Alternative Energy: October Fireside Chat with Credit Suisse Featuring Jonathan Doochin, Soligent CEO

Interview with Jonathan Doochin, Soligent CEO

As many of you know, I am very passionate about renewable energy. Recently I had another opportunity to sit down with Alternative Energy with Credit Suisse and speak about where I see our industry currently and share a high-level industry perspective on how I see future trends and the impact they may have. 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

We hosted a fireside chat with Jonathan Doochin, CEO of Soligent on 10/6, following our prior call with Jon in May of this year. Soligent is one of the largest pure-play solar equipment distributors in the Americas, headquartered in Petaluma, California. Please see our 5/5 note for prior takeaways.

Residential solar recovery better than expected, but still flattish or slight up Y/Y: Q3 demand and sales lead has been better than expected with a pivot to online tools and various markets opening up for business. Growth is also driven by seasonality (2H generally better than 1H), higher demand from customers working from home and facing higher energy bills (especially in the summer), and continued demand for energy security in wildfire and hurricane-prone regions. Jon expects an overall 2020 demand to flattish for most players but slightly up for large players. Our estimate of demand to be up 6% Y/Y in 2020 (3 GW) remains unchanged.

Strong growth in 2021: Driven by a backlog of projects being pushed out from 2020 into 2021 and potential demand rush ahead of a tax credit, step down to 0% in personal tax code after 2021. Unless the tax credits are extended under a potential Democratic/Biden sweep in the Senate and White House. Jon expects >20% growth in 2021 vs 2019 levels if tax credits are not extended, and at least 15-20% growth if tax credits are extended due to favorable economics and growing demand. In line with our base case 2021 demand estimate of 3.6 GWs, up 26% vs 2019.

Larger installers fared better: mainly as they didn’t shut down (with cash on the balance sheet or PPP loans) and continued to build a backlog, which is up 50% Y/Y. Medium and smaller installers also benefit from demand growth but didn’t have the resources to capture backlog in Q2. Labor availability has not been an issue across the installers, but some could face shortages for specialized roles such as crew leads and electricians.

Grid services also offer protection against customer defaults: FERC rule 2222 opens up grid services in many markets for solar customers and developers. Jon expects the company with the most screen-time with the customer to dominate any potential grid service opportunity, and not just the one with the relationship. Likely winners include developers (RUN, SPWR, NOVA) and inverter manufacturers building new platforms (ENPH, SEDG), but Jon believes even loan companies can be the point of interface. Interestingly, Jon believes that grid services multiply and diversify revenue sources that can help offset any customer defaults in loan/lease portfolios. Jon also thinks that companies providing grid service capability or software are potentially good acquisition targets for the large developers/inverter companies, similar to GNRC’s recent acquisition of Enbala Power Networks.

Pricing: Module prices are seeing some tightness as channel inventory has reduced while demand is growing. Inverter prices are stable with no price competition among SEDG and ENPH’s duopoly.

Batteries: Demand continues to grow as customers seek security (against blackouts) and savings (especially in CA with time of use rates).

I hope hearing about the conversations that take place with the larger bankings who set the projections for our industry is helpful to everyone. I know we are always executing to make solar and storage high impact in our communities so I wanted to share this with you all. Always let us know your thoughts.