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Insider's Guide to Energy
The Energy Industry is uniquely evolving as traders are under increasing pressure to manage costs, cash, limits, and risks. The Insider’s Guide to Energy Podcast addresses current and emerging challenges business executives face daily through stories shared from peers and industry experts while covering topics such as innovation, disruptive technologies, and emerging trends.
Insider's Guide to Energy
67 - Is the success of solar power keeping it from innovating?
This week Chris and Johan are joined by Harald Överholm, the CEO of Alight. Alight provides solar on-site and off-site PPA projects for corporations to accelerate the transition to solar energy. The three discuss about the main drivers of the solar market and its opportunities to save the money while hedging power against market volatility. Listen in to find out more about the business model transformation of PAA over time, current challenges and risks the solar industry faces and the future prospect of solar technology.
Alight’ Homepage:
https://www.alight-energy.com
Broadcasting from the commodity capital of the world, Zurich, Switzerland, this is ‘Insiders Guide to Energy’.
This edition to Insiders Guide to Energy is brought to you by Fidectus. Go to www.fidectus.com for more information.
| Timestamp | Speaker | Transcript
| 00:00.00 | chrissass | Welcome to insider's guide to energy I'm your host chris sas and with me as always is Johan Oberg. Johan, welcome back to the program.
| 00:07.90 | Johan | Thanks Chris great to be on again and I have to then admit that I didn't mention the weather last week as you said we're into some really rough weather in April and all I want is sun. Maybe a good topic for the. But the actual podcast as well.
| 00:24.64 | chrissass | Well I'd be happy to have some sun I'd be happy to have some solar energy. Whatever you want to talk about you know, interestingly enough for me as I was preparing for. We have an interview coming up with an author and she'd recommended some other books I've been reading this. This book. That's kind of strange. It's it's it's the moral case for fossil fuels is is the book I'm reading and it you knows it's making this kind of argument for for fuels. It's it's been hard to read through because i. Um, not buying all ah all of what it's saying so it's kind of interesting. It's got some interesting points and it's got some some stretches there so that's that's been my extracurricular activity for the podcast this week is reading this book and and making sure I get through it. But. What? what? I do want to talk about is not fossil fuels I want to talk about solar and renewable and on all the interesting things that we normally talk about on the podcast. Um, and and I'm looking forward to this week's show to figure out. You know how do we match projects up with people that have capital and all kinds of interesting things that you can do. That that interests me so I don't know what you're thinking, but but I'm hoping we cover some of that today and.
| 01:33.70 | Johan | No I agree now you know we touched off obviously on on the number of shows we've done on on on different kinds of renewables. Solar's always been a little bit on the agenda maybe not deep dived as much in in too many episodes around this but what I really look forward to as well is to see how do you. Integrate the ecosystem the business ecosystem into this kind of equation of moving to renewable. Not just the energy industry itself but actually the corporates as well. I hope to learn a little bit more about this. We had the ppa on before but maybe not always directed to solar so really looking forward to this. But. As you always says Chris maybe we should bring on the experts and see where where we go so welcome to the show hot I live home.
| 02:18.72 | Harald | Thank you so much guys a pleasure to be with you.
| 02:24.43 | Johan | We're always saying that we have a great advantage over our listeners. We have a great advantages because we've been able to do some research. We've spoken to you before in the pre-show. But for our listeners would you give them a little bit of introduction who are you and. The company you are working with.
| 02:40.36 | Harald | Yeah, sure. So I'm I'm Harold o'rom I'm the Ceo and founder of a light. We're a swedish solar power company. We sell solar power to to commercial and industrial customers across Europe and and to do that we build new assets and that's kind of the passion of the company I mean the whole. Point here is to drive the energy transition and it means just finding ways to build out assets and our way of doing that is to sell the power to commercial customers. Um myself I've I've spent my whole career which is almost twenty years now in renewables. Um, right out of engineering school in Stockholm I was actually. Ah, renewable energy engineer 1 of the first classes to to get that which was great like I um, just felt like a calling ever since something really useful to dedicate yourself to and when I got out of school. And I started investing I was in ah at a venture capital investing firm for for renewable energy I didn't know anything about solar because we didn't have that much solar in the nordics. Ah for all the obvious reasons you might you might argue. Um, but I really remember like in 2007 I was sent to um. Ah, my my employer at the time said why don't you go and check out the solar conference like let's learn about solar and I went to something called eu pvsec which is still ah, still going strong like a yearly conference on solar in Milan and um I remember being just like astonished at I got there I didn't know what to expect but it was just like. Packed with people from all over the world and obviously solar was just working like I mean it was just it wasn't ah, kind of an early stage technology. It was just something big and massive that was happening on an industrial scale and it was so logical like I remember those from then like learning those key stats. That I'm sure you heard is 100 times but it's like you know the the amount of energy that hits the earth from the sun is like 10000 times the the power we need to to to power all our energy needs and we'd need something like 1 % of the saharra to do that and that kind of stuff just it was just mind blowing and then I felt. You know I want to be a part of this this army this solar army and ever since I guess I've been so I went from being a venture capital emmester in renewables to um, getting a chance to do a ph d at cambridge that was fantastic wasn't because I wanted to be an academic. It was just because. There was a ph d position opening up to look at the global solar ecosystem and and figure out something which was my particular passion which was like how can solar be commercially viable like something that doesn't waste taxpayers money because that at the time was what people were saying like there was the big gripe but solar. But.
| 05:25.32 | Harald | But how can it really be something that stands on its own legs and then after that ph d based on all the fantastic people I met and and inspiring stuff I learned that's when we set up the lights that's eight years ago um and it was way too early so people thought we were crazy in the early days. But. But then I suppose the marketers came around to to validate what we do? Um, yeah.
| 05:48.29 | Johan | So quite interesting I bring us back a little bit to as an engineer you go into engineering school and and you look at renewables and especially solar coming out of ah Stockholm and being swedish myself I know that probably solar is not the first thing you would. Kind of look for what what brought you into this to start off with because it was an early thing.
