Illuminating India's Energy Future with Residential Solar
Shreya Mishra is the CEO and Co-founder of SolarSquare, a venture-backed startup dedicated to driving the growth of residential rooftop solar installations in India. In late 2022, they successfully secured a series A funding round led by Elevation Capital, with participation from Lowercarbon Capital and others.
In this episode, Shreya and Cody discuss the elements necessary for market adoption of rooftop solar in India, including consumer sentiment, financing options, permitting, government subsidies, net metering policy, system maintenance, and even the form factor of the panel installation setup itself, due to the unique nature of many Indian rooftops. And she recounts the ways in which SolarSquare is supporting or innovating in each of these areas. She's building an ambitious company and we enjoyed learning about the Indian context surrounding rooftop solar. This is a big topic, and this episode covers a lot of ground.
Get connected:
Shreya Mishra LinkedIn
Cody Simms LinkedIn / X
MCJ Podcast / Collective
*You can also reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded on Oct 3, 2023 (Published on Oct 19, 2023)
In this episode, we cover:
[01:48]: Shreya's journey from fashion tech founder to solar entrepreneur
[04:07]: How she learned the ins and outs of the solar industry
[07:22]: The evolution and key inflection points of the Indian solar market
[11:33]: India's policies for residential solar
[13:46]: How India is streamlining processes with a National Solar Portal
[16:31]: The permitting process for homeowners with a solar setup
[21:50]: Sectors and regions with the highest solar adoption rates
[25:43]: How SolarSquare addresses challenges unique to the Indian market, including roof architecture, cyclone risk, and lack of professional solar service providers
[28:03]: A deeper dive on SolarSquare's modular prefabricated solar pergolas
[35:59]: The emergence of financing options for residential solar in India
[43:08]: SolarSquare's staffing and focus on operational excellence over marketing
[46:07]: The role of large corporate players in the solar market
[48:34]: SolarSquare's financing history
[52:02]: How India's economic growth is driving increased electricity consumption and Shreya's vision for the future
[55:10]: SolarSquare is hiring!
-
Cody Simms (00:02):
Today on My Climate Journey's startup series, we have Shreya Mishra, CEO, and Co-founder at SolarSquare. SolarSquare is a venture-backed startup that is intending to drive the growth of residential rooftop solar in India. They raised a series A in late 2022, led by Elevation Capital with participation from lower carbon capital and others. Shreya and I have a deep and nuanced conversation about the elements necessary for market adoption of rooftop solar in India, including consumer sentiment, financing options, permitting, government subsidies, net metering policy, system maintenance, and even the form factor of the panel installation setup itself, due to the unique nature of many Indian rooftops. And she recounts the ways in which SolarSquare is supporting or innovating in each of these areas. She's building an ambitious company and I really enjoyed learning from her all about the Indian context surrounding rooftop solar. We cover a lot of ground and it's a big topic. But before we start, I'm Cody Simms.
Yin Lu (01:17):
I'm Yin Lu.
Jason Jacobs (01:19):
And I'm Jason Jacobs. And welcome to My Climate Journey.
Yin Lu (01:25):
This show is a growing body of knowledge focused on climate change and potential solutions.
Jason Jacobs (01:30):
In this podcast, we traverse disciplines, industries, and opinions to better understand and make sense of the formidable problem of climate change and all the ways people like you and I can help.
Cody Simms (01:44):
Shreya, welcome to the show.
Shreya Mishra (01:46):
Thanks, Cody. Pleasure to be here.
Cody Simms (01:48):
Shreya, I am so excited to learn from you today. I've heard your name, I've heard the name SolarSquare from multiple people as really being this shining star in India as a growing climate tech company that's making a real difference on the ground driving solar deployment, which is so important. Maybe let's start by having you share a bit about your background, how you came into SolarSquare and the work that you did leading up to that?
Shreya Mishra (02:13):
Awesome, thanks a lot. I'm very pleased to hear that people are talking about us. So that's news. Starting with how this all happened and how we started the company SolarSquare. I'm actually not one of the original founders of SolarSquare. So my background goes that I'm an engineer from IIT Bombay, did a little bit of management consulting stint, short private equity stint, three years of all combined corporate experience, and I jumped into entrepreneurship pretty young. I believe I was 25, 26 years in age. And I started out as an e-commerce entrepreneur, starting a fashion tech company. Very different from the world of solar. So I started my fashion tech startup in 2015, and at the same time, my soon to be husband, that time fiance, also my batch mate from my engineering days of IIT Bombay needed started SolarSquare. So both of us started on different parts in 2015, and in 2020 it merged where I ended up joining SolarSquare through a lot of serendipity, fate, and one failed startup basically, which was mine.
(03:10):
In those four years, 2015 to '19, Neeraj started SolarSquare as a B2B rooftop solar company, because it was large corporates and factories and warehouses, which were installing rooftop solar. And he bootstrapped the business profitably to about 15, $16 million in scale. He was ranking as one of the top 10 rooftop solar companies of India. At the same time. I started my fashion tech company in 2015 and I did not bootstrap it. It was a venture funded startup backed by Sequoia. I had lots of learning great highs and then terrible lows towards the end. Right before crash landing that startup got acquired. And so in 2019 I exited my startup and I was figuring out what to do. So that is when I decided to join Neeraj and Nikhil at SolarSquare. So that's my background and my journey.
Cody Simms (03:56):
Amazing story. How did you learn all the ins and outs of the solar industry, the energy industry, the Indian context with respect to all of that? What did that path look like?
