In conversation with… Andreas Thorsheim, Otovo

In this episode, host Jon Slowe, together with Nigel Timperley – Principal Analyst at LCP Delta, talks with Andreas Thorsheim, Founder and CEO of Otovo, an organisation providing solar photovoltaics to households across several European countries.

Episode transcript

[00:00:04.690] - Jon Slowe

Welcome to Talking New Energy, a podcast from Delta EE, the new energy experts. We'll be talking about how the energy transition is developing across Europe with guests who are working at the leading edge of this transition.

 

[00:00:22.290] - Jon Slowe

Hello and welcome to the episode. I'm sure many of you listening will have photovoltaic panels on your roof at home. I do. And it's a hot, sunny day. It's reaching the heady heights of 25 degrees here in Scotland where I live. So my photovoltaic  panels will be very happy in producing lots of power.

 

[00:00:41.740] - Jon Slowe

Some of you might be thinking about installing PV, and you certainly won't be alone. The energy crisis means more and more people are thinking about generating some of their own electricity. And today we're going to look at the market of supplying photovoltaic systems to households. Across much of Europe, this has been quite a disparate market. Lots of small installers, some energy retailers, some solar specialists. Today we're talking with one company that's taking PV to households across several European countries. And we'll be exploring what they're hearing from their customers, exploring their business model, and how they're looking to grow and scale the business further.

 

[00:01:21.100] - Jon Slowe

And I'll be joined, as always, by a Delta-EE expert and colleague. So that's a long enough introduction. Let's say hello to our guests. First, Andreas Thorsheim, founder and CEO of Otovo. Hello, Andres.

 

[00:01:33.750] - Andreas Thorsheim

Hi, thank you for having me.

 

[00:01:35.710] - Jon Slowe

And welcome to the episode. Andreas, I'm sure many of our listeners have heard of Otovo, but also I'm sure many haven't. So can you start with an elevator pitch for Otobo?

 

[00:01:47.010] - Andreas Thorsheim

Yeah, so Otovo is a marketplace for solar and battery installations, and we operate in ten European countries. And the way we go about things is that for the consumer, we're a place where they can get the solar quote online, and they can buy solar panels online just as easy as they buy a shirt or a pair of shoes. Now, underpinning that sort of webpage where they get an ecommerce experience, we have a marketplace where installers locally compete for the installation work. So we vet the installers - there's almost 700 installer companies on the platform from the north of Europe to the south of Spain. And they're qualified PV installation or electricians who input the cost of their work, of their panels, of their transport costs, etc. And the cheapest guy with sufficient quality gets the job, and that's the one who will set the price on the webpage when you go in and checkout the quote.

 

[00:02:48.510] - Jon Slowe

And can you give us an idea of scale? I guess you said ten countries, but how many systems have you sold or how many are you selling each year?

 

[00:02:55.530] - Andreas Thorsheim

Yeah, we're selling about 2,500 per quarter, so that's about 10,000 per year currently. Now we're entering the UK, Austria and Portugal now in August, so hopefully we'll be able to grow that quite significantly during the autumn. We've been at the pace of growth, where we're growing at about 200 plus percent on a yearly basis in recent quarters. And hopefully we'll be able to sustain that in 2023 and 2024.

 

[00:03:24.450] - Jon Slowe

Okay. And how long have you been going? When did you set up the company?

 

[00:03:27.510] - Andreas Thorsheim

We started in dark and rainy Norway back in 2016. We spent two years in this environment where power prices are low and labour costs are high, making the system work, but then having succeeded in that, right? And if you can make it work in Norway, you can make it work anywhere. We started rolling it out to other European countries, so we entered neighbouring Sweden in 2018, and since then we've added France, Spain, Poland, Italy, Germany and then now sunny UK, Portugal and Austria.

 

[00:04:03.630] - Jon Slowe

You've had a busy few years then and doing all of that during Covid as well. Out of interest, what was the spark that they used to set Otovo or what drew you into this?

