Gosolr drops Eskom-immune barrier to R1 399pm; plus the Rent v Buy solar debate

Company founder and CEO Andrew Middleton shares the innovative approach GoSolr is taking to make solar energy accessible to South African households. Drawing parallels with the early days of television in South Africa, where renting made colour TVs more accessible, GoSolr’s rental model for solar systems offers an affordable alternative to traditional purchasing. The conversation explores various aspects of the solar industry, including the advantages of renting versus buying, technological advancements, and the response to growing demand amidst economic and seasonal factors in South Africa. Click here for more information.

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Edited transcript of the interview with Andrew Middleton, founder and CEO of Gosolr.

Alec Hogg: Every time I catch up with Andrew Middleton from GoSolr, there’s another good reason to consider installing solar systems at residences. What GoSolr has done is democratise access to solar electricity. You don’t have to spend hundreds of thousands of rands to install; you can do it on a rental basis, as I have, particularly considering the uncertainty of the future and the costs of conventional capital. But today, Andrew Middleton, we’ll be discussing renting versus buying. In preparation for our talk, it reminded me of when televisions first came into South Africa. Televisions were so expensive that most middle-class people could only afford black and white sets. Colour was not an option. Then Teljoy and Theo Rutstein offered the option to rent colour TVs, making them more accessible in the South African market. Are there parallels with what GoSolr is doing now?

Andrew Middleton: Absolutely, Alec, and thank you again for having me. When I got a TV, I saw Teljoy as another television company, not realising that they had that rental model. There’s indeed a strong parallel with GoSolr. Solar energy is often seen as a luxury product for higher-income households, but it should be more accessible. I’m glad that Teljoy made TVs accessible in that way, and we’ve made solar accessible to many households with our solar-as-a-service or rental model.

Alec Hogg: You’ve only been installing for the last 18 months. Are there any limits to your growth? Considering the demand from South African citizens and issues like load shedding, it would seem there wouldn’t be a cap on that opportunity.

Andrew Middleton: There’s still plenty of market share available. Even with our current product set, and with our new, smaller product, there’s a place for our systems in at least two million homes in South Africa. We don’t believe there’s even 5% market penetration at this stage. In some wealthier suburbs, penetration might be 10 to 20%, but there’s still a lot of opportunity for us and other exciting players. There’s ample space, I believe.

Alec Hogg: Smaller product?

Andrew Middleton: Yes, we’ve just launched our 3.6-kilowatt product for R1 399. It’s one of the first in the market and should be an exciting option for smaller households, single individuals, or retired couples. We’ve seen interesting demand for this, and we’re always looking to innovate and create solutions for the broader South African households.

Alec Hogg: R1 399 per month? The first time we spoke, the product discussed was R1 740. How do the two products differ?

Andrew Middleton: The new product includes fewer solar panels—six in total—and a smaller inverter, 3.6 kilowatt compared to 5. Though it’s a decent size, this product is meant for essential load, covering the bare necessities for many households like plugs, Wi-Fi, lights, and TVs. However, it’s not suitable for appliances. Your 5-kilowatt version and above can run small appliances.

Alec Hogg: So it’s almost like an entry-level product. You won’t be able to boil kettles, but you’ll have lights, internet, and television sets. Given Eskom’s consistent load shedding, are you seeing escalating demand?

Andrew Middleton: I think it’s fairly stable at the moment. Since we last spoke, there’s been a drop-off from the unsustainable growth earlier in the year. Many players, including us, struggled to keep up, but we’re happy now with our service levels, being able to install within a week. The market is stable but showing signs of growth. We’re bullish long-term, and this period has allowed the market to consolidate, helping us with supply chain and network of installers.

Alec Hogg: And differentiation must always be an issue in a new area. Are you able to distinguish yourself?

Andrew Middleton: I believe so. Our pricing is likely the most competitive in the market, and we’ve been able to achieve that through scale. We pass on the benefits of our procurement and technological investments to our consumers, which are key differentiators. Customer service is crucial for us and others offering a subscription service. We only see returns if the product performs well throughout its lifespan, so we’ve heavily invested in customer service and technology. The core question is whether you want to own the asset or enjoy the service. We believe you don’t need to own it to reap the benefits, though there are pros and cons to both approaches.

Alec Hogg: Let’s delve into that. I touched on Telljoy earlier, but to install a solar system, you’re looking at several hundred thousand rand. Some banks are offering options, or there’s renting. First, let’s discuss buying, although I know that’s not your primary focus.

Andrew Middleton: Certainly. A household with excess capital will receive a return on investment. With rising electricity prices, the capital committed to an installation will yield a return. For those with excess capital, investing in this is a way to park that capital and see a return. That’s one benefit of ownership. That model can work if you prefer to own and maintain it yourself, ensuring proper installation and function. Generally speaking, we believe that households don’t have excess capital at the moment. Those that do should use that capital elsewhere, whether for discretionary or investment spending. The household can’t get the same return on solar equipment as companies like Osola, due to the scale advantage that allows us a lower cost for equipment. So, there are definite benefits to ownership, including business-related tax incentives and incentives for household ownership.

