Interview with Jonathan Doochin, Soligent CEO
As you all know I am very passionate about renewable energy. Recently I had the opportunity to sit down and talk about Alternative Energy with Credit Suisse and share a high level industry perspective on the future or our industry. Hopefully these high level takeaways will also be useful to you as well as we all work to grow our industry together.
Credit Suisse Summary
Alternative Energy: Fireside Chat Takeaways – Soligent:
We hosted a fireside chat with Jonathan Doochin, CEO of Soligent on 5/4. Soligent is one of the largest pure play solar equipment distributors in the Americas, headquartered in Petaluma, California. We include our takeaways and call transcript in this note. A replay of the call is available through 5/11 on 855-859-2056, pwd 7657804.
· Residential solar slowdown has bottomed out, but recovery not before Q3: Jon saw the COVID-19-related slowdown result in lower installations in early April (up to 50% below the runrate), but noted that demand picked up in mid-April with new online tools for sales/permitting. However, sales conversion rates are low as customers await market certainty. Jon expects the market to return to normalized sales volumes in late Q3, but could get delayed if COVID-19-related shutdowns make a comeback.
· Technology preference: Jon saw Enphase (ENPH) and SolarEdge (SEDG) maintaining their duopoly in the solar inverter market with no clear winner, but expects growth in storage to be a game changer and provides both to build an ecosystem of product and services around inverter. We have discussed both of their ecosystem plans in our analyst day takeaways from late last year (note links – 12/16 ENPH, 11/26 SEDG). The racking market is dominated by Ironridge (private) after its acquisition of QuickMount PV. The solar panel market has seen efficiency improvements, but is relatively commoditized with strong price reductions this year. The distribution channel is carrying ~2-3 months of inventory on hand which has remained unchanged despite supply worries before March (from Asia).
· Small installers slowly navigating through stimulus: Small installers generally carry ~27 days of cash on hand per Jon, implying many have started to run out of cash without any workforce/costs adjustments. Most of the small installers qualify for COVID-19-related stimulus for small businesses (PPP, furlough benefits, work share program, etc..), but are slow to claim them given limited legal/accounting resources. The industry is still hoping for targeted relief for renewables (tax credit extension etc…), that can help stimulate the economy faster at ground level across states, but see no immediate bipartisan support.
· No labor shortage expected in 2020 even if demand recovers, but could see reduced employee attendance due to COVID-19 during the ramp-up period. However, Jon highlighted an important point that longer term labor challenges could emerge if other sectors (such as hospitality, etc..) received more federal/state incentives.
· White House ruling still uncertain: Jon believes that weekend order banning imports of bulk power equipment from foreign adversary is ambiguous, though likely refers to transmission and grid control and not renewable projects. Expect additional clarity in the coming weeks.
· Sector consolidation opportunities could rather be limited in the solar value chain per Jon, despite equity/credit market dislocations, mainly due to the unprecedented and quick stimulus infusion by the Fed.