0:00:00.0 Kurt: Welcome to Master Your Finances. Do you like to gain valuable insights on a range of topics, including leadership, business strategy, and clean energy innovation? Are you interested in learning about the challenges that may arise when starting and growing your own business? Do you wanna know how to build a strong brand, assemble teams and raise funds? If so, you wanna hear from Dan Javan, the founder and CEO of Suntuity. Suntuity is a nationwide renewable energy company that specializes in residential solar, commercial and utility scale projects. With over two decades of experience, Dan is uniquely qualified to help you feel empowered and confident in your ability to apply the insights and knowledge he shares. He’ll motivate you to implement new strategies and take steps towards achieving your goals, as well as inspire you to contribute to environmental stewardship and make positive changes related to clean energy adoption.
0:00:53.9 Kurt: All right, Dan, thanks first for coming on the show. Do you wanna tell us a little bit about your journey as a founder and CEO of Suntuity and what inspired you to start a renewable energy company in the first place?
0:01:05.5 Dan Javan: Yeah, Kurt, thanks for having me and I’m glad to be on your show. I think renewables is probably the fourth iteration in my journey in business. It’s started off with aviation, moved into technology, moved into pharmaceuticals. And of course, here I am now in renewables, so this is my fourth iteration. And again, along the way, I’ve picked up things in life I think that have helped each iteration do better. Really got into the renewables game about 13, 14 years ago and really started with my own home, putting solar in my home. And at that time, it was more than cost savings. It was really environmental stewardship to do things right for the environment. But then while doing that I found out there’s a pretty good way of actually saving money while doing that.
0:01:57.8 Dan Javan: So back in the day when I installed my system on my home, it cost $140,000. And back in 2008, 2009, $140,000 would buy you a house. And most people thought there must be something actually wrong with me to put $140,000 in a system due to environmental concerns. But what they didn’t recognize is my system paid for itself in two years.
0:02:22.8 Kurt: Oh, wow. Really?
0:02:24.3 Dan Javan: Try to get a house to pay for itself in two years. And when people come back and say, how did that happen? The simple answer is there’s so much incentivization at a federal level, at a state level, and even local jurisdictional level that most homeowners, business owners don’t recognize. It’s when you find out you’re leaving money on the table. So when you start looking at that, now if you bring in a solution that actually almost offsets, if not eliminates, your electric bill, generates revenue through green tags that you get from different states, plus pays for itself in two to five years, and continues to generate revenue for you as a profit center for another 10, 15 years post, I mean, it’s a no-brainer.
0:03:09.9 Dan Javan: The first question people say is, “well, where’s the snake oil?” Well, there isn’t really a snake oil out here. It’s actually proven, it’s actually available, it’s actually publicly available. But again, so to take that and build the business that we’ve built now, we’re licensed in 26 states in the US, we have operations in 25 states in the US, pretty much across most of the Eastern Seaboard, parts of the Midwest, and the Western parts of the US. We cater to… We’ll originate this year close to 10,000 homes. That puts us in the top 15 in the country. But again, really, it’s an opportunity I think that every business owner and homeowner should leverage, because it’s readily available to you, and now more than ever under the Biden administration.
0:04:02.6 Dan Javan: So again, that’s just a journey to start off with the environmental side of it, but quickly transformed in the monetization side of it, which I think we’re gonna talk a little bit more about in this meeting.
0:04:18.4 Kurt: No, I agree. I think most of us understand the green energy side, as far as saving energy and fuel and not having to use natural resources more directly. Do you wanna tell us a little bit about the monomers? Because you just touched on it. I mean, saving $140,000, you must have had an expensive electric bill. That seems like a big number to me. I’m like, I have bad bills, but they’re not that bad.
[laughter]
0:04:40.6 Dan Javan: Yeah, no, I mean, back in the day, 2008-2009, we were paying $8 a watt for solar. So today, solar is almost a third that price. So just the same system would cost you almost three times as much back then. But the simplest answer is how did I actually pay for itself in two plus years? We had green tags from the state at $640 a megawatt hour. Like a 10 kW system would produce about 12 of that. Plus, I mean, the offset of electric, plus you get 30% as an investment tax credit from the feds, plus the state of New Jersey back then was paying for 50% of the system. So between the federal tax benefits, the state tax benefits, or the rebate, plus now the green tags, plus the electric savings, the system paid for itself.
0:05:37.5 Dan Javan: So fast forward to where we’re today…
0:05:37.9 Kurt: Oh, okay. I gotcha.
0:05:41.4 Dan Javan: The path we’re on today, I mean, we’re now at about six year payback. But again, when you’re a business owner, I mean, I can maybe count on one hand, investments you can make that have a payback of six years or less. I mean, that’s a pretty high IRR. And if you can monetize that with basically a loan that basically might extend it out another year, if you’re trying to track your IRR, it’s infinity. At that point, you don’t care about an 18%, 19% return because the savings and the revenue pay off any loan you have. It’s a self-sustaining investment. And we can get into details around that. I’m sure your viewers will probably be wondering how and why, but there are a lot of options and incentives that are available today that let you do that across the country.