 

[00:04:16.270] - Andreas Thorsheim

Well, you can have the long version or the short version, and I'll indulge in the long version this time. So basically, I was working in the tech industry and I didn't feel like I belong to energy problems or even climate problems. I was on the side making cheaper browsers for people in South Asia and Southern Africa and have them save money when browsing the Internet. That was sort of my calling and my work.

 

[00:04:42.620] - Andreas Thorsheim

But then during a work trip in California, I got to visit Peter Carlson, who's now founder and CEO of NorthVolt, eEurope'surope's largest battery factory startup. And back then he was working at Tesla and he showed me around the Tesla plant where they were making the Model S at the time. And to me, that was like coming into a cathedral. And I was like, wow, this technology is amazing. I need to read more about it. And one thing led to the other and I was reading about the declining cost of PV, and one day while I was doing that, I was looking at this cost curve that probably everyone listening to this podcast has seen themselves about the declining cost of solar panels. And two things occurred to me. First was solar panels will win on price everywhere in the world. Even in northern Europe.

 

[00:05:29.800] - Jon Slowe

Even in Norway.

 

[00:05:31.070] - Andreas Thorsheim

Even in Norway. And point number two, which was less commonly thought about, was that once the panel becomes essentially free, towards the end of the 2020s, the only remaining cost in solar will be the last mile cost. The cost of bringing that panel from the docks up on your roof where it can be useful. And I recognise that as an ecommerce problem. So to me, I didn't feel like I was changing industries, more like the solar industry came to me.

 

[00:06:04.010] - Andreas Thorsheim

The first leg of the journey was for the researchers. They needed to invent powerful and good enough solar panels. The second leg has been for the manufacturers they had to build big enough and efficient enough plants to get the cost of solar panels down. And now the third leg is for the tech guys. We need to sell this stuff online, like you order an Uber. Right? And that's what we're doing.

 

[00:06:25.730] - Jon Slowe

Well, I'm glad I asked the question and I'm very excited by your answer because I think the energy, just to make the energy transition work, we need that blend of skills. The energy sector traditionally had engineers, energy engineers working in it, electrical, mechanical engineers. So to get that blend of tech, energy specialist, behavioural scientists, all of those elements are necessary.

 

[00:06:52.250] - Andreas Thorsheim

Definitely. And I tried for a year. I resisted learning the difference between kilowatts and kilowatt hours, but I had to fold.

 

[00:07:05.490] - Jon Slowe

Okay, let's say hello now to my colleague and our second guest today, Delta-EE expert Nigel Timperley. Hello, Nigel.

 

[00:07:12.750] - Nigel Timperley

Hi, Jon. Hi, Andreas.

 

[00:07:15.630] - Jon Slowe

Nigel, I know you're very interested in Otovo's business model. Can you explain a bit about why and if you want to contextualise that with your work on business models in general or notp, up to you.

 

[00:07:29.370] - Nigel Timperley

Okay, yeah, well, I'm one of the more commercial beasts at Delta. I work on a service called New Energy Business Models. So, as the name suggests, it's a bit of a mouthful, but it suggests that we see one of the big challenges is what are going to be the new business models that bring all these wonderful new technologies to market? What is it that makes it possible? Clearly, for some, one of the big challenges for a lot of the new in home tech, we're looking at EVs, we're looking at heat pumps, we're looking at solar. There's a lot of capital costs, so something like subscription models or long term loan models and so on are of interest. But also, then, how do we make them competitive, where marketplaces are part of that as well? So those are all things we've looked at in a broad sense. Otovo is both of those things. As I understand that you're looking at both like subscription models, but you're also providing this marketplace and I'm interested in both sides of that. Perhaps we could start with the marketplace. Tell us a little bit more about how that works, because, Andreas, you went through the sort of various players there, right?

