Making Domestic Solar Energy Development Available to AllBy Cas Biekmann | Wed, 07/01/2020 - 12:49
Q: What inspired Bright’s move to Mexico?
A: I worked for Chevron building its clean-tech team. Most of the projects we financed were in countries with tax incentives, but those without incentives did not need them because they had sunnier days, had higher electricity rates and lower labor costs. The process for homes to get solar was complicated, however, as these were developing countries with exchange rate risks and high interest rates. Solar is a low-risk asset class though, so risk should be low if you execute it correctly. The permitting process can be streamlined as well; there should be few barriers for something that is cheaper and better for the country’s environment.
Bright is interested in emerging countries, and Mexico was at the top of the list. With its high solar radiation and need for electricity, it seemed the ideal country to kick off the company. What we have built is basically an operating system for distributed solar energy. We use local companies to distribute equipment and ship it to homes, and then use local installers to build it. The main factors for generating these partnerships are adaptability, cultural alignment and fluency in technology. We bring in the financing and connect all the pieces with software. In doing so, our goal is to take all the friction out of the process.
We are now the largest residential solar company in Mexico. We are partnered with Costco as our main retail channel, to educate people about solar and set up appointments to check if their homes could qualify for solar. We have partnered with over 12 installers as well. We have also joined forces with the Interamerican Development Bank (IDB) to finance these projects. The goal is to enable the industry and local banks to finance these projects. We consider ourselves lucky to have such a flexible partner regarding financing.
Q: Where does your investment stem from?
A: Other than the IDB, which is considered our senior debt fund, we use another private equity fund as the sub-debt on our projects. Bright is the equity owner of the projects. The company is capitalized through investors such as First Round Capital, which is the original investor behind Uber, Square and others. Y Combinator and the founders of PayPal, Sunrun, Twitch and others have joined the fold as well. Locally, our main investor and support is Daniel Servitje, who runs Grupo Bimbo.
Q: How does the company measure success when it comes to an installation?
A: Two things define this. First, we try to save our customers at least 20 percent on their CFE bills. We then do routine audits with our clients to see if they are saving money. Second, we are seeing that there is a lot of friction in the process of adopting solar. It is a hard process involving interconnection with CFE, third-party installers and making sure that the panels look good on the roof. We want to remove the friction, so that the homeowner knows exactly what to expect. If this process works as we imagine it will, then we consider it a success as well.
Q: How does the company’s finance scheme work and how has it coped with the pandemic?
A: We guarantee the energy production, maintain and clean the systems at our own cost. We have two options to achieve this: one is that customers pay everything up front and receive 13 years of service, with the goal of bringing their CFE bill down to less than 100 pesos. If people do not have the money up front, which can cost up to MX$100,000 to $300,000 on average, but are still interested in contributing to the environment and having a stable, low energy bill, we do not charge anything up front. Instead, people pay monthly an amount that is ~20 percent lower than what they would have had to pay with CFE. Most of our customers like this option because the risk is minimum. If hail hits the panels or a tree obstructs it, these are all things we deal with.
We actually think the pandemic has increased interest in our panels. People are consuming more energy domestically, ranging from 10 to 80 percent more energy in Mexican households according to recent news. In general, people are at home and interested to save in this regard, but want to do so safely. Using interactive proposals, we have reached potential clients in a more meaningful manner. The company has been preparing unknowingly for this pandemic for the past year by adapting remote working tools and procedures.
Q: Where does the company see opportunities for the public and private sectors to work together toward lower electricity prices?
A: Solar is a cost-competitive form of energy generation, and has the advantage of a technological development curve that will lead to lower costs in the future. But it needs to be done in a way that accommodates the government’s perspective. Solar needs the grid for transmission and distribution, so we think it is fair to charge a reasonable price to use those assets. This infrastructure has been paid for and provides value. The question is what the right cost for this is. If we all come together, we can find a fitting agreement, which can help reduce electricity and spur new development of low-cost asset classes.
Q: What are Bright’s goals?
A: Our biggest goal is to expedite and standardize the solar adoption process via software so that it becomes an even better experience for clients. If we do this, we will also be able to take this model to other countries as well and expand rapidly. Additionally, we also want to further reduce the cost to acquire new customers, meaning that we want to make our sales process more efficient, and pass these savings on to our customers.
Bright is the leading residential solar company in Mexico and was founded in 2014 with the goal of rapidly growing distributed solar generation in developing countries. It provides the financing and software that enable anyone to offer cheaper electricity to homes at no upfront cost.