SunEdison has gone through many phases as a company.
First, it was a pure-play solar developer that pioneered the power-purchase agreement. Then, it became vertically integrated after getting acquired by manufacturer MEMC. Now, with the development arm becoming the most important part of the company, SunEdison is expanding beyond PV and searching for other types of projects to feed its new YieldCo.
At our upcoming Solar Summit in Phoenix, GTM Research's Senior VP Shayle Kann will sit down with Chatila to discuss where the company sees the greatest growth opportunities. Judging from the company's recent acquisitions and expansion, it's everywhere. (Shameless self promotion: make sure to sign up for the event, featuring the biggest names in solar, before rates go up.)
I recently had a chance to chat with Chatila. Here's what he had to say about where the company is headed.
GTM: SunEdison has seen a torrent of new activity, most notably the acquisition of First Wind, to boost your project development pipeline and increase your presence internationally. What are the benefits to that acquisition as you seek to feed your TerraForm YieldCo with new projects?
Ahmad Chatila: It’s significant. For a YieldCo to succeed, you need two things. Number one, you need to identify the given risk profile for projects so that investors understand them and price them. And number two, you need to have growth.
The first one tells people the value of a given project, risk adjusted. And the growth then allows the value to be higher. It's a big reason we acquired First Wind. It gives us a new avenue for growth that will ensure that our vehicles, the one in the OECD countries and the one for emerging markets, can be successful. And that’s how we thought about it.
GTM: SunEdison has hinted that it wants to acquire other types of renewable energy projects. What kind of projects are attractive to you?
AC: Not all kinds of projects. I like hydro because it looks kind of like astoragedevice, and the life of the project is very long if structured in the right way. Also biomass, but it's a lot harder because the fuel risk is severe sometimes. These are the two that we like. Aside from that, there’s not much there.
GTM: And in what markets do those projects make most sense?
AC: The markets we like have a couple of characteristics. One is that GDP is large and the requirement for installed capacity is large. And number two, the GDP is growing. So the U.S. is a great country to be in. Also, India, China, Brazil and the U.K. So that’s where we’re focused. We’re very selective. A few years ago, we went through methodically and decided which ones we want to go into and which ones we don’t want to go into -- and we’ve been disciplined on that.
GTM: A lot of solar companies have been talking about experimenting with storage, either on its own or paired with PV. At this point, the hype seems much greater than the activity itself. SunEdison has quietly built up a team in storage -- what potential for applications do you see in that market?
AC: We’re soon going to announce various relationships we’ve had. We have invested in a couple of companies, and acquired another small one. Some of the small investments are technology-based. But the one we acquired is business model-based.
We are looking at certain markets in the U.S., like California and PJM, and trying to experiment with storage systems. We're also looking at Germany. By 2019, if you don’t have storage, solar will stop making sense based on the trajectory of the feed-in tariff for residential in Germany.
We don't want to become a battery company. That’s not our cup of tea. We think there are enough manufacturing companies that would do a great job and bring enough innovation where batteries will be low-cost enough for us to use.
Energy storage is very hard for just power, and it’s going to take a while for it to truly make sense without subsidies. But it will make sense one day. Storage for cars is a no-brainer. Every year, it’s going to be more and more attractive. It’s our view, based on what we’ve seen from leading companies and the numbers they have shown us, that we see dramatic cost reductions in batteries still coming.
GTM: You recently announced an expansion plan to finance micropower solutions for around 20 million people in developing countries. What's the business case there?
AC: Our effort has a dual purpose. One, we do charity work. But we’ve also learned that without making money, the business model doesn’t scale. We have found in many places that whenever there’s a charitable power plant, after a year or so, it’s simply not operating because no one is maintaining it. So our objective in most of these activities is to make money, and for others to make money.
So in the case of our joint venture with Omnigrid Micropower Company in India, it’s a business model design that allows us to ramp the business, make money, and at the same time, take care of underprivileged societies.
I’ve been thinking about this since 2010. If I didn’t think this was an angle where you could ramp the business and create a utility for underprivileged societies, I wouldn’t have announced it. So what you’re going to see from us are more announcements in this area that make sense from a financial perspective and for our shareholders.
I'm very confident in the business case to serve 20 million people. This year, we’ll probably take care of another million people, believe it or not. So it doesn’t take much to make the numbers very staggering. Once we show the business model works, I think you’ll see a lot of people jumping in.
GTM: You put another $5 million behind a partnership with GRID Alternatives to promote more diversity in the solar workforce. What was the impetus behind that program?
AC: We started an effort because we found out a number of things. One, our customer base has a lot of women, and we didn't have women on our executive team or in our top 100 leaders. So we worked on it very hard. In two years, we’ve taken the number of women [in our top 100 leaders] up from 3 percent or 4 percent up to 20 percent. We didn’t do it by forcing people to hire women. We just did it by telling them to interview women when they’re looking for people, instead of only talking to their [male] friends.
Number two, we found the decision-making process improves at a company when there’s more diversity. Men by default are overconfident, and women [tend to be] more analytical and careful not to overpromise. That creates a really beautiful balance in an organization if you have more women.
And finally, this is the right thing to do -- full stop. So because of that, it is something we have worked on very aggressively. And you’re going to see more changes in our company in that regard.
GRID alternatives was one way to inspire women in our company and in the overall industry -- and put some peer pressure on other companies to really change it.
When Solyndra happened, it didn’t impact Solyndra only. It harmed our company. So we don’t want our industry to have a reputation that it’s only men in leadership. From there, we want to extend it to minorities and those who may be underprivileged.
Join the GTM team at the 8th Annual Solar Summit on April 14-16, 2015 in Phoenix, AZ. Recognized as the U.S. solar industry’s premier annual gathering, the three-day event will feature groundbreaking content and unsurpassed networking opportunities. Visit the Solar Summit website to learn more.