Shreya Mishra (04:07):
Yeah, absolutely. So Neeraj and Nikhil they had run SolarSquare for about four years, through 30 member team completely bootstrapped. I mean Neeraj put all of his life savings and his dad's life savings into bootstrapping SolarSquare, and he did well. They learned everything about solar market, the policies, supply chain, operations, what it takes to design, install, and maintain high quality rooftop solar systems, SolarSquare's clients in that period were companies like Panasonic, Reliance, TVS Motors, Johnson and Johnson, et cetera, et cetera. So they learned everything about solar through the B2B market, and I was building a consumer business. So I learned my bit about what it takes to build a team, what it takes to do tech enabled operations, what it takes to acquire customers, build a brand, digital marketing, fundraising, all of that.
(04:56):
And so when we got together, so company already knew about solar, and Neeraj had wanted to start foray into residential solar. Because as the prices of solar were crashing and the economics of solar for small tiny rooftop installations on individual homes were starting to make sense in India. And so he thought that the residential market will be much larger than the commercial market, as it played out in US and Germany and everywhere else in the world.
(05:23):
It's only a course of time that plays out in India as well. He said that, "Hey, I know solar in a very engineering and solar supply chain context, and you know about consumer businesses." We got together and we started our foray into residential solar, and it's been still a learning curve for me to learn about everything. I think three and a half, four years almost into SolarSquare, I can say I know a fair bit. I'm qualified enough to be on this podcast and talk about solar now.
Cody Simms (05:50):
Well, awesome, great story. And to some extent there's product market fit and there's also founder market fit. You're shifting who your target customer is or your target go-to-market is, ensuring you have someone on your team and driving that shift. Who knows the market that you're entering into can be a really useful accelerant. So it sounds like that was the inflection point that really precipitated you coming in and taking the reins of the company.
Shreya Mishra (06:13):
Yeah, absolutely. Absolutely.
Cody Simms (06:15):
You mentioned this change in market dynamics with the price of solar dropping and getting to the point where it could be affordable in highly distributed manner, in small installation batches in residential. Let's take a step back and really talk about what is the Indian context with respect to solar and energy in general. We did an episode on India relatively recently on the pod, but India's the third-largest energy producer in the world today behind US and China. Fossil fuels still power a huge part of the Indian energy mix, in particular electricity mix with coal being a major factor, but solar is the fastest growing part of the energy mix in India. I believe somewhere around 10% of energy in India today is solar, and growing rapidly. How has that growth happened? Has it been top down growth with a lot of government push? Has it been very bottoms up individuals installing solar panels and driving expansion that way? A little bit of both. What are the roles of utilities? I have so many questions, so I'm going to let you take this question in whatever direction you want to go with it.
Shreya Mishra (07:22):
I usually love to share how the market has evolved off solar and specifically rooftop solar in India. I like it happens everywhere in the world. First it starts with utility scale solar, where government is buying large megawatts of solar parks which are feeding into the grid, and then again the same transmission losses and distribution losses. And all of that happens as the prices of solar crashed from 2013, '12, '13 onwards. I would say that the commercial rooftop solar really started accelerating. The early adopters were large corporates who either had enough capital on their balance sheet to buy purchase rooftop solar, which was breaking even pretty fast. There were some subsidies till 2013, but actually the end of subsidies was a sign of market exploding, and that actually happened to commercial solar in India. Once the subsidies went away. If you see the graph of commercial solar in India, it's in hockey stick growth.
(08:12):
And so commercial solar was the next, and in 2015 is when SolarSquare started entered this market, and we were working on large C&I, commercial and industrial, solar as they call it. Up until 2020, '19, '20. I would believe that for an average family, a middle class family to put up a tiny residential rooftop solar, it would still take seven to eight years for it to break even. But that breakeven period dramatically went down from eight years in 2015 to under five years in 2020. And that's the tipping point. When a solar system can produce power for free electricity for 25 years. If you can recover your initial investment in less than five years, that's pretty lucrative economics for a consumer. And so the return on a rooftop solar became more than 20% even for a residential consumer. And so that, I believe, we said that that is the leading indicator that now the residential market is ready to take off.
(09:07):
However, just the economic viability is not enough. Cody, as you would know very well. There are a few other ducks that are supposed to line up for the residential market, which is where we now dominantly focus on. For the residential market to inflect that there are a few other ducks that have to line up. First is economics, which happened in 2020. Second is policy and ease of government permits. How easy is it for a solar company to get a rooftop solar permit to get it installed, to get it up and running, et cetera. Third is availability of professional service providers, which can accelerate the market, because you can have the policy, you can have the subsidies, you can have the economics, but without reliable solar companies, the market cannot inflict, especially in India, which is a very highly trust deficit. Nation. Installers are not certified. There's not as strong a rule of law in India, et cetera, et cetera.
(10:00):
And so when a family is putting up $2000, $3,000 in a rooftop solar system, it's a very high ticket size purchase for them. And in a trust deficit country like India, the lack of a professional service provider was actually a really big problem. Which is something that we realized in 2020 that there was actually this latent demand, people who had been thinking of going solar for a year or two, but they didn't find the right service provider. So that's the third duck to line up. And the fourth is access to financing. You would've seen everywhere else in the world, majorly residential solar adoption happens on the back of either leasing or easy financing, easy EMIs where a consumer can pay monthly installments. Because forking out $2000, $3,000, even though it would break even very quickly, shelling out that much cash upfront is still a problem for most consumers.
(10:47):
So those are the four ducks do line up. And I would say that in 2020 we had this B2B solar business, which was doing 15, $16 million a year. It was profitable. Neither was 31, I was 30. And so for us to say that, hey, residential solar is going to be really attractive and the market is going to inflect in three to four years of time, we actually decided to pivot from being a B2B solar company to a residential solar company. By 2021, we decided to pivot. That's when we started raising venture funding, et cetera. That was a big inflection point and a huge bet on the residential solar market that we took. And sitting today in 2023, I can say that yes, the market actually has inflected and it'll continue to be on a very fast growth curve for the coming few years.
