Herve Billiet (00:00)
Hey Ravi, welcome back to the podcast What Solar Installers Need To Know. How you doing?

Ravi Mikkelsen (00:04)
Doing great, Hervé. Thanks for having me back again.

Herve Billiet (00:07)
So, you're the first person that I invite twice on the podcast. So, congratulations. I'll send you a medal of some sort- certificate later on. We recorded before RE+ and now we record after RE+ the goal is to go through the things that we learned that kind of stood out, and also talk about your $2 taco party and what we learned there. So, how did you go?

Ravi Mikkelsen (00:15)
has to.

It was really awesome. I mean, one, there was so much like, doomerism, you know, after the HR1 was passed and all of this media of, residential solar is dead and blah, blah, blah, blah, blah, and really took a beating. And so, I think because of that, people were just sort of, there was a lot of negative sentiment in the industry, especially in the residential sector.

You know, those that are at least the those of us that are focused on homeowner value, like there was negative sentiment and people writing about it. But going in, it's like, yourself, me and others that are posting a plan to reduce costs and increase value and increase our volume of deals that we do by reducing waste and kicking out bad actors. Like, I think that we're providing hope and hope being the active word

You know, which is a passive word. It's like, "oh, you know, it's, I think it'll get better" versus like, "I am working to make it better." That's why we're hopeful is because you and I and others are saying, "Hey, here's how we're going to reduce this inefficiency. Here's a new technology that can take care of this." And we're showing our installers and working with our installers to have a plan beyond the tax credits. Like, what happens beyond 1231? Here's how we grow the industry together.

Here's how we kick out the bad actors and provide greater value to our homeowner customers. And because of that, the intervening time between HR1 and RE+ and the amount of content we've all put out, the vibes were great, as you said. People were, it's like, okay, this is what we're doing. We're actively moving towards preparing our business for this change. ⁓

Herve Billiet (02:02)
Yeah,

so going there, I really like same doom and gloom.

Plus, it was not just in the media. I mean, we know several people that just don't have a business anymore. They had to close for multiple reasons- some reasons we don't know, others we can only speculate about. But then, yeah, some companies went under. But, my big takeaway is what I also wrote as like the solar coaster, let's call it solar ladder. We actually more in control of our businesses than we give ourselves credit for.

So there are certain things that we can do to adapt. For the last podcast, we had the idea to create a bingo card, right? About what can we do for the $2 a watt?

Ravi Mikkelsen (02:37)
Yeah, that

Yeah, your implementation of that was awesome. Having that people play... I don't know how many were dropped off at your booth when it was complete, but like everyone at the taco party loved it. And if nothing else, it's a great conversation starter. And it's like,

how are ways that we can improve our efficiency, improve our margins while reducing costs for our customers. ⁓

Herve Billiet (03:00)
And

it's complex, right? It's not just the typical. My first reaction was like, well, you need to negotiate how to read your distributor and get the price down on your hardware. That is not all of it. Your hardware is not 100% of your cost- it's far from it. It's like 30%, 40% max, something like that. So you need to spend time on the rest of it.

Ravi Mikkelsen (03:19)
Yeah. And, you know, there's this, I had a few conversations with installers...

Hey, it's like, I don't think I'll be able to get down to $2 a watt, but I'm providing great value. And it's just like, okay, like- overall, yes, you are providing great value to the homeowner, to the community, to the grid, to the world. I agree with that. And at the same time, is there a great value to having one of your employees input the address of the home into five different pieces of software? Is it a value

Herve Billiet (03:36)
Thank you.

Ravi Mikkelsen (03:48)
of inputting that information a second time or any of that information. Because if we have the information upfront, why isn't it just transferred through? There's so many steps in there that we have humans do what software does better.

You know, whenever I get this pushback, I see that scene from the office space in my head. You know, I carry the plans over from product over to engineering. And it's like, I'm a people person. You know, it's a funny scene, but it's like, this is kind of what we're saying as an industry. It's like, I'm providing value, but I'm doing these steps, which are just waste. And it's just like...

Herve Billiet (04:06)
Okay.

Ravi Mikkelsen (04:24)
let's remove those things. So we're actually providing greater value at lower costs. And that's what this $2 a watt message and mission is about. it's about increasing margins for the strong tail installers, reducing costs for the homeowner and the electrons that are produced that then go into the batteries, and then go into the grid that are used to fuel their vehicle, their new EV that are used to power their heat pump and other electric machines in their house.