0:06:30.9 Kurt: Absolutely. And I do know that each state is a little bit different. I mean, I remember reading that New Jersey tends to be at the top of the list when they talk about renewable energy. I mean, I happen to… We’re working remotely, so I’m actually in Florida right now. And I know, I was surprised when I didn’t hear like Florida was like the leading, one of the leading states in solar when there’s so much sun down here, literally the sunshine state. And New Jersey was ahead of it when I was looking at these surveys, which surprised me a little bit, only because it seems like it’d be pretty easy to roll out a solar farm or whatever down in Florida.
0:07:04.0 Kurt: But can you explain a little bit of the dynamics about how like a state like a New Jersey seems to be one of the leaders, seems to be some of the more northern states. Is that… Can you explain a little bit about how that all that’s working out?
0:07:20.3 Dan Javan: Yeah, no, absolutely. So I’ll start with Florida. So Florida, you’ve got FP&L. So FP&L, in fact, even though the reason why the utility rates are low in FP&L, if you actually look at a lot of the solar installed in Florida today, yes, residential solar and small commercial solar is beginning to pick up. But your utility rates are pretty low right now. So solar has to compete with low utility rate. And the reason why your utility rate is low is because FP&L has some of the largest utility scale solar products in the country. So NextEra, which FP&L has an option on, is in central Florida with hundreds of megawatts of utility scale solar that actually help FP&L subsidize the cost of electricity.
0:08:04.1 Dan Javan: I mean, when you look at a utility scale solar, you’re producing power in the one and a half to two cents a kilowatt hour range. It doesn’t get cheaper than that. Hydro doesn’t compete. Nuclear doesn’t complete at one and a half to two cents a kilowatt hour. Now, when you look at the northern states, most of the power coming out of northern states is either historically coal which is really the Ohio Valley or nuclear. And most people don’t recognize the production of power and nuclear is cheap. But the actual decommissioning of our nuclear power plant costs almost four times as much as building one. So now when you start building your cash reserves, that has to reflect in the cost of power. So when you look at your cost of power up in, say, New York in a 28 cents a kilowatt hour compared to FP&L at four cents. It requires initiatives like solar to actually offset that production.
0:08:56.8 Dan Javan: And that’s really why you see states in the northern or northeast parts of the US generating more incentives towards solar to offset that high cost of power, which the cost of production itself of the power is high. So leading states like Massachusetts, Connecticut, New York now with the different incentives they have, New Jersey, Maryland, PA. I mean, you wouldn’t expect PA, which is more leaning…
0:09:21.8 Kurt: That’s like an oil state. That’s a big oil state.
0:09:24.1 Dan Javan: It’s a red state, but they’ve got Srex in PA too. South Carolina. They’ve got state tax credits for solar. So all these states, if you’re in these states, you can leverage renewables. And now, of course, if you go west, I mean, California is like a different country. But California, with high cost of power, has incentives for solar. You look at other states like Arizona and Nevada that are coming up with incentives. So really, I think there’s a lot of opportunity across the country, regardless of whether you own a business out there or a home out there that you can benefit from. And of course, each state has slightly different incentives and quirks. But again, most of the northeast, I mean, it’s a slam dunk. It’s a home run. There’s no reason why you shouldn’t do it.
0:10:09.0 Kurt: And you’ve been in this for a long time, and I know that I keep reading articles and you can probably dig deeper into this. So it seems to me like the incentives kind of line up with the efficiency of the solar itself. So the solar is becoming more and more cost effective to compete directly without incentives. So is that why we went from this like two year payback, because it was heavily subsidized by federal and state just to get it started? Which the federal government does that a lot. It’s necessary because otherwise people wouldn’t… I mean, who’s gonna pay $140,000 and not have any type of incentive to do that? Very few. Right?
0:10:39.9 Dan Javan: That’s right.
0:10:40.6 Kurt: But now we’re getting to the point where it’s kind of like, okay, this is close. So the incentives are much smaller, but the solar itself is less. The actual cost of the commodity is less. So it sounds like it’s gonna be pretty close where just on its own, it’s gonna start being cheaper based on how it’s becoming more efficient over time. Is that what’s happening now? Do you see that?
0:11:01.7 Dan Javan: Yeah. So if you look at certain states, New York, for example, or you look at Connecticut, I mean, solar today has grid parity. And what that means is solar can actually compete with utility rates without incentives because the utility rate is so high. 28 cents, 29 cents. You look at Hawaii, 34 cents, 38 cents a kilowatt hour. I mean, you don’t need incentives to support solar. If you look at the Virgin Islands, 54 cents a kilowatt hour. You don’t need an incentive package to support a 54 cent a kilowatt hour offset. I mean, solar will be that hands down without any incentives. But what I’m alluding to is as the cost of solar comes down, the cost of utility goes up. The feds and the states are pulling back on incentives because they don’t need to incentivize and subsidize it as much.