 

[00:08:43.250] - Nigel Timperley

You talked about the researchers who create the tech and then the manufacturers who produce it, and then the guys like yourself who create platforms, but we need installers in there as well, and they come together on your platform and there seems to be a bit of a bottleneck in terms of installation right now. So how does that work? What's the process by which you attract installers and how they win work on your platform?

 

[00:09:11.210] - Andreas Thorsheim

Excellent question. Now, so maybe our entry to the UK can serve as an example. So we're entering the UK this summer, and the way we do that is we use the same technology, the same software platform that we've been using in other countries. And what the software does is that when you input your address, it will recognise the building on that address, ask you questions in order to determine the inclination of the roof and other things, depending on what date are available about that building from public sources and aerial photography, et cetera. But that can work just the same way in every country. Now, what you need to build locally in the UK is the workforce and the installers who are going to partake on the platform. So what we typically do is we start with a list of certified installers or members of the Solar Energy Association, some kind of high quality source where you know that these people are quality workmen. Then we'll call them through our account manager and say, listen, we're starting this online platform. We can make sales for you at the prices that you're comfortable with, and if you're competitive, you'll get orders straight into your order book. Does that sound interesting? And to some guys it is. And so they'll say yes.

 

[00:10:39.110] - Andreas Thorsheim

And then we'll ask them for paperwork showing that they're an incorporated company, that they pay their taxes and other things that help weed out the non-serious players. Then they register on the platform, they have an onboarding that takes a couple of hours, where they input the labour cost of their different skill sets, the cost of scaffolding, of inverters, of panels, all the equipment that goes into the system. And then that is sufficient for us to combine the data about the house and the building with the data about their costs. And then you can determine immediately what building 16 panels on a roof in Yorkshire will cost, because there's no unknowns, right? We know everything, so we know the shape of the building, we know the cost of the labour and the equipment. So we can give you a quote immediately online. There's no need for a home visit and all that waste. So that's how it works. Now, of course, this is handymen and they have varying quality, so before they get to compete freely on the marketplace, they need to do a certain number of test installations that get physically inspected by a third party inspector.

 

[00:11:54.280] - Andreas Thorsheim

That helps weed out the poor performers. And once they pass that test, call it Darwinism or capitalism, we'll make the better ones get more work and the poorer ones less work, and they'll get feedback. And usually even the guys who are not performing that well, they like the feedback that they get on the platform because they'll see, my scaffolding is so expensive, that's why I never get jobs on tall houses. Right? And that feedback loop is quite helpful to them to create efficiencies. And so the result of this is that it ends up with a division of labour that's a bit different than it would have been without us in the loop, because we'll do more of the marketing and the sales and the installer will be more pure play installer company. They won't touch PDFs as much, they won't do as much billing because we'll do that and then they'll be screwdriver in hand a larger percentage of their time.

 

[00:12:52.450] - Jon Slowe

Andreas do you find it... well from work we've done looking at similar business models for heating installations. Some installers are very happy not to do the sales and marketing and just turn up and do the installations. Others really enjoy that customer contact, they enjoy the quotes, they see that as part of their job. How do you see the split in the PV installer market? Is it a very clear split between people who like different parts of the job or does most of the market like what you're doing and happy to go on your platform?

 

[00:13:25.090] - Andreas Thorsheim

It's a bit of both. I think it's the same thing. It's like in the hotel industry. Some hotels enjoy being on booking.com or hotels.com and others want to have more of a boutique feel to them and won't participate on that type of platforms. And we see kind of, I'd say, three types of behaviour on the platform. The ones who enjoy not doing sales and marketing at all and will turn on into merchants on the platform entirely, as you see Ebay or Amazon merchants also, right, they turn into that. So it's a clear set of responsibilities. We do one job and they do the other. Others will have us provide work for one of several teams that they have, so they'll consider us a bit like their base load of work for their teams. And if for some reason and they will then have a backlog of projects, an order book that we provided to them. And if the other teams aren't fully utilised, they can eat a bit out of the base load that we provided. So that's sort of the second behaviour. And the third behaviour is players who primarily don't want to be on our platform but use it as backfill when they have gaps in their order book.