Like, that's it. We're providing greater value to them, increasing margins for the strong- tail installers, doing more business overall. And we're turning residential solar from a bill- savings value creator for that individual household to critical infrastructure for the entire grid. So it's not creating value for all the homes around it and the entire grid. So it's a transformation that doesn't, the only people that will, and entities,

that should be negatively impacted by this change are the predatory sales and finance companies. Like if you're charging 30% sales commissions, this is definitely going to negatively impact you. Good, like that business model should not be here. You're charging 30% dealer fees, Stop. Like bring it down below 5%. Yeah. Change your capital structure,

or go find out something else. Like, this is what we need to do as an industry. So it's like, this is where the industry needs

Herve Billiet (05:48)
Let's speak about that.

Ravi Mikkelsen (05:49)
to go.

Herve Billiet (05:50)
Let's speak more about that. I am actually not in contact a lot with people that have those high dealer fees. It is not our target audience that's in for it. It is not who I knew in the Amicus network when I had a solar company. So I'm actually not well connected in that people doing that. But maybe the reason why they do it is because they have a set way of doing it. Maybe we just need to speak about how others have been doing it without having a 30, 40% dealer fees.

When we had a solar company, pay your salespeople, we paid them a fixed flat based. And now on top of that, they receive 5% of whatever they were selling. Like cross battery, PV, adders, everything, just 5%. But we also gave them leads. They didn't have to go knock on doors or anything like that. We had a strong brand that we built and they benefited from.

Ravi Mikkelsen (06:17)
Yeah.

Herve Billiet (06:37)
They didn't have to pay for leads. They didn't have to invest in marketing that was all paid for by the company. They received business cards. So everything was paid for them. If they needed a car, I think we reimbursed some fuel at some point. So there was a company with a set structure that allows a salesperson that they don't have to invest themselves. So sometimes I hear some of those salespeople, they have to set up their own

Facebook campaigns and kind of run their own little contracting business. So maybe that is part of the issue that it doesn't have to be like that.

Ravi Mikkelsen (07:06)
Exactly, and it's part of the waste. I wanna clarify my statements of, like the entire sales, like the sales apparatus, like that's what this is. It's like, there are, setters and closers and appointment setters and all of these different like entities, and the Facebook marketers that sort of lead into this. It's like everybody, like they have to get paid. They have to feed their families.

So those are all adding costs, and that's like why these sales are so expensive. And they're not necessarily predating upon the homeowner until any one of them, you know, starts not disclosing and doing bait and switch and other things. So there are other predators, there's the inefficient processes. And then there is, to your point, there's a way that we've done things and it's like,

Herve Billiet (07:43)
Mm-hmm.

Ravi Mikkelsen (07:50)
in the primary capital of the residential solar industry has been your typical capital markets capital, a dealer fee plus reduced interest rate. And that, again, it's just like this marketplace lending model, which is sort of like the generic term for it, very big within the tech ecosystem to like 2013 to 2016 was sort of the biggest

launch of any sort of marketplace lending. But it's like, okay, you go out, you borrow, you get a three year, five year like warehouse line of credit, $100 million. Let's say it's 5%, whatever it is. So then you have to take your five year debt, turn it into...

Herve Billiet (08:26)
And when you say warehouse, let me clarify. So

There are solar installers listening, so warehouse is a terminology in the financial space. It's not a warehouse with inventory and solar batteries and panels in it.

The warehouse that you speak about is a financial term where they can accompany a financial institution can get access to a warehouse, which is basically access to a large sum of credit.

Ravi Mikkelsen (08:49)
Yeah, So that's exactly it. So they're sort of drawing on that line of credit to fill this up, and they have to pay it back within those three or five years. So they're making- they want to- they need to make

hundreds of millions of dollars worth of loans, create a portfolio, and then sell them off- either a securitization or a secondary sale, have the capital, pay back that original line of credit, then they can get another line of credit. And it's like this revolving model. That's a lot of how our industry was built. You promised the 10 % bill savings; it's great for that homeowner. Then in order to fill the loan portfolio,

you need to hire salespeople. so because it's a dealer fee model, it's just like, okay, then that the person who's in charge of the sales is in charge of choosing what financing option is being offered to the homeowner- that's best for the sale, not necessarily best for the homeowner. And so it locks, know, like these things lock a lot of things in place, right? ⁓ And so...