0:11:53.3 Dan Javan: So if you play this forward six, seven years, you’re gonna have, most incentives will run out across the US because solar will be able to compete at grid parity across most of the states, across the US in the six or seven year range. But the important thing is what you can do with it now. If you take action now your payback is gonna be six, seven years, depending on what state you’re in. If you take action six or seven years from now, it might be 10 years, which, again, is not a bad payback on a system that has a life expectancy of 35, 40 years. Payback in 10 years actually to me is a slam dunk. People buy buildings and depreciate that over 20 plus years. Why won’t you do that with solar in 10?
0:12:32.5 Dan Javan: But the action that you should take is really now while incentives and subsidies are pretty strong. So one of the things that the Biden administration did was it pushed out the IRA, the Inflation Reduction Act, that actually has a decent amount of incentives in there for renewables. And of course, solar is just part of it. But again all these regulations, to be frank, is only as good as the next change in Congress and the next change in the White House. So if you have the changes happening, really, you’ve got a two year window in front of you, or a year and a half. If the change you think is gonna occur at a congressional level or the White House level, this is why you need to monetize in the next two years, because you grandfather yourself in when that happens. So the time to act really is now.
0:13:23.2 Kurt: No, I agree. I mean, you have a bird in the hand is better than two in the bush, so to speak. You know what you’ve got and you know your payback time. I know one of the things that comes up a lot, at least when I talk to people, is, “well, what about like my roof on my house? If you’re gonna put a solar… ” I know years ago, I think you’ve resolved this. Maybe you can speak to it, though. Is, if you put a solar panel on there and all of a sudden I get a roof leak in two years. Now I’ve got a problem. I got to take the solar panels off and I got to fix the roof. And so now my cost of repair goes up. But I believe the industry solved that issue. You wanna talk to that a little bit on how it’s handled?
0:13:54.1 Dan Javan: Yeah, absolutely. So technology has come a long way. And that includes not just the electronics and the solar, but even the racking systems. So the racking systems right now, most of the standoffs, include certain types of butyl tape on it that guarantee you a waterproof attachment point, regardless of how it’s installed. In addition to that, any integrator or solar installer across the country with any level of credibility will give you a warranty on the roof. For example, we give you a 10 year warranty on the roof. And we guarantee all the penetrations, which means if you’re gonna have a problem for the next 10 years, we’re gonna come out and fix it. And again, we don’t usually have a lot of problems using the new butyl tape methods of attachment.
0:14:42.8 Dan Javan: But again, it’s all part and parcel of what we do. And in addition, the roof under the solar system actually lasts longer. It has less UV exposure, less exposure to the elements. So you actually are indirectly extending the life of your roof. And again, if a leak has to happen, it’s gonna happen in the first couple of cycles. And most of it happens because of expansion, contraction and winter. So if you’re in the southern states, you don’t have expansion, contraction, winter, so that won’t happen. But in the northern, it’s really… You might have ice damming that actually ends up with some kind of leak. But again, it doesn’t happen with the newer technologies out there on attachment points. I mean, that used to happen five years ago, six years ago, more often. But it doesn’t happen as much right now. I think the industry has really transformed from technology and attachment points that negates that.
0:15:37.4 Kurt: Okay. So I guess another… Now what about like just the general maintenance of it? I know, maybe you addressed this now, but my, like I don’t know. How often you need to clean these? I mean, they’re glass. Is it not a big deal? Is the rain sufficient to keep them pretty clean? Or do you have to worry about any of that? Is that pretty natural the way it happens?
0:15:57.8 Dan Javan: Yeah, no, most of the US you don’t have to, maybe in certain parts of Arizona, Nevada, in the desert climates, you might have to clean them out, because you don’t have rain sometimes for almost a year. But most of the US, the rain just washes it off. In fact, in the northeast when you actually have snow, snow actually attaches itself to any dirt on the roof, on the solar. So when it actually melts, it actually just runs off with that. So you’ll see after a snowstorm, your panels look almost like brand new. So in fact, you don’t have really any maintenance or cleaning. And again, there’s no moving parts when it comes to solar. So unlike wind, where you need to change bearings and things like that, solar is a stationary product, there’s no moving parts.
0:16:43.5 Dan Javan: And it’s basically minimal maintenance, if any… And again, maintenance happens with larger inverters where you’re really cleaning like air filters. Which again, if you’ve got an air filter, you got to clean that anyways in your HVAC once a year you just take it out and do it and it’s all readily accessible. But outside of that, I mean, maintenance is minimal.
0:17:04.8 Kurt: Excellent. We’re gonna take a quick break. You’re listening to Master Your Finances. We’ll be right back.
0:17:09.1 Kurt: Welcome back. You’re listening to Master Your Finances with Dan Javan. And we’re talking about solar power. And some of the things that have happened over the years to make it a little bit better and how the incentives have actually dropped because they’ve become more efficient. And they’ve become cheaper to actually install. And they’re better to install now because they’ve resolved some of the issues with the roof and really don’t have to maintain them too often. So they’re pretty low maintenance once you get the things loaded on there.