 

[00:14:46.320] - Andreas Thorsheim

So they might be part of auctions for government buildings or C&I projects and then they'll be fully utilised in April and in May and in July, but in June they're a bit short of work and so they'll just do cutthroat prices, fill the order book and have their teams fully utilised during June. And that's also nice because it creates a bit more competitive pressure on the platforms. Consumers get a bit better prices because of these guys, but you can't really build your empire on those because they come and go and are a bit more unstable.

 

[00:15:21.970] - Nigel Timperley

That description is really interesting. Thanks for those three categories. I did wonder actually if the current crisis was either a blessing or a curse for you, because obviously first thought is a blessing, right? It's boom time. Everybody wants PV. But of course, if all those installers have got more work than they know what to do with, what do they need you for? So is it good for your business or bad for your business?

 

[00:15:47.030] - Andreas Thorsheim

Well, the third category has all but disappeared, right? Because no one's got empty slots in their schedule. On the other hand, they are much more keen on avoiding waste. So driving over to an old lady's place, drinking tea, going back and doing the calculations, creating a PDF, sending the offer only to get a no, that's terrible these times, because you could be out there making money, right? So that's very wasteful. And our platform is extremely rapid in getting that no. We get that lady no very fast because she'll go online, she'll get a quote and she'll say, my God, £8000, I can't afford that. I don't want to do that. And if we can get her to know that it's a no within a second, that's great. Everyone saves lots of time. She does, the installer does. Even we do.

 

[00:16:45.190] - Jon Slowe

You're driving efficiency. Yeah.

 

[00:16:47.660] - Andreas Thorsheim

That means the installer, he can avoid all those missed opportunities. He can avoid the waste of driving or creating offers. So in boom times, he should definitely not make PDFs, he should definitely not be in Excel, right? The installer should be doing the valuable work that only he can provide. And that's in the electric cabinet, that's up on the roof, that's in his warehouse, getting the right number of panels into the car, right. These things are valuable and the missed opportunities aren't. I think it's a blessing and a curse, right? We could be selling a lot more, but we are constrained by the ability to install and the availability of equipment.

 

[00:17:35.110] - Jon Slowe

I guess there's something in that bit... What do you see for customers, then? How is demand changed over the last year? Maybe picking markets you've been in for a while rather than new markets because you've not got the comparison there.

 

[00:17:46.730] - Andreas Thorsheim

Well, it's quite easy to answer because it's the same thing everywhere. It's exploded and it started in the Nordics in September. Why did it start there? Because they're the most liberalised markets where most of the consumers are on live spot prices. They'll get the wholesale price directly into their bill immediately. So in September last year, demand tripled in Norway. And then the shockwave to the European power system just rippled through market after market, with Sweden second, Italy and Germany third and fourth, Spain fifth, et cetera. So depending on the degree to which governments lifted their price caps or the fixed price periods ran out for consumers, or whether consumers were directly exposed to power prices, they all felt the power bill explode and went in search of alternatives to unpredictable and expensive grid power. And I think that's been a boom to us in the solar industry. Heat pumps have seen the same explosion in demand. But even here in Norway, I heard, like the guys selling woods for wood heating, right? They've never experienced a season like this so every alternative to grid power is seeing an explosion in demand. Yes.

 

[00:19:12.470] - Jon Slowe

And that three times increase in demand, that's typical across the different countries?

