The most common response from CitizenRE supporters¹ is that since no money changes hands, no harm is done, even if CitizenRE doesn’t deliver any or is delayed in delivering their promised solar systems or manufacturing plants. “Who cares if CitizenRE fails? At least they tried.”

This is a really limited point of view… At least some of the misgivings about CitizenRE are their isolated, and often naive, approach to transforming the industry. There are a string of stakeholders involved in the development of the evolving solar industry. Other solar businesses, non-profit organizations, investors, the government, and policy makers played an important part in the successful growth of the solar industry to date, and into the future.

CitizenRE could be an amazing success or a total failure. There’s not a lot of information to judge them on, other than what they tell us. I would define their short-term success (the next two years) as building a manufacturing plant and setting up 1,000 or more rental systems. If they can do these two things, which are astronomically lower than their own projections, they will have accomplished something significant. Based on a) their current progress, b) their lack of focus, and c) the high number of “moon shots,” I personally think the delays will continue and the actual accomplishments will be limited.

However, it might be constructive to look at the question of CitizenRE’s impact on the various stakeholders. How does their success or failure affect everyone? In the interest of space, I’ve limited my discussion to four main stakeholders:

Consumers: This is the first stakeholder everyone thinks about, and includes both commercial and residential sectors². Since part 2 was published, I’ve struggled with the passion of the debate on both sides, trying to understand why this company in particular has resulted in such a strong reaction. I think the existing industry is most sensitive to disaffecting residential consumers, and CitizenRE’s apparently hollow marketing effort targeted them first and foremost (September 2007 installation timelines have now been extended into 2008 and beyond). The proverbial black-eye looms potentially large.

No money has changed hands, but goodwill has…CitizenRE’s failure isn’t just one less installation to any one consumer. It is their (and their friends’ and families’) future interest in supporting the technology or additional federal and state policies. CitizenRE’s failure will also create stereotypes in a lot of minds about the viability of solar who never “signed up,” even as the industry changes (You wouldn’t believe the number of people who still cite the solar hot water debacles of the 1980’s.). CitizenRE’s success provides obvious consumer benefits, insurance against electricity price increases, and potentially on a scale and in a sector no one thought was possible.

Interestingly, I don’t see everyone everywhere adopting this rental model, though. Why? Risk and reward. As electricity prices increase and solar prices decrease, you get a greater return from owning a system. Owning a system is an investment rather than an insurance policy.

Installers: Installers represent the market segment who could see the most direct financial repercussions from CitizenRE’s failure by putting their potential customers in a holding pattern. Most of CitizenRE customers may never have purchased their own solar system in the next 6 months…many over the next 2 years. But if 100,000 people “sign-up,” 100,000 “wait and see,” and 10% of those would have considered purchasing a system over the next two years. Thus, 20,000 potential sales were turned away. CitizenRE has now acknowledged this potential and when customers sign up, they are given a greater amount of disclosure about the possibility of delivery delays; it remains to be seen how this issue will play out.

CitizenRE’s success will put some people out of business, but frankly, that’s capitalism. It could also represent a new set of opportunities for existing or new installer businesses. An important part of moving forward is the training and use of certified installers, which CitizenRE has not appeared to immediately address (which is not surprising given all that’s on their plate)³ .

Investors: Investors themselves are probably the market segment that I have the least bit of personal concern over…They need to perform due diligence in determining where to invest their money. But a colossal failure, by CitizenRE or any other major solar endeavor, could create a chill in the ability of future technology and ventures to raise similar capital. Renewable energy is the current investor darling. Everyone is falling over themselves to push money into CleanTech investments, reminiscent of the dot com frenzy. Will an over-exuberance over poorly-thought out companies cause a similar industry correction? CitizenRE’s apparent colossal nature, and the results it does or doesn’t accomplish, makes its current and future peers highly scrutinized targets.

