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Posted by: Spencer on June 18, 2012 | Categories:
Scott Gordon began working for HelioPower, a California-based renewable energy solutions company, after realizing he wanted to leave behind a better world than the one he inherited. He laughs about that now: “I was in the business for 10 minutes when I realized nobody buys solar for that reason.” As Senior Vice President of Sales, he’s helped install thousands of photovoltaic systems and he’s heard plenty of reasons to install solar, but most boil down to: It’s cheaper. “Ninety-nine percent of our customers buy it to save money,” Scott says. “They can see how solar pencils out.”
Scott discusses solar power’s financial benefits, building a business culture based on integrity, what pitfalls to beware when weighing your own solar install, the changing face of U.S. energy distribution, and how smart meters may join in public debates about consumer privacy. This Client Spotlight is a long read, but it’s worth it: Scott offers one tiny, but fascinating, guess at the future of energy.
What does HelioPower do?
HelioPower, predominantly, does residential and commercial solar installation. We also have an asset management program that takes care of people’s solar systems. A lot of solar systems have been built by companies that have gone out of business; those customers have systems that aren’t working or aren’t working to their full potential.
We also do energy financing, and we own and operate systems—we own something like 150 systems that pay us every month for the energy coming out of them. And we do distribution. We sell equipment to other folks, buying in bulk so we can sell equipment at reasonable prices. Lastly, we do energy analytics. One of our biggest customers is Safeway. They want to know how many kilowatt hours it takes to, say, bake a loaf of bread.
That’s essentially our business in a nutshell.
For your commercial and residential clients, what is solar power’s biggest advantage?
Solar power’s biggest advantage is locking in your energy costs. Energy prices are going up. In California, for example, they’ve been going up 7% a year, on average, over 40 years. If you can lock in that cost, you have an advantage. My electric bill costs $85 a year. I’ve taken that extra money and put it into my kids’ college accounts. So in addition to locking in costs, and potentially eliminating my bill, another advantage is that my house is more valuable than my neighbors’. Home appraisers are finally starting to figure that out.
So it’s threefold: You lock in costs, increase the value of your home, and free up some cash to spend on other things instead of electricity, like a college account.
You didn’t mention transitioning from fossil-fuel-based energy.
When I got into the business in 2006, I had just watched “An Inconvenient Truth.” I thought, man, we have to change things. That was what got me into the business. I was in the business for 10 minutes when I realized nobody buys solar for that reason. Having a positive impact is maybe the reason they got interested, but it’s not why they buy solar power; 99% of our customers buy it to save money. Most of our customers aren’t even Democrats. They’re Republicans. Most have financial backgrounds. And they can see how solar pencils out.
HelioPower started in 2001. Eleven years seem mature for a U.S.-based renewable energy company. To what do you attribute your company’s success?
We had a visionary founder: Maurice “Mo” Rousso. He saw, back in ’99, 2000, that solar was going to be big, and he built us around doing right by the customer.
It’s funny thing, solar. People come to the industry all bright-eyed and bushy-tailed, and then you realize that end the end of the day, you’re a contractor. You go into to put PV panels up, for example, and you realize something’s wrong with the customer’s roof. What Mo really instilled in our culture is “Make it right for the customer, even if you have to lose money on a job.” That approach has gotten us to a point in our career where 60-70% of our business are referrals. We take care of our customers.
And because of that culture, we don’t have to market a lot. We’re the biggest solar company you’ve never heard of. It’s all word-of-mouth and referrals. That’s key to our success.
The other thing is, we don’t have a lot of employee turnover. We have a high skillset; the guy that installed my system in 2007 is still installing for us today. He has hundreds of jobs under his belt. Or a guy like me, who started off as a 1099 sales guy. Now I’m senior vice president of sales. It’s a career path. We can keep our costs down because we’re not constantly training and our customers are satisfied. There are fewer mistakes, a better customer experience, and more referrals.
What tools and services, besides installing renewable energy systems, do you offer your clients?
We have a lot of resources out there where we talk about issues coming up in the solar industry.
One issue is homeowners’ associations. Sometime they’ll rubberstamp an install; other times, they’ll drag it out a year and a half. We offer resources on our site on working with your HOA, on what they can do and what they can’t do.
I also blog about the ugly side of solar, which is something nobody in our industry wants to touch: Fly-by-night installers punching holes in your roof, all that. Ugly installs can literally destroy or burn your house down. Another part is ugly sales tactics, which is a predominant theme in the business. When we got into the business, we were a bunch of engineer hippies. Now who’s in? Your slick, vinyl-siding, used-car salesmen. Now you’ve got that sales guy who’ll sit at your table for nine hours until you sign his contract. You have guys promising double the amount of kilowatt hours you’ll get or guys showing you a really good lease payment, but you’ll be paying for the installation three times over for the next 20 years, and you’ll get slammed with a balloon payment on top of that.
We want to be educational on our site. My feeling is that we’re still a young industry, and as all these shysters take advantage of people, there’ll be a backlash. I think that’ll happen 12-18 months from now, when people begin to realize the lease they signed isn’t giving them the production guaranteed them. And the guy they worked with isn’t still in business. We want to shine a light on all this.
To survive this chapter of our industry, we’re trying to position ourselves as high-integrity. We don’t want to do a one-call close. Most of our problems are with customers that were one-call closed: A sales guy strong-armed someone into a contract; now it’s a year later, and the true-up is different than they thought—with solar, you pay once a year—and they’re very unhappy.
We’re trying to shine a light on this, so when it all shakes out, we’re still standing; so people trust us. We can say, “We were straight with you the whole time.”