Cody Simms (11:33):
Super helpful background. Let's talk about, I don't know if you can say unpack the ducks, but let's talk about each of the ducks that you mentioned that need to get lined up. Starting with, you mentioned the government support side, I think as one of the big ones. In 2022, there was a direct benefit transfer subsidy that the government rolled out. Can you explain a bit about what that looked like?
Shreya Mishra (11:58):
India is totally pleasantly surprised when it comes to solar policies and especially for residential solar. I think before direct beneficiary transfer, actually start from December 2020. India became, if I'm not wrong, one of the first countries in the world to make net metering for residential consumers a legal right. Now, net metering is a policy everywhere else in the world, but policies have flip-flops, right? It's not stable. We also, what happened in California with NEM 2.0 policies, where the net metering savings were cut down by 70%. And so the economic incentive of consumers or the savings that consumers can realize with solar was brought down dramatically. Because one utility woke up one day and said, "I'm going to change this." That makes the environment very, very unstable for the industry. So India did that really, really solid move by making net metering a legal right in December 2020 for all residential consumers.
(12:55):
So that made one part of the policy climate really, really stable, rights don't change for 50, 60 years or few decades basically. So that one thing that's very stable. The second is how government permits happen, which is all the permits that you need to go solar. And the third is how subsidy is dispersed. Coming to first is net metering is a legal right coming to government permits. Government permits are not as smooth. India has more than 60, 65 utilities or discom distribution companies across its different states. It's not paperless everywhere. There is still some physical paper movement, et cetera. I think the government has some way to go on making it easy for a homeowner to switch to solar. I mean, in today's day and age, you order an air conditioner and it's delivered to you the next day. So waiting for 30 days to get a solar permit is actually not great for the industry to grow.
(13:46):
But through my conversations at the Ministry of New and Renewable Energy and with different utility companies, I think India is going to make some very bold moves in the next 12 odd months, which will make this permit very, very easy across India. They will basically make a whole bunch of stuff digital, paperless, standardized, quick approvals, and I think that is going to be another massive tailwind for the industry. And third is, as you said, the subsidy or the direct benefit transfer. Prime Minister Modi himself launched the National Solar Portal last year. This portal is specifically for residential consumers to get subsidies. So it is one nation, one portal. Everybody applies for their subsidies through this portal, and the subsidy is credited to the consumer's bank account within 30 days of a solar installation.
Cody Simms (14:33):
So this is an investment subsidy?
Shreya Mishra (14:35):
Yes.
Cody Simms (14:35):
This is, you get paid for having made the installation or it's a production subsidy, which is you're getting subsidized payment on power generation?
Shreya Mishra (14:42):
It's an investment subsidy.
Cody Simms (14:42):
Okay.
Shreya Mishra (14:43):
You're being paid a certain amount for just having bought X, Y, Z kilowatts of rooftop solar.
Cody Simms (14:47):
Got it. Okay.
Shreya Mishra (14:48):
That's pretty phenomenal. And earlier, it was a messy system where every different state would have different subsidies, different schemes, different rates, and you would have to apply for subsidy in any state that you were operating in. So it was not as seamless. But now with one nation, one national portal, I think that's a pretty, pretty phenomenal move by the Indian government. And it is this portal that is getting integrated with the 60 plus utilities of India, so that the solar consumer or the solar company is simply working on one portal for all things residential solar. And given what India has done with UID, our Unique Identity and passports and many other things, I think Indian government's technology option has been pretty phenomenal in the last decade. And so I'm very confident that we will have one of the best IT infrastructures for solar permits and subsidies in India.
Cody Simms (15:40):
And does the consumer go direct to the government to get the subsidy, or do they work through you, the installation company to access the subsidy?
Shreya Mishra (15:47):
Right. The consumer simply registers on this national portal and chooses his vendor of choice. Let's say he chooses SolarSquare, we take care of everything post that. So his installation, his permits as well as we simply upload his bank account details in this portal and he gets the money in his bank account. So it's actually pretty streamlined
Cody Simms (16:06):
And you don't have to front the dollars yourself too, which is nice.
Shreya Mishra (16:09):
Yes, yes. I don't know if that's the case in the US, but in India we had to front the dollars. And then it would take us six to 12 months to get that money from the government because that's always a slow process.
Cody Simms (16:19):
That is the current state of things in the US.
Shreya Mishra (16:22):
Oh, wow.
Cody Simms (16:22):
With some of the direct pay implementations of the inflation reduction act. Some of that is hopefully going away soon. But yeah, it's been painful for installers for sure.
Shreya Mishra (16:30):
Oh yeah.
Cody Simms (16:31):
And then on the permitting side, so are permits managed by utilities? Are they managed by municipal governments? What is the typical process for an Indian homeowner to get their rooftop setup permitted and actually producing electricity?
Shreya Mishra (16:47):
So in India, solar company does everything for the consumer. We collect all the documents from the consumer, and most of these utilities have their own online portals where we would make the applications for permits. These permits, in some utilities, you would get it in one minute, which means it's instantaneous approvals. In some utilities it could take up to four to six weeks as well. So it's very dependent on utility to utility. But the good thing is that utilities don't have manpower. So as consumer demand for residential solar is increasing, they are forced to make this more digital and online. Because to have human beings process these applications as itself-
Cody Simms (17:24):
So they're not sending an inspector out on site to actually look at the work and issue the permit today?