Policy Makers: Solar is a subsidy-driven industry. So is wind energy, coal, petroleum, and natural gas. It is politically much easier to offer carrots than it is to take them away. I guarantee that policy makers are starting to hear about CitizenRE, but their degree of understanding is often limited. “If this company can do free solar, why do you need this tax credit? Rebates? Portfolio standard?” “Why should we start or extend our incentives if they all go to CitizenRE?” CitizenRE needs these incentives as much as anyone else. They aren’t exempt from solar economics, even with their purported vertical integration cost savings. The perception of market readiness can be easily muddied, and their model isn’t terribly repeatable, given the billions of dollars at hand that are needed to get started.

There is the distinct possibility that this flurry of excitement is all for naught. CitizenRE may fade from sight this year, or in five years, and do absolutely nothing. I’m really suspicious about the solvency of their business plan and their ability to execute it. I really don’t appreciate that they’ve created a hollow frenzy in retail consumers before their supply chain and installation structure had any framework. I think they need to focus on doing one or two things well, rather than talking about everything. Or they could prove me entirely wrong…

No matter your opinion, they aren’t going away, and we’ve reached something of a debate impasse. Consumers can read the opinions, largely based on conjecture and one-sided information, and make up their own minds. But until CitizenRE takes concrete and public steps toward their goals or releases verifiable information, not a lot of additional constructive debate can occur (if any of it has thus far been constructive in the first place).

Notes:

1. Interestingly, the most passionate and often argumentative stances don’t appear to come from CitizenRE itself, but from EcoPreneurs and seemingly average consumers. CitizenRE itself has made belated efforts to acknowledge the significance of the existing industry and their desire to respect and integrate within it. However, CitizenRE’s involvement in major solar organizations has been non-existent, even if they are “members” (having registered as the “Citizens Electric Corporation”).
2. If CitizenRE is a business interested in profitability, and that low-hanging fruit represents the best opportunity for stable profits and capturing the best market before a competitor, their major focus on the residential retrofit market is the least profitable approach. CitizenRE is essentially leasing roof space, which is not a particularly limited commodity. Why deal with 100 consumers, contracts, and installations when you can deal with one? Why not work to maximize your most profitable sectors before your competitors do? The most obvious answer is the ready political support that would come from involving average consumers in changing state or national policies. But with bills to pay, can a fledgling company afford this route?
3. The North American Board of Certified Energy Practioners (www.nabcep.org) is a highly recommended pathway for certification.

If you have been following politics on TV since last November, there’s a good chance you’ve watched Senator Chuck Schumer (D-NY) using an imaginary middle-class family as a rhetorical device to unify the Democratic message around this crucial target market. (note: if you object to comparing politics to marketing, keep in mind that Republicans have been using micro-niche issue targeting and other staple techniques from the marketing world for years, with great success)

At Green Options, when we build services and features, we hold ourselves to a similar standard: can my mother use this? Of course, I don’t expect my mom to get linked to our site through Digg and then add our RSS feed to her news aggregator (indeed, she’s never heard of Netvibes), but we try to make sure that all of the information we provide is accessible to not only the less green-savvy, but the less tech-savvy as well. At the same time, we do our best to make sure those users have the tools to understand terms like RSS and Web 2.0.

In the end, we know that all of the resources we provide won’t be right for all users, but we are confident that there is something useful or interesting for practically everyone, and we trust our users to decide for themselves what features and information they find useful.

Contrast our market-making philosophy with the multi-level marketing (MLM) approach taken by Citizenrē. Instead of giving users the resources to make their own energy and lifestyle choices through open information, independent ‘Ecopreneurs’ claim to provide a one size fits all solution: wait on buying solar panels today to get on a waitlist for renting them a few years down the road.

For those of us trying to build green markets now (especially solar energy), this pitch immediately raises two major concerns: lost consumer confidence in the solar industry if promises go undelivered, and the pre-empting of legitimate projects for solar installers by overzealous Citizenrē reps.

Over-hyped grand visions of a sudden MLM-based energy revolution are harmful at worst and apparently infeasible at best. The vast majority of ‘green collar’ professionals who spend their time in the details of building their industries understand that transforming our energy economy is (and will continue to be) a painstaking process.

I’m sorry to say that multi-level marketing will not be the hero of this story, at least not without having proven deliverables in place before initiating such a campaign. I may come to eat my words: it is possible that Citizenrē is just using MLM to prove consumer demand, and the word is out that the company will announce its investors and factory location a mere two weeks from now. But if I do, I’ll eat them happily, because it will mean that at least someone got through to the world.