Herve Billiet (09:51)
Mm-hmm.

Ravi Mikkelsen (09:53)
The installers want that fast capital, so they use that. And now, to offer those low interest rates, we're seeing, back when I switched from deployment into finance- dealer fees were in the 8 to 12% range. In 2015, we thought that it was too high. Now, it averages like 37%. And these are adding. And then that's on top of the sales commission. So you might have

$20,000 solar system, then $10,000 of sales commission, and then you're adding another $10,000, $15,000 on top of that. And so you're borrowing $45,000 to pay for a $20,000 solar system. And since all of that's like, oh, this is part of the cost of the sale, taking the entire tax credit on that. And so it's like, this is all just been like, hey, this is how it's done.

Right. so changing that model is difficult for all of us. And so let's we don't.

Herve Billiet (10:46)
Well, speak about the changing model then, Ravi. Like here

comes the drum roll and now you can speak about how Atmos is doing it differently.

Ravi Mikkelsen (10:53)
Yeah. And so, know, Atmos was created to just, you know, to basically, you know, we charge a very small processing fee and then we let our credit unions, as if you went straight to that credit union, we let them charge the rate that they charge for a solar loan, but it all comes through our software. So you get that instantaneous or near instantaneous decision with, you know, it's a near- cash cost credit union or bank loan.

And so it's more transparent. It's still just as fast, and ultimately, it's a much lower cost. We all know that the average life of these loans are like six to seven years, so that's what's modeled. The data show that a lot of people are paying back their loans in this time. And so if you have a low interest rate and a very high fee, you need to hold that loan for 20 to 25 years

to get your money's worth. If you have no fee and a higher interest rate, the faster you pay it back, the less interest you pay, the cheaper your system overall. So by switching this model, we are saving thousands of dollars for homeowners. And ultimately, when you reduce that cost, the electrons that are produced are cheaper. We're the dollar per kilowatt hour cost in this new model

is significantly cheaper. And now they're more valuable in that battery or for that heat pump. So it's about accelerating the sales and the use of this system.

Herve Billiet (12:21)
Ravi, I'd like to have your opinion on a summary of how the model financially works. So basically, Solar is unsecured.

Very few systems being, if you'd stop paying it, people not going to come out and take it away you. The cost there is just prohibitive of doing that. So basically it's an unsecured loan. So Ravi, if you have an unsecured loan, you pay down some points, but at the same time, at some point somebody else needs to buy over that loan. So you kind of give them some money of the dealer fee to make that loan more attractive since it's unsecured. But

at some point, people need to buy up those loans and aggregate them. And so there is the problem that you need to make that loan more attractive and use those points, those dealers fees, to achieve that. That's the problem, right?

Ravi Mikkelsen (13:06)
That is one of the challenges of that traditional model, that dealer fee model. So even though those financiers are charging 30 to 40% dealer fees, they're not keeping all of it. So again, it's waste in the system because they then, because they're offering a 2 to 4% interest rate loan when the market rate is more like seven to 8%. So now like you said,

Herve Billiet (13:29)
Mm-hmm.

Ravi Mikkelsen (13:30)
they're trying to sell off that pool of 2% loans that nobody wants. they're like, "Wait, well, here's a couple hundred thousand dollars. Here's millions of dollars of the fee." So it's just a transfer of value from the homeowner to whoever's buying that loan. But instead, if the market rate.

Herve Billiet (13:42)
Now, an additional problem is that if those

loans don't get paid immediately, if those loans don't last, sorry, for the term of the loan, but just are paid in like a few years, the dealer fee that was used to make that loan more attractive, if the loan only lasts six, seven years, now those financiers that buy this, they make all their money upfront in a very short amount of time.

Those people seem to be like winning in the entire solar game. A solar company runs on like about 5%, 3% profit margin total. But the people that buy those loans, they walk away with a lot more nicer percentage point of the entire pie.

Ravi Mikkelsen (14:18)
Well, I mean, it's, you know, them, even the ones that are purchasing those loans. it's like they're getting money upfront, but the interest rate on those loans, it's like what they would expect for them, you know, is much less. And so it's like basically to go from that, you know, 199 up to a six or 8%, whatever they're expecting that yield, they need that upfront cash to make it work.

Herve Billiet (14:32)
Mm-hmm.

