Harvard Business School's annual Business Plan Contest challenges students to craft ideas for companies in general business and social enterprise. This year's Social Enterprise Track winner was SunEdison, which facilitates the financing and installation of on-site solar energy projects for commercial, institutional, and municipal customers.
Plan authors Brian Robertson (HBS MBA '04) and Claire Broido (HBS MBA '02) discuss their work and the contest with HBS Working Knowledge. Broido founded the company in 2003 with Jigar Shah.
The contest is jointly sponsored by HBS's Arthur Rock Center for Entrepreneurship, the HBS Entrepreneurship Club, and the Social Enterprise Club.
Manda Salls: What is SunEdison, and how did you get the idea for the company?
Brian Robertson: SunEdison isn't so much an idea as it is a solution to a long-standing problem: how to mitigate the high up-front capital costs and transaction headaches associated with buying solar electricity. There are plenty of commercial and municipal customers out there interested in buying solar power, but they don't make the move because they don't want to have to shop around for systems, contract their own installation and, essentially, pay for twenty years of electricity costs today.
SunEdison was started to simplify solar for those same customers by being a one-stop shop. We develop the project, manage the process, put the solar system on the customer's roof and sell them the power from it for less than what they'd be paying for utility power, without their having to own the system or finance the cost.
Claire Broido: We like to say that we have an "everybody wins" model, because customers get their green power at a good price, they don't have to put any capital down, solar panel manufacturers and installers find new customers, our investors get a solid return, and we diffuse a technology we think is important for society and the environment. Plus, we're bringing back a lot of the excitement about solar power that's been missing over the years.
Q: What are some of the pros and cons you considered when you decided to start a socially oriented business?
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Broido: We went into this business with the belief that doing something socially responsible doesn't have to mean that you have to settle for lower returns. We're businesspeople who believe strongly that it's possible to do something both environmentally conscientious and economically beneficial.
With that in mind, it helps that we're passionate about our space and our model. The large "pro" for all of us involved in SunEdison is our belief that clean, renewable, and endlessly available solar energy should, and can, become a critical part of our national energy mix. There are so many pluses, from fighting global warming to cleaning our air and helping to make the country energy independent. Rising energy prices and the geopolitical situation have also become key drivers for our business. No doubt about it, the timing is right for solar to take off.
Q: How does your business model work?
Robertson: We bring together customers who want solar on their rooftops with investors looking for a safe, tax-advantaged investment. Customers sign ten- to twenty-year contracts and agree to lock in their electricity prices and buy all of the power generated off of their rooftops. The investor receives several federal tax credits available for solar investments, and at the end of five years can choose to keep or sell the system to other interested investors. The solar systems are covered under warranty by the manufacturer, such as BP, Sharp, or Kyocera.
Broido: We bring the players together and simplify the process by handling the financing, installation, operation and maintenance of these systems. Both our customers and project investors really love it.
Q: Can you share some of the criteria business plans are judged on? Why do you think your business plan stood out?
Broido: The social enterprise track business plans were judged based on the soundness of the idea, the credibility of the team, and the benefit to society.
Maybe we stood out because our business is up and running. We have something to show for the work we've put into writing the plan, quitting our jobs and selling the model to customers and investors. This isn't speculative. There are SunEdison projects generating power as we speak.
If you're asking about the intangible side of our plan, then we'd have to say that we believe SunEdison is an example of the right people coming together at the right time to make important changes in an industry that has amazing potential. The principals involved in SunEdison have over twenty years of collective experience in energy markets at companies like BP Solar, Enron, Constellation Power Source, and others. The combination of an experienced team with a passion for renewable energy seems to be making all the difference.
Q: SunEdison is already working with high-profile clients including Staples and Whole Foods. What types of challenges have you faced as a start-up handling such high-profile companies? What are some of the rewards?
Broido: We've learned to adapt to the pace and timing of large companies, and to understand their needs. But there really haven't been any negatives, and in fact we've come away heartened that our model works so well for companies of their caliber and requirements. Obviously, working with organizations like Staples and Whole Foods within the first few months of operation is a tremendous validation for us. We're honored.
Our challenge is timing: We need to find investors in parallel with finding new projects, and one cannot move forward without the other. When one area is running smoothly or slows a bit, we turn our attention to another. Time is very valuable when you're a small start-up. There's none to waste.
Robertson: The rewards are that working at that level can mean repeat business, which means scaling our operation, innovating, and replicating what works. For instance our Whole Foods installation has been up and running in Edgewater, NJ, for several months now, and Whole Foods has already approached us with seven additional sites in the northeast alone.
Q: What surprised you the most about starting a company? Any advice to budding entrepreneurs?
Robertson: In all honesty, the small, silly stuff like finding office space, setting up our banking and our legal work, dealing with computer problems, and setting up FedEx accounts are all things that must be done, but can take time from the important "big picture" issues.
Broido: Our piece of advice is that the budding entrepreneur must be wildly passionate about her idea. You have to believe not only in what you're doing, but you must have had the experience at excellent companies to understand what works. Confidence and passion will help you deal with the complexities and obstacles in starting any significant business. Oh, and be patient and flexible—a lot of this is out of your control! (And patience is not my forte!)
Q: Will SunEdison bring solar power into the mainstream? Where do you ultimately see the company headed?
Robertson: For years, everyone always complained that solar power was too expensive to be mainstream. The big idea that SunEdison brings is that cost is not the problem. Solar power was always treated like energy efficiency; people asked, "What's the payback?" Utility companies don't think payback. They think, "delivered cost of power."
SunEdison allows people for the first time to think, "What's the delivered cost of power from solar?" The answer is that solar is cheaper than fossil fuel power in many places with available subsidies. In about five years, the economies of scale we are already achieving will bring solar to parity with fossil fuel electricity without subsidies in areas with good sun and high electricity prices, e.g., Arizona, California, Hawaii, Nevada, New Mexico, and others. It is also important to note that while the "average" cost of retail power in the U.S. is around 8 cents per kilowatt-hour, millions of Americans are paying retail prices that are over 50 percent higher than that—a huge market for SunEdison.
In the future, we could expand our model to wind and fuel cell technologies, but right now we are focusing on getting our solar products right. We have a window of opportunity today given the rising energy costs and available solar incentives. Over the next few years our goal is to help interested customers prove to Americans that solar is viable and practical today. 