While the rest of the solar industry obviously shares in the hope that (for example) solar energy’s market share will reach 25% by 2025, unsupported promises and unbridled enthusiasm are obviously not enough to get us there. Development is more likely to be accelerated by unexpected climactic, economic, or political events than by down-line residual sales commissions. Indeed, in their ebullience, Citizenrē executives appear not to take into account the complexities of implementing such a huge, vertically-integrated business plan—but at least they have a vision.

I was taught that a company’s vision statement should be defined by an ultimate, unachievable goal. Given the company’s robust projections and …interesting (for lack of a more judgmental word) ‘pyramarkting’ choices, Citizenrē’s goals certainly appear to be just that: unachievable.

But that doesn’t mean we should throw the baby out with the bath water. One secretive company might not be able to do it, but a sea change in public perceptions certainly could. Grand visions of transformative change can and will spur innovative solutions, but only if we can help green markets grow in honest and transparent ways, and keep intact the trust of a cautious public.

Today’s guest post comes from our friends at Solar Kismet. You can find Part 1 of this series here.

The three most common reactions from many CitizenRE supporters when questioned about unrealistic goals is to:

1. Dismiss any questioning as being a solar industry conspiracy against the new competition. However, three other solar companies already offer a similar rental model, and you would be hard pressed to find any serious debate on their integrity.
2. Chastise the existing industry as having accomplished little and not having a real vision for the revolutionary ideas, even though the industry has grown at a rate of 40% annually over the last decade. Thousands of people work in the solar industry, many of whom have no vested financial interest in any one company, and a sizable portion are skeptical of CitizenRE’s claims.
3. Explain what CitizenRE isn’t rather than answering the substantive questions about what it is and can reasonably accomplish.

Ultimately, the skepticism of CitizenRE is founded in overstated plans that have relatively little supporting documentation, other than “trust us.” CitizenRE’s goals are ambitious to say the least:

• World’s Largest Solar Manufacturing Plant - Last June, Nanosolar (a company started in 2001 and backed by the Google founders) announced the construction of a 430 megawatt solar manufacturing facility, the world’s largest. Nanosolar’s new thin film technology was met with cautious optimism: as one industry insider put it, announcing and producing are two different things. CitizenRE states it intends to develop an even larger 500 megawatt solar manufacturing plant that will use a new combination of lower-quality silicon material. Originally slated to begin production in early 2007, the CitizenRE website now states a production goal of early 2008. In a recent interview, Sharp Solar, one of the world’s largest solar companies, indicated they have manufacturing lead times of 18-24 months under the best circumstances, which would further push CitizenRE’s new plant into 2009. The proposed plant is not on the radar of any solar news or industry analysts and CitizenRE has still not announced a location.
• New Solar Technology - CitizenRE’s new solar manufacturing plant will use a lower-purity silicon in the production of the solar panels, in hopes of lowering costs. All things being equal, this will result in a lower-efficiency solar panel. The new technology has no commercial track record. Furthermore, silicon supplies are tight, impacting multinational corporations like Sharp and Kyocera. CitizenRE will also need to deal with this tighter market.
• New Inverter Manufacturing Plant - Solar panels produce DC power, like batteries. Inverters convert the DC power into grid-compatible AC power. CitizenRE also intends to build their own inverter manufacturing plant.
• Third-Party Solar System Ownership - Three companies already offer “third-party ownership,” where a solar company owns and operates the solar system installed on a customer’s building. CitizenRE is similarly proposing to operate the third-party ownership model on residential homes, a scale over 200 times smaller. The also plan to do business in 30 or more states than existing companies currently operate. Industry analysts indicate that they cannot run any realistic scenarios where such a venture could be profitable.
• 100,000 Installations per Year - There are currently about 35,000 solar systems in the United States, with approximately 30,000 (PDF) of these coming in the last six years. CitizenRE originally had a stated goal of 100,000 installations per year, which has since been scaled back to a reported 25,000 per year.
• 2025 Vision - By 2025, CitizenRE has a vision to operate 25% of net electricity generation (presumably in the U.S.), 20% of peak capacity (also presumably in the U.S.), 330,000 megawatts of solar manufacturing capacity, and over 1 million megawatts of installed capacity. It is truly unclear how these are in the realm of reality. They will need to build 660 of their 500 megawatts plants in the next 18 years - that’s thirty-eight plants per year. And the first one has been delayed at least one year.

