Energy Evolution

In this 20-minute webcast, we discuss:

• What’s your perspective on changes in the energy industry?
• With more changes and choices to come, why shouldn’t companies simply wait?
• What criteria should companies base their energy decisions on?

Watch the recorded webcast:

Webcast Transcript:

Hello everyone. Welcome back to Solar Tea Time. We had a bit of a summer hiatus there. I’m Craig Noxon. I’m the VP of Enterprise Sales here at REC and today we have a very special guest this month. It’s my boss, and CEO of REC Solar, Matt Walz. Matt, welcome. Thanks for joining us.

Matt:         Hey, Craig. Thanks for having me.

Craig:       Hey there. Yeah, we’ve been trying to book you on for some time now. So, I’m glad you could make time. Before we get started, I’ll do my little housekeeping here. I want you all to be aware that your lines can be muted, however, you can type questions inside the webcast under the questions tab, and we’ll try and get to those by the end of the webcast. If we don’t, we’ll certainly get back to you via email. So, thanks.

Let’s get started with the topic of the day. Matt, you and I were at a conference not too long ago – Smart Energy Decisions – a few months back where you gave the keynote, and you talked about evolution, adaptation around energy choices with businesses and organizations, and I thought we’d pick your brain a little bit more based on those themes.

Craig:       We won’t go through the whole presentation, but I did want to take out a few of the highlights. So, I’ve got a couple of questions for you. So, without further ado, we’ll talk a little bit about survival of the fittest.

Matt, you spent the early part of your career at various roles within Duke before moving to REC to become the CEO. So, maybe, you could start by telling us a little bit about how things have changed in the industry and how and why Duke might have come to acquire REC and how that evolution started.

Matt:         Yeah. Thanks Craig. I’m happy to start there. You know, when I try to describe to people the industry changes that I see in the industry, the simplest way for me to do it is to share my own person experience. When I joined Duke Energy – maybe 15 years ago – I joined and was on a trading floor where we traded and managed power, fuels, capacity, emission allowances, renewable energy credits, demand response, other products at a wholesale level across a fleet of assets across the country for Duke Energy. It was, without a doubt, one of my most favorite roles and places to work, because it felt like you were at the heart of the power market. You were the heart of the industry. That’s where the action was, and I loved every minute of being on the floor. I loved the diversity of the opinions, the depth of experience, the creativity, the commercial risks and opportunities that they afforded to take, and I learned a ton from the people around me.

Over the course of my career, though, I moved more and more away from the wholesale market toward customers. To be frank, with my first role, I was on a trading floor. We didn’t deal with customers. We dealt with counterparts at the wholesale level, and customers are something off in the distance. Today, and over my career, as more and more opportunities and roles came up for me inside Duke Energy, I found myself – not by plan – moving more and more toward customers and more and more toward renewable energy.

So, today, when I sit in my role today at REC Solar it’s a completely different environment. The excitement and the interest and the opportunities feel very much like the trading floor fifteen years ago in that, today, this feels like we’re at the heart of the markets. This is where the action is in the industry. This is where you’re going to make the most impact. It’s very close to the customer. It’s behind their meter. It’s distributed energy and distributed energy solutions that give them more control and more impact on their energy spend and how it relates to their business. To me, that’s what makes it so exciting. That same passion and excitement of my first job is here today, and I think that’s because that’s where the industry, and the markets, have moved and where the heart of the market is.

The second perspective I have is on Duke Energy and their journey over the last fifteen years. So, there’s a couple of ways I can think about it. One, when I joined Duke Energy, I don’t believe they had any renewable energy investment. Duke Energy Renewables, which is the business that I came from before joining REC Solar, is – maybe – ten years old. In those ten years, it’s invested over 4 billion dollars in wind and solar projects throughout the United States. It made its initial investment in REC Solar to get closer to customers and go from big utility scale projects, like giant wind farms, to behind the meter solutions for customers, both at the commercial and the nonprofit space of the market. So, I see that evolution inside Duke and its commitment to invest in new businesses, new technologies, and significantly increase its share of renewable energy and its generation.

