John Shegerian: This edition of the Impact Podcast is brought to you by Engage. Engage is a digital booking platform revolutionising the talent booking industry. With thousands of athletes, celebrities, entrepreneurs and business leaders, Engage is the go-to spot for booking talent, for speeches, custom experiences, live streams, and much more. For more information on Engage or to book talent today, visit letsengage.com.
Hi, this is John Shegerian. I never could have imagined when we started the Green Is Good radio show back in 2006, that it would grow into a big podcast called The Green Is Good podcast. And now we’ve evolved that podcast to the Impact Podcast which is more inclusive and more diverse than ever before. But we did look back recently at some of our timeless Green Is Good interviews, and decided to share some of them with you now. So enjoy one of our great Green Is Good episodes from our archives. And next week, I’ll be back with a fresh and new episode of the Impact Podcast. Thanks again for listening. I’m grateful to all of you. This is John Shegerian.
Announcer: Welcome to Green Is Good, raising awareness of each individual’s impact on the environment, and helping to create a more beautiful and sustainable world. Now, here’s John Shegerian, Chairman and CEO of Electronic Recyclers International, and Mike Brady.
John: Hey, Mike, welcome to another show that we have of Green Is Good.
Mike Brady: Looking forward to it John. I mean, every week we get to… You know, I’ve said it before but I’ve got to say it again, if you’ll just indulge me. Number one, I love the time that you and I get to spend together and hang out. But it is so cool to learn new stuff every week. This is kind of like watching… I don’t know … the Discovery Channel and the Science Channel. But getting to ask the questions and getting to talk to some super cool guests, we learn great things about what we can do to change our environment to preserve it. And at the same time, while being green, saving some green. There are so many great money saving ideas that we get to share. We learn firsthand and get to share with our audience.
John: That’s the cool part. And you’ve always said this, Mike, the little things add up to a big difference. And that’s the fun… That’s the feedback we’re getting from our audience and that’s the feedback that you and I share with each other every day.
Mike: And you know, what is really cool is the fact that we get to reach an even broader audience. Each and every week, more and more people are finding out about the show. And of course, it’s available as a download application on iTunes, right?
John: Yes.
Mike: So, that is very cool.
John: And are going to tease a little bit about where else we’re located nowadays.
Mike: Yeah. Soft Rock 98.9. In addition to our sister station, we’ve KRDU. 11:30am. We’re also expanding to an hour. So, that is very cool. We’ve got two segments. So that means twice the guests, twice the fun.
John: And so we’re both AM and FM now.
Mike: Exactly.
John: Wow. And the fun part is because of our great tech people that we are also on the Apple iTunes network, which totally takes us to a great audience, anywhere people are. That’s the fun of what we do. Our message can be gotten by anybody around the world nowadays.
Mike: This is very, very cool. So we’re making technology work for us and spreading a very good, good message, because one of the things when we first got started, a lot of people were saying, “That’s okay. I kind of like some of the green stuff but isn’t it a little political?” Well, the answer, if you’ve listened to us before, on KRDU 11:30 am, the answer is a patent no. There’s no agenda other than leading healthier lives and taking better care of the world that we all share, so that we’ve got something to leave our kids and our grandchildren and future generations.
John: You know, you and I, get emails everyday, Mike. And I know we’re always sending them to each other for people who want to come on the show.
Mike: Right.
John: So people constantly ask me, “How can I come on the show? Or how do I qualify?” And it’s really as simple as our name. I mean, if you’re doing something in the green world or something that has to do with sustainability, which is people, planet, and profits, and it’s in the name of good, which is Green Is Good. We want you on.
Mike: Yeah, absolutely. The sustainability part is so good because it’s like any other endeavor in life. I mean, how you start is one thing, but really in the final analysis, it’s how you finish. So sustainability means the ability to sustain itself to keep going. You got a great idea. You’ve got a business model, something that is going to make a difference in the planet. That’s great. You get it started. But what keeps it going? That is sustainability.
John: You know, Mike, today we have a guest today in a sector that we’ve never covered before.
Mike: Okay, what’s the guest? What’s the sector?
John: We have a legendary name. We have Peter Mondavi.
Mike: Okay, I guess I can guess the sector. Would it be about why?
John: You would be right. And so we have an exciting show about what Peter’s doing with his winery in the green and sustainability field. And so I think it’s about time to get Peter on the line today.
Mike: Well, I love it. It’s going to be a very colorful show. Pun totally intended, because it’s not only about green, but we’re going to throw in a little purple too. Peter Mondavi. Our guest today on Green Is Good.
John: And don’t forget. The second half of our show today, we have Lyndon Rive from SolarCity. He’s going to tell you how to make your house a solar house today.
Mike: That’s all coming up right after the break here on Green Is Good.
Announcer: If a little green is good, more is even better. Now, back to Green Is Good with John Shegerian and Mike Brady.
John: Hey, welcome. Today, we are so honored to have Pete Mondavi Jr, who’s the leader of the Charles Krug winery. Pete, welcome to Green Is Good, and thanks for taking the time to come on with Mike and I today.