0:17:36.8 Kurt: So let’s talk a little about the branding. So how did you go about establishing and maintaining like Suntuity’s branding identity? So what strategies you use to differentiate your company from other competitive renewable energy companies out there? Because I know that when this first started happening, like everybody I heard of it was like, “oh, I’m in the solar business.” It’s like, I can’t tell you how many people I talked to were in the solar business that a year later, they weren’t in the solar business, let’s just say.
0:18:01.1 Dan Javan: Yeah, no, I completely agree, Kurt. Solar started off as a cottage industry. So you had a lot of folks that basically were in carpentry and electrical work that got into solar. But very few business owners jumped into solar that had prior Fortune 100 and Fortune 500 experience. That’s been my background. So I come out of Fortune 100 companies. And to be able to scale the business requires you put things into place that starts from personnel and products and deliverables, all the way up to finances. So when we got into the actual solar transactions, really, it was never on a transactional basis, it was really to meet and exceed expectations. We set with our customers, because that’s really how businesses grow.
0:18:53.1 Dan Javan: I learned early on that you need to build trust every day with your customers, with your colleagues and your partners. And using that mantra is really what’s been propelling our business forward. We try to always exceed expectations, don’t set promises you can’t deliver on. And one thing that’s extremely important, you’ll see a lot of fly by night guys, two men off a bus, like you said, “we’re in the solar business.” Don’t do things that are in the gray area, don’t do things that are illegal, don’t screw it on laws. Because at the end of the day, you’re putting a power plant in someone’s house or business. If you don’t know what you’re doing, you can do a lot of damage.
0:19:42.4 Dan Javan: And a lot of people look at the lowest price point, they might look at the quality of the product, but what they miss is the quality of the workmanship of the actual installation. So part and parcel of what we did was bring in talent that actually was used to delivering with quality. Like we’ve got a full QA/QC department that actually reviews every single project to do more of that, I think is really what started building the brand image of the organization. But then of course, at the same time, it’s being able to scale. And a lot of that comes from prior experiences I’ve had in my other businesses.
0:20:18.7 Kurt: No, that’s excellent. And you bring up something, because I know when I was hearing, there’s only so many, I mean, I don’t know how many there are, but there’s several big companies that make solar panels. But there’s more people that actually install them. So even though you might have the same name of the product, the installation is still important. It’s just like hiring a carpenter. I mean, you can go down and buy two by fours down in Home Depot, and they’re all gonna be pretty much the same, no matter who buys them. But how they get installed and how it builds your house out, could be very different depending on the skillset of the carpenter who came in there to actually do the work. So I agree, especially with a roof.
0:20:52.8 Kurt: And you’re right, it is a power plant. People don’t realize you’ve got whatever 7,500 kilowatt, whatever the number is on your roof, that’s a power plant. So you need to pay attention. There’s a lot of power coming out of that. And you can get hurt or killed if you don’t treat it correctly. Right?
0:21:09.9 Dan Javan: Yeah. I mean, and people sometimes skimp on the pricing. It’s like heart surgery. If you’re gonna replace your valve, would you go to the cheapest surgeon on the block? You wouldn’t. You’d go to the best skill, the one who has the highest ratings, the one that actually delivers success every time. I mean, people need to keep that in mind because, like we said, if you don’t do it right, you can do some damage.
0:21:33.3 Kurt: Right. So that’s really important. So you talked a little bit about, because you came from a Fortune 500 background. So you wanna tell us a little bit about some of the key principles you use in actually building the team. And then how do you ensure like there’s a cohesive between and motivation in the workforce there. So how do you make sure they’re all… Because it’s become a large, if you’re doing 10,000 houses a year, that’s a pretty big business. I’m sure you’re not out on every site of every house when they’re being built. So you’ve got to have a nice team in place.
0:22:00.1 Dan Javan: Yeah, no, I mean, you’re only as good as your weakest link. And you’re only as good as the leaders in your organization that are actually downstream. So the important thing is making sure at any given time you exceed expectations. And again, I’ll be humble enough to acknowledge that we’ve not always done that, but we’ve always had the intent to do that. And what that means is when relationships are built, not when things are going well. It’s when things are not going well. What you do differentiates you from the others. And we always like to stand behind our installs and our product and differentiate ourselves when it comes to that. A lot of people don’t think of that way. Maybe I’m a more traditionalist when it comes to business acumen around it. But I think there’s still a place in the country or in the world today for some of these traditional business methodologies where a handshake means something, promising someone that you deliver on means something.
0:22:55.0 Dan Javan: And I think people actually appreciate that. So from our perspective, it’s deliver with excellence, exceed expectations, surround yourself, frankly, with people that know more than you do. If you’re the most knowledgeable person in the room as a leader, you’ve got a problem. You need to get to a point where you can become obsolete in your organization. And the day you can do that, you actually build a successful organization. A lot of leaders that are new to the game feel that as a threat. That’s really not a threat. I mean, there’s really nothing for you to lose. It’s your organization. But to do those things, I think, are the things that you use to get to success and then obviously build a culture. The culture has to be built around excellence, leadership leading from the front and also have a sense of humility. Because if you don’t have humility, you can’t acknowledge the mistakes you made. If you can’t acknowledge the mistakes you made, you’re not gonna be able to fix them.
