Episode Transcript
Summary
The global cumulative installed capacity of solar has been doubling approximately every three years since the year 2000. Since 2000, we’ve gone from 1.2 gigawatts of total installed capacity around the world to 939 gigawatts in 2021.
3:31: Tom Dinwoodie from the Epic Institute and RMI tells us about the history of modeling technology adoption curves: from the automobile, the refrigerator, to the laptop. His group models the adoption curve of solar technology.
What did they find?
6:53 If solar technology fits the adoption curves projected by the Epic Institute and RMI, we could keep global warming to 1.5 degrees C.
But there are a lot of challenges to expanding solar. So we talked to John Witchel whose company King Energy is installing solar on multi-tenant buildings.
9:59 He identified the ‘split-incentive problem’ of multi-tenant buildings: the landlord has no incentive to lower the cost of energy because they don’t pay for it, and the tenant has no incentive to improve the quality of the building because they don’t own it. And so King Energy rents the roof, and pays the landlords, and decreases the energy costs to the tenants by adding the solar.
13:01 The solar industry has also had a lot of other challenges: expiring tax credits, tariffs, competing energy sources. But the Inflation Reduction Act just expanded solar investment tax credits for the next 10 years, alleviating many of those issues.
14:37 Even through these challenges, solar has expanded because, as John puts it, it feels “exactly like the early days of the dot-com boom.” Full of opportunity.
15:17 Solar and Moore’s Law: For each generation of a technology, you get better – “a lower defect rate, higher density, better throughput.” So solar is expanding exponentially. Solar panels are now 10x cheaper than they were just 10 years ago. They’ve got a positive feedback loop, or ‘positive disruption’ as Tom Dinwoodie puts it.
In sum: Solar is growing fast, and the challenges are being overcome. That’s good for the climate.
TRANSCRIPT
Introduction
[00:00:00] James Lawler: Welcome everyone to Climate Now, a podcast that explores and explains the ideas, technologies, and the practical on-the-ground solutions that we will need to address the global climate crisis and reach a net-zero future. We know that the world is adding a staggering amount of new solar energy to the grid every year.
[00:00:21] James Lawler: The global cumulative installed capacity has been doubling approximately every three years since the year 2000. Since 2000, we’ve gone from 1.2 gigawatts of total installed capacity around the world to 939 gigawatts in 2021. To put that into some perspective, one gigawatt is equal to about 3 million solar panels, or about 333 large wind turbines.
Additional source: https://ourworldindata.org/grapher/installed-solar-pv-capacity
[00:00:47] James Lawler: So, with the help of our guests today, we’re going to try to explore the following questions: number one, what predictions can we make about the future of a given technology if we know how quickly that technology is being adopted in the early stages of its spread. Two, how quickly are we adding solar energy to the grid , and what does that rate of adoption say about what the future of our energy mix could look like?
[00:01:10] James Lawler: And three, what are some of the business opportunities that have been coming to light, if you will, as solar energy has begun to ramp up? I spoke with two different guests, each with their own firsthand experience of this topic.
Introducing John Witchel, Co-founder and CEO, King Energy
[00:01:22] James Lawler: John Witchel is a software engineer and serial entrepreneur who has founded nearly a dozen startups, mainly focused on financial technologies.
[00:01:30] James Lawler: One of those fintech companies, called Common Assets, was acquired by SolarCity (Tesla Solar) to provide the software backbone of the solar installer’s unique solar bond program. That experience in renewables eventually led John to start his newest company that we’ll be talking about today, King Energy, which installs solar arrays on multi-tenant commercial rooftops.
[00:01:52] James Lawler: Before we talk to John, we speak with Tom Dinwoodie. Tom is a true pioneer in the renewable energy sector. After leaving MIT Energy Lab in the early 1980s, Tom founded a wind energy company that built one of the first wind generation facilities in New England. He then started PowerLight Corporation, which was one of the first major US solar companies in the 1990s, back when commercial-scale photovoltaic technology was still very much a work in progress. That company eventually merged with Sun Power. Today, Tom is working very hard to decarbonize the planet on numerous fronts. He’s a trustee at the Rocky Mountain Institute (RMI).
