Clean Energy Future by Arno Harris

Recurrent Energy: Financing 'News'

With the rise of the solar PPA, we've been experiencing increased press inquiries about Recurrent Energy and Solar as a Service. As a result, we made the decision last week to officially confirm the facts of Recurrent Energy's March financing to reporters.

The funny thing was that in trying to make the news sound more current, the early coverage we received (from Venture Beat and Red Herring) gave the story a more immediate angle and made it sound like we'd just raised the round last week. The fact is we raised the $10MM round in back in March and the business has been around (as my readers know) since early 2006. The stories also made it sound like our investors--Mohr Davidow Ventures and JEN Partners--were piling into a hot category when in fact both have been supportive and involved with Recurrent Energy from our early days. Of course, we're happy to get the coverage and it's been nice to get the congratulatory notes.

One of the key reasons we were able to raise our round was that we convinced our investors we had a well differentiated strategy. What makes us different is our market focus on organizations with large property portfolios—the largest and most valuable market segment—and innovations in our Solar as a Service offering that meet some very unique needs of our target customers. Raising the round back in March means we've been actively engaged in the market with our offering, validating the approach.

We believe the market for solar services is huge and growth will be sustained over the long-term. We don't think that being first or biggest at this moment matters all that much because it's so early. What matters is being smart about what you're selling and who you're selling it to--it can't just be about "solar financing" or selling the lowest cost kilowatt-hours via a PPA. Price is important of course, but there are other critical components to delivering value via solar services. Our focus on providing a differentiated service to the highest value market segment is the core of a strategy that will ultimately deliver market leading growth.

We intend to tell more of our story over time of course, but the pace will be determined by what makes sense for our customers--which is of course the way it should be.

SMUD Visit -- Solar Shares

I had a nice visit with the team at SMUD several weeks ago along with Shai Agassi, Martin Roscheisen, and Chris Anderson (who arranged the trip). We were very graciously received by SMUD CEO Jan Schori and members of her team.

One highlight of the trip was the tour of SMUD's grid operations center led by Jim Shelter. It's one thing to read about things like transmission congestion, dispatch, reserve margins, and ancillary services; but, it is another to see how the operators actually track, manage, and control it all. What is equally remarkable is how calm and orderly the process is--I kept thinking about the plans we have for Recurrent Energy's solar network operations center and took lots of mental notes.

Here's a photo of Shai, Martin, and me at the heart of it all:

Another highlight was the opportunity to meet with some of the senior executives at SMUD who oversee programs relevant to our businesses. We met with Bill Boyce who runs SMUD's electric vehicles and vehicles-to-grid program which was of particular interest to Shai, who is blogging about his efforts to start a very ambitious electric vehicle service following his recent departure as president of SAP.

For Martin and me, it was great to hear from Mike DeAngelis, the program manager for renewables and DG, and John DiStasio, the assistant general manager for energy delivery and customer service. Of particular interest is the upcoming Solar Shares program, which is the approach taken by SMUD to comply with the California Solar Incentive program requirements. Rather than implementing a host-customer incentive program, SMUD will meet it's solar generation targets by purchasing bundled solar energy in 1MW units from developers via a solar Power Purchase Agreement (PPA). It will then sell solar "shares" to its residential and commercial customers, allowing them to make a claim that their supporting and receiving solar energy service.

Solar shares is yet another take on how utilities will integrate distributed solar generation into their supply mix--and I think it's a promising approach. It encourages larger scale generation, which should create some purchasing efficiencies. Buying energy via a PPA allows them to shop for the most efficient projects that combine the best siting, design, and capital structure--leveraging the efficiency of the market to achieve the best cost per kWh. Plus using a PPA puts the performance obligation on the developer, aligning the interest of the developer with the utility's interest in receiving reliable solar output. Recurrent Energy is participating in the RFP process on Solar Shares -- we'll be very interested to see how it all turns out.

Thanks to Linda Carey Johnson, SMUD's chief information officer, for arranging the visit on SMUD's side -- we had a great time.