0:23:46.4 Dan Javan: So those are just some of the things that me at a personal level, I leverage. And a lot of this stuff, Kurt, I mentioned, I started off my background in aviation. I used to be a commercial pilot, I used to be a flight instructor. I mean, in aviation, there’s no room for error. You have checklists, but you also have to acknowledge mistakes. Because if you don’t you’ve got 150 lives or 200 lives behind you that get impacted by your actions or inactions. And that’s why you have checks and balances. The day you recognize that, regardless of whether you’re the owner of the company or the CEO of the company, your fiduciary obligation starts to your customers and to your company. Everything else has to fall in line. I think you’re gonna start executing along those lines. And those are just some of the morals and qualities that I’ve actually leveraged to actually help grow my businesses.
0:24:34.7 Kurt: And you bring up some really valid points. I mean, I had a personal experience with like a large HVA company locally, it was regional. And they actually made a mistake, they installed the wrong unit, and very expensive to pull it out and put a whole new unit in. We went through negotiation, but I really wanted that unit. And they actually did it and didn’t complain. And I know how much money they lost on that. But they made a mistake. And I’m sure they learned things, they put things in place. But I now use them for everything. Because I know if something goes wrong, if they agree to do it, they’re gonna do it right.
0:25:08.3 Dan Javan: If only we had more money with referrals through you…
0:25:10.5 Kurt: Oh, my God. Yeah. I agree.
0:25:13.4 Dan Javan: Then . You’re gonna not change that. So that’s what we need to roll forward.
0:25:19.5 Kurt: And I think, in your point out, I think a lot of businesses, they look very myopic on this one transaction, if I lose X dollars, I’m gonna suffer a loss. It’s almost like, hey, look, if you resolve a problem, that’s a marketing cost in my view. It’s kind of like, “hey, you made a mistake, we all make mistakes. But we learned from those mistakes. So that means that next hundred that go out the door, you’re probably not gonna make that mistake. The next thousand, the next two thousand, whatever the number is, that is highly unlikely to happen. Because you’re gonna put something in place to prevent that or minimize the chance of that ever happening again.”
0:25:54.0 Kurt: And I’m sure you probably had some things along your way where you’re like, “oh, we don’t want that happening again. So here’s what we’re gonna do now to make sure no other customer has to be involved in that particular situation again, because we had some break in our system or our process. It wasn’t quite working the way we hoped it would work.” right?
0:26:09.7 Dan Javan: Yep. Absolutely. You’re spot on.
0:26:12.8 Kurt: Yeah. All right. So we’re gonna take another quick break here. You’re listening to Master Your Finances.
0:26:17.5 Kurt: Welcome back. You’re listening to Master Your Finances. I’m here with Dan Javan. And we’re talking about solar, which is pretty great and learning how to put a good team in place and really paying attention to your customer and trying to resolve issues, because that is the best way to gain trust among your base. So how did you get this started? I mean, you had to go out… This is a relatively new industry, so to speak. You had to go out and get funding. And so what advice would you have for other entrepreneurs that might be seeking capital for their renewable energy ventures they may be thinking about? What would you suggest to them?
0:26:51.4 Dan Javan: So my first response is get creative. And what that means is think outside the box. So most people that get into a business or want to launch something, the first idea is, “well, how do I leverage the banks and get a loan.” There’s different ways of actually raising cash and capital well beyond just banks. And again, I’m not talking about the private equity side. I mean, so one of the advantages in the solar industry is there are existing finance companies that actually finance projects that have milestone payments. I mean, that’s the cheapest way you can actually raise capital that is project-based. And again, based on the milestone, you can have surplus cash in there that you can leverage to run your operations and actually build on operations.
0:27:37.7 Dan Javan: But the important thing is, one of the first things you should do is try and put job costing on a per project basis if you’re actually gonna try to raise capital. Or again, if you’re just a business in general, really make sure that your use of funds is for the appropriate means that you actually took the cash out of. I mean, in addition to that for renewables today, you have green banks that are willing to give you loans at low interest rates. You have different finance companies that will fund you. You have EPCs that will actually own the system and just sell you the power through a PPR lease agreement that you can actually then buy out after six years or seven years from now.
0:28:16.7 Dan Javan: So let them bear their initial upfront cost. That’s another methodology. And now…
0:28:22.7 Kurt: I’m sorry to interrupt you, but you’re going through a lot of strategies, which I don’t think the listeners are gonna quite catch on. So you mind just talking… And we’ll get through them all. I would definitely wanna get through them all, but you wanna break down maybe how that project-based works or might have, you just give us kind of a structure, an example structure of like how that might work. I mean, I don’t, you’ve been doing this a long time, so tell us… Okay, I’m gonna, that’s a great idea. So what are, how would I kind of do that? I mean, what are some methodologies apart? Just the basics, not too much detail, but what the basics…
0:28:54.6 Dan Javan: So the easiest financing you can get, frankly, is a loan for the project. So you can get a loan from the green bank, you can get it from the SBA, you can get it from your local bank. That’s one methodology. And again, getting a loan is fairly straightforward. You basically have your financials that you offer them and they’ll say year and day, and then it’s gonna be for the project itself. Most banks will give you a loan today with no liens on your actual assets other than the project itself. That’s one way of doing it. The other option I brought up is like a power purchase agreement or a lease where you don’t have to own the system, at least not on day one, just buy the power from the system, let somebody else own it and fund it and have a buyout option.
