When I moved to California to co-found Sunrun after fighting in Afghanistan, the solar industry was a small band of true believers -- no more than 5,000 strong.
My first political act was to join Vote Solar, which sent me a now-beloved t-shirt. My first lobbying meeting was at the California PUC, where I asked Polly Shaw to make the residential PPA eligible for the residential California Solar Initiative rebate, not the commercial one.
A decade later, that small band has expanded to 270,000 Americans, who together have helped establish solar as the biggest source of new energy in the U.S.
Since 2013, I have had the honor of leading the SEIA board of directors as its chairman and vice chairman, working with many members from all sectors of our industry to win critical policy fights and shape the future for solar and the technologies that complement it. Thank you to the board, the SEIA team and member companies for working together to make solar stronger.
Next month marks the planned completion of my time as chairman, following a successful CEO selection and on-boarding of Abby Hopper, who is an outstanding leader for the SEIA team. Tom Starrs, vice chairman, dear friend and partner in leading the board, will become the acting chairman.
Based on what I have learned over the last four years, please accept these recommendations for the future.
1. Create value
We can all celebrate that solar is the largest source of new power generation in the U.S. and costs less than fossil fuels in many parts of the country. Consequently, solar installation growth continues across the industry, and more Americans are working in solar today than in nearly every other segment of the power industry. Solar is no longer an “alternative” energy source.
The negative byproducts of fast growth and improving competitiveness are shrinking margins and over-leverage for some solar companies, resulting in headline bankruptcies, corporate restructuring and significant mergers.
Historically, the solar industry was focused on driving down costs to achieve parity with (and then advantage over) fossil fuel competitors. By leveraging technology-driven cost structure improvements, we have largely accomplished that mission. Now we need to create better equities for investors to maximize this advantage.
Efficiency improvements and capacity expansion will increase solar’s cost structure advantage, driving up volume and expanding markets. But it will also shrink absolute margins, intensifying the pressure to alter companies’ strategies and consolidate businesses where scale counts, especially in manufacturing, logistics and finance.
The sooner solar companies adapt and change, the more economic value they will create. In our business, there are two greens. The first is making money. The second is improving the environment. The more money we make, the more we improve the environment, which will benefit all of us.
2. Support competition
As long as we advocate for regulatory structures to support our businesses, we legitimize closed and semi-open markets dominated by incumbents. Once we can transition from regulated structures to competitively determined ones, our companies will move from policy fights where the battle space is designed and dominated by adversaries to competitive, open markets where the best solution wins.
A future where are all markets are more like ERCOT may be even better for the U.S. solar industry than if all markets are like CAISO. An open electricity market is the road that allows solar to capitalize on its technology-driven, low-cost advantage and collaborate with essential enabling technologies.
3. Stand united
Intermingled economic interests and expanding customer segments create more shared policy objectives among all solar companies. Working together, we are advancing the entire solar industry and enhancing our companies’ current interests as well as future opportunities.
We all need to support policies that create future opportunities for the entire industry. We are all riding the “solar coaster.” The business model you have today is unlikely to be the business model you pursue tomorrow. The solar business model changes happening now are only the most recent twists in our industry’s evolution -- an evolution that happens more rapidly than in other industries because we are growing at a faster clip.
Supporting policies that create new business opportunities across the industry "buys" real options for our individual companies. Buying options is an effective way to manage the volatility of the solar coaster and to maximize long-term equity value.
If we were a mature industry (i.e., one with low growth and high penetration rates), fragmentation would make it difficult to have one national solar industry association because factions would fight over carving up a fixed pie (i.e., win-lose or lose-lose). However, we are the opposite. Today and for a long time in the foreseeable future, solar will be a growth industry with low penetration rates and huge market potential. That means solar companies can, should, and will pursue integrative (i.e., win-win) policies that support our entire industry.
Independent of business model, technology type, position in the value chain, or customers served, the solar industry and our individual companies will grow faster and more profitably when we work together.
4. Build alliances
While the solar industry continues to expand its investment in policy advocacy, including a 50 percent increase in SEIA revenues since 2013, our adversaries can still outspend us more than 10:1. In the future, the solar industry can invert this ratio by building and leveraging external alliances. Alliances are worth more than just dollars because they multiply legitimacy and political strength. Inter-industry, interest group, and grassroots alliances are essential to solar’s future political power.
The solar century
Just as coal dominated the 19th century and oil dominated the 20th, the fundamentals convince me that this is the solar century. No single country’s policies can stop solar from becoming the dominant source of energy in this century. If a national market disappeared today, then it would drive down the global cost of solar, increasing demand elsewhere. The sun will rise -- we just need to make sure it is shining on the American solar industry.