 

[00:19:17.860] - Andreas Thorsheim

Yes. It's pretty stable. Everything three X from when the power price bled through to consumers. It was tapering off somewhat in the beginning of 2022. But then the Ukraine war and the response in tightening of gas markets came about. And I think that just consolidated demand at these high levels. And I think what will happen now is that even if prices come down somewhat next spring, demand won't. Because what you're doing when you're buying insulation for your house or a heat pump or solar energy insulation, it's not as much buying cheaper power in wholesale markets or in the spot market. What you're doing is you're buying a hedge, you're buying an insurance against future high prices. And when consumers have experienced the disaster of erratic prices, they're going to they don't forget, they're going to want that insurance. Right. So it's like you've seen your neighbour's house burned down. You're going to want our insurance for the rest of your life. This is a permanent shift to home efficiency, energy efficiency, home energy production and demand.

 

[00:20:41.390] - Jon Slowe

You've got two models. Nigel, I know you're really interested in the subscription model as well as the paying upfront model.

 

[00:20:47.170] - Nigel Timperley

Yeah.

 

[00:20:49.250] - Jon Slowe

I can see you've got different categories of customers. Some customers are struggling to pay the next energy bill. Other customers can probably - they don't want to pay the higher energy prices, but they can. And they might have money saved up from a few years of Covid. Yeah, really interested in understanding that subscription business model a bit more. Nigel, I know you got lots of questions, but do you want to start with just in a nutshell, what is that subscription offer? And then, Nigel, you can follow up with that.

 

[00:21:21.270] - Andreas Thorsheim

Yeah. So the pay as you go model for solar energy was invented and developed in the US and was an invention that drove this residential solar market in the US. With companies such as SolarCity, later Tesla, Sunrun and Sonova being the champions of that product. And what it does is that a way for the consumer, rather than paying 5000 or €10,000 on day one, you drop that price up into monthly instalments, or you pay for the solar power the same way you buy grid power. So in different ways, you're making it into a monthly payment. And because solar energy is so affordable compared to grid energy, you can start saving on day one on month one, and that expands the market. To all those people who don't have the investment opportunity on day one.

 

[00:22:22.950] - Jon Slowe

There's an obvious question, Andreas... the length of the contract. So how long do customers have to sign up for... What's typical?

 

[00:22:35.490] - Andreas Thorsheim

The customer signs up for 20 years. And that's been the norm in the US market since this emerged in 2016. And when we started in Europe, we also created 20 year contracts as the norm. And consumers are comfortable with that because with a contract that is 20 years, it's long enough so that the monthly bill is small, you amortise it over.

 

[00:23:06.840] - Jon Slowe

A long enough time.

 

[00:23:08.080] - Andreas Thorsheim

If you amortise it over a longer time, the monthly payment is smaller. Even if it's a bit more expensive in the long run, the monthly instalment is low enough to beat the power price and still you get ten years of free power at the end of the period if you keep the system. Right. So that's what makes it attractive on a monthly basis. And of course this could be theoretically a two year or eight year or twelve year or a 28 year contract. It's kind of arbitrary to put at 20, but it's something the consumer understands as a long amortisation, it creates attractive monthly rates and I don't think they ask a lot more questions than you would and it's kind of than you would if you're building a nuclear power plant or a gas plant because it's exactly the same model, right. It's just not individual. The state or the utility builds a big power plant and they have the ratepayers pay for it over decades and it's exactly the same. We're just doing it in a super small scale on your roof, right? Yeah.

 

[00:24:12.210] - Jon Slowe

We've got energy as a service already, as you say, amortising cost to a power plant over many years. Nigel, I know you're interested in let the contract and moving house, for example.

 

[00:24:23.230] - Nigel Timperley

Well, yes indeed. Cancellations, customer defaults and then also flip side of that, which is the finance provider because finance providers tend to want collateral and adding in the B2C customer as a sort of random factor, you're not entirely sure what's going to happen. Are you able to explore some of that?