| 06:10.78 | Harald | Yeah, know it was super early and um on a European level solar was happening at that time too. But it was just all driven by government subsidies like government defeat in Tariffs you know, um. And and I mean again people were always complaining saying that like look solar. It's just like ah it's a pyramid scheme to scam the government like it doesn't work and you know what's what's this all about so but but at the same time I mean climate change was really even back then and and and just the energy transition was was clear. It was going to happen. It had to happen even back Then. Um, so it was this massive tension between something that was really small, kind of too early too costly. But at the same time had this wonderful like logical almost like theoretically pure ability to fix a really big Problem. So I Guess as an engineer you know that's really attractive but like what's I mean. Case as an engineer Sometimes you're really attracted by just technical problems. But I think on on a broader scale As an engineer you kind of attracted by something that seems very logical but it's just not.. There's a bottleneck that has to be fixed and you you got to figure out what it is and and you get to work on it. Um. And that's been my sense with solar ever since that it's like the endgame is so Beautiful. It's so clear like we could really power this globe with solar and a bit of wind and and batteries etc. But but really solar could be bulk of it. But but what's holding us back. You know what's the Bottleneck. It's a system question. It's a system engineering question and that system entails. The commercial bits too and the financial bits etc. But you got to get the whole system right in order to drive deployment I Think that's you know it's It's enough to keep you keep you busy. Keep you passionate for a long time.
| 07:54.58 | chrissass | So you said you started the company seven years ago or some some bit early I think was your comment. You said that folks were maybe smiling at you and wondering about that. What what are some of the dramatic changes you've seen that take place in that 7 years
| 08:11.10 | Harald | You get to started with cost because even if it's a bit dull to start there like it's so important I mean solar is coming down in costs and we have our own version of moose law. You know the classic semiconductor law we call it Swanson's law in solar but like ultimately it's solar is silicon so it's kind of similar dynamics and so I think Swanson's law I might be misrepresenting it. But I think it's like solar will come down 20% in in cost for every doubling of of output volume and and it's been really true. So solar has been kept coming down while the alternative cost of energy like the cost of energy from the grid has been going up and getting volatile. So solar just hit like I think two or three years ago in Europe it just hit this point where it had and we call it grid parity or socket parity I mean just it was just on par with other power production at a broad level. You know across many geographies across many situations. That's of course like fundamental I mean it's really fundamental shift in the market. It drives so many things. Um it drives. Yeah, it drives everything because even if even if the governments are now still supporting it various ways. It's actually not costing the governments anything. It's just they can support it by enabling it. But they actually make money of it so and then it's enabling a commercial market the one that we're in etc and but but look in addition to cost I mean of course we um, it's about the sustainability drive of society I mean that's a given like society's gone through and I think the parents agreement was probably the. Watershed moment. So after the Paris agreement. Um the the kind of the sharpness of corporate sustainability goals like it's not just for fun. It's just something people really care about. It's a competitive advantage between companies in the same industry, magical etc. So now I mean let's let's let's not forget the. Third reason which is pretty pretty yeah ah pretty much something that's happening right now in Europe. It's just the energy security bit. Um, that's been around forever in the us. It's always been a clear part of the us energy transition. But in Europe I think it's something that's obviously now I mean just as a few months is is critical. So you have these three things. It's the cost. Um the parity bit. The it's the the sustainability bit and it's energy security bit and they've all just gone through this this really clear transition over the last decade.
| 10:34.33 | chrissass | Um, and then who who are your customers now as opposed to your early customers who who do you? who's buying solar from you.
| 10:43.41 | Harald | That's pretty similar like so we've always just been working with big companies I think it's more of the way they're buying that's different like the early the early things we sold were kind of pilot projects. Someone was really enthusiastic at the company's side but you know so they would do something but would do something really small. Um, and and it wasn't a significant you know bit of their strategy at all and now it it might be very much the same companies. We. We try to focus on kind of your average fortune 500 company with um its investment grade. It's got a decent size power need. Active ah across multiple markets like you know like Toyota is a customer to us. You know some of the largest banks or customers does um which is that now because this has become integral part of their strategy It's a part of their cost strategy. It's a part of their sustainability strategy. Suddenly everything is so much bigger. And the way they're buying it now is just different like they're buying it with a focus and and an urgency and a management and tension to it. Um, and they kind of they are I feel challenging us to come up with as large impact as large projects as possible. Um, that's really really different. Um. I mean we did something I don't know if the kilowatt makes sense to you here, but with it the smallest project we did early on was Twenty Kilowatts I mean it's like almost something you could have in your summer home. It's like almost nothing but we still did it like and with you know with a commercial ppa and power purchase agreement and and there was a commercial deal like on the gross profit. Level it was still profitable but but it was ridiculously small.
| 12:17.37 | chrissass | And so has storage evolved to a point that you've noticed changes in storage as well. So the intermittent problem is that started to be solved at least at the corporate level.
| 12:28.77 | Harald | Yeah, storage is obviously going to be very important I think we all agree on that if you look at the way. So the answer is yes on a global level but probably no right now on a european level and what I mean by that is that if you look at companies like us selling solar to. To commercial customers in the us for example, storage is even now the attachment rate like the the rate of how much storage is attached to solar is very high. It's like 80% to something so almost everyone is buying solar is buying it with storage um whereas in europe that's absolutely not true and and the difference. Ah, is um, the main difference is that just people come up with solid ways of of creating revenue for storage in the us that we we haven't quite come around to yet in Europe that's going to happen pretty soon. The second reason is actually that in in many places in the us like Texas and California there's a serious um. Interest from companies to protect energy like they're seriously worried about blackouts so it's a whole different value level like they're actually buying solar and storage or or buying the the service of solar and storage because they want to protect themselves against blackouts and I don't feel that we really have that interest in Europe yet. It's more of like. It's it's sometimes Iss a theoretical interest from customers. But it's not really something they want to pay for because they haven't seen black ads and who knows if that's actually changing now I mean I think so I I think so very much so and and I mean I think.
| 13:51.23 | chrissass | Um, is the current here political crisis changing that in real time is is the russian Ukraine war getting that on people's radar now.