[00:02:28] James Lawler: He’s managing director of Arc Equities, which invests in clean tech, and he’s executive director of the Epic Institute, which is focused on monitoring the most promising global solutions to climate change, and has been looking at the adoption rates of solar and wind energy, and what that rate of adoption means for the future of our energy system.
[00:02:45] James Lawler: Tom, welcome to Climate Now, it’s great to have you on the podcast.
[00:02:48] Tom Dinwoodie: Great to be here, James.
[00:02:50] James Lawler: To get started, tell us a little bit about the Epic Institute. What is it and what do you do there?
[00:02:55] Tom Dinwoodie: Epic is a team of analysts and developers focused on modeling the adoption curves of climate solution technologies and practices.
[00:03:04] Tom Dinwoodie: We do this across seven industry verticals, all of which are needed to decarbonize the planet. These are electricity, buildings, transportation, industry, agriculture, forest and wetlands, and the seventh being carbon dioxide removal, which is an emerging industry, or one which is going to need to emerge to help us remove the legacy emissions in the atmosphere.
[00:03:28] James Lawler: So, what do you model within each of those sectors?
[00:03:31] Tom Dinwoodie: There’s a history of tracking adoption curves: technologies of the 20th century for the adoption of the automobile, electricity, standard items in your household today, refrigerator, TV set, fax machines, cell phones, the internet, the laptop, you know. The adoption of these technologies and these methods happen over decades at the most. It doesn’t take centuries.
[00:03:56] Tom Dinwoodie: You look at the adoption of airline travel, for example, that just happened in a few decades, and there you had to put an entire infrastructure in place, right, with airport terminals, all the logistics and the regulatory issues that go together with air travel.
[00:04:09] James Lawler: Massive workforce training to accomplish that, also.
[00:04:12] Tom Dinwoodie: Yeah. Massive. But it still happened within decades. It’s very interesting to look at that.
The Positive Disruption thesis
[00:04:18] James Lawler: So, the rapid adoption curves you anticipate for solar and other renewables are based on a concept you call positive disruption. What exactly is that?
[00:04:27] Tom Dinwoodie: That thesis basically states that while the world awaits governments to take action on climate, market-led transition to climate solutions is well underway, and at a speed that may just work for humanity.
[00:04:38] Tom Dinwoodie: I experienced growth of my own company, PowerLight, which had been growing 85 percent year over year from 1994 to 2007, when we merged with Sun Power.
[00:04:49] Wow.
[00:04:49] Tom Dinwoodie: And the industry itself was growing 40 to 60 percent year over year, and wind was growing similarly. So, it was rather easy to predict back in 2010 that if the industry maintained anywhere near that kind of growth rate, the global electricity sector would be decarbonized by the early 2040s.
[00:05:07] Tom Dinwoodie: The same thing is happening now in other sectors, like transportation with EVs. So anyway, RMI took on this work. They already had tools for the modeling and the transitions under their belt, within the energy sector, anyway. They had already undertaken econometric analyses of the transitions, likely in both the U.S. and the Chinese economies. They took those analyses and backed out the logistics functions, the adoption curves for the various technologies, and fed them into a different kind of model for the positive disruption work.
[00:05:38] Tom Dinwoodie: The result of that initial RMI work from 2017, which is published on the RMI website and on the Epic Institute website, was an emissions curve that approximated the IPCC’s RCP 2.6 trajectory. That’s representative concentration pathway 2.6. 2.6. Refers to the radiator forcing in the year 2100, 2.6 watts per meter squared, and that leads to a planet that remained well below 2 degrees Celsius throughout this century.
[00:06:11] Tom Dinwoodie: Then, in 2018, I formed Epic Institute in part to take over the positive disruption work, which RMI willingly allowed on the condition that we find experts for modeling the land use sector, which was not a core strength of RMI, but they did a very good job approximating that in their first analysis.
