The Australian solar electricity industry is exploding, with more companies entering to take advantage of the Federal Government’s rebates. But Tony Thornton, chief executive of market leader Solar Shop, says these start ups must be prepared to fail.
“Being at the forefront of an industry, there is something going wrong every day. We’ve certainly failed in a number of ways, because we are creating an industry and don’t have anyone to copy off,” he says.
“As soon as we roll something out, you make a lot of mistakes and you have to create a culture that says it’s okay to do that, it’s okay to learn from them and move on quickly. When we do something right, others copy us, and when we make a mistake they learn from that and run with it.”
The company has taken advantage of renewed demand for solar electricity systems, which Thornton says began during 2007 after Al Gore released his film warning of climate change, An Inconvenient Truth. The company started in 1999 and now turns over $71 million per year.
So if demand is so high, why has Thornton described the past few years as a “nightmare”?
“Growing the company has been a nightmare, because in a way we are creating an industry. We deliver 25% of solar systems in the market, we’re the largest supplier by double, and challenges have included finding people to hire who simply don’t exist.”
“There is no single entity to recruit from, and we’ve had to invest, train them and do that very, very quickly. And with no one to follow, the industry sort of watches us, and whenever we do something right that rolls on, and whenever we make a mistake it’s avoided.”
Solar Shop was given a massive boost when the Federal Government increased its rebate for households to install solar electricity systems.
And while Thornton freely admits the business must be ready to stand on its own when the rebates disappear, he says the company has positioned itself in a market with a huge prospective customer base that will see it operating for years.
“That assistance is designed to get us to a point where the industry can stand on its own. The Government has been intelligent, and has recognised that between 2015-17 renewable energy will be cheaper than standard grid electricity.”
“You build an industry over time, and our market is huge… Australia has one of the best environments for solar, and one of the lowest solar penetration rates.”
Thornton says there will be a point in the next few years when electricity from solar panels becomes just as cheap as traditionally delivered methods, and the business will explode. But until then, having the Government deliver financial assistance to customers has been a double-edged sword.
“From a cash perspective, managing those issues has been tricky. Over time with certain rebates and tariffs, the Government owes you quite a substantial amount of money. The rebates have changed now, but in previous years they take anywhere from 90 to 120 days to pay and that presents cashflow challenges.”
Thornton says customer demand will kick in when government assistance disappears, as customers will be lured in by the prospect of reducing, or completely eliminating, their electricity bills.
“The industry has been driven by attention from the Government and economic viability. People’s attitudes have changed, they want to reduce electricity bills and help the environment, and we fit in that space.”
But the promise of reducing electricity hasn’t been the company’s only drawcard. It says the ability for customers to generate their own income from solar panels has soon a surge in activity.
“There are people using solar as an investment just to generate income. There was one customer who purchased 15kw worth of panels, when he only needed 5kw to run his house. He’s putting electricity into the grid and earning an actual income from utilities.”
Some might say giving your customers a revenue-generating product is a dead-end, but Thornton says the market is completely untapped and demand will last for decades.
“You have to keep in mind that less than 1% of homes of a solar system. It’s a product that does pay for itself, and payback times range from seven to eight years, and if you generate enough electricity then you generate income, and there is a lot of demand for that.”
As the company grows, Thornton says the business will face more problems.
“Going from a staff of 12 to hundreds over two years was hard. We say you’re only a new person for a day, because there are so many people coming in. It’s hard to create a culture, and it requires a whole amount of focus.”
“I suppose that will be the biggest challenge, creating a culture and getting close to customers. We need to educate the market, engage regional markets and answer a lot of questions. We’ll improve the website, keeping having information nights and keep giving out details about why to go solar.”
Thornton says the company hopes to have 10% of Australian households installed with solar panels by 2020 – leaving it with plenty of room to move.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
