Acro Energy Technologies Corp., a leading U.S. solar integrator, announced yesterday that it has signed a Stock Purchase Agreement with Energy Efficiency Solar, Inc., a California corporation headquartered in Pomona, Calif. ("EE Solar") and Bill
Korthof, the sole shareholder of EE Solar.
EE Solar is a full-service solar energy company that has been installing residential and commercial solar systems in Los Angeles, Orange, and San Bernardino Counties since 1989. EE Solar generated approximately $4.2 million in revenue in 2008, servicing customers from its offices in Pomona and Orange. Korthof is the president of EE Solar and will join the Acro Energy team.
"Southern California is the largest growth market for distribute solar," said Nat Kreamer, President of Acro Energy. "Bill and the EE Solar team give Acro a strong platform for helping more southern Californians - who pay among the highest rates for electricity in the Country - save with solar."
Under the Purchase Agreement, Acro Energy will acquire all of the issued and outstanding shares of EE Solar for a purchase price of $1,500,000, consisting of
$250,000 cash, a promissory note in the amount of $750,000, and $500,000 of common stock issued from the treasury of the Company at a deemed price of CDN$0.24 per share. The company will also enter into an employment agreement with Korthof, as general manager, Pomona Operations.
I had the good fortune to catch up with Nat Kreamer yesterday before the deal was signed, and asked him what it was his customers were looking for in a PV system. In addition to being the interim President of Acro Energy Technologies and member of the Board of Directors, he was a founder, President, and Chief Operating Officer of SunRun, a leading provider of residential solar power purchase agreements. Kreamer has also worked in power industry consulting, clean energy investing, and energy trading. He graduated from Rice University and Northwestern University. An officer in the US Navy (Reserves), Kreamer is an Afghanistan war veteran and recipient of the Bronze Star Medal. He is a Senior Advisor at the Madison Policy Forum, which promotes non-partisan dialog about timely national security issues.
Here’s the Q&A with Kreamer:
Q: When you look at all the various elements of a PV system – the cells, inverters, cabling, trackers – where is the technology going and how aware are your customers of changes and how things are evolving? What are their main requirements?
A: Clearly we’ve seen a lot of upstream investment in the marketplace. In solar panel equipment/module manufacturers all the way to people like Spire who make the fab equipment. That has benefited the declining ASPs which really grows the addressable market of solar because it’s made it more affordable for people and more cost-competitive vis-à-vis power from the grid: the avoided cost of power. I think that general trend is very positive for the whole industry. In essence it will have a much larger industry and there will be more power generated from solar here in the United States and around the world.
There are a couple of things that an end customer thinks about. We think about it in two parts: We are an integration business at Acro, meaning we need to decide who we are going to have a relationship with from a manufacturer’s standpoint and what products we are going to install on customers roofs. Some of those customers pay us directly as cash so they’re the end consumer of the power and they also own the system. Other customers, such as SunRun, own the system and they sell electricity to the end customer. In both of those cases, clearly price is important because it needs to be economically valuable to go solar for the customer. Quality and reliability are very important. The level of service from the manufacturer is also important. You’ve got to have all three of those to be a contender with serious businesses in this industry. That can be a challenge for some of the more start-up organizations that you get in module manufacturing as well as the inverter space where you have complex, expensive pieces of equipment that are essential to the system and should have a long life. As a consequence I think end users tend to be less experimental with what they’re buying as equipment because they want to know they will get the power that they paid for, whether they are a buyer of capacity and consumer of that power or they’re a buyer of capacity and a reseller of electricity.
The one thing that you clearly see is that most manufacturers today are able to create a module on the silicon side that has enough Watts for it to work in nearly every application. So Watt-density or efficiency is less of an issue in the residential market than it would have been five or ten years ago. You infrequently can’t find 500 square feet on a residential customer’s home where you can put up panels. The second component is aesthetics are clearly important: people want to make sure they have something that looks good, but they want to make sure it’s really going to generate. Depending on where your customer is and what the application is that can be important. Lastly, I think that there is – if you think about it on the inverter side, that’s an area where we’re starting to see more innovation and more products come out whether it’s effectively charge controllers for PV systems that allow you to manage shading. We’ve seen some announcements of that here at the show. Or applications like nphase inverters which are micro-inverters that are panel-attached. Those are become more popular and fitting into the designs. Definitely popular to end customers in so much as monitoring capabilities have a stickiness factor to them especially in the retail marketplace that is very attractive. The tradeoff typically with those applications is they increase the installed cost/Watt so you have to balance that as what is my total cost based on this customer and what is the value.
The reality is there are two ‘greens’ in our business. The first green is cash: how much is this going to cost and how much am I going to save? The second green is ‘I feel good about doing this’. Any equipment that addresses t is the second green as their primary value proposition typically don’t do well vis-à-vis the ones that do a good job on the first value proposition.
Q: Some PV panels are manufactured in China using the most expensive materials possible. Even though they do offer guarantees of 20 years or 25 years, I would question the long-term reliability. Does that come up?
A: We have gone with market leaders as a company. Our panel suppliers are SunPower, Sharp and Sunteh. There are a lot of things that are available that can be at more competitive prices but to your point I don’t think it’s a balanced approach to providing value and reliability to get that power. If you pay 20% less for a panel and it generates for well over 7 years but then you find that half of your array is out, you may have chewed through all the savings in your value if you’re a retail customer. You’ve got to be careful about being penny-wise and pound foolish over the long term investment and we feel like we have very good relationships with as well as good options for our customers on all the dimensions of efficiency, aesthetics, reliability, strength of manufacturer warranty, historic performance. If you looked at any of those three suppliers, you’d be hard-pressed to say they’re not leaders. We’re also not speculating with technology that is untested or manufacturers that are untested.