Peter Mondavi Jr.: Well, thank you. Thank you for the invite. I look forward to it.
John: Well, we just have to tell you straight up. We want to learn about what you’re doing. And you’re our first winemaker. Besides having a big time world famous family name, you’re our first winemaker ever on the show. So we’re so excited to learn about what sustainability means to the winemaking industry and what it means for your wonderful brand, Charles Krug.
Pete: Glad to be the first one on here.
Mike: Let’s celebrate with a toast. Okay?
John: Alright. So tell us a little bit… Why have you taken your Charles Krug brand that’s been around a long time into the Green Revolution? How did that start? And how does that look?
Pete: Well, really, it starts in our backyard. I mean, literally, because my brother, Mark and I, who both run this place, were born and raised here. We grew up. We started here when this Napa Valley wasn’t like it is today. It was a very rural agricultural community, very little traffic. Napa River was just beautiful, teeming with fish, steelhead runs. My brother is an avid fisherman. So we’d go down there fishing as a kid all the time for steelhead. Over the years, we saw that diminish. The steelhead… I mean, the quality of the river, which kind of measures the local environment quality, just diminished and degraded over time. And we’re not the only ones here in Napa Valley. There’s quite a few leading the sustainable charge that God, we really need to address just our backyard here.
We do own about 850 acres of land throughout Napa Valley from the very south end and Carneros towards up in the hills and [inaudible] mountain as well, and several places in between, which have… The farming there can have a significant impact on the health of the Napa Valley and most importantly, the Napa River, which runs right through the Napa Valley. Just to kind of give you a context, the Napa Valley is probably about, 20, 25 miles long, and on average, maybe a mile wide. And that’s it. So all the vineyards have a huge impact on the river.
So, we moved our vineyard operations some years ago, maybe about five, eight years ago, more towards a sustainable agricultural commitment to enhance the Napa River. I do know it’s actually coming back to life again. We’re getting more steelhead, salmon runs coming up here. So why we did it was really for future generations.
John: Okay. How did you do it though? How expensive was it? What kind of investment was it? And what does that really mean in terms of your practices and how you carry on the winery business then?
Pete: Well, it’s really an evolution. It didn’t turn on a switch, and all of a sudden, do it. We were looking at it. We’re looking at organic techniques. Other neighbors were pursuing this as well. We kind of learned together and advanced things. I mean, some of the things we do is… Now we’re going to more cover crop. Before we would till the heck out of the soil. It’d be a beautiful vineyard. I mean, nice green leaves and then all your manicured dirt. But all that dirt, when you get wind, you get rain, the top soil would run off into the river, just plugging up the river with silt. So we went to cover crops. So now we literally plant a variety of weeds, literally, in the vineyards. And that keeps the topsoil locked in. It does other beneficial things too. It also harbors beneficial insects in there.
We put up things like bat boxes that eat enormous amounts of bugs at night when they come out. Songbirds, they eat a lot of bugs as well, or during the daytime hours, obviously. We put raptor boxes up in our boxes, and those birds will take care of some of the rodent problems we may have in parts of our vineyard. So we do these things, naturally avoiding or at least minimizing the use of chemicals and stuff. And if we do have to do some applications, we try to do natural-based applications, which are much more sensitive to the environment. Mold and mildew, coarser sprays. For that we try to get on top of it and we will leave our vineyards, meaning we will literally come in if there’s a problem with mold or mildew, we’ll take leaves off, expose the bunches of grapes to more breeze, more sunlight, to reduce the growth of any mold or mildew out there. These are just some of the examples of what we’re doing out there. And we didn’t do them all at once. We’ve evolved and learned.
Mike: That’s really amazing too because when you first started out, I mean, this whole thing about natural pest control, natural mold and mildew control, you started out by telling the story about how you put in cover crops to save the topsoil from running off and becoming silt in the river and choking off the river but losing the topsoil. And you did that by weeds. So I guess the vision right now of a really good sustainable vineyard would be, well it is well manicured, but if you see weeds between the vines, you know they’re doing something right.
Pete: Yeah, exactly.
John: So you started this, and it’s been an evolution. How many years ago did you start this, Pete? And is organic farming becoming the norm now? Are you the leader of this and other people are following you? And because the Green Revolution has taken off so much, has this also become a great marketing tool for yourself also?
Pete: Now, the sustainable is in… let’s talk Napa Valley.
John: Sure.
Pete: I think it’s starting to become the norm.
John: Great.
Pete: I can’t tell you exactly how many vineyards are in the [crosstalk] [inaudible] or not.
John: Right.
Pete: A much smaller portion are in the organic, but that’s gaining some momentum there. So, the train is moving and it’s not going to stop. So I can see everybody around. There’s lots of cover crops, so on and so forth. So, well on the road to sustainable farming here in Napa Valley. And as I mentioned, the Napa river is benefiting from that. Now, from a marketing standpoint, it’s much more subtle. We do talk about it not necessarily on the label. But on presentations, some of our sales material may reference the fact of sustainable farming. We don’t make a huge deal out of it.