Ravi Mikkelsen (14:44)
And so it is literally like, so if, but then the exact same thing is like if a credit union like one of ours is charging 8%, now they just sell it at 8%. And just like, hey, this is a $100,000 loan and they're buying it for $100,000. They don't need to pay me $60,000 or I don't need to give them an extra $40,000 to make it economic. It's just $100,000.

Herve Billiet (14:48)
Okay.

Ravi Mikkelsen (15:08)
So basically there's no fat extra fee. So that homeowner who got $100,000 of solar system, their loan is being sold for $100,000 or near enough versus that homeowner who got a 20 or $30,000 solar system, but they took out a $60,000 loan. Basically, there's just $40,000 being transferred from them

to that other borrower because they got this low- interest loan that they're then paying off in a few years, and they're not getting the value from that low interest rate. So it's, you know, by changing this model, we're going to reduce the cost, increase the volume and increase the value to the homeowner, their neighbors, the grid at large. And, you know, the same thing sort of on sales. It's like we more channels, more price transparency.

And the lower we bring down the cost, the more people are going to go solar. We make it easier for people to buy solar. That's where we should get to is that people are like, hey, they come to one of your installers on their website or their app, put in their address and their basic bill. And it's like,

I need a 7kw system and one power wall and that will take care of 95% of my bill and this will pay back in 7 years and it's $15,000 cash or a $16,000 loan. Great. Let me choose one of those options and here's a down payment. It's just like, let's make it easy for people to buy this from us.

So we need to provide more data, more upfront price transparency so that they can make that decision versus needing all this complicated, over-engineered sales proposals that are super splashy. More, more people are becoming aware of it and just be like, "Here's my bill. Here's what Solar can do for me." Here's the changing grid environment and moving from an

a NEM to an NBT, or I like to call it NEM4. NEM1 is just like the utilities throw in cash. It's like, we're trying to incentivize solar, so we're gonna pay you greater than retail. NEM2 was, all right, retail only. NEM3, as we know, is basically a very low

volumetric rate and then you self-consume to get your economic arbitrage. NEM4 should be, hey, let's actually make this grid infrastructure and that battery is deploying on a multi-time per week basis. And so it's just like, hey, here's a spike. The spot price is at $2 a kilowatt hour. Great. Here's 15 kWh out of my batteries and then it's going to refill off the cheap electrons.

Like this is where we need to, this is where the grid is going. And the faster we get there, or the less time we spend in this solar- only, solar- bro sales, doldrums. It's just like, Hey, this is happening because of, when we switched from NEM2 to NEM3,

Herve Billiet (17:53)
Yes.

Ravi Mikkelsen (17:59)
it was very sudden and there was no ramp.

Herve Billiet (18:02)
You mentioned, Ravi, with the batteries that are being sold, hopefully by solar companies that use a battery-first approach, or at least not just PV- only, but batteries is definitely part of the sales pitch. I think those batteries need to provide a value,

more than just backup. And one value you can do is with a virtual power plant. There's a of talks about it, and yes, Sunvoy, we're also working on that. They're making those batteries more part of the solution and part of the revenue stream back to the homeowner. Now I want to go back, Ravi, to the $2 a watt Bingo card. I have it in front of me here, but I think there's a lot of different pieces here. And if you don't have it in front of you, haven't seen it, just imagine a Bingo card easy with

basically, each department of a solar company that needs to be optimized. And so we spend a lot of time now Ravi about Atmos and reducing the cost of capital to their homeowner. We just spoke about a virtual power plant that can add value. But there are a lot of other departments there that need to be analyzed. So basically, think about all departments in a solar company. Each one of them needs to make a difference. And we spoke about different tools too.

Make sure you bring the right tools to a solar job. But also, what other ideas do you have Ravi about reducing the cost of a solar company to do business?

Ravi Mikkelsen (19:17)
Yeah, so there's a lot of automation, more software tools like Sunvoy that are creating a platform to build upon or what's needed. We're establishing direct pay relationships with distributors so that if you finance with us, we'll use that lower- cost capital to pay for the equipment directly so that the

Yeah, the distributors aren't adding, financing at the sounds and adding in margin, or it's not going on the installer's credit cards and using credit card interest rates to finance it. So those are some small things. Advocate for permit reform. it takes a long time for permits to be approved or for interconnection in your area, these are things that we need to come together at as an industry.

