Getting Paid by the Sun with SolarCity’s Tim Newell

April 15, 2015

JOHN SHEGERIAN: Welcome back to Green is Good, and we’re so honored to have with us today Tim Newell. He’s the Vice President of Financial Products at SolarCity. Welcome to Green is Good, Tim. TIM NEWELL: Thanks for having me. I’m really pleased to be here. JOHN SHEGERIAN: Tim, this is going to be an exciting show because you’re going to be talking about not only the great brand, SolarCity, that you work for, but you’re also going to be talking about something that’s relatively new to the sustainability world, green bonds, and we’re going to get into that in a minute. Before we get talking about SolarCity and green bonds, I would love you to share the Tim Newell story with our listeners, because you’ve had a very interesting and exciting life. So can you please share your story a little bit with our listeners before we get going onto talking about solar? TIM NEWELL: Sure, I’m happy to. I’ve been in the investment world out here in San Francisco for some years now, but I didn’t start off there. I started off in politics and government, and worked in Washington for a number of years. I worked first for Pat Leahy, the senator from Vermont. Just about a year after I started working for Senator Leahy, a Congressman from California, Norm Mineta, came to see me. He said that he was looking for someone to come work with him and work on technology issues. He represented Silicon Valley. It was tremendously interesting to me. I told Patrick that I was going to take a year or two and go work for him, and to this day, when I see Senator Leahy, he kind of looks at my watch and says, “Is that year up now? When are you coming back?” I worked for Congressman Mineta and got to see all the developments in Silicon Valley in the technology industry. In 1993, when President Clinton came into office, they asked me to come down to the White House and serve as the Policy Director in the Science and Technology Office. I spent the next five years having a great time, working hard and seeing what I could do for President Clinton and the White House staff. JOHN SHEGERIAN: That’s great. What an experience. That is just awesome. TIM NEWELL: It was a great time to be doing it because it was a time in which technology was at the front burners of both policy and politics. The Internet was exploding, the web was exploding and some of the companies that we think of as ubiquitous companies today were only just starting. It was just a really terrific time to be doing it. After five years there, I was released on good behavior. I came out to California, I joined an investment bank out here, and then eventually moved into the investing world and venture capital world, and started a company a couple of years ago that was a financial technology company, building a platform to allow everybody to invest in solar, not just the large institutions. Along the way, SolarCity was one of the companies that we were planning to finance. One day, when I was sitting in the conference room with a team of lawyers and businesspeople from SolarCity getting ready to ink our final deal and get ready to launch an offering for SolarCity, Lyndon Rive, the CEO of the company, walked into the room and said, “I want you to clear the room. I just need to talk.” I thought, “Uh-oh, this can’t be good.” He sat down and said, “Tim, we’ve decided that we really want to open up the door and let all investors participate in solar. It’s part of making everybody have a stake in the transformation to clean energy. We decided that we need to do this at SolarCity, and so now we’re having a build versus a buy discussion, and you’re the buy part.” Within about a week, we made an agreement for him to buy my company, and about a month later, I walked in the door and have been running fast ever since. JOHN SHEGERIAN: Wow. That is just awesome. We’re so happy to have you on because you really are at the cutting edge of two major developments. When I had Lyndon on, I want to say two-and-a-half or three years ago, solar was just really at its beginning stages. Now, there seems to be a solar installation truck almost at every corner in every neighborhood. The two developments that you’re at the cutting edge of and that you are really the creator of, in many ways, is not only solar and SolarCity but the solar bonds concept. Can you share with our listeners both each of those concepts separately, and the explosion of both, but then the convergence of both? Explain how they work together. TIM NEWELL: Sure, happy to do that. For a long time, solar energy kind of bumped along. There were some real enthusiasts who wanted it and people who were committed to the environment or people who liked experimenting with new technologies, but its growth really hadn’t taken off, insofar as individual homeowners choosing solar. What changed that was really two things. First, the cost of solar over the past few years has come down so dramatically, so that it costs less than half of what it cost just a few years ago. That has really changed the game for many people. At the same time, there has been financial innovation that has changed the way people pay for solar. SolarCity has really been at the heart of that. Now, if you want to go buy solar panels, instead of having to pay $20,000-$40,000 to put solar panels on your roof, you can simply go to a company like SolarCity, choose to put solar on your roof. SolarCity puts it up there, owns it and simply sells you the power. That power is cheaper than the power you get from your utility. Those two things, lower cost solar panels and a new financial model – that means that homeowners don’t have to put tens of thousands of dollars down to go solar, they can