If I look ahead to Duke and their forward outlook, I think every year the outlook for renewable energy to take a greater share of the future generation next in the company has grown year over year over the last 10 years. That’s a very simple last perspective from a Duke standpoint and I think it says a lot. When I joined Duke Energy, I don’t recall the word “customer” being used. It was rate pair. It was a rate pair and how do we think about rate pairs in our service territories? Today, if I’m in a Duke Energy meeting, there is a customer message up front, and we only talk about customers and how do we deliver more choices to them that are cleaner and build to a smarter energy future that is at the heart of where Duke is going to go and be successful going forward.

Craig:       Matt, you talked a little bit about choices – more choices for customers, more of a customer first attitude among Duke, and I assume, other utilities, things generally getting better, and that’s the evolutions. So, from a customer’s perspective, why not wait? Why not just say, “Listen, things are getting better. Renewable will go down over time.” Why not just sit and wait until that happens a little more?

Matt:         There are two dynamics to that. One is, what’s possible today, and I think one could say there’s a lot of changes. They’ve been coming a lot. Maybe they show up even more in the future. So, why not just wait to see how solar storage, microgrids, and other digitalization of the internet, and everything, shows up? Just like your iPhone – or I remember when I had a Blackberry and that was the greatest cell phone ever. Today it’s an iPhone. Like, why not wait for the next generation to come out?

I would say the reason not to wait is because the expectations from your customers and your other stakeholders – like employees and investors – are that you are going to move forward. You don’t want to wait, because, I think, you are going to lose two things. One is the longer you wait, the less relevant you could be for your customers.

From my personal experience, if I think about books, twenty years ago I lived in Chicago. There was fantastic Borders on Michigan Avenue. I spent a lot of time in that. It was the greatest place for me in terms of experiencing books, exploring books, finding books, and everything around them. Today I wouldn’t even think of that as an option. I go to Amazon. I don’t even read them. I listen to them on Audible. My expectations have moved, materially, as a customer, with what’s possible, with what’s been shown to me and delivered to me. My expectations have moved away from what was a great experience. So, now, it’s not an acceptable experience.

I think, when it comes to renewable energy, you’ve got to understand that there’s an expectation. Your competitors are doing it. If you are thinking about this, your competitors are out there doing it. Just look at the RE100 or other metrics out there of who is signing up for big sustainability goals. Your stakeholders expect it, not just your customers. Your employees require you to have a clean, sustainable footprint. Investors, frankly, more and more expect you to have sustainability goals and to tie that to your long-term strategy. So, I see it as an expectation that you should not ignore.

We talked about evolution a little bit. I think Darwin says it best. He said, “It’s not the strongest of the species that will survive, nor the most intelligent, but the one most adaptable to change.” By not changing, by not adapting, that is not a good business plan. It’s been well proven, and it’s not a good business plan for businesses or a species. You have to adapt with change.

If that doesn’t resonate, I’ve seen a number of customers that are drawn to sustainability, but they act on savings. Those that made decisions to invest in onsite solar, or renewable energy, did it last year, the year before, or even five years ago and got many happy customers that are saving off the systems that were available then and are happy with those investments. So, if you boil it down to one thing, by waiting you are forgoing the opportunity to save and lower your cost structure tied to energy.

Craig:       So, I just want to pick up on something. You talked a little bit about evolution and you mentioned the Blackberry and the iPhone or orders to Amazon. So, that kind of disruptive technology, in those cases – Airbnb, Amazon, Uber – that’s a revolution.

So, is this disruptive technology? Is it an evolution – DG and renewable energy – or is it a revolution? How do you see that?

Matt:         You know, I’d say that if I look at it with my industry hat on, this is evolutionary. These are small changes that add up. So, at the end of the day, a behind-the-meter solar system is still producing electrons – the same type of electrons that a centralized generation powerplant from 25 years ago would have produced and delivered safely, affordably, and reliably to a customer’s business. It involves a similar technology. You have inverters. You have wiring. You have steel. You have similar components. So, I think there’s one argument to be made that this is just a continuous improvement on the same technology.