Shreya Mishra (17:29):
It's not for the permit. But once your solar installation is complete, they are sending an inspector to check the installation and ensure that there's actually an installation before a consumer gets subsidy. Because, otherwise there could be fraud where a consumer actually doesn't get anything installed on his roof, but actually just takes the government subsidy. So there is that inspection element involved right now, but I am hearing that that may also be made more democratized where it would just not be the government agency, but any licensed electrical contractor in India, which can come and sign and approve your solar installation, I mean he has to be licensed with the local utility, but that just makes it easier and more open market for solar companies consumers to get solar permits going.
(18:17):
I think from start to finish, once a consumer decides to put up solar, it would take anywhere from 45 days all the way up to 90 days given all the permits and everything else in between the actual installation. I mean, SolarSquare does it in literally eight hours. We have modular prefabricated installation, so that's the irony of it, right? The actual work just takes a day.
Cody Simms (18:39):
It's not that different from the US. I have rooftop solar. It took a few days to put the panels up and then it took a few weeks to get the utility out here to actually issue my permit and get the system starting to produce electricity. That leads me to my next question. Working backward on your answers on the government side, which is the net metering piece. So you mentioned it's now a national policy to have net metering. So presumably then once the system is permitted, that's when it can actually be switched on and start generating electricity, I presume. And does all electricity that the rooftop solar system generates automatically go to the utility and then the homeowner is credited for those electrons? Or are the electrons actually powering the home itself?
Shreya Mishra (19:20):
So the way on grid systems or net metered systems work in India is that six, seven hours of sunlight, solar is producing power. Whatever your home is consuming during the day, you consume it instantaneously, whatever is the excess goes to the grid and it is taken back from the grid at night post sunset.
Cody Simms (19:37):
So you are actually consuming your own produced electrons in a direct way. Okay.
Shreya Mishra (19:41):
Absolutely. Absolutely. And the other good thing in India is that most utilities in India like net metering, you can carry forward excess units to the next month as well. So let's say I am out on a vacation and my solar kept producing power for 15 days. I actually don't lose all of that power. I can carry forward the excess produced to the next month, but at the end of one year, this lapses. So you can't carry forward excess power or you can't actually sell technically to the grid the idea of rooftop solar or residential, commercial, all kinds of rooftop solar in India, that it should be designed for captive consumption only. So you only produce as much as you require and you can't sell or make money by selling access to the grid.
Cody Simms (20:22):
And on a daily basis, does India see any kind of curve like phenomenon on power production?
Shreya Mishra (20:28):
Not yet. And I think that that will get aggravated once India has massive penetration of rooftops solar. We are seeing in Australia, right? Like one in three homes in Australia have rooftop solar, and so afternoon times has massive duck curve and all of those issues.
Cody Simms (20:42):
A different kind of duck for our listeners. Not the ducks in a row that Shreya was talking about earlier, but actually the shape of power production that looks like a duck or actually the power consumption that looks like a duck because it ramps up in the evening time.
Shreya Mishra (20:56):
Right? Right. It's high in the morning, then goes down and then goes back up during the evening. And solar production is when you minus the production from the consumption, you basically get a duck, because solar produces its maximum at 12 o'clock where most working families would be outside their home. And so there is high supply and less consumption in that moment of sunshine hours. I think that's going to be a problem everywhere in the world, and that has to be solved through... We all know will be solved through storage and batteries to just enable the grid to balance its supply and demand. Less than half a percent Indian homes have rooftop solar yet. So I think India has different kinds of problem where we are talking of accelerating adoption of residential solar and rooftops solar, the problems of duck when overloaded transformer capacities. All of that happens once you're looking at massive penetration.
Cody Simms (21:47):
Those are good problems to have.
Shreya Mishra (21:48):
Those are good problems to have five years out.
Cody Simms (21:50):
And where has the bulk of penetration been today on rooftop? Is it urban? Is it rural? Is it growing equally? What does it look like?
Shreya Mishra (21:59):
So if I split between the consumer categories, commercial is way bigger than residential today. Because I think in the commercial segment, consumer awareness has reached critical levels. Every business owner, whether he has a school, college, hospital, factory cold storage warehouse knows that solar makes sense, that it breaks even in, I mean commercial solar because of bigger sizes as lower cost per kilowatt, so breaks even faster despite subsidies. Commercial solar, most places in India would break even in under four years, and residential solar with subsidies would break even in India under five years. So I think the bulk of the market is commercial, and that's fairly spread across India. I believe West and Central India and North India has more deployment than East. I mean, east India has had some policy issues and permit issues and stuff like that. I believe east has had much lesser adoption than rest of India.
(22:54):
Coming to residential solar, like I said, it only started... I think it's reaching critical consumer awareness levels now. And while there is subsidy, even without subsidy, the economic case of solar is great, but subsidies are actually aiding build trust in solar as a category, where there is more neighborhood conversation that hey, it makes sense. Hey, I got zero electricity bill. And so the trust in the product itself is increasing. On the residential solar front, there's a pretty strange statistic for India. 80% of India's residential solar happened in one state, and that state is the state where Prime Minister Modi used to be the chief minister, which is Gujarat.
(23:33):
He basically made permits. He said, "I want to promote solar in Gujarat." When he was a chief minister. And the state took up a very, very easy paperless digital, super fast permit IT infrastructure. And while the subsidy was same everywhere in India, just because permits were really smooth in Gujarat, and even though at that time 2015, '16, '17, the solar company would have to front the subsidy and then collect the subsidy back from the Gujarat utility, it was all super smooth. It still is super smooth in Gujarat. And so that made 80%. So India, I think about 500,000 homes have solar. I believe close to 350,000 of those homes are in Gujarat. So rest of India is really small. And with the national solar portal, we are now seeing other states of India start accelerating adoption of solar, residential solar to accelerate.
