Deal Radar 2009: Sungevity

Sungevity uses the Internet to offer its customers an easy and affordable way to buy and install solar rooftop panels. Customers only need to provide their address and some information about their current electricity usage and bill. In less than a day, with the use of satellite data, Sungevity studies the possibilities and comes back with a quote, telling them what their electricity savings over the next few years would be and how much of their electricity bill can be converted to solar energy, and showing illustrations of what their roof would look like with the solar panels on it. 

Customers can pay a deposit on the solar panels through a credit card, and the panels can be installed in their homes within days, thereby shortening the entire process, which is usually elaborate and takes months. In addition, these solar panel systems can cost as little as $2,000 (after incentives), making the process financially attractive. The only caveat is that it is currently only offered in San Francisco due to the incentives the city provides through its Solar Energy Incentive Program.

Sungevity was founded by Danny Kennedy (CXO and president), Andrew Birch and Alec Guettel (chair of the board of directors). Kennedy spent several years advocating climate change and energy policy issues, ran Greenpeace campaigns in Australia and the Pacific and set up Greenpeace USA’s office in California in 2001.  The company launched on April 22, 2008 (Earth Day) with the goal, ‘to make solar purchasing simple, easy and affordable for everyone literally everywhere with Internet access.’ 

The company is currently not backed by any VCs. They received seed money from co-founder and Board Chair Alec Guettel. Another round of $2.5 million was raised from friends and family, including actress Cate Blanchett, and two German institutional investors, iSol and Solon, with further plans to raise additional financing this year.

The solar energy market is still very fragmented, with a lot being invested in manufacturing the modules and other components of a solar electric system. This is only half of what the customer pays for; the rest is the installation cost of getting these highly commoditized components from factories to customers’ roofs. In California, there are over 460 companies, of which the top ten sell 50% of the solar in the state. The state of California, through incentives, is promoting the ‘million solar roofs program’ but at the current rate of installation, Sungevity believes the state will only be able to meet half that number. 

Sungevity, seeing this opportunity, caters to the underserved market by cost-effectively delivering sub-10 kilowatt roof systems. In the six months since their launch, the company has sold over 140 systems and provided quotes to thousands of others, making them one of the top ten in California for solar installation below 10kW.

Sungevity differentiates itself from its competition in two main ways. First, their systems are far less expensive than other installers. Because a large part of their process is done online, a customer can receive a quote within 24 hours of sending a request. Second, Sungevity sells standardized systems as compared with others who sell as much solar paneling as possible to their customers in an attempt to cover the entire roof, making this customization expensive. Sungevity aims to replace top tariff rate electricity with solar energy, thereby allowing customers to ‘Make Their Home a Hybrid.’ Their top target customers are families living in homes with a large electricity load from appliances like air conditioners. Current returns on investment over a 25-year period are in the range of mid-teens to over 20%.

The total addressable market is huge, at approximately $10 billion, and is growing 40% per annum. Ultimately solar companies will take on the trillion-dollar grid electricity industry, with a cleaner end solution. In California, the TAM is currently about 50mW of sales (or 50,000 kW) and is expected to be close to 2,000mW by 2012, with an average system sale of 3kW. Globally, the TAM is projected to be greater than 10,000 mW of residential sales in 2012. Sungevity’s solar panel model is expected to be available across seven US states by 2009. They forecast that by 2012 they can penetrate 3% of European residential sales, 8% of US sales, and 0.5% of Asia/Australian sales. 

The company operates on a business model which sells systems directly to customers in California and sales support services to installers globally. With over 140 sales in their first seven months, Sungevity expects to break even in the second half of 2009. They are on track for revenues of $2.5 million for 2008 with a $4 million revenue run rate in 2009. The environmental impact of these 140 sales is an average of 2.5kW in total, with their current customers expected to save approximately $3.5 million over the next 25 years.

According to an article in Fortune, Sungevity may run into problems in leafy places like Berkeley, where roofs may be partially covered by trees, making it difficult to see the roofs in satellite pictures and online and provide a fast and reliable quote. Sungevity’s market is middle-America suburbia, while its competitors like SolarCity cater more to homes in well-established neighborhoods which are ready to go solar.

The company plans to come out with an IPO in 2012, at which point solar is expected to be on par or cheaper than grid-based electricity. 

Recommended Readings:
Tapping into the Sun
Deal Radar 2008: SunRun
Forbes Column 08: Lighting the Way in India

This segment is a part in the series : Deal Radar 2009