Where do you think the U.S. renewable energy sector will be in two years?
That’s a very interesting question. Honestly, a lot hinges on who gets elected in November. Democrats are more friendly to the solar industry than Republicans, even though our customer base is primarily Republican. It’s ironic.
We have another interesting factor, which is all this fracking going on. As natural gas gets cheaper and cheaper, we’ll see more natural gas power plants getting built, which could reverse the trend of higher energy costs. It could affect transportation. FedEx and UPS, for example, are converting their fleets to natural gas.
As far as the industry is concerned, solar will do well in states with high energy costs. The good thing is, we’re nearly at the point we don’t need incentives. The rebates are almost gone; we just have the federal tax credit left. But solar prices have dropped by half over the past five years. That’s good.
Wind is a different animal. It’s in a lot of trouble right now. They’re suffering. That’s a wild card.
Then you get into biomass. The really big player over the next five years will be biomass. We did a 500-kWh biomass system; before, they were spending gobs of money to haul out waste. Now they just throw their waste into the biomass digester, and they’re doing great. So that’ll be a big player in renewable energy.
Ultimately, you’ll see less wind, more biomass, more natural gas, less coal. Coal is on the ropes. The big issue with coal is the U.S. is converting to natural gas, and all the coal in the U.S. is being exported to China and India and places that are behind us in terms of clean energy. Coal will lose over the next few years. Biomass will win. And solar will do well.
How is solar and renewable energy changing the aging U.S. energy grid, which currently relies heavily on carbon sources?
Utilities are struggling. I spent ten years as a software engineer; I got into computing in the mid-’90s, when computing distributed. You started seeing you don’t need a supercomputer for processing power. You can use spare processors on a million laptops. Now we’re in the Internet 2.0, where computing’s truly distributed.
The grid is something similar. In computing, we still had mainframes; the energy grid has centralized power plants. Utilities are trying to maintain a sense of a centralized power plant. But there’s a shift happening, just like in music. The music industry lost control of production. It happened when we, as kids, would make mix tapes. Then we started copying CDs. Now everybody shares music, and the music industry has lost control of the means of production.
That’s what’s happening. Big utilities are losing the means of production. Renewable energy is just a fraction of a percentage now, but they’re still losing control. Meanwhile, my solar system is producing energy. So are the 3,000 systems I’ve installed and the 15,000 SolarCity has installed. They’re all producing energy.
Here’s the problem for utilities: The trend was only to go one way, where the energy started at the power plant and end up at your business. The issue they have today is, energy isn’t flowing in one direction. It’s flowing in multiple directions. When my meter goes backward, San Diego Gas & Electric has to figure out what to do with my energy. They have to balance the grid.
Utilities’ perspective is, they’re losing customers, but at the same time, they’re being asked to invest $10 trillion to update our grid. Their revenues are going down, but they have to make investments. This is an interesting challenge for them. Utilities have to figure out new sources of revenue.
One way is through a smart meter. They’re very smart. They know what time you wake up, what time your garage door goes up and down, what time you’re on your computer, if you have a pool. That builds a profile of you. So your smart meter knows how many loads of laundry you do every month. So what? Well, Proctor & Gamble wants to know. Utilities are gathering some of the most powerful marketing information ever through their smart meters. The state of California said “You can’t share that information with other companies, unless you get your customers’ permission.”
They’ll get many people’s if the utility says, “If you agree to share your information, we’ll give you 10% off your electrical bill.”
Now all of a sudden you’re getting coupons for laundry detergent. The pool company is sending me stuff because they know I have a pool. Or I’m getting marketing from Anheuser-Busch, because they know I have a kegerator. But even more insidious is if I’m a person with malcontent, and I hack into a utility’s database, I can figure out when you’re at home or not. I can case a neighborhood, using energy data.
We have to think about that. The grid is changing dramatically. Utilities have to invest. They’re losing revenue, but they have to change. They’re going to get into the business of distributing power. They’re going to get in the business of selling my power to you and figure out a model that answers the question “How do I sell Scott’s energy to Spencer?” The implication is time of use: You’re going to be charged different rates for your energy use at different times of the day. In California, everybody’ll be on this plan by 2014.
Beyond that, the next step is called dynamic billing. Rates will change every 15 minutes, based on grid demand. Your electricity rates can change. Your fridge will know this. It has smart-grid chip in it. Every appliance that rolls off the assembly line in 2015 will be smart-grid enabled. You’ll be able to log on and allocate your power use. In the U.S., we don’t think like this. We think “Plug it in and use it.” Eight years from now, it’ll be “When do I plug it in?” and “For how long?” and “How do I program my pool pump?”
Right now, if you run your laundry in the middle of the day, it costs the same as it would at 2:00 in the morning. Not so two years from now. If you still have solar, you’ll had freedom. If you’re not producing your energy, you’ll pay three times as much. I mean, you can still run your laundry whenever you want, but it’ll cost you more. Is that really freedom of choice? Not really.
How did you, personally, get involved with HelioPower?
It was having kids. Early in life, I was always in an environmentalist. Then I got out into the real world. After awhile, I started to think “What happened to you? You’re a software guy. You have kids now. What kind of world will you leave them?” Did I betray myself and sell out? I had these deep thoughts. I realized, I can take my knowledge and put it to solar and have a deep impact. I did it for those reasons.
I still do it for that reason, and I still think about my impact. Through my efforts, I’ve literally removed tons of CO2 emissions. I feel good about that. Yes, I’m making money and creating jobs and helping my customer control their energy costs. But I can tell my children “When your dad goes to work, he’s starting to make the water and air cleaner, so your kids can had the same life you have.” I haven’t lost sight of that.