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GOSOLR DROPS ESKOM-IMMUNE BARRIER TO R1 399PM; PLUS THE RENT V BUY SOLAR DEBATE

30th August 2023 by Alec Hogg

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.

--------------------------------------------------------------------------------

Watch here



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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.

Read also:

 * GoSolr launches game-changing solar solution
 * GoSolr: Illuminating paths in the darkest times
 * When Eskom wobbles, demand for Gosolr surges – and SA’s home-solar leader
   gets a new convert

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