Cody Simms (24:27):
Wow, very cool to learn in one locale. And then it just so happened that obviously that was the locale that Prime Minister Modi came from, and so you're able to then take some of what worked and push it out at the federal level, at the national level. I'm curious how you've seen the actual installation process work. You mentioned one of the other key things that needed to line up for you was workforce, and a skilled labor workforce that's capable of delivering this at scale. What does the installation process tend to look like in India? Everything from rooftop inspections to installing the panels to supply chain and logistics of sourcing the panels, to then the software and hardware components that get associated with the panels like inverters and whatnot.
Shreya Mishra (25:11):
So when we started SolarSquare, Cody, we thought that like every other large residential player in the world will be a financing first company, and India's market will inflict on the back of easy financing and et cetera, et cetera. If you look at Solar City or enPower in Germany or Solfosil in Brazil, all of these large residential solar players have a very financing first business model. When we started in India, we actually realized, and this was more for what Neeraj had seen over the past four or five years being a solar entrepreneur, was that India has very different challenges. And the biggest challenge in the residential solar market for India, Cody, was the lack of any professional service provider.
(25:49):
There's a large fragmented, unorganized installer base. Many of them are fly-by-night operators. There are no safety standards, there are no quality standards. The consumer is completely unsuspecting, and ends up buying poor quality, no after sale service, and in many cases extremely unsafe rooftop solar installations. So when we started this business, we said we have to be operations excellence and customer service first. And so, one of the choices, one of the design choices we made as a business is to be a full stack brand, and not go with franchisees and focus on financing. We said we first have to solve for high quality installations, professional service, and a after sales network for residential solar.
Cody Simms (26:32):
These are high voltage DC systems sitting on the top of your home. There's potential for a lot of danger.
Shreya Mishra (26:38):
Yeah, absolutely. And over and above that, Cody, I think in the US or Germany, everywhere where it snows, the architectural designs have sloping roofs. And so on sloping roofs, you put up these panels on these shingles or the slope of your home. I'm sure it must be the same at your home as well. In India, we have flat RCC concrete roofs and roof is a social real estate. We actually exercise and have our morning exercise and morning chai, morning tea, even parties on our roofs. So most 90% of Indian consumers don't want to let go of their roof space with solar. So how do we install solar on such homes? We actually create solar pergolas. So these are elevated six to eight feet pergolas on top of which we put up these solar panels.
Cody Simms (27:21):
Oh, wow. So you also get shade as part of the benefit as a consumer,
Shreya Mishra (27:24):
Absolutely. You also get shade, but that means other than electrical expertise, there's also civil and architectural expertise when you're putting up these solar pergolas. One of the biggest safety risks, like you said, these are 1000 volt DC current going through your roof. So of course there's electrical safety, but there's also civil safety, because you are putting up these pergolas on your roof, which experiences very high wind speed. And unfortunately due to climate change, India used to have one cyclone in 10 years. This decade, it is expected to have two cyclones per year. And so to design these pergolas to actually be cyclone proof was extremely important.
(28:03):
So one of the things we did at SolarSquare and we said, Hey, if you want to scale this business, you have to create these pergolas across hundreds of cities and hundreds of thousands of homes. And so how do we ensure safety? Because leaving it up to, like you said, labor or skilled or unskilled labor was very risky. So we created our own modular prefabricated solar pergolas. These are made through precision manufacturing in factories and very much like IKEA. They're simply not ported on your roof. So we were forced to introduce that proprietary solar pergola design to the Indian market, and we made it super affordable for a regular consumer. This is not meant for the villa owner. This is meant for a middle class Indian family, which basically pays $40 a month in electricity bills.
Yin Lu (28:48):
Hey everyone, I'm Yin a partner at MCJ Collective. Here to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning and doing that goes beyond just listening to the podcast.
(29:00):
We started in 2019 and have grown to thousands of members globally. Each week we're inspired by people who join with different backgrounds and points of view. What we all share is a deep curiosity to learn and a bias to action around ways to accelerate solutions to climate change. Some awesome initiatives have come out of the community. A number of founding teams have met, several nonprofits have been established, and a bunch of hiring has been done. Many early stage investments have been made as well as ongoing events and programming like monthly women in climate meetups, idea jam sessions for early stage founders, climate book club, art workshops and more. Whether you've been in the climate space for a while or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to mcjcollective.com and click on the members tab at the top. Thanks and enjoy the rest of the show.
Cody Simms (29:49):
Just to set the context Shreya, so you've got many Indian cities, highly urbanly dense, people may or may not have any kind of yard to be able to enjoy outdoors with. And so the rooftop, as you said, becomes the social gathering point in the evenings and in the mornings for the family and friends to gather. And so now you've designed these systems that build these covered pergolas that sit on the rooftop under which you can have your morning chai or whatever and read the newspaper or whatnot. You're safely generating solar power on top of these pergolas.
Shreya Mishra (30:22):
Precisely correct. I mean, we have so many consumers who put up for grass and plants and create a little garden underneath their solar. So, pretty much the base underneath solar in India is pretty much a social real estate. And so we wanted to make ensure that.
Cody Simms (30:36):
Which probably helps further with word of mouth, like your neighbor gets a rooftop panel on the roof and like, oh, that's a cool conversation piece. Your neighbor gets an entire shaded pergola on their rooftop that also generates power. And then they're really having a conversation about should we get this too?
Shreya Mishra (30:53):
Correct. Absolutely, absolutely. Coming to all the points that we said. So number one was the lack of a professional service provider. So one of the things was safety. Number two was quality. Again, fragmented, unorganized market. People put up oftentimes poor quality components because consumers really don't know what goes into their rooftops solar system. For most consumers, they think solar equal to solar panel, and they don't care about anything else that goes into the system. While in fact, solar is just one of the 70, 80 components that go to your solar system. So that's the second thing, right? Quality components, wiring.