0:29:36.5 Dan Javan: To me, that’s actually usually the best way to do it is if you do that, the system is now being run, tested, maintained, insured at someone else’s expense. And then like a lot of business owners may not have the tax appetite. You take all the tax benefits. Having a PPR lease is probably the best way to do it because a third party financier takes all the tax benefits, just like you’re leasing equipment. There’s no difference between leasing a solar and leasing a vehicle. You do it the same way. And then you do a buyout clause at the end of six years or 10 years or whatever. The system’s already been tried, tested, proven. It’s reliable. The guarantees and warranties are in place. At that point, you do a buyout and then you take a loan.
0:30:22.3 Dan Javan: Or then you can actually run that off cash flows. Like in states where you have [0:30:25.5] Essex, green tags, Jersey, Maryland, Massachusetts. You could even forward contract on the green tags. For example, in New Jersey, it’s $100 a megawatt hour for 15 years. Let’s say you had 100 KW system that would give you about $12,000 of green tags. You can take a loan against the green tags. And collateralize just the green tags. You can even actually sell your green tags upfront for a discount based on a discount rate that you can agree upon, 6%, 7%. So there’s a lot of different ways. And I know, I mean, I can pretty much write several pages around this because there’s so many different creative ways of doing this. But again, I started off the discussion saying you have to get creative. There’s a lot of money sitting out there.
0:31:15.4 Dan Javan: Like even the Department of Commerce is sitting on cash that you can leverage. .
0:31:21.9 Kurt: Are there any resources somebody could go to, to kind of research like some methodologies on a finance like green or solar? I mean, are there places that kind of hubs that you can go to and kind of say, “hey, here’s some options that we see are working right now.”?
0:31:36.3 Dan Javan: Yeah. So I’ll give you a high level. So if you go to the SEIA website, which is seia.org, which is the Solar Energy Industries Association, they have different types of financing on there. Now, I won’t give you details of who the financiers are, but it’ll tell you different options. And if you now just run a Google search for certain types of financing in solar, you’ll get pages and pages of companies that are willing to provide it. I mean, when we started in renewables and solar 12 years ago, we had maybe folks you can count on one hand. Solar is now a multi-billion dollar industry and the financing portion of it is even bigger. So, I mean, there’s financing readily available. All you have to do is know what keywords to use and you can pick up a keyword from the SEIA website and run searches for that.
0:32:25.1 Kurt: Okay. That’s fantastic. Wow. I had no idea there was that many different ways to… I know some of those things, but I was like, wow, that’s a lot of different options out there. So let’s just say that it’s developed and it’s matured to the point where the bigger investors are very interested in this because I guess they’re seeing, they’re probably seeing a pretty good return and a relatively low risk rate, I’m gonna assume. Is that what’s been kind of happening out there? It’s a relatively low risk strategy for people?
0:32:52.0 Dan Javan: Yeah. So default rates are really low because solar saves you money. So if someone is defaulting, they’re gonna have to pay a high electric bill. And what happens with the high electric bill that you don’t pay is you get shut off. So it’s a utility that you can’t live without. So you’d rather pay your solar bill than have to pay a high utility bill. So when you look at default rates, it’s really low. Even with all the issues of the pandemic and capital markets tightening up, the default rates are pretty low because people typically pay their utility bills. So it’s a fairly risk averse transaction. And at the end of the day, if you don’t pay your bill, the financiers have the right to redirect the power to the grid anyways. And they’ll just monetize it from the utility. So they have…
0:33:36.3 Kurt: Oh, there you go. It’s like assignment of leases for a commercial landlord. [laughter] The bank is like…
0:33:42.3 Dan Javan: Right. So you’ve gotta backstop…
0:33:44.0 Kurt: So, well, when I sell my home, I’m assuming these are now assignable. I can assume them or assign them?
0:33:53.2 Dan Javan: Yeah. So you can assign them. And again, many financiers have an automatic approval flow in there. And some of them will come back and say the new homeowner has to qualify. But again, qualification criteria actually go down each year. When you first got into this, you need to have a 780 score. I mean, now you can get a lease or a PPA down to 600 for certain programs. Anyone coming in that qualifies for a mortgage is gonna have a score well above that. And it’s only gonna save them money. So there’s no reason why people wouldn’t do it. So.
0:34:25.9 Kurt: Okay. So, yeah, I’ve never seen an issue with somebody transferring a house with solar on it personally, but I know there’s a process. You do have to have an extra couple steps in there, but it just…
0:34:34.4 Dan Javan: It’s an extra form that you sign. That’s it.
0:34:39.2 Kurt: Right. So any other financing ideas? I mean, you’ve got a lot of ideas out there. Any other resources for that?
