By Karen E. Klein - Sep 15, 2010
As a former environmental activist, Danny Kennedy, 39, says he is “probably more missionary than mercenary” when it comes to clean energy. Still, the founder of Sungevity, a Berkeley (Calif.)-based company that sells solar power panels for homes, is “entirely comfortable with the fact that we’re going to make a killing in this industry.”
Coal, natural gas, and nuclear energy fuel the vast majority of America’s energy consumption. Solar energy and other renewable sources account for less than 3 percent of the total, although their share is growing. The residential solar market in the U.S. increased 101 percent during the 2009 recession, according to the Solar Energy Industries Assn. With the nation’s toughest environmental regulations, California made up the lion’s share of that growth, with 220 megawatts of new capacity installed in 2009.
Already in the top 5 in sales of U.S. residential solar companies, three-year-old Sungevity wants to dominate the Golden State market, and is just starting to sell in Arizona and Colorado. This year, thanks to a new customer lease option, Kennedy says revenue is on track to exceed $25 million, up from just under $3 million in 2009.
The lease program became a reality in March, when U.S. Bancorp, the parent company of U.S. Bank, invested $24 million to create a tax equity fund with Sungevity. The capital finances 10-year, no-money-down leases. That means customers have no up-front investment; most begin seeing reductions in their electricity costs immediately. “It’s good business at so many levels, from a PR level to a return-on-risk level,” says Darren Van’t Hof, the bank’s director of renewable energy investments. “In my own personal view, residential solar development will eclipse commercial and utility scale in a matter of two or three years.”
Big Ballot Win for Wind and Solar All this is heady stuff for a self-described “policy wonk” who was born in Los Angeles to Australian parents and who has made his home on both sides of the Pacific Rim. A serious environmental advocate since he was a teenager, Kennedy began working for Greenpeace in the early 1990s, coordinating whaling blockades and working to save forests. Climate change is what most captivated him. “My passion has always been the energy stuff,” he says.
In 2001, working on the California Clean Energy Campaign, Kennedy oversaw a big win: Stunning 73 percent voter approval of a $100 million Bay Area bonds issue to fund wind and solar. The landslide helped catalyze the state’s nascent green energy industry. Popular support for climate change remedies had reached a tipping point, he thought. “We didn’t need so many campaigns any more to show that we had a problem. At some point you cross a threshold and it becomes incumbent on you to prove that you’ve got solutions,” he says.
In 2006, he met up with an old friend, Alec Guettel, who had turned his own environmental activism into a career as a serial entrepreneur. The two decided to go into the residential solar business together. Roof-panel solar systems had been around for decades in California, more as a curiosity than as a scalable industry. Kennedy and Guettel viewed the sales process, involving site visits and engineered drawings, as clunky and expensive. Because only 1 in 10 deals would close, buyers had to absorb $2,000 to $3,000 in marketing costs.
From Blanchett to Series B Funding Sungevity’s breakthrough was to move the process online. The company uses Google Earth and high-resolution aerial photography to inspect rooftops, estimate solar potential, and deliver customer estimates within 24 hours. Sungevity sells all of its systems over the Internet, with subcontractors that install and maintain the panels as part of the lease deal.
There were early backers. Sungevity raised $2.5 million in 2007 from friends and family, among them the actress Cate Blanchett, a friend from Kennedy’s university days. In 2009, many of those investors and some new angels re-upped for a Series B, which was led by venture firm Greener Capital and joined by Firelake Capital Management. It has raised around $10 million, Kennedy says.
Getting people to change the way they have always done things, particularly in a commodity market, is not easy. “If Edison came back today, he would recognize the electrical grid,” says Rachel Sheinbein, a principal at San Francisco-based venture fund CMEA Capital, which invests in clean energy. “Solar power providers are not starting fresh in a whole new industry, like what Intel did. It’s more difficult to compete against well-established incumbents.”
The growth of residential solar is still dependent on government incentives. The industry’s 2009 growth, for instance, was largely due to the removal of a $2,000 cap on the 30 percent federal investment tax credit for new solar installations.
The Prop 23 War: Tech vs. Oil An attack on those incentives has recently drawn Kennedy back into politics. He’s become a leader in what is shaping up to be a legendary fight. Environmentalists and Silicon Valley moguls are facing off against the Texas oil companies and Tea Party backers that are funding California’s Proposition 23, an initiative on the state’s November’s ballot.
The proposition would suspend the state’s popular 2006 global warming law. By requiring California to roll back its greenhouse gas emissions to 1990 levels by 2020, the law strongly encourages the widespread adoption of alternate energy technologies and has created a boom in the state’s 500,000- employee clean energy industry.
The proposition is billed as a jobs initiative and has drawn support from business and manufacturing organizations, anti-tax groups, and Republican Senate candidate Carly Fiorina. But it has outraged its opponents and may ultimately be remembered for having cemented the political coalition of clean tech and dot- com chief executives with environmental advocacy groups such as the Natural Resources Defense Council.
Kennedy attended a “No on 23” meeting this summer at Google’s Mountain View, Calif., headquarters. “It was a rich moment; a turning point,” he says, describing the array of environmental and business luminaries armed for battle. “We might have seen a coming-of-age, when clean tech business decided to stand up and take on big oil.”