Cody Simms (31:27):
It's a power plant. I mean we tend to forget that it's a power plant.
Shreya Mishra (31:31):
Exactly. It is a power plant. It is a mini power plant, precisely. So many other components inside it matter, then comes all the government permits. So we take care of that as well. So as a full stack brand, Cody, we take care of the entire journey. So once a consumer reaches out to us, we do a free solar consultation, which is how our sales happens. You reach out to us through our website or you get a referral or off SolarSquare from one of your friends or family who's gotten SolarSquare installation. We give you a free solar consultation where we have a fleet of 80 trained solar consultants. They're basically our sales guys. And they are trained to educate the consumer, why we call them solar consultants because that's where the market is today. There's a lot of myths. People really need to understand what is net metering, how does [inaudible 00:32:14] happen? How will I get my subsidy?
(32:15):
So this person will educate them on everything and then also do a survey of their roof. We give them a real time 3D design of how solar will look on their roof. We've built that capability. We send them a commercial offer right there on the spot. And we also have partnerships with multiple lenders where we also will give a five-minute eligibility for financing or easy EMIs, monthly installments payments to the consumer. So all of that happens in this sales consultation. Once the consumer books with us, we do everything end-to-end. We do the design, the final design, we do the installation. We have about seven to eight installation contractors that work with us. They're fully trained by us, they're dedicated to us. They're practically managed and trained and controlled by us completely. So they will do the installation.
(33:02):
Then we help them get the financing, we take care of all the government permits. We simply collect the documents in the solar consultation. And then all of the applications with the utility are done by SolarSquare. So the consumer doesn't leave his home. He doesn't leave his home for anything. Not for permits, not for subsidy. We take care of everything. And then the most crucial part comes, which is the after sales or the post installation maintenance of these power plants. Like you said, these are power plants and every power plant needs maintenance. It is a mammoth task, if you have these hundreds of tiny, tiny, tiny power plants within a city and then thousands and hundreds of thousands across India, how do you actually maintain them? How do you actually give them after sale service? That was a unique problem that we are solving for. A hundred percent of SolarSquare customers actually have to buy a five-year AMC. We don't sell without it. Because we believe that simply put, you don't fight climate change by installing solar. You fight climate change when that solar actually produces power that the home consumes. Because there are-
Cody Simms (34:05):
What's an EMC?
Shreya Mishra (34:06):
Annual Maintenance Contract.
Cody Simms (34:07):
Oh, AMC, sorry. Annual Maintenance Contract.
Shreya Mishra (34:09):
Yeah. So we believe that you only fight climate change and you only reduce a home's carbon footprint when this solar actually produces peak power. And just like in India, and I was recently reading this article in the Times as well. Where even in the US, thousands of consumers are left hanging with no after sales. The installers have gone out of business. I mean, it was a booming industry. Lots of unreliable players entered the market. And same is happening in India as well. And that's why we believe that after sales or maintenance post installation is extremely important. And India has a very unique problem, which is that we are a very dusty country. So that dust settles on solar panels and if panels are not deep cleaned for three to four months, the power production can go down by as much as 30%. That's another massive menace. And there's actually Bloomberg reports and articles on the global soiling loss of solar panels. And in India, that problem is specifically acute because it's a developing country, lots of construction, lots of dust, et cetera.
Cody Simms (35:09):
I often wonder when homeowners set up to calculate the ROI on solar panel installation, they don't actually think about, unless they're going to get up on a ladder with the mop and clean their solar panels themselves, they're probably paying someone a few hundred dollars every few months to come clean their panels as well, which actually eats into your profit margins pretty substantially. So it's interesting to hear that that is part of the upfront package that you help the consumers think about in terms of the all-in costs of doing solar, which includes maintenance.
Shreya Mishra (35:37):
Absolutely. Absolutely. And I think it's so important because I don't think you can create a long-term business in this category if your consumers for next 10, 20 years are not getting that rated performance. So I think it's only good business, but of course you need tech enabled workflows, you need manpower, you need all of the infrastructure to offer this after sales.
Cody Simms (35:59):
And on the financing side, with the five-year called it EMI or Equated Monthly Installment payments, presumably that has also been something that in order to be able to offer that you've had to have the credit markets in India mature to the point where most people have access to be able to qualify for a financing product like that. Is that also a relatively recent phenomenon in India over the last 10 or 15 years?
Shreya Mishra (36:24):
Yeah, absolutely. I think financing for commercial solar is available, but usually it's the corporates own banking relations, right? It's like solar is buying any other piece of machinery or CapEx for your factory warehouse, et cetera. But for the residential consumers, actually financing has become predominant only in the last two years. And I think Polar Square has had a significant role to play there because it was a chicken and egg, it was a cold starter problem. Because there were no professional service providers, imagine lending... So let me take a step back. Like you said. Is the credit market mature enough to lend for solar or any other consumer durable category? Yes, it is. That is available for all consumer durable categories, but solar is unique because it is not a off the shelf product, right? I'm actually integrating 70, 80 components to create this power plant.
(37:11):
And so along with underwriting this consumer and his credibility, I also have to underwrite his solar installer, and the quality of solar that he's installed and whether he will give after sales and whether this consumer will actually get his rated savings and peak performance. Because if his solar plant underperforms, there is a high chance the consumer defaults on the loan. So for lenders, they're very resistant in India to lend for residential solar because it's not off the shelf product and they only want to lend through a professional service provider like SolarSquare. So we actually convinced a whole bunch of lenders to lend for this category, and in the early days we gave them guarantees. We said that, Hey, you do your underwriting, I give you the guarantee of solar performance. And after a year of no non-performing assets, because why would you default on solar, right?