Herve Billiet (19:59)
And check out Solar App Plus. If it's not in your area, should definitely check it out.

Ravi Mikkelsen (19:59)
and

Herve Billiet (20:04)
And it's funny what you mentioned there about putting out an address in multiple places at Solar App Plus. So we're to combine those. So it's going to be one button in Sunvoy to just push everything into the Solar App Plus application. Just one more step to just to simplify it. What do you think about too many part numbers? So that you see some installers, have so many types of panels, so many types of batteries. That's all lot of training and additional overhead to keep track of all those moving parts, right?

What do you think about reducing the number of panel brands, reducing the amount of batteries that you install, of a consult I did there? Does that make sense?

Ravi Mikkelsen (20:37)
Yeah, definitely. Just like the logistics and this sort of like, you know, it's like, because, you know, certain parts aren't acceptable in certain jurisdictions. You know, had one installer in California who was rejected for inspection because they use three eight inch bolts to hang a power wall instead of quarter inch bolts. These are stronger bolts, but they're not on the list. You know, it's like, so

Herve Billiet (20:58)
Mm.

Ravi Mikkelsen (21:03)
if you're holding multiple skews because again, that is a need for reform in the industry, and we can control that and influence it. Another great organization, permit power, is putting forward model legislation to states to standardize. Or having to track, that's another thing, is like,

I know many installers who work across multiple counties or townships that they keep a very complicated spreadsheet; Like, here's all the rules in this city or county, and here's all the rules in this one, and they have to go back and forth. That's a huge logistical cost and a pain in the butt. So there's this, and then on the equipment.

It's like some of the things may not properly work together. It's like the more you can standardize and streamline, that's gonna be easier on the training, on the install, on the tooling that you have to have, on the balance of system parts, space. The more things you have and the more types of things you have, the more space you have to have.

Herve Billiet (22:07)
Yeah, maybe we should have added another piece on the bingo card like say no You just bought up several pieces- say no to one more panel brand, one more panel wattage, and so on, one more battery. But also say no to distance

We had like, think a 60 mile radius, something like that around our warehouse. And I saw one lead being discard because it was 61 miles away from the warehouse. And I come on guys, why don't say no to it? But then I instructed my, team to reject leads more than 60 miles. And the reason is that it's not just a one time drive. The salesperson goes out once- I can afford that's two extra miles. And then the site visit goes out

two extra miles and then the team goes out and then, for maintenance, maybe you need to go out back again. So that one extra mile is actually significant when you look at all the projects that you do. So, so you need to say, start saying, no, maybe I want some counties. We've done business in one specific county far away and you pull up the business license, you pay fees anywhere for just one project. Maybe you should have said no to that one single project and like,

we'll keep you on the list. If you have five more projects in your county, we'll come out. So maybe say no would have been like a good item to add on the bingo card.

Ravi Mikkelsen (23:16)
Yeah, and I think that brings up another opportunity here as well, is that, you know, software platforms like yours are ours

where we're getting in is it's like, hey, you know, we've got this 60- mile radius. It's like, well, maybe, you know, just like, you can say, hey, you know, that lead came to your installation company, but it's at 61 miles, but that's, you know, 40 miles for me. And so you pass it over to me and I give you as much like, hey, thanks brother. You know, let me take you to dinner. Like.

Herve Billiet (23:37)
Mm-hmm.

Ravi Mikkelsen (23:43)
It's not like, give me $5,000 like you're a door knocker, but it's like, let me give you something. Like you're passing that over to me,l and you know, it's like, I buy you an Xbox game or, you know, a Lego set. Like those things are very expensive. But so it's just like, let's compensate each other. Let's support each other. It's like, hey,

Herve Billiet (23:57)
If.

Ravi Mikkelsen (24:04)
I don't want to do, it's like, oh, you get out that 62 miles and you forgot something, now you got to drive back and get it. Like you said, it gets expensive if you just go out a little bit more, but if you pass it off to another friendly installer that's on team $2 a watt here, they compensate you a little bit.

And then you don't have the extra cost, you get a little extra cash. And overall, now they get a lower cost system because there isn't the added expense.

Herve Billiet (24:32)
All right. Ravi, thank you very much for being a second time on what installers need to know. Thank you very much for your time.

Ravi Mikkelsen (24:38)
Yeah, third time next year. We're going. Let's do it. Thank you.

Herve Billiet (24:41)
We'll do it. Thanks, Ravi!