| 14:05.20 | Harald | Yeah, just a sense that you know can anything be trusted in this world like who knows what's going to happen to gas. What's going to happen to power prices, cyber attacks, whatever like this this absolutely I mean I think we've been expecting that to come to Europe for quite some time and I think we've certainly sensed.
| 14:15.56 | Johan | Again.
| 14:24.25 | Harald | This last month that it's been much more prevalent in the conversations we have.
| 14:28.17 | Johan | So if we go back a little bit then I like this journey where where you said it's a small installation to start off with and and maybe that was dealing with 1 or maybe 2 people at the corporate site ah to now where this. Installation means that you have number I would assume number of stakeholders involved. You said cybersecur see is down into production to make sure that you have security of supply you might have facilities because you're not putting up a few solar panels you're putting up quite a quite a lot of them and suddenly there's an investment part of a ppa.
| 14:57.34 | chrissass | So.
| 15:04.90 | Johan | So who who's actually how's your counterparts in the company has that changed a lot as well.
| 15:08.90 | Harald | Yeah, absolutely so what really has changed is that we typically have a clear counterparty today who's kind of dedicated to this business whereas in the early days I think as any early, um, any early business you trying to sell to other businesses. We had to sort of create the customer. We had to sort of go to. To to the customer company and and kind of tell them that tell them who is going to be responsible and and and just come up with something but now increasingly there is a project manager and in In fact, we actually. Internally we we probably wouldn't work with the customer today unless there was a clear designated project manager who had quite some standing in the organization because it's just such a clear sign that they mean business. Um, and that project manager might be. You know, coming out of the procurement side or coming out of general operations or or facility management. That's a little bit different but it's just someone who's got a clear mandate to drive um procurement of renewable power from new sources really important. That's a really important distinction. So companies have for some time been buying like. Certified green energy but it just came out of some hydroplan in Norway. That's been around for 100 years so like you know, not to not to pick in the norwegians but nothing got built because they they bought that power and now so this is really critical like it's it's all about buying power from something that gets built to generate the power and and a lot of companies are and. Just increasingly appointing someone to do that making sure that we'll hit a certain like threshold like 50% of their power within 2 years or 70% of the power before 2030 etc so that what we would be looking for.
| 16:41.67 | Johan | So what? What would you say then in terms of these obviously a project manager that is certified is probably the wrong word to use but that has the mandate to do this which is critical in in any kind of larger implementation if you do, but what would you say is the main cup. The. Main drivers you know I go back in my career you know, ah 20 years something ago and we start looking at reducing travel cost and it was usually so some kind of a C O two or sustainability manager that didn't really have too much power. That's obviously changed now with sustainability manager and I have a. Much much much more crucial position and in the companies but we also had the finance. We also have that there's a number of things that kind of relates to to what you do so. What would you say? financialist course one of them. What would what are the the main drivers and how do you see that shifting.
| 17:36.98 | Harald | Yeah, definitely the big shift is that it's much more about money and and because now you can have some really serious savings day one. You can save money over time in a way that wasn't feasible before and when it's about money I mean you get like the big broad.
| 17:37.10 | Johan | If E is shifting.
| 17:56.52 | Harald | Universe of companies. Ah, it's just's it's just written into the the fundamental dna of every company is to save money and if you can't do it and you can save a lot of money you get. Ah you have to do that. So and then you get the attention of the cfo etc and when you try to do the opposite which we sometimes did early on you tried to sell something that's actually going to lose the money. But you try to tell them that they do it for good causes. you're fighting against like that that I mean again you're fighting against the Dna of a company. It's very difficult so today every company is doing it because they're going to save money and that's a wonderful driving force. It's just a wonderful ah lubricant to the machinery. But then. Almost every company I think that part of the passion and the energy for doing it comes out of them knowing that this is the right thing to do so just on the on the personal level and on the company level. They just feel this is fantastic if they would just be saving money but it was completely neutral. Sustainability wise. Maybe they wouldn't like.
| 18:41.46 | Johan | Are.
| 18:52.97 | Harald | Maybe they just wouldn't get around to doing it. Um, but then there's a clear distinction in terms of sustainability I think between companies that the broad you know there's a broad group of companies. They like it. But there's a certain set of companies in certain industries that just truly compete about sustainability. At this point. So for example, you know the beverage industry in Europe. Has been going very very focused into our our segment like just buying solar ppas ons site offsite like reconnected by Deme and why beverages I mean just there's no particular reason why you would do that as a beverage industry the ah the only. Thing being that once once start doing it and communicating it. They all kind of have to do it because they can't afford waiting it out and seeing if that competitor actually wins from it. They just have to it's Fomo like just got to go for it. Um, that's that's obviously great for the planet and you know it's and it's probably the right thing to do for these companies. So but it just that's.
| 19:42.50 | Johan | Um.
| 19:47.46 | Harald | That's a separate degree of urgency sometimes that you feel.
| 19:49.92 | chrissass | So are they using this power on site are they trying to sell it back into the grid. What what's happening with your projects so you your your large court fortune one hundred Fortune five hundred I bought solar from you. What am I doing with it.
| 20:02.80 | Harald | So you would be using it like for it to for for your operations and and we do either we put it behind the meteter. So that's like on your premises and then you're just going to. That's just going to be like an like theoretically it's like an energy efficiency measure so you just buy less energy from the grid. Just buy less power because we're generating power behind your meter. So but from the from the point of view of the grid. It's just like you've stopped using power. Um, so it's really simple, um, and and then maybe I mean if there's a really sunny day in the middle of the summer and it's a Sunday and you're not working. Maybe you're going to generate too much power. So it's going to go back into the grid that you're going to get. Like paid for it. But that's not the use case at all I mean that's just like ah a residual um, but then we also do the grid connected bit where we build a big site. You know a big field somewhere. Um and then it's ah it's a financial contract with the power buyer. It's a contract for difference. Um, it just It's just a hedge for them. It's just a way for them to lock in the cost and but again it's it's a way for them to hedge the power that there's that they're going to use. So so um, lock in the cost that they already know that they're going to be having.