simply choose to have cleaner electricity at a lower cost, has just caused the industry to take off. It’s one of the great success stories in the U.S. right now. The industry is growing hand over fist. SolarCity has grown about 100 percent a year over the last several years. Probably the last time, John, that you talked to Lyndon, two-and-a-half years ago, there were probably 2,000 employees at SolarCity at the time. Today, there are 10,000 employees, and we’re the largest solar employer in the United States. That’s all because of one single fact. For millions of Americans, it’s now cheaper to choose solar energy than to go with the same old utility energy that they’ve been getting. JOHN SHEGERIAN: That’s amazing. For our listeners out there that want to learn more about SolarCity, you can go to solarcity.com. To learn more about what Tim’s going to speak about in a little while here, solar bonds, you can go to solarbonds.solarcity.com. Tim’s also going to be at Sustainatopia May 27-30 at the Hyatt Regency in Beverly Hills. If you want to come hear Tim speak in person, he’ll be there and you can sign up for Sustainatopia on their website and sign up for the great conference that’s coming up May 27-30. Tim, can we talk a little bit about distributed generation? What does that mean to the solar industry, and how is that helping the explosive growth of the solar industry? TIM NEWELL: The utilities that serve most people, they build large power plants, facility-scale power plants, and then they attach long transmission lines and they transport that power to where people need it. What is different about solar is that it is distributed over all the rooftops where people use the power. With the changes in both the cost of the technology and the changes in how you finance the technology, now it’s feasible to deliver power right where you need it. You can put it on your rooftop, you can consume it yourself, and what you don’t consume in your house, you sell back to the utility, and they have to buy it from you. What that does is that instead of having to build huge power plants around the country and long transmission lines, power going to every house, that we can now make the power where people use the power. That model is something that, again, is changing the way we think about producing and consuming electricity. There’s been a lot of work done on how distributed electricity affects the electrical grid and a lot of advances in being able to consume more and more electricity from solar on rooftops. I think that what you’re going to see is that that becomes a greater and greater proportion of the electricity produced and consumed in the United States. Last year, for instance, one-third of all new electrical generation capacity in the United States came from solar. JOHN SHEGERIAN: Wow. That’s incredible. You gave a great highlight. When I spoke to Lyndon last, it probably had about 2,000 employees, and you have 10,000 now. How do you keep that massive growth going? How do you keep that velocity going? What’s your vision and Lyndon’s vision on the growth now? TIM NEWELL: SolarCity was founded in 2006. It was founded by two brothers, Lyndon and Peter Rive, who are still with the company today as CEO, and Elon Musk, the Chairman of the company. When they founded it, they founded it with one simple idea, which was if you want people to adopt solar on a broad scale, which is what they wanted, then you need to save them money, not cost them money. That was really the idea at the heart of the company, and it’s still the central strategic concept of the company today, which is save people money, give them clean energy, but give them clean energy that costs them less. Allow them to save money every month. It really doesn’t take more than that, because if you ask people would you rather have clean energy or lower costs, the answer is yes. Really, what the focus of SolarCity is, is trying to keep up with the growth that’s out there, the demand that’s out there, to put together a great product and a great service and be able to deliver that to more and more people. We’re in 16 states and the District of Columbia right now. We keep expanding. In fact, we just expanded a couple weeks ago into the state of New Mexico, so hello to all our new New Mexico friends. We look forward to expanding to other states as we move forward. JOHN SHEGERIAN: If you just joined us now, we’re so honored to have with us Tim Newell. He’s the Vice President of Financial Products at SolarCity. To learn more about solar or to buy some of their great products or some of Tim’s great products at SolarCity, you can go to www.solarcity.com or www.solarbonds.solarcity.com, or you can hear Tim in person speak at the Sustainatopia conference May 27-30 at the Hyatt Regency in Beverly Hills, California. You mentioned at the top of the show, Tim, when you were giving your history a little bit, about how SolarCity and Lyndon purchased your company, Common Assets, and that you launched a new product, solar bonds. Can you explain to our listeners what is a solar bond? And how can people get involved and invest in solar bonds? TIM NEWELL: Sure. SolarCity has financed more than $5 billion worth of solar systems with leading institutional investors and corporate investors, everyone from Goldman Sachs to Google, and that’s great. It has helped fuel our growth, and we’re going to continue to do that. But one thing that’s important to the company is allowing everybody to participate in solar, and not just save money from having solar on their roof, but also to be able to earn money from being able to invest in solar. The reality is that there’s still a lot of people who can’t choose solar or are not in a position to choose solar