John: Does it give you a different marketplace, though? Instead of just certain markets carrying it, will Whole Foods carry your products, as opposed to if it wasn’t organic or sustainable winemaking practices?
Pete: Yeah, you can count it selectively. So where are those buyers in those areas, those communities, that tend to be more sensitive to sustainable farming? Yeah, we’ll talk about it more and tell them what we’re doing. Truthfully, out there, there are some markets that are less sensitive to that. I wish everyone was ultimately very sensitive to it. But it really is a market by market approach.
John: I want our listeners to know this was not just some light endeavor by you and your dad and your brother. This was a $20 million investment over the years that you guys have made into organic and sustainable practices at your winery.
Pete: Yeah, that’s the price tag for replanting most of our vineyards, because we’ve been here, the family has been here on these properties for 65 years.
John: Wow.
Pete: And because a vineyard lifespan is about 30 years, we needed to start replanting. So over the last decade or so, we’ve been replanting our vineyards and moving them into the sustainable program as well. The idea here is my brother, Mark, and I are a third generation here. Fourth Generation is coming along. Some of them show interest in the wine business. Some of them are still too young to do that.
John: Got it.
Pete: So we want to have this so we can sustain it for multiple generations to come along as a family business.
John: So, talk about that. Let’s go right into the family business issue. You know, your name is a legendary name in the wine business, which, of course, I’m sure, in many ways, is a curse and a blessing with all the pressure on you to keep producing great wines. But what is it now in a world of big business and big brands, and multinational companies? How is it that the Mondavis get to stay independent and stay successful?
Pete: It’s kind of a combination of things. First of all, it is difficult. There’s a lot of consolidation out there amongst the wineries. There’s becoming a handful of these super producers or whatever want to call them gobbling up brands throughout not only Napa Valley, but California and around the world. So they’re becoming very, very large suppliers of wine. And also, the distribution network. Really we go through a three-tier distribution network. Some states have multiple distributors, but every state at least has one major distributor that we ship our wines through. And that distributor in a major state could represent literally 10… maybe even up to 15,000 different bottles of wine. We’re eight amongst those. And so, because of the consolidation of distribution, that is very challenging.
However, we’ve been around, as I mentioned, for so long. We have a very good relationship with our distributors, and they like what we’re doing, they like our brands, they support us. So that helps us kind of stay afloat in the distribution network. And I think we’re kind of unusual in that situation to have that heritage and a direct family connection with all the distributors because all the distributors actually are family owned. They’re not publicly traded [crosstalk] on Wall Street.
John: Gotcha.
Pete: So they are private, they are family. And I think we relate very well to the family there. The other thing that being a family business, selling through these distributors, is we take a distributor change very seriously, and struggle over a distributor change if one happens, whereas some of the larger corporations that have so many brands, they will just realign their brands because it’s to their best interest, disregarding, potentially, a distributor’s performance.
John: Gotcha.
Pete: So, we change the distributor if they’re having a very difficult time with our brand, which happens very infrequently.
Mike: Well, Peter, as you mentioned, too, with a long term and in very almost familial relationship, that your company has with the distributors, I would think that the fact that you are practicing sustainable farming and growth operation, that that would, by definition, make a real difference with your distributors as well, that that would really resonate because it is more about family and about thinking for the future and future generations. Are we correct?
Pete: Oh, absolutely. And also it sets us apart from the kind of big mainstream wineries who may not have as extensive a sustainable program. It sets us apart from those and makes us a bit unique out there amongst those thousands of brands. Like I got a report the other day. I saw it on the internet. I think the United States now has 6000 wineries.
John: 6000 wineries.
Pete: 6000 wineries.
John: So talk about how do you measure success with 6000 wineries out there and the history that your family has and that you have. What is your yardstick now for success? You’re running a sustainable winery. You would love the fourth generation, your children to come into the business. What are some of the yardsticks that you look at on a month to month, year to year, generational basis.
Pete: Well, really, first of all, we look long term and generationally. The most important yardstick here, which has kept us independent and family owned is family comes first. I mean, the first thing is this is going to remain a family-owned business. And that’s the most important thing and the kind of easy to measure. His whole family owns it or not. And then is it profitable to the family? Is the family living appropriate lifestyle stuff? You know, we are. Do we have the returns that Wall Street would command? Absolutely not. I think we’re well below those returns, given the amount of assets and the investments we have. But you know what? It’s the love and the pride of the business, the quality of the product, the lifestyle of the family business, that really makes it a success for us. So, we have quite a bit different yardsticks than that of a publicly-traded winery.
John: You said there are 6000 wineries. Is Charles Krug and Peter Mondavi family… Are you the leading organic wine grape producer in Napa Valley?
Pete: I don’t know if we’re the leading one. We probably have, as far as the acres are concerned, probably more acres under sustainable than most of the others. We could probably be in the top 10. This is not documented. But just knowing our acreage and some of the acreage of some of the other growers here in Napa Valley, we’re probably in the top 10.