| 21:13.10 | chrissass | What's life expectancy of a project. So if you put you know one of these bottling plants or a beverage company and they they make the investment today. What what? a kind of plan are they looking at looking at a ten year return are they looking at a 5 year what how long are they expecting this this infrastructure.
| 21:26.83 | Harald | Yeah, and so I mean and the way we do it. We always do it kind of as a service so it's always us doing the investment and it's actually always us who own the so it's build loan and operate and we can we own the project but but basically so a lot of times we'll have a power contract that actually runs out before.
| 21:28.46 | chrissass | Be in place.
| 21:45.37 | Harald | Long before we think that the technical lifespan is over. Um I mean solar is kind of it's funny today because you don't know how long it's going to last I mean people say you have projects that've been going for 40 years and they still produce power. Um, and if you just if you just operate them in in a proper way. They'll go on. Producing power. There's no inherent reason why a solar panel would stop producing power the system as such. It's going to have a certain you know, certain things certain parts that need to be replaced or they corrode or whatever. But but if you do that? Well and and you kind of do. Pre-emptive maintenance. You can keep the system alive like literally forever which is kind of yeah, it's just kind of and fantastic aspect of it I really like that from from a sustainability angle. Um, then I think when you put it on a rooftop. It's it's more the rooftop and the building that's going to set the time sp limit of it like you you probably need to do something to the rooftop and yeah, so you have to. Move the system and that who knows exactly how how you'll recoup that afterwards.
| 22:45.97 | chrissass | But the business model you just described is is you actually own the asset and you just sell them power then so they're just giving you permission or access to the site and they give you the ability to install the infrastructure but you actually own that asset and then they still have a power bill each month it's just from solar pricing as opposed to grid pricing.
| 23:05.00 | Harald | Yeah, exactly and and the underlying thinking is of course that this is the least amount of behavioral change that you can create for a customer so they're used to buying power by the Kilowatt hour we help them to buy power by the Kilowatt hour we just happen to create a new asset to do that. But for them, you know they they shouldn't have to switch their mindset. They shouldn't have to make an upfront investment in 20 years of energy. They shouldn't have to get the known m team for solar in-house. They should just go on doing whatever they they do like beverages for example, um, deploy their capital and their focus into that. But. But switch into solar with a minimum of hassle. So um, and I would I would say that that's the mainstream demand for solar then you'll always find like a few. Ah, really, you know, really passionate customers who actually have someone who would love to own a solar system and that's great. You know they'll do that but they won't work with us. So.
| 24:02.95 | Johan | So when you say in switching. Obviously there is a switch easy switch which we like is that drives transformation that drives adoption if it's easy and you don't have to change in the systems and and all the rest but ah in terms of contract Time. So you you get? you get a sales cycle of course with your customers and then you get an approval by the project manager and then you got deployment. So How long how long is kind of the sales cycle around this give or take but more importantly, what is this? How how long does it take to put everything up and to switch.
| 24:32.38 | Harald | Yeah, so yeah, let's just step through the Timeline. So probably the sales cycle is pretty quick these days so that's a big shift in the market. It used to be that we had to teach them solar power climate change blah blah for like 2 years but but cutting out the teaching down and just like you're meeting customers who actually know what they want and it's more about proving that we're the right supplier. The sales cycle can be three month you know a quarter like two quarters um then um, then you sell it or like you sign off on on the key terms. Then it's up to us to actually. Engineer and build the system. Um and get it up on the rooftop. Let's add another 1 or two quarters for that um get the panels into place get the suppliers. You know our contractors into place. Um. The actual building times really quick. You know once once the people are on the site and and and and you have the panels like it's it's a week or 2 to actually put it up on the rooftop. Um, and then you have the contract time which is really long like we just said you know we're building a system that's going to last forever. Maybe um, contract times are north of ten years always um that's what the customer wants and that's what we want so customers typically want it to be roughly 10 years and we want it to be roughly 15 years and then like that's the tension. but um but yeah why not I mean we only sell to companies that know that they're going to be using power for for forever like power along with. Rent and taxes like a given. It's going to be as long as you run as a company you're going to be paying for power so and they want to lock it in and we're locking it in for the long term. Um and the longer we look it in the easier it is for us to to finance it and and to have revenue certainty.
| 26:01.50 | Johan | Um, if.
| 26:14.60 | chrissass | So you locking in like a cost plus model. So do they like you just guaranteeing a certain margin that you're getting are you locking into prices for that 10 to 15 year window.
| 26:26.98 | Harald | We're we're locking in the prices for them. So I mean the the whole negotiation system. But what are they going to pay us per Kilowatt hour across this time period and is there going to be some kind of escalation or like a cpi adjustment clause or is it really just of like a fixed price I mean that you can have some debates about that. But. But ultimately they want just price certainty they pay per Kilowatt hour after the Kilowatt hour is produced they just want to know what the price is that's it. Um, and and then how do we get to that price I mean through the magic of market supplier meeting demand. Um. Sometimes we have to go cost plus sometimes we can have ah a more decent margin. Sometimes we do stuff at like almost zero because we want to win the deal and and you know like get into the next deal. Um that that barriers but but the market is at a point where I mean the cost of solar versus the alternative cost for the customer is at it. A nice decent point where there's a decent delta that means that there can be a good deal for the customer savings day 1 big savings over the lifetime while we get a decent return in capital and and and and you know a gross profit to the team. So um, that. And that that mean that's the magic and you asked, but what's the shift in the market. That's the magic like we have that delta to play with. We can't create margins.
| 27:41.62 | Johan | So so if if we look at the finance show model of it. Obviously you mentioned in the beginning that the the decrease in in in the the production of solar especially maybe on the hardware etc. Is it. There is is there a challenge here because if you look at it. You look at the ev model. For example. People may be waiting a little bit. Well next model would be better next model would be cheaper because prices are going down so I might wait a little bit next year two years time when prices have gone down another 40%. It will be even cheaper for us to buy it is this something you come across or or is this because customers are well aware today.