 

[00:24:47.430] - Andreas Thorsheim

Yes. So let's start at the financing end of this. This is an asset that is in high demand for financing, right? Because it's an attractive product. It's a distributed infrastructure where the counterparty isn't one corporation, it's thousands and thousands of European homeowners. And that's a good category because it's kind of the top of the demographic pyramid. It's the people who own their own homes. They typically have high credit worthiness and the chances that they all default at once are very low. They have individual lives with individual circumstances. So the credit profile of that portfolio is already quite good. Then the attribute of the product is good because it's a product where when the consumer gets this product, his ability to pay increases, which is different from a bank loan in any other category because the utility bill falls by more than the solar power bill increases. Right. So you're freeing up cash. So it's a wonderful credit product for the investor, whether it's a debt investor or an equity investor because it's one that's freeing up cash at the other end of the contract. Now, of course, if you're a lender into this, you will ask whether you get your money back, what type of risks are you running the consumer circumstances may change, and so you want to credit score them once you get them on board.

 

[00:26:25.190] - Andreas Thorsheim

And we do that, and the US players do that with FICO, scores or equivalent in the different markets. And the worst payers, they cannot take part in this. You cannot give money away to people, give an asset away to people who will not be able to pay for it. Then there's provisions on what happens if you move. Not everyone has a horizon of living in the home for 20 years. And then there's a pay or stay provision in the contracts by which you either pay out the remainder of the contract when you're selling your house. And that's typically quite feasible because you're getting paid a million for your house, right? So that's okay. Or you're just going to sell the house with the subscription as part of the deal. People are used to that with gas subscriptions and other types of charges that go with the house as you buy it. You'll consider that while buying it, it's kind of the same demographic that moves in as was moving out. So they'll typically find the same things they'll typically find the same things attractive. And as for the maintenance and operation of this, it's a great product because there's no moving parts in solar power, so the panels typically stay up there and don't do much.

 

[00:27:48.880] - Andreas Thorsheim

And in Europe, there's sufficient amounts of rain for these things to clean themselves, pretty much. So the only challenge over the lifetime is the inverter that is not scheduled to last for 20 years. So in the contract, we will change the inverter if it malfunctions, and that's typically scheduled after ten to twelve years. You'll have to do one inverter change halfway through the contract, roughly. And that's part of the contract we're planning with the inverter change halfway through every contract.

 

[00:28:25.140] - Nigel Timperley

Yeah. Gosh so in a sense...I take your point about the demographic. It's almost like a swarm deal. You're prepared to live with a certain amount of default, I guess, because it just becomes a numbers game. Right. The vast majority don't default, and therefore you just edge in a certain amount of loss as an operational cost, I guess.

 

[00:28:50.320] - Andreas Thorsheim

You do, right. And the data from this and luckily, we have ten to 15 years of data from the US. Now with the pioneers in this industry, and they have incredibly low default rates and incredibly low losses given default. And the reason being that the consumer, if he defaults on this payment, will replace those kilowatt hours with more expensive kilowatt hours from the regular utility. So it's the cheapest bill not to pay when you're in financial trouble. So that motivates the consumer to pay these bills, even if there's unpaid parking tickets and tuition fees or whatever you have out there. Right. Those are probably better to default on. Right.

 

[00:29:36.590] - Nigel Timperley

What happens with the feed-in tariffs or equivalent schemes? Does that accrue to the householder or to the finance provider in Europe?

 

[00:29:49.430] - Andreas Thorsheim

I'd say all or almost all benefits that are provided by governments or local governments accrue to the consumer. So investment aids, tax credits feed in. The whole value of the power in our contract goes to the consumer. So the consumer basically pays us for the infrastructure. And if it's a rainy day and there's no sun hitting those panels, it's their problem. Now, if it's a very sunny day and they can sell some power back to the grid, that's their benefit.

 

[00:30:27.830] - Jon Slowe

That performance risk and that technical risk are really well understood with PV, so people are happy to take that and you'll have to take the performance risk on the PV panel and one of those to change a contract.