John: I know you explained some of the the bats and the blue birds, and how they play a role in your organic farming practices and sustainable practices in the winery. What other things are you doing in terms of sustainability with regards to your business and your home? Because I know you have some other interests in terms of restoring buildings, which is really recycling buildings, again, a form of sustainability. I know you also have some fish-friendly farming stuff going on. Tell our listeners about those things, too.
Pete: Yeah, lots of things. I’ll start at the home. I do have solar cells. We have TV panels on our roof. It represents about 25% of our consumption right now. I’d love to increase that. We have a couple of hybrids that we drive around. Another thing unusual… We didn’t remodel the house a couple of years ago, we did not add air conditioning.
John: Wow.
Pete: We added extra insulation. It’s an Adobe construction. [inaudible] I think it’s fairly conservative there. You know, things like that to kind of conserve at home. Here at the winery, recycling our water that we use here in the winery for sanitation purposes. We recycle that through the vineyards. We’ve done excessive amounts of insulation. I think that’s because we keep our resellers cool [crosstalk] 65, 60 degrees.
John: Right.
Pete: And just dumping more money into an excessive amount of insulation, I guess, is by far the best return. That’s where most of our money goes here, energy money, is in refrigeration. We’ve oversized our cooling tower because that actually saves money as well. Of course, all our lighting is predominantly [crosstalk] [inaudible] out here.
John: So it’s safe to say Pete, this is a DNA thing with the Mondavi family. You guys talk a good talk, but you also walk the walk across the board.
Pete: Yeah. I think that’s the most important thing, is to have it affect every aspect as much as we can.
John: How about the fish-friendly farming program? What’s going on with that? What does that have to do with the winery?
Pete: Fish-friendly farming is kind of an extension of sustainable and to a certain degree organic farming. What that does is a lot of our vineyards border either the Napa river or tributaries to the Napa river. And what that does is it’s farming practices that are specifically sensitive to the health of the Napa River and its tributaries, i.e. the cover crop, minimizing any spraying, developing… This is probably one of the big things and very expensive things, is developing the riparian area. Through working with the county here and biologists, we’ve kind of recreated the original, the natural riparian area, because a lot of invasive plants have come in, and invasive plants actually harbor bad insects, bad diseases, to the grapevines. So we’ve replanted areas with the original native vegetation, which is great. They don’t harbor these bad insects and some of the diseases as well. So what that does is it creates a great environment for the river. You layer it. So you have a ground base that filters out any sediment that may work through the cover crop area. And taking care of trees that have shadows over the water keeps it cooler. So it’s really farming techniques that are ultimately sensitive to the river itself.
John: Pete, we also want our listeners to know, what are your short term and long term goals here. You’ve told us about the history. You’ve told us what you’ve done in terms of sustainability and the DNA of the Mondavi family. What are the short and long term goals for Mondavi and for Charles Krug the brand?
Pete: Well, long term, obviously, is to remain family owned, estate driven wines coming off the acreage of vineyards that we have here, and really promote this for multiple generations to come, and also create a local environment here that is just a beautiful, healthy environment for people to raise their children as well as our children and future grandchildren. A little shorter term, we just want to make sure we’re financially viable so we can get to the long term goals.
John: Is it your belief that this is the future of the food and the wine industry, that the consumer is going to be wanting organic products more and more, and that this is the future waived that’s here to stay, it’s not just a fad, it’s a trend forever?
Pete: I believe it’s a trend especially when it comes to food, consumables. Definitely a trend that people are looking for sustainable, organic, not only for their potential health, but I think for the health of the environment as well.
John: Hey, Pete, a little bluebird told Mike and I that your family is planning something special. We’re down to the last couple of minutes here. And we want to hear in the last two minutes of our show, what’s special coming? The bluebird gave us a little heads up here. [crosstalk] We want [inaudible]
Pete: Yeah, we have something very special, very big, coming in next year, but we’re in the planning stage right now. The year would be 2011.
John: Okay.
Pete: And we’re going to celebrate Charles Krug 150th anniversary, the first winery in Napa Valley.
John: And how are you going to celebrate?
Pete: Well, a whole variety of ways. I’m not going to spill the beans.
Mike: Not too much.
John: Wait a second. What was that blue bird… Okay. [inaudible]
Pete: A lot of stuff in planning. So stay tuned on that. But we’ll definitely involve our historical buildings. You mentioned earlier that we refurbished, essentially kind of recycled. So that’ll definitely be part of the celebration. These are the buildings built in the 1800s by Charles Krug.
John: And just for listeners to know, where can they buy Charles Krug products in the United States and beyond?
Pete: Well, we’re only distributed in the United States.
John: Okay.
Pete: Some of the restaurants, for instance, Morton’s has several of our products. Depending what wine you’re looking for, there are some local stores that will have. And it’s really difficult to say exactly where in each market. But go to your local wine store and ask for Charles Krug. We are distributed in all 50 states.
John: Perfect.
Pete: So if there’s a nice wine store there, they can definitely get access to the wine through the distributor.