| 28:14.88 | Harald | Um, I think that yeah I think the dynamic is different because we because this is a pure as a service model. So if they if the pricing ends up right? They're just locking in a saving from day Once it's never a cost.
| 28:29.81 | Johan | Um.
| 28:30.30 | Harald | Like it's literally never cost like from month one they're just making money and I think when you're in that zone with a company and now I'm being like I'm I'm generalizing broadly here. But I think once you hit something like a 10% immediate cost reduction of a significant piece of opes companies just go for it.
| 28:44.20 | Johan | That.
| 28:48.18 | Harald | Like they actually they're actually almost skeptical if you're offering more than 10 percent saving day one because it's like sounds too good to be true. So I think no but I think it it just falls in that that category if you can if you you're kind of selling them money. Um. You're selling the money they won and like you know why would they want to wait like it's just let's just go for it. Plus you're locking something in which is and and what we always do and what I think the customers do increasingly is that they they try to have an opinion about power prices in the long run. They just buy like some power forecast 10 years into the future. That they can believe in then they look at all the aggregated savings and then they do the net present value day. One of those savings and they look at that number and it ends up being like really big. You know if it's like wow it's 10000000 years um that's such a significant number. And if they come up with it themselves. It's something they really believe in so they go to the to the go the go to management and and they just say well we can sign this contract today we can lock in 10000000 eus of savings. Um, what you know? what's holding it back and nothing is holding them back so they sign the contract.
| 29:48.86 | chrissass | So so you you were in the the venture side or an investor before um I think one of the trends that unrelated to energy that I think I've heard is that companies aren't having the longevity that they used to have so. Companies being around 10 years you know we used to always take that for granted, you're doing 1015 year contracts what's the risk tolerance that that some large percentage of them that the world isn't changing and that those companies are still going to be relevant in ten or fifteen years is that part of the the calculus and is that even a concern.
| 30:21.21 | Harald | That that is a could be a concern for our investors and for ourselves. Obviously so um, we tend to look at we have to look at the overall we call it bankability of of the projects we do and one critical aspect of bankability is the customer long like that. Longevity but like the the general setup of the customer the credit worthiness of the customer. Um, but it's also other things. It's like the site I mean you have a great site with ah with grid access and. You could argue that even if the customer disappears you have a route to market because you can sell it to the grid you can sell it to whoever is the next tenant on that building etc. So I mean its not. It doesn't hinge solely upon the one off taker it shouldn't because then you've not done your homework you should create like multiple routes to market but probably the most lucrative one is going to be the initial customer. Um, so yeah, we have to care about them. We have to pick we we tend to work with large customers. Um I use toyota as an example, but you know we have many others who who like Kingspan for example, is another customer of ours. The global construction material company. Active across the globes been around for 100 years you know we we have all resourceses to believe that they're going to be around 15 years from now. Um, we look at the sites that we deliver to so we deliver to a kings band factory in Sweden where we have a rooftop a one point five Megawatt rooftop um we came in on that side. Just as they were building it and and we knew that they were building it with a 20 year horizon so that's great that feels good too. Um, but but yeah I mean so it's not like ah you can't do it for every site and every customer everywhere. That's that's the sad truth um you you have to. At least this point in the market you have to refrain refrain yourself to to looking at those good situations that you can easily analyze.
| 32:09.24 | chrissass | Okay, so so yeah I mean I just think there's a trend there you know there used to be a lot of companies we thought would be around in our our pension funds forever that aren't so I just think the world's evolved a little bit but the second question that that I have is recently I've been hearing about supply chain issues. And in renewables and having trouble. So how is that impacting your business are you having supply chain issues in the current environment.
| 32:30.71 | Harald | Yeah, we've I mean no one no one could have could have missed that that this has been a major issue for for I mean for a lot of industries over the last two years um and it it's it kind of covid that sort of got things out of balance. Um. Specifically for solar. It's just been two things. It's been shipping of course which is pretty general so affects a lot lot of people but it really affects us because ah, most panels come out of Asia so they have to go the the Shanghai Rotterdam route um and shipping was was costly and it was unpredictable. That's now. Come back down again. But then maybe it's going going in the wrong direction again because of of Ukraine etc that it's it's anybody's guess um, but on the actual solar specific supply chain. The 1 issue is. Polycilicon production and it's something that's specific to us so we have pv grade polocilicon. It's it's a poillicon material. That's only produced to to create solar panels. Um, and it's really the main. It's the main input into a panel. The rest is quite. It just doesn't really matter like we have some really really thin like silver. Threads in the pals. But it's like you know, even if Silver Triples it doesn't really manage us but poliillicon does so and it was it with covid. There was ah a period of polycilicon disruptions and that led to like polyillicon hoarding across the value chain and and and the prices went very much north. They now are coming back down because people are building out po silione production people have stopped hoarding some of old some old production come online but there's risk in that I mean I think we all would welcome more of ah a european value chain. Um as the european commission has has. Has communicated a lot recently is that we're really trying to really trying to facilitate for module manufacturing and Polo Silicon manufacturing to come back to Europe um, that would be great. Just. Just for the sake of supply security and like having some diversification I think 80% of all polyillicon pv grade palelasillicon is coming out of China at this point so like 80% I mean it's pretty. It doesn't matter what your outlook is for China or or stability. It's just still like an unnecessary concentration of a value chain.
| 34:46.92 | chrissass | And has it delayed projects then in the last two years if you had projects you had to kick off later that pushed to 2023 or anything because of supply issues yet.
| 34:57.79 | Harald | We've been lucky so we have actually not had to delay projects but I would say we've spent like 5 times as much management time on getting the modules to the site in order not to get delayed so in 1 way or the other I mean it probably has held us back because it's just been a distraction but we've been lucky to um.
| 35:05.40 | chrissass | Logistics.
| 35:14.85 | Harald | Being able to. It's still quite a broad value chain like lots of players out there and you can negotiate with everyone across this value chain and if you if you dedicate yourself to it you you'll get. You'll find a way to get stuff into the right place at the right time but it's it's been much more costly than it used to be.