[00:06:33] Tom Dinwoodie: So, we approached The Nature Conservancy and they agreed to join the effort, and TNC turned out to be an excellent choice because they had scientists who were deep into the problem, global models and methodologies. They were tracking hectares all over the world using satellite data, and they had leading peer-reviewed publications already in the space.
[00:06:53] Tom Dinwoodie: Our 2020 annual report that we did with TNC came to an emissions trajectory that led to a 1.5 C pathway. So, it was an improvement over the original RMI work because we went deeper on the land use sector. Then in 2021, we did the next annual report. We made improvements to our model and our data sets, and again, we showed maintaining the 1.5 C pathway.
[00:07:18] James Lawler: So, the Epic Institute and RMI models suggested that the adoption of renewables would be fast enough to transition our electricity system to 100 percent renewable energy by 2040 and keep on track for only 1.5 degrees Celsius of warming. The passage of the Inflation Reduction Act in August, 2022 could certainly accelerate the deployment of renewable energy like solar and wind.
[00:07:42] James Lawler: It will be interesting to see how the new policies will eventually affect those S curve projections in a future report, but even though solar adoption is projected to increase, and it’s one of the cheapest energy generation sources out there, how is that likely to play out on the ground? What are the challenges that remain to building out these quickly growing renewable sectors like solar?
How John Witchel got the idea to start King Energy – a company that installs solar on multi-tenant commercial rooftops
[00:08:03] James Lawler: Now, we’ll bring on John Witchel, who is tackling just that. Well, John, it’s great to have you on the podcast. Thanks for joining us today.
[00:08:11] John Witchel: Thanks so much. Glad to be here.
[00:08:12] James Lawler: What was the insight that led you to start King Energy? What was the process that led you to that idea? And then what is the idea, and what do you guys do today?
[00:08:20] John Witchel: Sure. So, I was looking around for my next startup and I was flying into LAX, and anybody who’s ever flown into LAX, or really any major metro in the United States. On the approach, I looked out the window, and what I saw was all these great big, beautiful flat roofs. They’re all white, they’re just the easiest thing you could ever put a solar panel on.
[00:08:39] John Witchel: And I thought to myself, well, why at this stage aren’t all of these buildings covered in solar panels. At heart, I’m a capitalist. I believe in efficient market theory, so there must be a reason. And I started looking at, why is that happening? Why aren’t these buildings being developed?
[00:08:56] John Witchel: There’s residential homes all over the place that are being developed. There’s a lot of ways to look at solar in the United States, and the way that we look at it is we fundamentally look at it as a financing problem.
[00:09:07] James Lawler: What does King Energy do then?
John Witchel: King Energy is a company that develops, builds, and manages rooftop solar for multi-tenant commercial buildings in the United States.
[00:09:20] John Witchel: We fundamentally are in the business of identifying these properties, nurturing them, and building the system, financing those systems, and then taking care of those systems for the long-term. I would often say that solar is fundamentally a FinTech company with a small construction company attached to it, not the other way around.
[00:09:42] John Witchel: So, all the innovation and all the opportunity and all the creativity is all about figuring out how to finance these companies’ builds. A rooftop system of this size will be in the half a million to $3 million range. So, you have to figure out how to finance these systems, and then you have to figure out how to service these systems.
[00:09:59] John Witchel: At the heart of that, you have what’s called the split incentive problem. The split incentive problem in a multi-tenant building is, the problem that exists whereby the landlord has no incentive to lower the cost of energy for his tenants, and the tenants have no incentive to improve the quality of the building because they don’t own the building.
[00:10:23] John Witchel: So, neither party is incentivized to install, own, and operate solar. So, you have to have a third party come in and crack that nut. King Energy does that. We specialize in multi-tenant buildings where other developers, and there’s plenty of them out there, who tend to focus in on a single offtaker or owner-occupied building, following a more traditional pattern of underwriting against the quality of the single owner-occupied building.