John: Perfect. So Mike, and I want to encourage all our listeners to buy Charles Krug wine, to support the Mondavi family for keeping up with their sustainability and being a leader in the Green Revolution and sustainability practices. Pete, next year, when you have the big Charles Krug event, Mike and I would like to have you back on so you could talk about it and share with our listeners what you’re doing. I’m sure it’s going to be a big wonderful bash. And you could give us an update on how things are going at your wineries. And Pete Mondavi, Mike Brady and I, just want to say thank you for coming on Green Is Good. You are living proof that green is good.
Pete: John and Mike, thank you very much.
Mike: Our pleasure, sir.
Announcer: If a little green is good, more is even better. Now, back to Green Is Good with John Shegerian and Mike Brady.
John: Hey, welcome back to Green Is Good. And don’t leave us because we’ve got a great guest coming up, Lyndon Reeve, who is the CEO of SolarCity, which Mike and I have heard about… About a year ago, Mike, we heard about SolarCity?
Mike: Yeah, just about a year ago now. The whole Solar revolution, John, has been something that has just really intrigued me since I guess back in the early to mid ’70s. It made so much sense. I mean, what have we got especially here in the central valley, in the summers, holy smoke. I mean, we’ve got nothing but sunshine, sunshine, sunshine.
John: And the technology is improving every year. So it makes it easier and more affordable to get these in people’s homes or businesses. And as you say, we are… I think you brought in an article once … a matrix of… that we live in one of the sunniest parts of the whole state.
Mike: Absolutely. This area is just absolutely ripe for solar power. And you know the joke back in the early ’70s, I remember with some of my friends, when I was living again in another very sunny climate in Tucson, Arizona. We would talk about solar power. And one of my friends said, “You know what? There’s never really going to be solar energy until somebody figures out how to put a power meter on the sun.”
John: Well, okay.
Mike: There is that profit motive, but more companies, including the company that we’re going to be talking to a representative of today, have found ways to really make a good living and make a good product. Of course, the whole thing about sustainability, the three P’s, right, John?
John: Right. Profit, people, and plan. I know I put it in backwards orders, but you’re right. Those are the three P’s that we talk about all the time.
Mike: You really need all three. You’ve got to have… I mean, if you’re taking care of the planet, you’re taking care of the people. It’s great to do things out of the goodness of your heart. But let’s face it, I mean, you need to be able to feed your family, [crosstalk] and business needs to make a profit. So, here we go.
John: Right. And one of our earliest guests, Josh Dorfman, said, this is a very… You know, The Lazy Environmentalist, he told us back about a year ago, that SolarCity has one of the most affordable and cost efficient methodologies to get the solar up on your house, and I think even your business. So it’s going to be fascinating today to share with our listeners, how this can be done, and inspire others to start making this move, because energy is one of the important areas that we all help with this green revolution.
Mike: You know, it’s going to be very cool too, because one of the things that has changed in solar technology is you don’t need the panels to be as big and it’s not as…
John: Good point.
Mike: Let’s put it this way. It didn’t used to be very attractive. Well, now it can be a lot more sensitive and environmentally aesthetic. I mean, to the environment as a total, it looks good. So we want to talk about that today too.
John: I’m excited to get Lyndon on the phone. He has a great story. He’s a serial entrepreneur. And I think learning more about SolarCity and getting our listeners educated to what they offer is going to be great for all of us.
Mike: And we’re going to be Lyndon Rive of SolarCity when we come back from the break. So stick around for a whole lot more of Green Is Good.
Announcer: If a little green is good, more is even better. Now back to Green Is Good. With John Shegerian and Mike Brady.
John: Welcome back to Green Is Good. We are so honored today to have Lyndon Rive on the phone with us. Lyndon, thank you for being a guest on Green Is Good. And welcome to Green Is Good. We’ve been talking about your great company, SolarCity, for the last year or so. So it’s an honor to have you finally on our show.
Lyndon Rive: Thank you so much for having me.
John: Well, Lyndon, you’re a lifelong entrepreneur. You started starting businesses when you were 17 years old. You have got a huge history of success already under your belt. The last company you sold to Dell, I think in 2007, Everdream. You co-founded SolarCity in 2006. What made you get involved with the Green Revolution? What was your epiphany? What was your magic moment? And how has it gone since 2006?
Lyndon: So you know, the last company was a company called Everdream, as you mentioned, and it was focused on Enterprise software. After doing Enterprise software for nine years, the excitement just wasn’t there. Both myself and my brother are extremely passionate about the environment, and we’re looking at what can we do to really address some of the environmental challenges that we face. We looked at all different parts of renewable energy and realized that solar is one renewable energy technology that essentially is infinitely scalable. It can go almost everywhere in the US. And people seem to be able to relate to it. But the challenge with solar is the cost and the adoption rate was extremely slow.
John: Right.
Lyndon: So we decided, what can we do to fix this problem? Instead of just sitting on the sidelines and complaining, what can we do to really help the adoption of solar? And this is why we started SolarCity.
John: Tell us what the model is and how you’re different from other solar companies. Why does a guy like Josh Dorfman, who is a wonderful source of information, The Lazy Environmentalist, come on our show and even say, “Hey…” tell our listeners, “You should be looking up SolarCity,” which by the way, you can look up at SolarCity.com? Why are you becoming the name brand and how are you differentiated from your competitors?