(37:59):
It's something that gives you money. It saves you money. So if you default on solar, you actually end up paying your utility, which is more expensive. So we actually saw very little, actually zero defaults in our first year, and that got a bunch of lenders excited, and now we have four or five lenders working in this category. I still believe that interest rates are very high for this product category, because I mean the traditional banks are not yet entering this category. It is these young new financing companies, which obviously have higher cost of capital, and hence the interest rates are very high. But let's say the State Bank of India starts lending for residential solar. I mean they can do this at 9%, 10%, 11%, which is currently happening in the market at 15%, 16%.
Cody Simms (38:46):
I'm hearing so many different fronts that you all have needed to help drive innovation around from bringing the financing market to bear in India around solar, residential solar in particular, to innovating on the form factor of solar panels in India with these pergola designs that you've created to helping to push and create a skilled workforce that can create these installations to similarly having a skilled workforce that can manage the post installation maintenance contracts, to presumably all of the work you have to do on even procurement and sourcing supplies and materials, which we haven't even talked about. Is there also any work that you're doing, from a technology perspective, internally to make these processes easier to manage? If you had to say, Hey, we've done all this process innovation, here are the two or three technology innovations that we have driven ourselves, what would those be?
Shreya Mishra (39:45):
Yeah, yeah, absolutely. So I think we've very humbly saying this, but I think we are the torch-bearers of residential solar in India. I think we were the first professional company to say, we are going to do this. We did everything. I've sat in utility offices for hours, we've innovated on our own solar pergolas. We are the first to launch after sales, convinced lenders to finance in this category. All of that you just said, right? I think in terms of technology, absolutely. Operating at this larger scale did require us to build a lot of tech enabled operations. We have our own order management system, which actually is designed differently for every utility, because the project timelines and the permit timelines for every utility are different. So we've actually built our order management system for all the eight states that we operate in across India. We are already building the control operation center.
(40:37):
We are the largest single largest owner of distributed solar assets in India by volume. Somebody else may have 100 megawatts in one location, but nobody has thousands, tens of thousands of sites across India. So by volume, we are the largest owner of distributed solar assets. So our problem is how do we remotely monitor and diagnose issues at thousands of these sites? So we are building the tech for that where we will monitor solar performance, we'll get alerts. And we've also recently acquired a company which is into remote diagnostics of rooftop solar installations because sending human beings every time one of your solar underperforms to check what happened is not viable, is not economically viable. So we are also building remote diagnostics capabilities. So that's on our workflow, internal tech. We are also building tech to marry a consumer to the correct lender because different consumer profiles across different geographies, you can get better interest rates from different lenders, right?
(41:36):
Somebody's strong in the south, somebody's strong with only salary professionals, somebody wants to lend better to small business owners. So we've started to marry consumers with lenders, again through an app that we have built. And so this is all on the workflow and internal tech side, which allows us to scale operations. Next we are going to be building our Home energy app, which is basically an app which will allow consumers to monitor their rooftop, solar performance, real time monitor, their post installation maintenance visits, monitor their EMI payments, raise a concern if they have. So all of that is going to happen through this home energy app. And naturally India is also going to see battery adoption. So as battery adoption increases, we'll also allow consumers to monitor and manage their battery storage through this home energy app. So that's the other piece of tech that we will be building, but that's about a year out.
Cody Simms (42:29):
On the US side. A lot of that consumer facing management is done through I think mostly the inverter or micro inverter companies like SolarEdge and things like that. Does that market exist in India today?
Shreya Mishra (42:41):
Yeah, absolutely. So currently our consumers are using the inverter app because SolarSquare hasn't yet built the app. But what we will do is we've already integrated multiple inverter APIs with our app.
Cody Simms (42:52):
Got it.
Shreya Mishra (42:53):
So now this consumer, irrespective of which inverter he's installed, he can use the SolarSquare app to track his solar performance because this allows him to raise tickets and track his EMI and after sales and all of those things so, he doesn't have to use multiple apps.
Cody Simms (43:08):
And what has staffing looked like? I would assume based on everything you've described, you have a fairly substantial operation in terms of headcount and people. What does it look like in the core corporate side of the business as SolarSquare and then presumably you have a significant network of people out doing work on rooftops?
Shreya Mishra (43:28):
Yeah, absolutely. The total company size is 400.
Cody Simms (43:29):
Wow.
Shreya Mishra (43:31):
But I think there's a very conscious choice that SolarSquare has made. We've invested massively in operational excellence. We've invested very little in marketing as well as sales. And I think it was a conscious choice that once we get to a very high customer experience and very well-oiled operational engine or operations excellence, as I like to call it, only then should we press the pedal on sales and marketing. We are still in just about 20 cities of India. While the market exists in 500 cities, we've decided to go full stack, which means we are more controlled and we have to be more measured in our expansion because I just believe that India is a poor customer service country in general. And so anybody who's choosing to give the consumer good service has a disproportionate advantage, competitive advantage as well. So that's the second thing. In terms of our team, corporate is just about 65, 70 odd people.
(44:25):
We have 80, 85 people who are doing sales. They're the solar consultants, as I told you. We have about a hundred odd people in operations. We have about 50 people in after sales and about 50 people in customer service. So that's that. But the installers actually, people who go on the roofs to install, they're not on SolarSquare's payroll. So we have another 200 people who are actually the installers, 200 to 250 people who actually go to consumer's roof to do the rooftop solar installation. We have one crew does one install a day. Each crew is about four people, three people who are actually doing the work and one supervisor.