Alec Hogg: Okay, that’s the ownership side. On the renting side, let’s revisit the analogy of early television in South Africa. If you had bought a television in the early days, you would have been pretty unhappy a few years later as technology brought down prices. Is this playing out now in the solar field?

Andrew Middleton: Absolutely. Technology is advancing, and pricing is decreasing. We’ve seen something akin to Moore’s Law over the last five to 10 years, especially with solar panels. The next game-changing technology, we believe, will be in storage batteries, with sodium batteries possibly replacing lithium. There’s a great deal of research and development worldwide, particularly in the East, Asia, Korea, and China. Massive investment is also happening in the US, driving renewable energy technology, particularly in solar and battery storage. We will ensure that our current and future households benefit from these advancements, instead of investing in technology that may become obsolete.

Alec Hogg: What happens to your business in this respect? You’ve made a substantial investment in, say, lithium batteries, and then sodium comes along. Does that render your investment redundant?

Andrew Middleton: No, we don’t think so. The change won’t happen overnight. Lithium batteries have a certain lifespan. If a case arises where it’s beneficial to replace them with something like sodium, we can do that. Those lithium batteries will still have a commercial use or a use elsewhere. We can repurpose them. We’re anticipating this happening in five to 10 years, maybe sooner, and we’ve accounted for that in our planning.

Alec Hogg: What about the case for renting?

Andrew Middleton: The first consideration is whether you want a service or to own the equipment. The hassle factor is significant. With renting, you can call us 24-7 for maintenance and replacements. The alignment of interests is also key. When you purchase from an installer, they’ve made their profit upfront. There’s no ongoing incentive to look after you. Our model depends on keeping customers happy for many years. We also believe that there are better uses for limited household capital rather than investing in something expensive that doesn’t have our scale benefits.

Alec Hogg: There isn’t much extra cash to spare in the South African economy right now…..

Andrew Middleton: Indeed. The upfront cost and maintenance of solar equipment are significant. Batteries will eventually die, and it might be 10 years, but replacement cycles must be considered. If it’s our battery, we’ll replace it, and it’s our problem. If you own it, you must plan for redundancy. We expect our batteries to last between five and 10 years, but technology may drive us to replace them sooner.

Alec Hogg: Could there be a market for second-hand equipment?

Andrew Middleton: Potentially. Commercial users might find value in second-hand batteries. Even utility companies might benefit from using older batteries for peak demand management. Repurposing batteries for other markets is another option. We’re also exploring the future use of electric vehicle batteries in households. There will always be a use for some part of that battery, and we’re better positioned to harness that potential than individual households.

Alec Hogg: It seems like a whole ecosystem is developing.

Andrew Middleton: Yes, there is. Handling end-of-life solar panels and batteries on a global scale will become a significant industry, focusing on recycling, repurposing, and responsible disposal.

Alec Hogg: Let’s explore the parallels with television’s early days in South Africa. Are there similarities with the solar field?

Andrew Middleton: Absolutely. Subscription services are thriving, and ownership is no longer the primary goal. We often compare our service to fibre-to-the-home, where the infrastructure is built to provide fast internet without the household needing to own it. Other analogies include music and film subscriptions through Spotify or Netflix. Subscription services are here to stay, including possibly even cars.

Alec Hogg: Some critics argue that this mindset leads to owning nothing and being content with that. It’s more about efficiency, isn’t it?

Andrew Middleton: Absolutely. Let companies manage and aggregate the assets, providing services for households or consumers to use. While the debate may focus on the future and sustainability, at Gosolr we want to ensure that this service is available to everyone.

Alec Hogg: Bringing it back to solar energy, I wanted to ask if you’re encountering a limit to what you can supply. Is there any resistance to meeting this seemingly untapped demand?

Andrew Middleton:Well, as I mentioned, the surge that we experienced in the industry from about January to May was unprecedented. I don’t think it was sustainable. We’ve definitely seen a slowdown, and now it’s stable. There are several factors driving this stability, including a better-than-expected outlook for load shedding over winter. Load shedding is not our primary focus, but logistics is one of the benefits you gain from solar. It’s not the major benefit, but it certainly impacts short-term demand. As we discussed in the last call, households are under financial pressure, and so adding new expenses can be a challenge. Despite the potential savings from our product, it’s still a new cost being introduced. It’s not a complete substitute cost, especially in winter when there’s less sun. So, I believe the solar industry is gearing up for a promising summer, as summer is better for solar. We’re looking forward to the sun coming out, particularly in the Western Cape, where it seems to have been hiding for a while. That’s where we anticipate a resurgence in demand, hopefully accompanied by a peak in the interest rate cycle, allowing households to enjoy a bit more disposable income.

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