Lyndon: You know, it’s actually quite simple. We listen to the customers and ask them what’s preventing you to go solar. The number one reason that we get from our customers is the upfront cost. So for the first year of starting the company, that has been our primary focus. So we focused on reducing the cost, but reducing the cost wasn’t enough. Even at 10 or 20% less than the competitive rate, it was still too expensive, it was still $20,000 to get a solar system. So this is where we invented the Solar Lease program.
John: And you were the first to do that. What does that look like? You were the first to create this?
Lyndon: That’s correct. So the goal of the program was, how do you get somebody to go solar, but not investing a single cent and saving money on day one?
John: Mike, I like this. This sounds good already.
Lyndon: So we came up with the Solar Lease program. The homeowner can now go solar, not invest a single dollar, and start saving money from day one. So let’s say your electrical is $200 a month, you’ll get a solar system. Your new electric bill, combined with your lease payments, will add up to about $170 a month. So you’ll save $30 a month, use clean power, and make no investment.
John: Okay, so now you go from being a software enterprise guy, highly successful, Everdream was a huge success, and now you come up with this idea with your brother. And now it’s 2006. Are people telling you you’re crazy? Are people telling you this ain’t going to work? I mean, how does that look at that point?
Lyndon: It’s actually traditional entrepreneur feedback when you start a company. Most people go, “You know, it’s probably not the best place for you to start a company.” When we started the company, most recommendations that we’re getting is, “If you’re going to start a solar company, start a solar panel manufacturing company.”
John: Right.
Lyndon: We actually did look at that. And we just thought, that’s not going to move the needle. We have to eliminate the barriers to adoption. And that’s not done on the technology side. The technology works. The technology that’s out there today has been proven. They are all high quality. So you get many different panel manufacturers, and most of them are really good quality. This is a proven technology. So we felt that the reason for getting into the service business would address most of the challenges for homeowners for adopting solar. And traditional investors don’t like service business because there’s no barrier to entry, your competition can copy you left and right. They prefer technology plays. Smart investors who have done service plays before know that if you get the right team, they will be able to execute the competition.
John: So, how hard was it? How much money did you raise in 2006? And how was the adoption of your new concept as you started going?
Lyndon: So 2006, we just had started. We decided the best way to grow was to buy two smaller companies. So we had the start of the team. So we had experience. We had all the licenses that we needed to do the installations. But we didn’t focus on the financing. 2007, we started focusing on the financing. But in the interim, we started focusing on reducing the cost of installation because we didn’t have financing in 2007.
John: Right.
Lyndon: So we came up with this program known as a community program. So you go into a community of homes, and you tell the community, “Look, instead of me just selling one half, if I sell 50 homes in this community, I’ll give you all a discount.” And that launched us. That made us number one in the state just by that single program.
Mike: Really? So you just took it from a sheer volume standpoint, making it more affordable for the homeowners. And I guess one of the things too, is Lyndon, when nothing succeeds like success, you make one sale, get that initial neighbor to buy into it, he starts talking or she starts talking to their neighbors, and pretty soon you’re able to deal in volume and everybody wins.
Lyndon: Absolutely. It’s a three-part win. The customer wins because they get lower [crosstalk] installation cost and we win as [crosstalk] [inaudible] volume in a certain area.
John: Cost. A company. And the environment wins.
Lyndon: Absolutely. That’s the third part.
John: Wow.
Lyndon: You’re right.
John: This is wonderful. So that’s how you got going. Go back to this. I want to just bring up… We have a lot of entrepreneurs that listen to the show. So I want to go back to a subtlety, talking about the right team to execute. When you move from Everdream over to this concept that you and your brother had in ’06, did you bring a lot of your Everdream team with you?
Lyndon: Actually, we did. Just so the listeners know, my brother and I started the previous company together as well.
John: Okay.
Lyndon: So we’ve been working together…
John: A long time.
Lyndon: A very long time.
John: Got it. That’s nice.
Lyndon: So, a very long time. Uniquely different. He’s the best in the world when it comes to technology, operations, and execution. That’s his clear strength. And then my strength is business development, sales marketing.
John: Perfect.
Lyndon: So we supplement each other very well. But yeah, we did bring many of the employees from Everdream to SolarCity. In the two acquisitions that we made in the early stage that were core to the company, we interviewed probably 30 or so different solar companies. And it was crucial to find the right culture.
John: Got it.
Lyndon: So, we managed to breed this culture where work hard, play hard, but focus on execution as a priority, and then strategy, as 1%. A mistake that many entrepreneurs make is there’s too much focus on strategy. You need a strategy.
John: Sure.
Lyndon: That only requires 1 or 2% of the time. Identify the strategy, and then focus the rest of the time on executing the strategy.
John: Right. So, ’07, you started executing and you raised money?
Lyndon: Yes. So the challenge with raising money, specifically for a solar lease program is volume. So we really encountered this problem. In 2007, the biggest reason why we weren’t able to offer the leasing program is the volume was not interesting to the banks.