0:34:45.1 Dan Javan: It’s different for different opportunities. So for example, under the IRA, now you have obviously the ITC, investment tax credit was there before, but now you also have a PTC, which is a performance tax credit. So you actually get paid based on the performance of the system as another revenue source on top of the power that you save and produce. So I would recommend people look at ITC and PTC online for solar and you’ll see different ways of financing and you can finance the performance revenue also on a system with a loan against that. So there’s just so many options out there. And again obviously, different folks in different states have different things that they cater to. You have state tax incentives and state loan incentives, too. Like New York has a green bank. So they’ll actually loans for different solutions in New York for the commercial side of it in addition to all the other financiers that you have that we need to put money in.
0:35:46.9 Dan Javan: So all I’d say is there’s just a ton of opportunities out there. If you do the research, you’ll find different options and you should be able to monetize it.
0:35:56.9 Kurt: Excellent. We’re gonna take another quick break. You’re listening to Master Your Finances.
0:36:00.7 Kurt: Welcome back. You’re listening to Master Your Finances. I’m here with Dan Javan. And we’re talking solar, a lot of opportunities, lots of ways to finance it, lots of incentives and credits from the federal as well as a lot of the states. So you need to look at both levels there. So going forward solar is obviously developed a long time since I first heard about it in the ’70s. And I was putting like ReflectoShield on the side of our windows on the house to try to take advantage of not having the house get too hot, a way to save energy during the energy crisis of the ’70s. I know we’ve gone a long, long way since then. So what do you see as being some of the most significant opportunities or potential roadblocks coming up for companies like Suntuity and in the renewable energy industry? So what’s coming up in the years that we’re looking forward now?
0:36:47.2 Dan Javan: So I think one of our biggest challenges has always been educating our customers. I mean, the opportunity is there, the incentives are there. But if you don’t know about it, there’s no value. So we spend most of our time educating folks on what the options are. And then obviously, once you educate folks, the question is really, what’s my cost of capital? What’s my cost to finance? Because obviously, 90% of this industry runs off financing. So one of the things that we started differentiating ourselves with is how do we get in front of a larger audience? So part of us… So we are actually looking at going public in the upcoming months. Part of that is leveraging the public forums to actually get the word out on the different opportunities and obviously the options that Suntuity has to offer across the country.
0:37:35.2 Dan Javan: In addition, the other challenge has been cost. So cost has obviously come down quite a bit. But there’s still a long way to go. And most people don’t recognize. If you look at the actual breakdown of the cost of solar, I’d say about a third of the cost is acquisition sales. Another third is buying down your loan APR, depending on whether it’s residential or commercial. And then the actual system itself, with our entire margin stack and everything else in the EPC is really 40% of the cost. So if you can start bringing down the cost of acquisition, you bring that cost of financing down. You now are able to bring down the overall cost by almost 25% to 30% at a minimum. So one of the reasons why we’re also going public is access to cheaper cost of capital, because then we can leverage that cheaper cost of capital and then obviously leverage that for our customers.
0:38:29.5 Dan Javan: The other thing that we’ve done and we just put a press release out is our first direct to consumer website. In the past, you wanna buy a car, you would go to a dealership. So up to now, you wanna buy solar. Someone’s gonna knock on your door. You’ve got to call a sales guy. He’s gonna show up and he’s gonna charge you in your cost stack the cost of acquisition that could be as high as 30%. So with our direct to consumer website, it’s AI enabled, financing approval on the website, contracts all on the website, engineering all on the website through AI technologies at a cost that’s about 35% cheaper. And you can go out there right now, buy a system in 15 minutes, fully finance it and actually walk out of there with the full design, full contracts that you’ll actually get a sites every day where we’ll actually come take a look at your house or your business and actually let you know if this is all good to go.
0:39:24.8 Dan Javan: But again, so it’s the first website of its type that’s AI enabled in the industry. And we’re doing that because we want solar to be a lot more accessible to people. And to do that, you’ve got to bring the cost down, because as you bring the cost down, you open up new states and new markets, because now you can compete with lower utilities. And again, so our direct to consumer website is open to all states in the continental US today and you can transact. But it’s stuff like that that we need to do as an industry to actually grow the industry. I mean, if you look at all of last year, the industry installed maybe 600,000 homes across the country, which is nothing. I mean, penetration rate of solar today, 4.6%. There’s almost 93.4% of upside if we can actually do things differently. And there’s projections right now in the next six to seven years, the country will be at about 20% of penetration with solar.
0:40:22.0 Dan Javan: But it’s not gonna happen if you don’t do these things to bring the cost down, make it more accessible, bring the cost of capital down. And those are the things that we are doing as an organization and also as a move towards being a public company to be able to leverage that for a customer base and consumer base.
0:40:40.9 Kurt: One of the things I read, and I don’t know what this means, and you can maybe explain this further. I just remember reading an article like in California, they’re having all new homes at some point need to be solar ready. So how does that differentiate between an older home that’s already been there for 30, 40 years? How does that help as far as this process goes? And do you see that happening more and more where the contractor either voluntarily or maybe a state is like requiring it as part of the code? What do you kind of seeing happening out there as far as allowing this to happen?