[00:10:49] James Lawler: Can you explain what’s in it for those two different sides of the equation to work with King Energy?
[00:10:55] John Witchel: So, the way that we approached the market was to go to the property owners and say, hey, we want to rent your roof. Very simple value proposition. And we can offer you enough money that it’s worth your time and trouble to deal with that.
[00:11:09] John Witchel: We have a great approach for landlords where we can come to them and we can say, hey, we’re going to increase your rent, we’re not gonna put a lien, there’s no recourse to you. You know, this isn’t really shadow financing. You can recognize this as true rent, which increases your rent role, which increases your cap rate, which instantly increases the value of your building because we require no investment from the property owners at all. And that’s new.
[00:11:38] James Lawler: It’s pure. It’s just additional cash coming in every year.
[00:11:42] John Witchel: Yep. It’s found money, from their point of view. And then you turn around to the tenants, and you go to each and every tenant.
[00:11:49] John Witchel: Some of them are big, national tenants like Dollar Tree and Auto Zone. And then some of them are like, the pizza parlor. You approach each one of them and you say, hey, good news, we’re putting solar up on the roof. We’d like you to sign up for our program, and we will give you a 10 percent discount off of what you would’ve paid with the utility for all the energy that we’re able to generate, and we’ll sell to you directly. Oh, and by the way, because the last thing you want is one more bill to pay each month, we will combine your utility bill and your energy bill into a single bill. You pay one bill. Both bills are paid concurrently.
[00:12:25] John Witchel: The only thing that’s changing in your life, Mr. Pizza Parlor Owner, is that you’re gonna pay a little bit less for energy, and you gotta mail your bill to a different address. Turns out, they all thought that was a pretty good idea. We have almost a hundred percent take rate on that, and we have had huge uptake from our building owners.
[00:12:43] James Lawler: Super exciting. That’s so cool. Great story.
[00:12:46] James Lawler: So, I’d love to take maybe a step back. Talk about the solar industry in general. When we spoke earlier, you referred to it as the solar coaster. Why do you call it that? And I wonder if you could talk about some of the recent twists and turns.
[00:13:01] John Witchel: Sure. So, we sort of lovingly refer to the solar industry as the solar coaster because there’s always a looming existential crisis.
[00:13:09] John Witchel: There’s always something going on in solar. So look, when I first got into solar, 2012, the PV production was crashing. It was gonna completely vapor lock the industry. By 2016, the federal investment tax credit that subsidizes solar was set to expire. Then everybody was panicked about whether or not you were going to be able to afford solar, and then at the last minute it gets extended, so life continues.
[00:13:39] John Witchel: Then Donald Trump takes office and starts expanding the pipeline, and allocating national resources to drilling, and then the ITCs are gonna expire again, and then Biden wins, and it’s going to be a new day in solar. But the reality of the Biden Administration sets in, and then, NEM3 is going to destroy California, and NEM3 goes back to the drawing board, and now it’s back from the dead, and then the latest dust up is the Commerce Department’s issues with tariffs.
[00:14:06] John Witchel: It’s like living in San Francisco. There are earthquakes all the time, and you’re either okay with that, in which case the solar industry’s going to be great for you, or you’re not, in which case, the solar coaster starts to feel pretty nauseating.
[00:14:20] James Lawler: And why is that? I mean, other industries have sort of a comparable profile in terms of these twists and turns. Why has solar withstood, and I think it’s the case, correct me if I’m wrong, but there’s been exponentially increasing deployment of solar even through all of this.
[00:14:37] John Witchel: My personal experience has been that this feels exactly like the early days of the .com boom. There was an opportunity that opened up, at that time it was called the Internet, and there was just chaos and mayhem. Everywhere you turned, tens of thousands of entrepreneurs flooded into this new industry, all of them innovating and trying new things. And trying to make dial-up modems faster, and constantly arguing about whether the federal government is going to continue to expand our fiber lines. The only thing that was certain was that innovation was going to continue to pick up speed. It was very chaotic, it was a wonderful time.