John: Got it.
Lyndon: It’s fairly complicated to structure this program. And unless you’re going to do large volumes with the bank, they don’t bother.
John: Right.
Lyndon: So this is why we launched the community program. The community program allowed us to get to volume. Once we achieved the volume, then we were able to structure a relationship with the banks to do the leasing program. So we had a bowl of each other. We had to do one, and then the other.
John: Got it.
Lyndon: 2008 was the year of launching the leasing program that made us the largest residential solar company in the country.
John: And by then you were venture backed?
Lyndon: Yes. So venture funding, we’ve raised a total of just under 18 million.
John: Wow. Good for you. That’s amazing. And so then you took the show on the road. So now you’re across America?
Lyndon: We are in 4 states today. We covered most of California, Arizona, Colorado, and Oregon.
John: Are you number one in California?
Lyndon: We are.
John: And how are you in Arizona and Colorado?
Lyndon: Arizona, definitely by a healthy margin. Colorado, we just opened up the doors two weeks ago, three weeks ago.
John: Wow.
Lyndon: So, we still are very new in Colorado. And in Oregon, we’ve just launched there as well. So those are two new states for us.
John: I mean, no pun intended in terms of the blue sky here. But solar power is less than 1% of the US electric market right now. Is this as many hours as you want to work and as much as you want to dream? SolarCity has that far of an opportunity in front of it?
Lyndon: Absolutely. In our lifetimes, the solar industry will see infinite growth. The market is there. People see the value. They like the notion of getting cheaper, cleaner power. It’s a very clear value proposition. I’ve sold many things in my life, and it’s rare to find something that’s crystal clear.
So consumers want it. The market wants it. The environment needs it. So I see solar adoption for the next 20 years to continue at the growth rates that it’s been going.
Mike: Well, Lyndon, let me just give voice to a question that’s been running around in my head right now. As John mentioned, less than 1% of the power provided is by solar power. But when things finally kick in, where do you see the saturation point being for a typical home? In your best guess of a scenario, how much of the electrical power would be supplied by solar within the next five years?
Lyndon: So our average customer in California, our solar systems provide them between 60 and 85% of their power on average.
Mike: And that’s at the present rate.
Lyndon: That’s at the current rate. Exactly.
Mike: Okay. All right.
Lyndon: Now, we could provide more power, but we’ll leave a little buffer in there for energy efficiency improvements.
Mike: Okay.
Lyndon: So, we could do 100%, but then the energy efficiency… solar power would just be wasted if they do energy efficiency improvements.
John: Got it. So, I mean, when you go into a community now in a household, what is your sell through rate in terms of the leasing program versus the household buying it? And is this only for household SolarCity? Or are you morphing into a business opportunity also for businesses?
Lyndon: You know, we’re known for our residential business.
John: Right.
Lyndon: But most don’t know that a little over 50% of our business is commercial.
John: Oh, so SolarCity is for businesses out there. So anyone who’s listening out there that’s interested in this proposition for their business also, can go to SolarCity.com, and also get an opportunity to avail themselves of your program for their business.
Lyndon: Yeah, and for business, it works very similarly. So instead of doing a lease, we do a power purchase agreement, which is known as a PPA.
John: Right.
Lyndon: And how that works is we sell the business, like kilowatt hours. We sell them, essentially, the electricity. And the cost of electricity for business is, in most cases, either at the same price and sometimes a little less. The savings are not as great as for residents just because the cost of power for residents is higher than for commercial. But they do see some savings. And then they get to lock in the energy rates, and most importantly, they get to use clean power.
John: And for the homes. I want to also go back to the homes. Is the value proposition almost always favoring the SolarCity model when you go into a home in terms of saving the household money on their energy bills?
Lyndon: When you get into a small electric bill, let’s say around 80 or $100, is your electric bill.
John: Sure.
Lyndon: Then it’s hard to show savings on the solar lease program.
John: Gotcha.
Lyndon: Anything over $150, you start seeing savings with the federal lease. And this applies to California. This is not the case in Arizona, Oregon, or Colorado. Their small electric bills work.
John: Got it. I understand.
Lyndon: Just because California, the electricity is sold in different tiers. The more power you use, the more expensive it is.
John: Got it. So the answer is, in most cases, yes. California being a little bit of its own animal. But for the most cases, you take this across America, for anybody’s bill size, your program should work very, very well.
Lyndon: Yeah. And you know, some homeowners prefer to buy it. So in that case, we’d absolutely sell it to them.
John: Got it.
Lyndon: Other homeowners like the notion of leasing a system. So they have a production guarantee. We guarantee the output. So if we say it’s going to produce 10,000 kilowatt hours a year, we guarantee. And if it doesn’t, we’ll pay the difference.
John: That’s wonderful. You’re a young man, Lyndon, with years of business ahead of you. So take us through the 1%. 1% is today. When you and your brother sit down to dinner and talk about what the future is and how many states we have in this nation and beyond, how far can you take 1%? What number is SolarCity aiming for to create a solar economy here in America?
