Rooftop renaissance

KEEPING COOL WITH

Hey there,

We’re excited for our first company deep dive in a minute — that’s what’s on tap today. Many more to come for the rest of this quarter. Today’s is also an exclusive coming-out-of-stealth announcement; we’re stoked the Heliose team trusted us to be the first to tell their story to a broader audience.

There’s a burgeoning narrative about how rooftop solar is struggling in the U.S. Coverage of that story — which is both grounded in data and, as always, a bit hyperbolic — has hit major outlets over the past month. Still, there is a significant opportunity to improve the rooftop solar customer experience in the U.S. and accelerate how much and how seamlessly rooftop solar gets sold, installed, and integrated into grids nationwide. That’s what Heliose is working on.

P.S. — we’re hosting a happy hour in Manhattan (Chinatown) on 2/22. First Keep Cool gathering in a minute, would love to see you there. Details here.

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DEEP DIVE

One thing I’m focused on in my writing this year is not burying the lede. So here’s the deal. Rooftop solar in the U.S. should be better. It should be cheaper. More people should have it. It should be complemented with energy storage in order to smooth out integration with the grid.

If you look at the other country I’m a citizen of, Germany, rooftop solar penetration rates hit nearly 10% of homes more than three years ago. U.S. rooftop solar penetration is less than 5%. Even though the U.S. gets way more sun than Germany does, it has less than half as much rooftop solar.

Since 1957, when the first commercial solar photovoltaic panel was created at Bell Labs, the price of solar PV has come down 15,000 fold. Back then, producing one megawatt-hour with solar PV cost roughly $300,000 per megawatt-hour in 2019 dollars. Today, that can cost $20. That’s a staggering achievement. Early solar technology deployed to power satellites in space cost an unimaginable amount more than solar panels installed on roofs today.

As a result, solar is often championed as the cheapest electricity source known to man. At least when it’s sunny. Hence, solar – inclusive of rooftop solar – is one of those climate technologies that everyone thinks is just ‘working.’ And it is. 

Still, it should be ‘working’ even better in the U.S. In some senses, it’s not working particularly well here in America. File it under ‘things that aren’t working,' at least not as well as they could be, if you’re cataloging this piece against my 2024 topic areas. It’s time for rooftop solar "2.0."

Rooftop solar 2.0

Keith Rabois, a legendary venture investor, has a succinct formula for startup success:

If that reads like gibberish to you, here’s a distillation: 

Many climate challenges and technologies could benefit from software that mimics this formula. Rooftop solar, especially in the U.S., is one of them.

Here’s a striking statistic, for instance. The majority of rooftop solar in the U.S. is still sold door-to-door! I have nothing against door-to-door salespeople. But for a technology as mind-bendingly elegant and technically sophisticated as solar photovoltaics are, does it make sense that, in the 21st century, rooftop solar is still predominantly sold this way? As it turns out, the deeper you dig, the more components of America’s rooftop solar value chain you uncover that are, at minimum, dated. That aren’t super efficient. That leave something to be desired. 

Rooftop solar is struggling in the U.S. as a result. After growing by more than 30% in 2021 and 40% in 2022, the rooftop solar market in the U.S. likely grew less than 10% in 2023. And, owing to policy dynamics in California, 2024 solar sales are actually expected to come in lower than 2023 sales.

As a result, the larger media ecosystem is starting to circle the rooftop solar industry like sharks that smell blood in the water. In part, for good reason. As noted recently in Time:

I won’t spend much ‘energy’ here opining on whether the rooftop solar industry will or won’t collapse. What matters is that a return to exponential growth is possible. Given how well rooftop solar sells in countries with much less sun, clearly, there are problems unique to the U.S. that need addressing. 

To better understand the dynamics at play here, I recently sat down with Jason Owen, the CEO of Heliose. Heliose is emerging from stealth this month; as I got to know Jason, he offered to let Keep Cool present the exclusive coming out party. Their mission is to accelerate the next leg of exponential growth in rooftop solar. They aim to make that happen by ensuring consumers everywhere can get accurate, cheaper, real-time pricing for solar systems.

Trimming the fat in rooftop solar sales

The first thing I wanted Jason's help understanding was what some of the main challenges in rooftop solar are in the U.S. today. There are more complicated things one could point to, like how policy is shifting in California or grid dynamics that can make installing more rooftop solar increasingly difficult to square with grid reliability. But Jason singled in on simpler factors: 

One problem with the opacity of how solar systems get sold and installed in the U.S. is that it obscures a lot of excess cost. Specifically, Jason and the team singled out two areas that inject significant added costs for consumers who want to install solar panels on their roofs. This is excess 'fat' if you will. It keeps U.S. residential solar sales from 'running' faster. 

1. Sales commissions: 80% of residential solar in the U.S. today is sold door-to-door. Commissions for a solar salesperson can be as high as 20 to 30% of the total system cost. 20% plus is widely accepted. That's a significant disincentive to buyers.