yet, but they should still be able to participate in the growth of solar. What we did is we took what was the heart of my company, which was a platform to allow individual investors to participate, and we modified that to be able to distribute solar bonds to essentially all investors in the United States. There really are very few restrictions. You need to be 18 years old, you need to have a U.S. bank account. For the first time, what we’ve done is to open the doors and invite everybody in to participate, to finance, the same kinds of solar assets that the largest investors up to now have been able to participate in. What you can do is you can go to our website. You can go in and you can see the different bonds that we have available. They’re very straightforward. They have maturities that range from a year to 15 years. You choose what’s right for you, and you can transfer money, you can buy a bond, and then we pay you for the next year or two years or five years or whatever period you’ve chosen. The rates that we offer are attractive rates. They’re higher than you typically get for your savings account or a CD or treasuries or other kinds of investments for the same maturities. You can do it all online. You can also do it through your brokerage account or your IRA, if that’s what you’d like to do. JOHN SHEGERIAN: Wow. When did you launch this, Tim, and how has it been received? Are you getting the traction that you wanted to get in terms of the volume of sales? TIM NEWELL: We launched this in the fourth quarter of 2014, so we just launched it a few months ago. This was something new. It’s the first registered national offering of solar bonds that’s available to all investors. In doing something new, it takes a while to get out there, but we’ve been really pleased at the reception we’ve gotten. In just the few months that we’ve had solar bonds available to investors, we’ve had thousands of investors come and register on our site and have sold millions of dollars of bonds. Those bonds are used to finance our growth. What we do is we install solar around the country. When people invest, what they’re really investing in is helping us to put solar panels out there on homeowners’ houses and businesses and schools, etc. JOHN SHEGERIAN: That, and they’re also investing in the future of the planet and they’re also investing in the future of their own portfolio, so it’s really a win on every level, I take it. TIM NEWELL: It is a win. This is part of a trend that, in the last couple years, has really been accelerating, which is people wanting their money to have a greater impact. They want good returns from their investments, and they should have good returns. That’s something that we really try to deliver. But they also want to know that their investments are having an impact on things that they care about, like the environment or creating jobs or other things. I think you’re going to see that in the next few years, that that trend toward impact investments is going to be one of the major investment trends. JOHN SHEGERIAN: That is so fascinating. Tim, this whole issue of crowdfunding has become really exciting. Is this a form of crowdfunding, or is that totally separate and different from what you’re doing? TIM NEWELL: There’s two ways to look at that. There is a form of crowdfunding that was specifically envisioned and authorized by the Jobs Act a couple of years ago, which was some legislation passed by Congress. That was something that was pretty restrictive and it focused on relatively small investments into startup companies. This is not that kind of crowdfunding. What we’re offering are fully registered securities that have been registered with the SEC. They’re similar to other kinds of publically registered bonds that investors can buy. Looking at it in a different way, this is crowdfunding in the largest sense. What we’re doing is we’re opening the door to let all investors participate in something that only the largest institutional investors have been able to have access to previously. JOHN SHEGERIAN: And like you said, the interest rates are competitive. Is the security competitive? I don’t know much about investments. I’m not an investment advisor obviously, but in terms of AA, AAA, are the bonds rated high in terms of security and safety? TIM NEWELL: The bonds are unrated because they are senior unsecured debt of SolarCity. SolarCity is a relatively new company. It is unrated. One thing I need to say is that any kind of investment involves risk, no matter what it is. All investors should make the decisions for themselves, what’s right for them, or working with their investment advisor. We absolutely don’t try to convince people they should buy the bonds. We’re excited for those investors who think this is the right investment for them, who want to invest in something that has attractive rates and helps grow solar, and so far we’re having a lot of success doing that. We really encourage investors to take a look at the bonds, to consider them in light of their own portfolios and their own situation, and make a decision that’s right for them. SolarCity has been growing very fast. We think it’s going to continue to grow, and we look forward to having everybody participate along with us. JOHN SHEGERIAN: That’s awesome. Tim, thank you so much and thank you for sharing that great story with this new product that you have at SolarCity. To hear Tim in person, you can go to Sustainatopia May 27-30, where he’s going to be speaking about solar bonds and about SolarCity. To learn more about solar bonds and SolarCity, go to www.solarbonds.solarcity.com. Thank you, Tim, for being a solar bond and SolarCity sustainability superstar. You are truly living proof that green is good.