Tag Archives: Infrastructure

Sola.io – changing the way renewable energy is financed

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Late last year, I had the privilege to be one of the judges for the PitchX competition for start-ups. The overall winner was Sola, a new investment platform to fund solar power using a virtual power plant structure to bring together investors and producers, who might not otherwise have access to the financial and production benefits of this renewable energy resource.

I had the opportunity to catch up with Alan Hunter, Founding Team member of Sola while he was in Melbourne earlier this month. He was busy in the middle of a series of investor meetings and finalising arrangements for their energy retailing licensing.

Prior to Sola, Alan had established a fleet company that leased cars to Uber drivers. Recognising that some immigrants lacked relevant qualifications for advertised jobs, but lacked the finance to buy a car, the business joined the dots and enabled many people with a driver’s license to secure employment. It told him a lot about about helping those less fortunate by building a business designed to remove inequalities and lower barriers to entry.

With that experience, an interest in renewable energy, and a desire to help consumers reduce their power bills Sola was launched. Starting out as CEC-approved Solar Retailer, Sola offers consumers a subscription service to electricity (at a cheaper rate than users pay today).

Sola is now planning to offer the same subscription service with a solar system, for a cheaper monthly payment. It is able to achieve this though the development of an innovative investment and infrastructure platform, that will serve three main types of clients:

1. Home-owners who want to install solar energy, reduce their own power bills, and even generate additional benefits as rebates or credits from feed-in tariffs

2. Retail investors, who may not have access to solar energy (renters, apartment residents, or those in dwellings ill-placed for panels)

3. Wholesale investors and self-managed superannuation funds looking for an alternative fixed income asset

In short, Sola underwrites the cost of panel installation on consumers’ homes. In return, Sola acquires 100% of the energy generated, and the customer subscribes to Sola for their monthly usage. Consumers become subscription members of Sola’s network, via the latter’s retailer license.

For retail investors, Sola will present them with an opportunity to access fractional ownership of a virtual power plant, for as little as $100. These investors then receive a dividend from the energy sales generated by the network.

For wholesale investors, and for a larger stake, they will be part of a closed end capped fund, which will generate a dividend from the energy sales. Sola has an energy off-take entitlement over the panels, and over time, panels which are replaced may still be sold into secondary markets, such as in developing countries, if they have a remaining useful life.

Some of the benefits of this structure include a more equitable arrangement for access to, ownership, and distribution of solar energy assets. It also removes the need for unsecured lending to finance panels and systems which may soon become obsolete. Plus, it enables people who might not have direct access to solar panels to benefit from this asset.

The complex issue of Federal and State rebates came up in our discussion. According to Alan, the former are useful in supporting the roll-out of Sola’s virtual power plant model, and in accessing the carbon credit marketplace via the Small-scale Technology Certificates (STC). Whereas, State rebates are better for end-users, who can engage Sola direct to install their panels, and then join the Sola retail network.

Then there is the issue of inverters, and batteries. It’s generally the former that are rendered obsolete before the panels, but the costs mean that customers tend to end up replacing the whole system. And the latter will not become economic until purchase costs reduce, and feed-in tariffs are phased out.

Finally, Alan wanted to make sure he got this point across – Sola will shortly be launching campaigns in seven locations, to sign-up 180-230 homes, in areas impacted by bush fires. The aim is to give participants a 35-40% saving on their energy bills, as well as establishing the first phase of the virtual power plant network.

Next week: Australia’s Blockchain Roadmap

 

 

 

 

 

Fear of the Robot Economy….

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A couple of articles I came across recently made for quite depressing reading about the future of the economy. The first was an opinion piece by Greg Jericho for The Guardian on an IMF Report about the economic impact of robots. The second was the AFR’s annual Rich List. Read together, they don’t inspire me with confidence that we are really embracing the economic opportunity that innovation brings.

In the first article, the conclusion seemed to be predicated on the idea that robots will destroy more “jobs” (that archaic unit of economic output/activity against which we continue to measure all human, social and political achievement) than they will enable us to create in terms of our advancement. Ergo robots bad, jobs good.

While the second report painted a depressing picture of where most economic wealth continues to be created. Of the 200 Wealthiest People in Australia, around 25% made/make their money in property, with another 10% coming from retail. Add in resources and “investment” (a somewhat opaque category), and these sectors probably account for about two-thirds of the total. Agriculture, manufacturing, entertainment and financial services also feature. However, only the founders of Atlassian, and a few other entrepreneurs come from the technology sector. Which should make us wonder where the innovation is coming from that will propel our economy post-mining boom.