2. Dealer financing fees: Six major 'wholesale’ lenders in the U.S. do 60% of all rooftop solar lending. These aren’t banks. They don't lend money at an interest rate governed by the Federal Reserve. They source capital from third parties. When they lend, the rates are higher. That adds to the cost of the rooftop solar system installations. 

If a rooftop solar system costs $30,000 and you get third-party financing, the dealer fee could be in excess of 40%. So that's another $12,000 for financing alone. And the sales commission could be 20%, too. Suddenly, your total cost is already 50% higher.

Jason noted that he and the Heliose team told themselves, "There has to be a better way to do this." Their stated goal is to bring down the price of residential solar in the U.S. by 50% within 24 months. And to make the whole process better with a vertically integrated software platform.

Going ‘vertical’ to increase sales and transparency

Ideally, if you integrate more of the necessary downstream and upstream processes needed to deliver a product (vertical integration), you have fewer disparate stakeholders communicating with each other to share that information. This alone can simplify things and promote transparency. As it pertains to rooftop solar, many things need to happen before a system can get installed, even beyond the sale itself. A customer might need a roofing upgrade. They may need a main electrical panel upgrade. They need engineering documents. Many of these are handled by disparate parties. Heliose will roll them up into one service. 

Based on that, I also asked Jason how far 'upstream' he wants to go.

To that end, Heliose has built a lot of technology into how they get customers' information faster. They can benchmark whether a house will need a main electrical panel upgrade before installing solar quickly and asses what it will cost. That's the type of thing you want to know upfront as a consumer because, well, it can cost thousands of dollars. As Jason continued:

Frankly, the fact that none of this has been done was a surprise to me, too. I asked Jason about companies like Aurora Solar that have made a name for themselves by tackling a specific part of the rezi solar installation process. In Aurora's case, it's system design. 

Jason noted they haven't seen any other company do what they're trying to do, namely offer real time rooftop solar rates simply. Companies like Aurora pioneered the proposal side of installations and provide better data and simplified design options to consumers. But they aren’t vertically integrated. Their proposals are often still handed to a potential customer by a door-to-door salesman. 

From my editorial vantage point, I do think there are other companies going after a similar concept. Project Solar stands out as an example. The primary subheader of their landing page says “Same Equipment. Same Warranty. Lower Price.” Mona Lee Solar is another. 

Whether there’s one, two, or several competitors in a market isn’t a non-starter. It’s a good thing. How these companies differentiate themselves from one another over time will be interesting, as will who ‘wins’ what market share in which geographies.

Further, there are companies like Haven Energy adopting a similar approach to Heliose that are leading with a different technology (batteries, in Haven's case). Haven and Heliose have "sister" strategies. I (and Jason) hope companies taking the battery-first approach are super successful. As we discussed last week, solar + storage are a match made in heaven.

Why is no one talking about this?

Another question I often ask myself and asked Jason was "Why is no one talking about this?" 

OK, it's rarely true that no one is talking about a specific subject. On energy and renewables Twitter, there are some folks talking about challenges with rooftop solar in the U.S. Still, if you take even a baby step outside the various echo chambers many of us oscillate between, the silence gets deafening. It's certainly not widely discussed that rooftop solar sales in the U.S. are slowing and that, frankly, penetration should be at least twice as high as it is today. Here's what Jason offered:

This is something I hit on frequently. Too often, there are layers and levels of abstraction in our discourse. Especially in our business, technology, and climate discourse. People say "soft costs" or "supply chain." Which is often code for "I don't know precisely, so I need to obfuscate a little bit." Those terms don't necessarily tell you anything about, say, a door-to-door salesperson's commission or financing fees from wholesale dealers, as we discussed earlier.

All the more reason to come home to transparency for consumers into what they're paying for, what their options are, and with whom they can work to get it done. 

The coming out party

Finally, I made sure to ask Jason about his and his team’s plans for coming out of stealth. He noted they’ve been in the background building Heliose for a few years. They raised pre-seed funding last year from investors including Origin Ventures, Social Leverage, Junction Venture Partners and Revelry Venture Partners and are going out to raise their seed now.

Most importantly, they’re launching their beta in three markets in the Southwest with strategic partners this month. Their biggest short-term KPI is onboarding installers, whom they need to test, iterate and ultimately, buy into their process. The value proposition for any installer is that Heliose will deliver them ‘bowtied’ customers at a fixed price that's with their acceptable customer acquisition cost. 

Jason noted they’ve had close to 100% percent success so far working to onboard installers. Now it’s time for them to get the economic engine humming. There are many other things that need to happen to accelerate decarbonization in the power sector, and to tackle climate challenges in general. But getting back to the basics of transparent and fair pricing can go a long way in getting more solar systems on roofs in the U.S. It’s not always the most complex stuff that needs solving. They’re launching with limited beta markets; if you’re in Arizona, New Mexico, or Texas and want to explore rooftop solar, give their site a spin. The product will be available for the entire U.S. this year, too.

OTHER COOL OPPORTUNITIES

Entrepreneur in Residence Program - Menlo Labs

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Hope you enjoyed this one. Inquiries for Heliose? Feedback? Respond to this email and I’ll pass it all along.

– Nick