0:41:07.0 Dan Javan: Yeah, so that’s already happening across more than just California. So it’s happening in Colorado. It’s happening in many northeastern states. In fact, New Jersey, like I think a year before last passed a law, any warehouse more than 10,000 square feet has to be equipped for solar. It doesn’t need to have solar on it. But equipped for solar means structurally the roof has to be sound to take on additional weight for solar. In addition, the electrical systems have to be sound enough to be able to take the backfeed. So you’re seeing this happening more and more. One of the things that we’ve taken for granted, I think, in the US that our European counterparts have not is availability of power.
0:41:44.8 Dan Javan: I mean, if you go to Texas today, they don’t have power half the time. If it wasn’t for solar installations in Texas, the grid would go down. If you look at Europe with what’s going on with Ukraine and Russia, I mean, energy is not a commodity. It’s a necessity without which, I mean, countries literally shut down. We’ve taken that for granted in the US. But I would foresee 10, 15 years from now, renewable production on site is gonna become a matter of national security. Most people don’t recognize that. I mean, already you’re getting into a situation where you have hurricanes, storms. You have homes that are solar with batteries that stay up and running when the rest of the grid goes down.
0:42:30.1 Dan Javan: It might sound like, “well, it’s not a needed thing,” but say that to someone that’s got someone on a ventilator in the house. If they lose power, what happens? People die. So it’s gonna become a point of necessity in the next eight to 10 years across the US. And while the incentives are there people need to take advantage of it right now. So that’s I see where things going across the US in the next decade or so.
0:42:53.5 Kurt: You brought up one point that I know comes up a lot that I didn’t even think of until you just said it with the battery, the backup. Solar is great when the sun’s out, but occasionally gets dark at night. So how is that… Why don’t you explain how that technology has been moving? I know the Tesla’s out there. We hear about that kind of thing as far as the electric car, EVs, that stuff. But how’s that relating the battery technology? What’s going on in that universe? And how is that affecting the viability of solar as far as your home and what you just spoke of as far as losing power for a bit of time?
0:43:26.3 Dan Javan: Yeah, no. So batteries play more than just one role. Most people look at batteries as ability to go off grid in case of power loss. But most people don’t recognize in many states you’ve got time of use laws for power. You’ve got demand response cost of power. And that happens with businesses, too. So now if you can leverage storage, which, by the way, costs have come down significantly and you can spend an hour talking with your storage. If you fast forward to where things are gonna go in five to 10 years, and it’s already happened in California with M3, batteries become a revenue source for you because you can store power in the battery from the solar and then sell that power to the grid during time of use. You can sell frequency regulation availability. You can sell demand response availability.
0:44:17.4 Dan Javan: So not only are you monetizing kilowatt hours from the solar, you’re monetizing kilowatts and kilowatt hours from the battery, not just in the home, but also on the grid. And I’ll take this one step further because now EVs kick into gear around this because that’s really what’s gonna drive solar and storage adoption. The biggest battery in your home 10 years from now is not gonna be the battery on the wall. It’s gonna be the battery in the car. If you look at EV technologies now, more and more EV charging companies, which is, again, one of the reasons why Suntuity invested in a national EV charging company, Bluedot, was the battery in the car will eventually power your home and/or the grid. So when you start thinking along those lines, your battery in your car, like I have a BMW iX50. I have 113 kilowatt hour battery. That’s a big battery. It can easily power your home. And at the same time, if you have grid imbalance, I can redirect the electrons into the grid and actually generate revenue in certain states like California.
0:45:19.5 Dan Javan: So that is where technology is going. So if you start equipping your home now, all this time we’ve been talking about revenue from kilowatt hour production on solar. But people also need to start looking at revenue generation from kilowatts and electron transfer into the grid from storage in addition to solar. That’s gonna help propel renewables even more. And that’s coming. It’s already here in California with M3. And we all know what happens in California, happens in the rest of the US over the next five to six years. So that’s where we are.
0:45:51.0 Kurt: Awesome, Dan. It’s been great. The time just flew by. I appreciate you coming on today. Any final word or two before we leave today?
0:46:00.3 Dan Javan: No, I mean, like you said, there’s got to be a sense of urgency, I think, to leverage solar technologies. I think the technology is proven, the financing is available, and it’s a revenue source that most people don’t recognize. And then just really from our perspective, really, we’re in this for the long haul. We’re in this to build and educate customers and consumers. And the adoption of what we’ve been putting in on the EV side and the storage side, I think, obviously, is gonna propagate a lot of that stuff. But Kurt, I guess, in a nutshell, I think this was extremely enjoyable. I appreciate you bringing me on. And maybe we can have a follow-up session sometime in the future for this.
0:46:37.9 Kurt: That sounds great. All right. Well, thanks again, Dan. Appreciate you coming on. You’ve listened to Master Your Finance. You can subscribe. Don’t forget it, masteryourfinances.us. Have a great day.