 

[00:30:41.100] - Andreas Thorsheim

Yeah. And I think it distributes the risk and trust in the perfect way. Because the question you'll ask when you're about to get solar panels on your roof is, what do I really know about LONGi? Or what do I really know about Futurasun or about Fronius or SolarEdge? These aren't exactly brands like BMW or Mercedes, but even if maybe many of the listeners on this podcast will recognise those brands, it's not something that everyone has grown up with is accustomed to. So how can you know that this is a top quality brand when you're talking to me? When I put on the webpage at otovo.co, you're getting a Fronius inverter, how does the consumer know whether that's good? Well, the proof is that I'm willing to own that Fronius inverter in your home for ten years. And I know that if it malfunctions after five years, you're in the right of having that thing replaced. Right. So I'm ready to own that thing and sell you the service that it provides. And I'll have much higher cost if that thing malfunctions. So I'm putting my money where my mouth is because I'm buying it myself.

 

[00:31:56.570] - Jon Slowe

Well, there's a famous phrase: risk is best born by the company able to understand it and take it. And in that example, you're far better, Otovo is far better off to understand that risk and choose a better manufacturer compared to the customer. Given our time, there's loads more questions I'd like to ask. Nigel, I'm sure there's lots more you'd like to ask as well, but we better get on to the Talking New Energy crystal ball. So I'm going to bring it out, here it is in front of me and I'm going to set the door to 2030 today. So eight years' time. Different question for each of you.

 

[00:32:35.130] - Jon Slowe

Nigel, your question. So this, as a service business model for well, both a marketplace and as a service business model, isn't unique to photovoltaics. It's there for heat pumps, but it's not ubiquitous, it's not widespread at the moment. There's not that many companies doing this. So by 2030, how widespread will it be, do you think? And will it be new entrants like Otovo or large established energy companies, or a mix of both? So that's your question, short question, snappy answer, please.

 

[00:33:17.670] - Jon Slowe

Andreas for you, what would Otovo look like in 2030? And I'm not so interested in scale, more about what... Will you be doing exactly the same thing as you're doing now, or are there new things you want to do or enhancements that you want to bring to market as well? So, Nigel, let's start with you and then to Andreas.

 

[00:33:38.370] - Nigel Timperley

Okay. It's an interesting one, this, because as a service, models have really taken off in B2B, much less so in B2C for all sorts of reasons. But a single B2B customer can be easier to sell to, it's a bigger prize once you sold to them. They're probably more predictable in terms of their demand profile. You can think about... they're easier to credit score. There's a whole bunch of reasons why B2B is where you might start. That doesn't mean B2C isn't attractive, it just probably means it needs a bit more thinking about.

 

[00:34:09.210] - Nigel Timperley

My feeling from recent work is that actually we are at the start of an S curve of adoption of solar. I'm absolutely sure that Andrea is sitting in the right industry in the right space. And I do think as a service has got a lot to offer, not just in PV. I think it's got a lot to offer with EVs and heat pumps, all of these high value products with big price tags. My worry is whether the finance people will come on board. We're actually talking to asset leasing managers in banks at the moment to get a sense of that, but I think a lot of it's just familiarisation.

 

[00:34:48.390] - Nigel Timperley

I talked to one senior asset leasing manager at a large global UK bank and they talked about how they put hundreds of millions behind a smart metering deal and had surprised themselves and they were now looking at new energy. And a lot is just familiarisation. I think we've seen a very slow runway with that, whereas people have got on board with what the risks are, there is potential to amortise charges over future energy flows. And the points that you've made there, Andreas, about the unusual nature of this business, that everybody needs energy one way or another. So that does change the game. It's not just like having a finance deal on a TV. It does change the game. And I do think we could be seeing something quite interesting. So, yes, I'm very bullish about as a service in B2C over the next ten years. I think B2B will lead the way, but I think B2C will follow. Sorry, that was a long answer, but it's a complicated picture. But I think we are starting to see hearts and minds come on board, particularly in the finance community, which is crucial.