As I have commented before, the public debate on innovation (let alone public engagement) is not happening in any meaningful way. As one senior executive at a large financial services company told a while back, “any internal discussion around technology, automation and digital solutions gets shut down for fear of provoking the spectre of job losses”. All the while, large organisations like banks are hiring hundreds of consultants and change managers to help them innovate and restructure (i.e., de-layer their staff), rather than trying to innovate from within.

With my home State of Victoria heading for the polls later this year, and the growing sense that we are already in Federal election campaign mode for 2019 (or earlier…), we will see an even greater emphasis on public funding for traditional infrastructure rather than investing in new technologies or innovation.

Finally, at the risk of stirring up the ongoing corporate tax debate even further, I took part in a discussion last week with various members of the FinTech and Venture Capital community, to discuss Treasury policy on Blockchain, cryptocurrency and ICOs. There was an acknowledgement that while Australia could be a leader in this new technology sector, a lack of regulatory certainty and non-conducive tax treatment towards this new funding model means that there will be a brain drain as talent relocates overseas to more amenable jurisdictions.

Next week: The new productivity tools

Infrastructure – too precious to be left to the pollies…

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With its 3-year Federal parliamentary cycle and fixed 4-year terms in each State and Territory*, Australia is never too far away from an election. South Australia and Tasmania are both currently in full election mode. Victoria doesn’t go to the polls until later this year, but the informal campaigning (rather like a phony war?) is already underway. And although the next Federal election is not due until 2019, the stump speeches are already being wheeled out.

Fiction imitates (or even predicts) fact in ABC TV’s “Utopia” (hard hats obligatory)

With so much focus on “infrastructure”, it’s going to be a bumper year for hard hats, hi-viz vests and photo opportunities in front of big “stuff”. It’s just such a shame that even with the real life Utopia, Infrastructure Australia (and respective statutory and quasi-independent bodies in each State), so much of the decision-making is left to politicians. Because this “stuff” is far too important to be left to the short-term priorities, self-serving tactics and party preservation shenanigans that most of our elected representatives are forced to succumb to.

Hot infrastructure topics this time around are energy (especially in South Australia), water (Murray Darling Basin), resources (what do we do after the mining boom?), and the call for “jobs” linked to putting up or digging up “stuff”.

I understand that we need employment opportunities both sparked by, and as a driver for, economic stimulus. But there has to be more than simply creating short-term jobs on unsustainable projects (Adani, anyone?). Of course, one could argue that the powerful construction and mining unions (and their infrastructure owning superannuation funds) have a vested interest in maintaining this trajectory.

But if these projects need to take on long-term debt, with the 3 or 4 year election cycles, you can see how difficult it becomes to manage budget priorities. Worse, incoming governments may strive to cancel, overturn or curtail projects of their predecessors, which won’t endear them to the private sector companies (and their banks) who have successfully bid on the contracts.

Roads represent a large chunk of the infrastructure “stuff” in my own State of Victoria, and are already shaping up to be a key election issue (at least in the minds of the parties). For a major city that still doesn’t have a dedicated train service connecting the CBD to its ever-growing international airport, Melbourne probably needs fewer roads, and more planning (especially as we move to ride-sharing and self-driving vehicles). Besides, while we are in an urban and population growth cycle, given the rate at which some of the current new roads are being built, they will be under-capacity before they are even finished.

I would argue that there is just as much demand to upgrade and refurbish existing infrastructure, (which will probably generate just as many employment opportunities) rather than feeding the insatiable demand for shiny new toys. Or revisiting (and even restoring) some “old” ideas that might actually make sense again today, such as the orbital railway concept connecting Melbourne’s suburban hubs. Sure, we have the new Metro Tunnel project under the CBD, and this may lead to extensions to existing suburban services, and even the airport itself. But future projects have not been scoped, and are subject to prevailing party ideologies (not to mention the NIMBY brigades…) – rather than serving  the interests or greater good of the population (and environment) as a whole.

Finally, some sobering news came out of the UK recently, where London is actually experiencing a decline in passenger numbers on public transport. There have been a variety of explanations for this drop (the first in more than 20 years) – from the threat of terrorism, to new work patterns (more people working from home); from changing lifestyles (more Netflix, less Multiplex), to the “on-demand” economy (more Deliveroo, less dining out).  With fewer people likely to commute to the CBD (40% of the population will have self-directed careers), governments, their infrastructure boffins and their policy wonks will need to think about what this does actually mean for roads and rail…. and how much longer must I wait for the NBN in my suburb of Richmond (and will it already be obsolete by the time I have access)?

* For the breakdown see here.

Next week: Blockchain, or Schmockchain?