You can look at it in modules. The production of modules, over time, has gotten better, faster, and cheaper. Inverters have gotten better, faster, and cheaper. The components are – I jokingly say – it’s not like it’s the flux capacitor from Back to the Future. These are founded in the technologies that were at the heart of centralized generation 20 years ago, but they are applied in a way that enables it to be done onsite, and it can be done emission-free, and it can be done in a way that saves more money for that customer.

I think where it becomes revolutionary is when this takes off and gets to scale, and you get this critical mass of it in the market. That really becomes revolutionary for our economy, for those that want to avoid climate change, the environment, people’s way of controlling their energy spend and managing in their business and connecting to their overall strategy. That feels like where it becomes revolutionary. How you apply it becomes revolutionary, but I think at the end of the day a solar system on your roof is an evolution of what has been out there for decades.

Craig:       Yeah, still delivering electrons to you house and, in some ways, going back to how it used to be before utilities. People would have their own energy with the windmill.

Matt:         Yeah, exactly.

Craig:       So, going full circle, how should customers be thinking from their own perspectives? How could they be thinking about these energy decisions and making these evolutionary steps? Can you help us with the framework?

Matt:         I think the framework that seems to resonate, and is common across our customers, is the three C’s. It’s clean, cost, and control. If you frame your decision making around being cleaner, less costly, and getting more control over your energy, you will be able to make the right decisions for your business, not only to shape the choices and apply them to your business, but, also, to syndicate it and talk about it with the larger stakeholders within your business, because most of the time it’s not an individual’s decision about on-site solar, or PPAs, or other investments. It is an organizational decision within our customers. That framework will help shape a good decision, and then, also help those that are championing it to navigate it and get it approved and accepted within a larger organization. So, just focus on those three things – cleaner, less costly, and more control.

Then, the last thing I’d say is, my perspective is, we’re working with several companies and organizations that are leading the vanguard in this area about how to bring solar and renewable energy into their business. Every one of them is charting their own path. There isn’t one standard formula on how you do it. There are those that are focused on onsite solar. Some are looking to offsite solutions. There are folks that want to bring resiliency into their behind the meter distributed energy solutions. So, they bring in solar plus microgrid to bring value – not to just have lower energy, but to bring value to critical infrastructure in their community. I see it in those that want to own their systems versus those that want to have someone own the system and operate it for them.

There isn’t one solution for everybody. So, if you think about those three C’s and then you have the understanding that you can listen and learn from a lot of what other people have done, by the end of the day you should chart the strategy that makes the most sense for you business, and it’s okay that you’re doing it differently than others.

With that, what I’m excited about is that I believe REC and Duke Energy Renewables combined – our mission to be that energy partner for people in the market really fits well with the three C’s and, then, helping people navigate how to connect with their strategy.

When I look at the heart of our business, the brand that we stand for is built on stewardship, ownership, and bankability. Stewardship – we are committed to making a positive impact on the world. Ownership – we’re not a consultant. We’re not a developer looking to flip it. We are long-term owners of assets. That’s the heart and soul of REC and Duke Energy. We’re not here to just advise customers on what they should do. We’re not here to build what they do. We’re here to do those two plus own and operate where applicable. Then, the last part, that bankability – I firmly believe our brand is founded on what we do lining up with what we say. We can leverage the balance sheet of Duke. Our word is our bankability and the balance sheet of Duke brings that to bare for our customers and ties into our bankability.

Craig:       When you were talking, I thought of two other C’s which is customer choice, which seems to be part of the evolution. There’s more choice now than ever, and that’s just continuing.

Matt, I want to thank you. We’re just about out of time. Thanks for your insights. Thanks for joining us for Solar Tea Time. I hope to have a cup of tea with you.

I’ll wrap up, but if anyone would like to talk to REC or Duke Energy Renewables more about how to adapt your own energy mix and leverage renewables, feel free to email us. You can also email us with questions, and we’ll certainly get back with you.

So, thank you Matt.

Matt:         Thank you Craig.

Craig:       On behalf of everyone at REC, cheers. Have a great day. Bye