 

[00:35:57.720] - Jon Slowe

Thanks, Nigel, that was great. Andreas, your question.

 

[00:36:02.410] - Andreas Thorsheim

In 2030, I think we will have added to the kilowatt hours we're selling from your roof batteries that can store those kilowatt hours to when they are most needed. And we will have added other components to that system EV chargers, maybe the water heaters, heat pumps that act in concert with your needs. More importantly, I think that providers like ourselves, who own tens of thousands or hundreds of thousands of assets in a fleet across a price zone across the country, we'll be able to do things with that fleet that the individual owner can't. We can provide grid services or in different ways, arbitrage capacity, frequency, energy, price, imbalances in a way that provides a service to the wider community and pays the individual participants in this. So I think that the first step is put solar panels on the roofs. Second step is put batteries where those solar panels are, and then third is add software to this so these things play like a piano and not individual tangents.

 

[00:37:20.410] - Jon Slowe

Okay, so it's quite interesting. Andreas, I can see other companies, a bit like yourself, trying to do all of that in one go. You're focusing very much on getting scale first on PV or PV and battery first, and then once you've got to scale or whites, you've got enough momentum, attraction, you move on and have those other layers you talked about.

 

[00:37:43.330] - Andreas Thorsheim

Every day we're putting assets out in people's homes where they've signed a contract to be with us for 20 years. So the average tenure left in our portfolio remains at 19 years all the time because we're adding so many new ones. So the accumulated graph of this is looking very steep, right. So every day I'm building a relationship with new people, right. And I think it's a smart approach. And I come from subscription, online subscriptions, and I know that once you create that relationship, that's the best starting point for adding new stuff, doing all at once, it's a bit like thinking about the final and the quarter finals. That only means you get knocked out in the cup phase, right? You need to think about the game you're playing right now.

 

[00:38:36.610] - Jon Slowe

Nigel, one questionou you didn't get to... Start ups or new entrants like Otovo, sorry you're probably not a start-up anymore Andreas, I'll call you a new entrant.

 

[00:38:48.190] - Andreas Thorsheim

Honoured to be categorised as a startup still.

 

[00:38:52.870] - Jon Slowe

Or large established energy companies. Do you see innovation coming from all areas, or do you think it's companies like Andreas's that are already driving the innovation that change here, Nigel.

 

[00:39:03.370] - Nigel Timperley

I think it's coming from the startups, but I think there'll be lots of partnerships with energy companies because the energy companies do have a role to play. And I can see the energy company in the future becoming sort of this atomised entity which just buys in and partners with skills rather than having to do everything so that I could see you must be talking to energy companies as potential partners, I imagine, Andreas. That's how I would see it anyway, so I would see it as a partnership deal rather than.

 

[00:39:35.250] - Jon Slowe

Thanks. Well, fascinating discussion. Really enjoyed it, lots more I'd like to carry on with but we better draw it to a close there. Thank you very much, Andreas. Really enjoyed your company today.

 

[00:39:47.070] - Andreas Thorsheim

Fantastic conversation. Thanks.

 

[00:39:49.270] - Jon Slowe

Thanks, Nigel.

 

[00:39:50.450] - Nigel Timperley

Thanks, Jon. Thanks Andreas.

 

[00:39:51.120] - Jon Slowe

Thanks and thanks to everyone for listening. We hope you enjoyed the episode and look forward to welcoming you back to Talking New Energy next week. Thanks and goodbye.

 

[00:40:02.010] - Jon Slowe

If you're as passionate about the energy transition as we are, then please keep in touch. You can follow us and me on Twitter, LinkedIn or subscribe to the podcasts on your chosen podcast platform. If you like the podcast and like sharing, then please do rate us and to listen to archived episodes, to read transcripts, see the latest Delta-EE insights, then please visit www dot delta dot e e dot com.