Lyndon: Yeah, I think we can definitely shoot for 20%, almost growing 1% per year.
John: Wow. That’s incredible. That’s incredible.
Lyndon: It’s a dramatic growth. But my forecast is that probably between 10 to 15 years from now, a primary source of new power will be solar.
John: Okay.
Lyndon: So remember, you have this massive legacy infrastructure that you can’t displace.
John: Right.
Lyndon: So over 20 years, 20% of our power can come from solar. But my forecast is that 10 to 15 years from now, a primary source of new power will be solar.
John: So, you know, with any good information and with any great business concept or empirical information, you always have the naysayers. You know, Al Gore has his naysayers. And everybody who’s doing something that’s groundbreaking or paradigm shifting, always has its detractors. Tell us about the debate among environmentalists and the advantages of large scale solar power plants and the threat to the environment. Where does SolarCity stand on that with regards to some of the people who like to sometimes throw arrows at great concepts?
Lyndon: Sure. So the debate is centrally around large solar farms in the desert that will disrupt the environment.
John: Gotcha.
Lyndon: SolarCity’s position is that all renewable power is important to solve the environmental challenges that we face. So we’re talking large scale and small scale solar.
John: Right.
Lyndon: Now, we have not been too involved to see the details of that debate, as our primary focus is rooftop solar. We do do large scale. So we do a megawatt or 2 megawatts. But most cases it’s on a roof. So there’s no disruption to the environment.
John: Gotcha.
Lyndon: And our focus is just a distributed solar. So it’s within the grid infrastructures. You don’t have to worry about transmission lines or anything to that extent of carrying the power to the source. It’s at the source.
John: So really, you’re steering clear. You’re not in the solar farm business and are not part of that discussion at this point.
Lyndon: Not at this point. But I want to make clear that I am a big supporter of solar farms, as I think it’s needed combined with distributed solar.
John: Got it. Your office is set up in Northern California. How many employees do you have now?
Lyndon: We have about 520 employees.
John: So tell us about your green DNA. I mean, besides selling a great product that’s helping transform society and the way we look at energy and use energy, what are the green DNA items that SolarCity is incorporating within its own company?
Lyndon: So, everything from a fleet. So work vehicles are the most fuel efficient work vehicles. Our sales team drives around with Priuses. All our paper brochures, everything is on recyclable material and ink. We won the TERA-Award for our corporate environmental contribution. So the TERA-Award is a big award given to corporations for what they’ve done, not just as a business model of selling solo, but within the company, what are the steps you’ve done to be environmentally friendly.
John: Wonderful. Who gives out that award, by the way?
Lyndon: TERA does.
John: Okay.
Lyndon: It’s actually fairly hard to win it. You’re competing against some really passionate companies.
John: So Lyndon, basically, you and your brother, not only talk a good talk, but really at SolarCity, you have a great walk. You walk the walk over there.
Lyndon: Yeah. It’s really rare that you have a company where every employee not only cares about the success of the company, but actually really cares about what we’re doing. I would like to refer to it as the double bottom line. The first bottom line is, you’ve got to make sure it’s a sustainable business, and the second bottom line is make sure that you’re doing, environmentally, the right thing.
John: Hey, listen, we’ve got about three minutes left, and I want to ask you two questions. First of all, why don’t you dispel the biggest myth about solar power, number one. And then number two, I want you to take our listeners into where the future is for SolarCity, and where are you going from here?
Lyndon: So the biggest myth is that solar is too expensive. That has to be addressed. Solar is affordable today. In fact, it’s been affordable for the last two years. You can save money from day one, with no investment. And there’s no reason why you should not do that. So that’s the biggest mess. And this applies to homeowners and to business owners.
John: You’ve done a great job today, dispelling that. And I want our listeners to go to SolarCity.com to see how they could save money so they could contact your company. So you’ve dispelled that. What’s next for SolarCity and how are you going to go from 1 to 20%? I want to hear your vision here.
Lyndon: So it’s really important to make this offering available to more homeowners [crosstalk] if you want to expand the company nationwide.
John: Sure
Lyndon: We’re already in 4 states. We are going to expand to additional 5 states in 2010.
John: Wow.
Lyndon: So that’s going to be the majority of our focus. We are helping the green economy grow as we do employ… Today we employ about 520 employees. We hired over 150 people over the last six months. We expect to hire another 100 in the next six months. So it really is a good solution not only for the environment, but also the financial economy that we face.
John: Well, you’re helping to build the green collar economy.
Lyndon: Yeah, exactly. It’s green collar workers. The construction industry has been hit hard, and there are very talented people there that can apply their skills to installing solar.
John: Well, Lyndon, Mike and I, want to say thank you very much for joining us today. We want to tell our listeners again, if you want to see and learn more about Lyndon’s wonderful company, SolarCity, go to solarcity.com. And Lyndon, we’re going to have you come back a year from now to give us an update on the progress of your wonderful company and your vision. We wish you all the luck in the world. And Lyndon Rive, you are living proof that Green Is Good.
Lyndon: Thank you so much for having me.
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