| 35:29.85 | Johan | Yeah, and I think this is you know a topic in itself especially days like this in terms of of looking at energy and and and kind of the the ecosystem being tied into one region or one area you know from from oil to gas and now it's also to to the Chinese and the um.
| 35:45.17 | Harald | Um.
| 35:48.69 | Johan | And solar but 1 of the questions I I had that came up a little bit when I listened to you is you know when we look at real estates. We look at legacy real estates and we look at new bills so legacy is okay, we need to change the supply that we have for energy. And and there's a massive market of course in this and you know we're looking at smart homes and all the rest. You know? How do we retrofit and how do we change and put soldierslars on the roof. But what I'm curious at is with this new green wave the the Paris agreement and all the rest. How do we do with new buildings because this seems to almost. As as an outsider a little bit like an open goal. You know is that kind of legislated every new buildings will have the solar on it. It's pre kind of set in the architects and and how how do you see? This is there a difference. Are we there.
| 36:30.46 | Harald | Um, but ah, that's happening. Um I'm okay so I don't sit on the exact. Ah, latest figures but but I know um for sure in California in France I think in in cities across Europe like I think berlin this is this is specifically being implemented so there's a certain cut of point and like everything that's being built after this cut of point has to have. Ah, certain degree of solar self-production or I suppose you can wave it but you have to have some really good reasonses for it. Um, so I think that's totally logical and it's going to happen because again I mean solar is just. Come down so much in price. It's more widely available. It's just the no- braininer to put it in there. It's easy as you're saying if you do it when you build something you can you can cut a lot of costs because you can you can free ride on on the establishment cost of actually building the the house in a way. So I think that's that's definitely the future. it's it's um. um
| 37:31.44 | Johan | So how how do you see that? what why I'm asking a little bit I read an interview with with the Swedish builder called Saturnka you probably know him. It's a big from gottenberg he owns builds a lot of real estate for people that hasn't heard of him but he's a big builder and his.
| 37:31.78 | Harald | Yeah, it's logical future.
| 37:48.22 | Johan | Part in talking about the future of buildings and smart building was that really everything in a building will actually be some kind of an energy generator so windows. For example, will actually now become a transmitter of of the sun. So it's not just the solar panels. We know the Tesla kind of tiles et cetera. How do you see this.
| 38:06.44 | Harald | Um, I have to disappoint you in that we're kind of no but I have to disappoint you in that like I think the business line we're in is to take solar as it is right now and turn it into a sausage factory like just like.
| 38:06.65 | Johan | Moving forward as well. I You don't disappoint me you disappoint him. But.
| 38:24.92 | Harald | Literally Churn out identical solar assets. So we're we're we're completely uninovative when it comes to solar like we we literally don't spend time looking into the horizon of solar other than you know, maybe for personal reasons because it's fun. But.
| 38:26.29 | Johan | Yeah.
| 38:39.42 | Harald | But really, what has enabled our market is the fact that 95% of solar today is just 1 particular type of solar. It's polar crystalline silicon solar um, it's it's it's completely bankable. It's an operating history that that just is fantastic. You can finance it at at at like almost nothing.
| 38:48.33 | Johan | Um, and.
| 38:55.33 | Harald | And so that's what we do, we just keep churning that out and and and make it even more standardized. Um, and so I mean and I think that creates if you want to be philosophical about it. It creates enough maybe unfortunate like lockin effect in this market that that because everyone who is like us is just. Completely focused on this 1 technology. It's going to be really hard for other new interesting technologies to break through and become important in solar because we've all now built a very strong ecosystem and it's it's not just us. It's not just the finance years. It's It's the insurers. It's the people who do construction. It's the way they set up their vans. You know for particular panels. It's like it's everything. It's a true you know ecosystem moving into one particular way of doing solar um, but that's the way it is and I think the last numbers out is like 96 %
| 39:43.72 | Johan | Um, a.
| 39:45.52 | Harald | Of all installed solar last year was just this one and this is what you know as solar like the typical square panel kind of two square meters and and slightly blue or black tinted. Um, but there of course's like 10 generations of next level solar and and they're just unfortunately not. Finding their way to the mass market. Um, and I'm not sure I have the answer to half the.
| 40:07.42 | Johan | No, but I I like the answer because and definitely not disappoint because I think what is really interesting as well. Especially on this show that we have a lot of technologies that might work that could be tested. And that's not going to drive to Sustainability. That's not going to drive the transformation. So I'm actually quite pleased to hear that it's actually something that you can now scale into large parts and not just looking at the maybe innovation kind of a thing.
| 40:29.53 | Harald | Yeah, yeah, that's what so much? Yeah, no, but that's what so much fun in this market is that like billions and billions of yours are now going straight into just building new assets in ah in a way that's.
| 40:38.77 | Johan | Um, and.
| 40:43.40 | Harald | Absolutely clear to everyone How to do and then you can take a step back and just look at it more industrially and you can just go. Okay, so what's the next bottleneck you know how do we just keep increasing the flow but you can you can stop thinking about all the kind of big threshold things like how do we get this to ever be commercialized and like oh it's just so difficult sometimes but but that's. No I Think that's the great energy of our market is that we move Beyond that.
| 41:04.58 | chrissass | So you offer this as a service and you have disparate customers. You mentioned a few big names when you were talking about what they do. Um I can't but help but think that one of your core competence is a company would then be software to manage this service or or managing it through some software platform you use whether it's yours or someone else's um, if I look at maturity of industries as we get more mature so you just talked about multiple generations of panels. But there's kind of a. Acquiesc on a certain workflow. You know you you generally want to improve your margins over time right? So is is it the software that's going to make you more efficient because the panels are going to come at their 20% rate or whatever you described by Stevenson's law I think it was is what you call their if that was the right namewanwansson lost i.
| 41:48.91 | Harald | That's Swanson I think it'swanson here but you know yeah, it's not very widely and known anyway.