If any ONE of these things was announced by an unknown company, the idea would be met with serious skepticism. Frankly, if many of these things were announced by an established company, there would be skepticism. But the combination of industry-changing goals, all with serious learning curves, really brings into question CitizenRE’s basis of understanding. Could five established companies accomplish these goals, let alone one unknown?

CitizenRE’s business structure and start-up methodology also raise questions. As a multi-level marketing company, CitizenRE has recruited over 5,000 “ecopreneurs” who are not company employees, but rather associated with the company and will potentially receive a payment based on signing up other customers. Typically MLMs involve emotional sales pitches, sold from person to person, and can be associated with devolving into pyramid schemes, where a few top leaders make money by exploiting the lower ranks.

In CitizenRE’s case, money isn’t exchanging hands, which is frequently cited as a reason CitizenRE can’t be a scam. Instead, an equally powerful motivator is being used, one that drives the environmental movement: hope. CitizenRE is essentially promising THE energy, environmental and economic solution all rolled into one. It’s a powerful emotional driver that has resulted in the viral spread of CitizenRE’s ecopreneurs and potential customers, many of whom are no doubt one in the same, and whom may not understand the nuances of what they are selling or purchasing. Perhaps the promise of a future solar system is reason enough to participate, in leiu of immediate payment. Since ecopreneurs will ultimately be compensated (PDF) based on the number of systems they refer, misinformation and excessive hype has been the common marketing strategy. The company has since disapproved of such tactics, and ordered associates to stop using such tactics.

In addition to the sales force and resulting customers, CitizenRE will also need to train and recruit hundreds, if not thousands, of site inspectors and installers across the country. Not all homes will be suitable and every installation is unique, with the permitting and interconnecting process varying by each locality and electric company. Imagine trying to process 25,000 permits for a backyard deck, a common permitting request, in a few thousand cities. Now imagine doing so with a technology of which the inspectors are only vaguely aware. As permits delay things, installation quality will likely suffer in the name of making up speed and efficacy. And once the installation is complete, the system needs to be inspected for safety with the electric grid. Delays are inevitable at nearly every level of the sales and installation chain.

Ultimately, one wonders why they did it this way - marketing heavy and delivering lightly. Why not start building the manufacturing plant, which in order to raise money from investors or loans from banks, would have to show fiscal solvency in and of itself? Prove that idea. Why not start installing tens, and then hundreds of systems in the California first, the best market for solar systems, and build some industry experience and credibility? Prove that idea. Why not focus on doing one thing well before doing all things hypothetically? I am amazed at how far the hypothetical has taken this company.

Instead, CitizenRE has promised it all to everyone. There is basically nothing they haven’t decided they can do bigger and better than the existing solar industry, as if forging new paths is only a matter of an idea. But ideas are cheap and CitizenRE needs to hit grand slam after grand slam in order to come close to their vision. The shifting time frames and requests for patience have already started, and it is only a matter of time before various parts of the plan fall apart. The best businesses do one of two things - “promise and deliver” or “underpromise and overdeliver.” It’s kind of ironic that the industry is now abuzz about CitizenRE, a brand new company that hasn’t delivered anything…only promised.

Next Time: What effect might CitizenRE’s improbable success have on the industry? What about failure? (part 3 of 3)

Most of us in the Green Blogosphere have followed new company Citizenrē, and its REnU program, with great interest. Mike has been analyzing the company at Solar Kismet, and we asked him to share his thoughts with our readers.

As Green Options launches new features and tools in the coming weeks, you’ll see that we’ll be involved in helping consumers consider their options for solar power. As such, we firmly believe that full transparency is necessary for the solar industry’s continued growth. This author’s thoughts and ideas are his own, and do not necessarily reflect those of Green Options, its management or staff.

