visit every home.’ We really got poo-pooed. But our argument was that it’s not scalable to have a sales force driving around in traffic in suburbia. So the first two years was proving the concept. If we hadn’t built those two key pieces, the inside sales tool and the remote design tool, we wouldn’t be able to be the scalable business that we are today. We can be sitting here in Oakland and selling to Denver. That’s the benefit.
X: Who thought up the remote design tool?
DK: I would give credit to Andrew Birch for the details of the business model. He and I dreamed of a software application that allow us to do the site visit remotely. Google Earth was just becoming commonplace then. People were getting familiar with satellite imagery and GIS tools. But it took an uncommon genius, a young software developer in Australia, to build that for us. His name is Adam Pryor. He’s still based in Sydney, and a lot of the IP is his. He built it with a company called Extro Interactive, the developers for the website. He did the CRM stuff too. When we licensed the aerial photos through Bing and Microsoft, part of their license agreement is they have a know-how clause—they get to peek under the hood. They sent a guy here to have a look at how we were using the images, and he said “Wow, we have 300 developers in Redmond and we haven’t cracked that nut yet.”
X: What’s this inside sales tool that you mentioned?
DK: It’s a bespoke CRM [customer relationship management] system that we’ve built specifically for the solar residential electricity business. There are competitors trying to work out how to do remote solar design with their own tools, but they still don’t have the systems to take advantage of it, because they are doing the conventional sales visits. We have never had a sales force that goes out to do site visits. Some of the other industry players are now adopting our model. Solar City has gone to 40 percent inside sales. Others surely will too, because the cost structure of running cars around with guys is just too high.
X: Can you talk a little about the way you help homeowners finance a solar installation?
DK: The affordability comes through the solar lease. Charles Ferer [Sungevity’s chief financial officer] brought us that know-how—he is like our Eric Schmidt. He was the CFO at Solar City, and had been there when they innovated the solar lease, and he helped us create our own solar lease. I believe the financial engineering in the last three to five years in this space has been as important as any technological engineering. The product itself is great; it’s bomb-proof, it sits around and creates electricity at 15 percent efficiency, which is unbelievable—try thinking of another mechanism that turns sunlight into a free service at 15 percent efficiency. There isn’t one. Our problem has been getting these things to market.
You have probably heard the analogy to cell phones. If you had to pay for your handset and all the phone calls you were ever going to make in advance, you wouldn’t sign up. But because you can pay it off in the course of a contract as you go, we’ve all taken it on. The S-curve from less than 1 percent penetration 20 years ago to 90 percent penetration today is the same S curve that I think this technology is on, and the thing that makes it most likely to succeed is financing.
X: How do the leases actually work? Does the homeowner own the solar equipment that goes on his house, or do you?
DK: You don’t own it, we do, in a joint venture with an investor. In our case, right now, it’s US Bank. You assign the tax credit to the investor, and you also assign the rebates that you get from the State of California. Between those two values—the tax equity investment and the rebate stream, plus some depreciation value that the investor can also get—about half of the system is already paid for up front. Then the lease payments over the 10-year term pay for the rest. It’s a win-win-win, because
