A New Solar Energy Business Model?

Wired writes about a new company, CitizenrÄ“ Corporation, that “will loan yousolar a complete rooftop solar power system, install it for free and sell you back the power it generates at a fixed rate below what your utility charges.”

Much of the article is devoted to a discussion of whether the company is a scam or not, and there are worrisome signs that it might be, starting with its multi-level marketing scheme. This is a model that requires a lot of upfront capital and many competitors in the alternative energy industry have pointed out that CitizenrÄ“’s source of capital is secret and therefore can’t be verified.

What interests me, however, is not the credibility of this particular company, but the potential for a disruptive business model innovation to hit this industry. It’s not clear yet that this model works in the solar power business, but it certainly works in other industries. From the article:

Nor is the model entirely unproven. Corporate facilities have long benefited from the type of lease-financing scheme CitizenrÄ“ offers. Ryan Wiser, a scientist with the Lawrence Berkeley National Laboratory, says bringing that financing to the residential market is completely viable, provided the investor money is there. He calls CitizenrÄ“ ‘a breakthrough.’

‘There’s an increasing number of companies that are doing this kind of financing’ for commercial customers, says Wiser. ‘There’s certainly a market on the residential side; the difference is how do you make a profit. They will have to bear huge transaction costs to get started.’

One concern, of course, is obsolescence. The alternative energy industry is constantly innovating and it’s reasonable to expect that over the length of a ten year contract (five years are also offered) a new and more efficient technology will be available. Nonetheless, one obstacle for any homeowner considering solar power is the initial investment required to install the equipment. This model removes that obstacle.

This business model is not new, but its application to this business is. it shows the potential of looking outside one’s own industry for new ideas. Competitors always complain that new and threatening ideas and technologies are scams or unworkable. These complaints may be true about CitizenrÄ“, but for many watching from the sidelines, there is a deep-down desire that the model works.

‘The vision is a beautiful thing,’ says John Coequyt, director of climate issues for Greenpeace. ‘But there’s no way they can deliver on the promise at this point. Whether they can in the future is clearly uncertain.’

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