| 41:52.51 | chrissass | Um, yeah, um, but so so you're going to get some economies there as you do newer deployments so you're going to get more efficient but usually we engineer business to get efficient over time so over that 10 year window that that I'm buying your service I would expect your company to have strides forward and efficiency is that the software what's going to give you. What's going to give you improvements over the next ten years from from from your business point of view.
| 42:14.77 | Harald | Yeah, good I mean you kiss you now and now you're talking about the a shell what we install now I think partly the beauty of solar is that you you you look so many of your costs in day one and you have really little operation and maintenance anyway and we do it quite efficiently with. Ah, good data management today. Anyway, we don't we probably don't see like fantastic margins coming out of um the existing solar plants. What I do believe is that is that when it comes behind the meteter solar. Um, it's going to be massive or like a rapid transformation over the next five years from where we are now which is like here's the solar. We're selling the Kilowatt hours as intermittent power. Um, whenever the sun shines it's going to move from that to some pretty intelligent system that delivers together with storage and intelligence just delivers kind of power. Um. Which is geared towards when you need it. It's probably communicating with the rest of your system to figure out when you most need power when your peaks are when the power market is is most costly for you and kind of optimizes the overall savings but also can switch over to optimize your security if that's what you want optimize for so it can go. You can you can use intelligence to just make more money make more savings but but you can then also switch over the intelligence to kind of just create uninterrupted power supply or like a security of supply and this will this is the logical outcome when you add storage and you add a bit of intelligence and also the rest of the local energy system of the customer gets more intelligent. As it is. You know, continuously over time because I guess that's just a natural evolvement of of of everyone's um, on-site energy system and so that and and that I mean I I would like to believe that that's going to also create abilities for margins that we don't see today because now we're kind of like just selling a very pure commodity. Um. And as with any commodity market you kind of like it's it's quite You know it's quite clear to the customer. What the margins are um but as it becomes more of an actual important overall service. The margins are going to be there. But of course also the development costs and the r and d costs and and we are going to have probably the hunted drive. Much more software development than we've done this far. We've been able to almost purely rely on third -party software up until now.
| 44:34.43 | Johan | But that also means that the more you go into the software the more you go in touching or actually going into the smart home or the smart building kind of thing because it's not just the energy that you produce it's It's how do you optimize the actual. Ah, production where are people are you using air condition. Not ah weekends that the whole build the automation of a building. So I think it's It's a messy world when you go into to this one as well and I think that's kind of could be a bit of a.
| 44:54.90 | Harald | Yeah.
| 44:59.67 | Harald | Yeah, yeah, it's a logical I Totally Agree. It's a logical progression and and that you the more intelligence you put into these systems the more they start of course logically. Speaking to each other and and we'll still be running the solar and and the storage system like the actual power generation system. But maybe there will be you know parts of the building that can act as storage as well. Like you know, whatever like air conditioning is a good example, you can kind of choose to run it different times at different capacities.
| 45:17.57 | Johan | Um, a.
| 45:33.54 | Harald | But still get to the same end goal. So it's actually something that works partly as as storage or as um, movable energy demand and then of course that should be logically linked to to the to the grad system. Ah but but I would say I mean the market is pretty far from um.
| 45:40.48 | Johan | Um, ah.
| 45:51.28 | Harald | I mean this is not holding the market back today like it's not something that customers are questing. It's not something that you know we didn't we didn't lose a deal yesterday because we couldn't deliver a fully integrated intelligent ah building system like it's just it's just the vision and it's logical progression of the market. But um, there's going to be multiple steps. Um, and you know 1 step at a time that customers are going to be asking for and today they are just asking for solar like intermittent power on the rooftop but let's go. It's simple, clear.
| 46:16.36 | Johan | Um, yeah.
| 46:20.57 | chrissass | so so I get the intermittent power just because it reduces cost. We had a guess on I think in Asia that talked about the cost the savings that they're their fortune 100 and large customers were getting so I I get that. Is um, ev fleets or fleet management has that started coming up in conversations yet or is it still a bit early since it's intermittent power conversation only for that.
| 46:39.80 | Harald | Um, um I think we um, we'd probably feel that we are truly like a solar as a service provider we try to just put the blinders on and just deliver on that and and and and scale very focused on that and and that's again, it's not held us back I mean we've never had the sense that. We could only win the solar deal by throwing in some Ev charging. Um.
| 46:59.52 | chrissass | No I'm just wondering if it's creating demand for you I'm wondering if if if it's hit the market rate. So there's some there. It's not all over the world and there's a small percentage of cars that are really electric and there's fleets looking to go that way and I was just wondering if if that's driving demand on on your customer's point of view.
| 47:16.22 | Harald | I Don't think we're perceived that it actually drives the solar demand. But I think we perceive that it's kind of parallel demand I mean a lot of times when they decide to kind of join the energy transition. They appoint the project manager then this is something that's most likely the project manager is going to be working on in parallel to solar because it's going to be like.
| 47:18.60 | chrissass | Or if they're looking into.
| 47:35.20 | Harald | And and there is this this general positive sense a lot among a lot of companies that they can now truly do something through their built environment. They can change a lot. They can get to like you know, two point two point zero in in their real estate fleet. So I think they have an enthusiasm about Let's do solar. Let's do ev charging at the same time. Um, and so it's it's definitely happening I don't think the one is driving the the demand of the other but it's like something that that that they feel is connected and they want to do it at the same time. But that said interestingly I think they they rarely want to do it with the same supplier. They're quite happy to kind of like get the specialist supplier niche. Niche and and so we we don't really come up towards having to or quite honestly we don't even know about it sometimes like I don't know if that's what's driving the demand on on a certain site.
| 48:20.50 | chrissass | so so I think we've gone all over in the conversation. Johan um I mean to me what's clear is you know that there's there's need for power for these large organizations is there's a way they can reduce their cost structures they buy it as a service is what I heard and it's an immediate savings and they calculate this out. The future value of this over the ten years or more of the project and it becomes a significant savings to them just as it is today without any any new technology and new magic just what's on the truck today is what I'm hearing um any thoughts from you go on or final questions because that that's kind of my take away from this conversation so far.