Green products come in all shapes and sizes, with many varying claims about their content, performance and cost. Sometimes it’s hard to understand the nuances of something you don’t want to become an expert in - you just want it to be excited about your green choice and have it work. Renewable energy is no exception.

Renewable energy captures everyone’s imagination, much more so than its practical cousin, energy efficiency (those funny-looking lightbulbs really do work). But it’s hard to evaluate what the best renewable energy options are environmentally and economically. You can buy green electricity (but is that really helping anything?), you can install a solar system on your house (but it’s so expensive!), you can get more energy efficiency (so boring!), or you can have a solar system installed on your house for no money down and fix your electricity rates for the next 25 years (really?).

Did you catch that? “No money down” and “solar energy” aren’t two words that normally come together. But they have in the last two months and it’s caught the eye of thousands of people interested in selling and buying these systems. But what’s the catch? Exactly. Here’s a short lesson in “too good to be true”…

I should preface this by saying that I’m a skeptical person. I’m not going to be the one leading the masses with inspiration, so when I first heard of Citizenrē, a new solar energy company and their “no-money down” solar business model, small flags went up. I didn’t think too much of it at first. But when I started to get questions from multiple, non-related sources (consumers, industry, consultants, etc), I realized that Citizenrē had started to gain real marketing traction and decided to look into it a little more…

Citizenrē purportedly offered consumers the best of all solar energy worlds - a solar electric system on your home for no money down, no risk, and insurance against future electricity cost increases. Their goal was to install 100,000 solar systems per year on homes across America and they were recruiting salespeople from all over the internet, as well as pushing press releases, websites, and blogs touting their goals and promises everywhere. (Editor’s note: According to Renewable Energy Access, Citizenrē now plans to install 25,000 systems annually).

Here’s how Citizenrē’s model would theoretically work:

Interested consumers sign a contract with Citizenrē to have a solar system installed in exchange for a monthly solar system rental fee; reportedly, if you signed a 25 year contract, no deposit was required. Homeowners and businesses in more than 35 states would be eligible (those with net metering and a retail electric rate of 7 cents per kilowatt-hour or more). The monthly rental fee would be equal to the amount of electricity the solar system would produce annually multiplied by your cost of electricity (or even less). So instead of paying your electric company $100, you might pay them $50 and Citizenrē $50, if it offset 50% of your electricity use that month. Note that you haven’t saved any money at this point. Theoretically, you could pay Citizenrē a little less, say $45, if your Citizenrē rate was lower than your electricity rate. But the main benefit is that you lock in your electricity prices for the length of the contract and assuming electricity rates go up over time, you started to pocket the difference as personal profit.

A quick example:

• A 3 kilowatt solar electric system installed in Colorado might produce 4000 kilowatt-hours per year;
• If a home uses 8000 kilowatt-hours per year, it will offset 50% of your use;
• If your electricity rate was 9 cents per kilowatt-hour (cents/kWh) and you signed a contract with Citizenrē for the same amount, you pay each $360 per year (save nothing);
• If your electricity rate went up to 10 cents/kWh the next year, you would pay the utility company $400 and Citizenrē $360 (save $40);
• You can move your solar system once at no charge, or reassign the contract to the new homeowner.

What’s in it for Citizenrē? They take your monthly rental fee, the federal solar tax credits, accelerated business depreciation benefits, potentially lower costs from vertical business integration, and potentially the renewable energy credits (if legal).

I should stress that this business model in and of itself is not new. At least three companies (SunEdison, MMA Renewable Ventures, and Solar Power Partners) offer the same concept to companies or utilities installing large solar systems in limited markets where the incentives and policies align. And I suspect the concept will trickle out to more states and smaller solar systems over time. But not now and not Citizenrē.

Unfortunately, Citizenrē has put their marketing cart before their solar panel horse. They have built up a salesforce of thousands and pre-sold thousands of solar systems, but they have nothing to install for at least a year. Not one solar panel.

Next Time: If the business model isn’t new, why does Citizenrē raise so many flags? (part 2 of 3)