[00:15:17] John Witchel: The solar industry today feels a lot like it, and it actually has a lot of the similar qualities to the software industry, and particularly the computer hardware industry, in that they both benefit from a feedback loop that drives the cost of energy, or the cost of computing, down. So, this is a very well understood feedback loop, which is called Moore’s Law in the world of chips, where you just see an exponential step down in the cost and exponential rise in the power of computers.
[00:15:51] John Witchel: The same feedback loop is occurring in solar, where with each generation of solar panels, you get better and better and better. At manufacturing the panels with a lower defect rate, higher density, better throughput, consistently solving all these little problems.
[00:16:06] John Witchel: You’ve seen that play out over the last 10 years. 10 years ago, solar panels were 10 times more expensive than they are today, and there’s no sign of that feedback loop abating.
[00:16:19] James Lawler: Very interesting. So, what do you think the biggest challenges are today that the industry faces? What are the big hurdles at the moment to continue this adoption curve that we’re seeing?
[00:16:31] John Witchel: It is very challenging to beat any technology that has a positive feedback loop on it, if you’re challenging it with essentially a linear feedback loop. So, if you look at Facebook or Apple or Google, who all have positive feedback loops where the more customers you have, the bigger you are, the more powerful you are, it’s just really hard to beat those companies if you’re just coming in, and trying to buy ads to acquire users.
[00:17:00] John Witchel: The same thing’s true in solar. It’s really hard to continue to compete against an industry whose prices to manufacture a solar panel are a 10th of what they were 10 years ago if your price is going up, right? So, long-term coal loses, long-term natural gas may not lose, but it will definitely be much smaller than it is today, and wind and solar wins.
[00:17:32] John Witchel: The headwinds that we face today are whiplash. It’s crazy enough on the solar coaster that it can be really discouraging for capital to invest, for students to commit to their careers, for people to change jobs, and leave oil and gas and retrain to go into the solar industry. For a municipality to make a 25-year commitment to a PPA. For a farmer to agree to allow you to install solar panels that are built high enough in the air that they can still farm crops.
[00:18:15] John Witchel: All of these opportunities are impeded by the solar coaster, by the whiplash quality of the industry because it creates enough uncertainty, and enough fear that a lot of people say, hey, you know what, I’m just going to take a wait and see approach. And a big part of what companies like King Energy do is we try to de-risk that for property owners who really don’t want to be in the energy industry.
[00:18:41] James Lawler: Right.
[00:18:41] John Witchel: For investors who have very legitimate concerns about changes to the regulatory environment/ we say, yes, we can help de-risk that for you, and you can move your money safely into the industry.
[00:18:58] James Lawler: Well, John, thank you so much for joining us today. That was really fascinating, and I really appreciate you taking the time out to do this while you’re growing your amazing company. So, thank you.
[00:19:08] John Witchel: Thank you very much. I appreciate the time.
Wrap-up
[00:19:11] James Lawler: That was John Witchel of King Energy, and earlier we spoke with Tom Dinwoodie from the Epic Institute about the adoption trends of renewable energy technologies.
[00:19:19] James Lawler: These interviews were recorded before the passage of the Inflation Reduction Act, or IRA. So, one of the challenges John mentioned with respect to the solar roller coaster is less prevalent now that the investment tax credit for solar has been extended for the next 10 years. Additional challenges certainly remain, including the expansion of the grid to take on all the new proposed solar projects, which we will tackle in an upcoming episode, so stay tuned.
[00:19:42] James Lawler: That’s it for this episode of the podcast. For more episodes, videos, or to sign up for our newsletter, visit climatenow.com We hope you can join us for our next conversation.
[00:19:53] James Lawler: Climate Now is made possible in part by our science partners, like the Livermore Lab Foundation. Livermore Lab Foundation supports climate research and carbon cleanup initiatives at the Lawrence Livermore National Lab, which is a Department of Energy Applied Science and Research Facility. More information on the foundation’s climate work can be found at livermorelabfoundation.org.