| 48:55.83 | Johan | Know I agree with you Chris now what I liked about it as well and I know we're always trying to you know on this show trying. Okay, but what's next what is the new cool thing that might change the world again etc. Even if that's whatever it is but what I liked about it as well as the focus that is actually tangible today that actually that. It's it's changing this energy transformation is part of it. It's not always testing it. It's a pipe. It's it's already. There. It could be deployed as as harold said quite quickly as well. Which was surprising that it's that quick sales times is short. But maybe 1 last little question. Ah, maybe not directed to to specifically your company but your expertise and and and you mentioned the beverage industry as a vertical that has taken off kind of towards each other going this road but from a geography point of view. Are there areas that or or. Areas where corporations are jumping on this quicker than others. Obviously you're based in a nordics. Maybe not the first one you think about Sun. But obviously it's happening as is there. Can you see any trends or is this more all over the place today.
| 50:03.17 | Harald | Um, yeah, it's pre all over the place I would say but like the clear. Okay, so you got to look at where do people have industrial demand so certain places there's actually not that much industrial demand so but like northern italy. Like boom like it's this really big place where you have massive industrial demand maybe more so than southern italy for example, um, ah Poland you know great place like massive industrial demand like all kinds of production. Um, and and then secondly you got a look at where where power costs are high but lately that's been across. Everywhere in Europe like across every geography so that's actually less of a determinant these days. Um, solar insulation. Well I mean from stockholm and southwards like we have enough solar resource to create fantastic savings for customers and then that kind of doesn't matter like but yeah I mean the savings are better. In the south of Spain so all things. Yeah, yeah, you know definitely I mean this market is is booming in Spain like Spain is probably the most crazy market because they just have an aund but they have also a fantastic ecosystem for solar because they've been.
| 50:53.90 | Johan | Um, but are they adopting equally as quick are they are they jumping on this.
| 51:12.68 | Harald | The point like in in solar 1.0 like the the government-driven market Spain was pretty big so Spain is full of people who know a lot about solar can build solar quickly. So it's it's that too. Um and remember that I mean when we do it as a service which is the mainstream way to do it in the market. Capital cost is really important for us and actually capital cost is is quite significantly lower in in north europe than it is in Southern Europe um so that kind of makes up sometimes for for the difference in in solar resource and it just ends up being still an attractive price to the customer. But.
| 51:39.83 | Johan | Um, a.
| 51:45.87 | Harald | No, so I would I would say this is now happening everywhere where you have in in Europe where you have industrial presence industrial demand or data centers like all you know everything we expect from power intensive infrastructure. Um, and um, it's um, yeah, no, it's it's it's really been a quick shift. 2 2 or three years ago I would have been more able to pinpoint certain hotspots and lots of places where nothing was happening now it's everywhere.
| 52:10.36 | chrissass | Um, do people get res for these if if your customers are they are they getting credit for these as so so there's a secondary market. So so your customer is generating are you getting the recs who who gets who gets the credit for it to sell the credits.
| 52:17.18 | Harald | Um, yeah, so if it's it like energy.
| 52:25.33 | Harald | So so what we call the eacs or like the energy distributionion credits or or sometimes they call guarantees of origin or you know you can, but it but it's just like the the the underlying certificate that that a particular Megawatt hour has been generated. That's that's always something that goes to the to the customer because if it didn't. It wouldn't be fully additional in the sustainability way of thinking and and then then I would say there's a particular cohort of customers that might not want it so like certain really big industrial um, high intensity energy users. They might not care and then they might say look you can sell this you know. Make some money of it and and and reduce that from our bill instead. But but the vast majority of customers would want to to get them and to cancel them because that's what you do with them you you cancel them in order to you kind of denying the market access to this particular credit and by doing that you you kind of upholding. The the general market for credits as as an incentive to others. Um.
| 53:24.48 | chrissass | How important is that to your business model. How how are those those credits I mean I've heard mixed feedback on credits right? So some people like them. Some people don't like um yeah.
| 53:33.16 | Harald | So We give them away for free I think that answers the question now I dislike I think on um, on a monitor level. They they're meaningless like they don't We don't really see that they have a price. Ah but because the system is there. They have to be generated and given away so it's more like ah just ah, a thing. That happens it but it never goes into pricing and if if if you have a customer that they would say look you can sell these these credits as you wish? um you can do it. You can get something for it but the transactional hassle is huge because there's no liquid market for It. You get a. They basically call a trading desk at you know, a utility trading desk and and ask them what they're willing to pay you for it and they're not going to buy buy it unless the volume is really big. Um, so I don't know like I don't think it's a functional market instrument actually.
| 54:22.28 | chrissass | Just curious curious. No well sorry to deraal us at the end I was just curious that was that was pestering in the back my mind I just okay I wonder how this works and ass end Johann usually says is you know we we ask the dumb questions on insider's guide because you know it's just the background.
| 54:35.18 | Johan | Um, if.
| 54:35.74 | Harald | No, but that's not a dumb question that like that's like a super complicated question because like no one No very few people truly can can like truly mentally absorb how that market is supposed to work and and what what good it's supposed to be doing versus the ideal World. So I think I think it's really good. Good question. Um, so.
| 54:55.82 | chrissass | Well I want to thank you for the conversation today I found it enlightening no pun intended but I definitely and enjoyed hearing about your business model and and what you've built I like hearing that you were early and that you were able to to ride through the early days to get to where the market is today where the demand is in the market today. Was happy to hear you say that supply chain isn't really hurting your projects because you know some of the things I'm reading in the articles I read certainly in parts of the renewable segment it. It does seem to be a problem today and it seems like you guys are fortunate to be able to work through that. Um, thank you so much for being our guest.
| 55:28.35 | Harald | Um, well thank you so much. It's been a fantastic conversation and and really a pleasure to join you.
| 55:33.70 | Johan | Thanks.
| 55:34.10 | chrissass | Ah, for audience you spend another hour listening to insider' guide to energy. We hope you've enjoyed this content as much as we have if you have please like it subscribe to it comment on it and don't forget to tell your friends about insider guide to energy. We'll see you again next week bye bye