where America is genius. That's what we're good at."

Photo: Sungevity

This post was originally published on Smartplanet.com

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