(45:02):
And like I said, even though they're not on our payroll, they're fully managed by us. We work with just six to seven very high quality installation partners. We've trained them, we monitor them, we quality audit their installations. The labor side of things, Cody, may be a big challenge like in Germany and US. Actually India, there's plenty of people available. And that's why in fact also the cost of installing solar is much lesser in India because the soft human costs of sales as well as installation, both are not digital like e-commerce, right? Both are sales is human, installation is human, but the soft costs are low because labor is competitively very cheap in India.
Cody Simms (45:39):
And how are you seeing other big players leaning into residential? I mean, you talked about you all saw that opportunity and decided to really go all in on it with the company. I assume other big energy companies in India, other big power companies in India who've been doing large scale utility, solar and large scale commercial and industrial solar also see this opportunity. Are you seeing an overall maturation of the space here across multiple parties?
Shreya Mishra (46:07):
Yeah, I think the Indian market will be very different compared to the US market, where an ADT and so many others have gotten into residential solar as the market got heated up in the last decade. Residential solar is not a financing first in India today. Like don't get me wrong, financing is important. We are unlocking it. We may even take on our own lending license and lend to consumers in the future. So financing is super important, but in a trust deficit country and in a country where there's much lesser regulation on contractors and installation qualities and safety standards, I think a professional service or play is what will really create brands and businesses. What happens is that some of the large corporates, they enjoy doing commercial solar and utility solar, because sometimes that's crony capitalism. Sometimes it's also much easier, right? Do one installation and that's half a million dollars.
(46:56):
When SolarSquare was a B2B solar company, our average ticket size was half a million dollars per customer. Now it is $3,000 per customer. So this is a lot more nuts and bolts. You need to build customer acquisition, you need to build service networks. You need to actually be responsible for customer service, customer experience for safety, quality, all of those things. So I think this is never going to be the cup of tea of any large corporate or large solar player. I think definitely people are watching this category and watching it closely, but I think the winner here will be somebody who specializes for the residential solar market.
(47:34):
And most of the large corporates like Tata, Mahindra, Reliance, they're all going to be in manufacturing in India because solar panel manufacturing, India wants to be this hub of panel manufacturing. Government is giving production link incentives for manufacturing. So again, large corporates find that more their cup of tea. So commercial utility manufacturing, those are the areas they will stick to. Residential will remain an entrepreneur's play and agile entrepreneur's play. And given how nuts and bolts this is, I mean we are the only venture funded player in this category.
Cody Simms (48:05):
So you find yourself competing mostly against mom and pop small business installation companies?
Shreya Mishra (48:11):
Absolutely. So our competition is actually small mom and pop, the whole unorganized segment, and we think that that's how it is going to be. Because I mean, there's no other venture funded player in this space. I don't expect one to show up either. So yeah, I think the Indian market will be one through just nuts and bolts operations and service more than anything else.
Cody Simms (48:34):
Let's talk about the venture funding. So you've raised a couple rounds of venture capital most recently. It looks like a series A round at the end of 2022. Maybe share a little bit about the financing history.
Shreya Mishra (48:45):
Yeah, absolutely. So SolarSquare was a bootstrapped company from 2015 all the way through 2020, when in 2021 we decided to pivot towards residential solar. That's when we decided to raise funding. We raised a $4 million fund seed round at the end of 2021, and then towards the end of 2022, we raise our $11 million series A. We've had Lower Carbon, which is now one of the world's largest early stage climate tech funds, participate in both Seed and CDSA. And our CDSA most recently was led by Elevation Capital.
Cody Simms (49:18):
And Elevation is both an Indian and US venture technology fund. Is that correct?
Shreya Mishra (49:23):
Yes. They have offices in India and US, but I believe bulk of their investments are in India. I mean, they do SaaS, consumer all kinds of investments in India. And I think Climate Tech was fairly recent for them, as is for everybody. All the traditional VCs are still doing research and figuring out what their thesis in climate tech is, and there are more specialized climate tech VCs like Lower Carbon, which are taking the bet. But Elevation had a thesis in the residential solar space and they'd been watching and starting the space for a few years. So they took the bet on us at CDSA.
Cody Simms (49:57):
That's great. Well, it was Harsh at Lower Carbon I think who originally put us in touch and said, "You've got to talk about Shreya and hear what they're doing at SolarSquare because it's a very unique story. And I'm super glad he did for sure. And I presume given just the size of the market and where you mentioned you are relative to total penetration, like India, is the focus for the absolute foreseeable future for the business. Is that a correct assumption to make?
Shreya Mishra (50:20):
Oh yeah, absolutely. I think we have our hands really full. Like I said, India has less than half a percent penetration today. The opportunity is, I mean, 30 to 40 million homes, which can be prospective, which can install rooftop solar, going to 60 to 70 million homes in the next decade just given how our GDP is growing. We're talking of a 50 billion opportunity in the next seven, eight years. And our ambition is to be, we are the fastest growing in this space in India. We are a very close number one or number two probably when it comes to residential solar in India right now. And I think our goal is to be the number one with a 20% 30% market share, which is a mammoth ambition in itself. I think we are busy for the next decade or so, but who knows after that?
Cody Simms (51:05):
Well, I mean clearly we all know the importance of India when it comes to power and energy. We all know that India is also one of the countries that is likely to face the impacts of climate change as much or more than any other place on Earth. So obviously the work you're doing, hopefully you're able to feel it on multiple impacts.
Shreya Mishra (51:24):
Yeah, no, absolutely. And I think that's the absolute joy of being a climate tech entrepreneur, right? The massive economic opportunity. Of course, everybody sees that, everybody's talking about that, but also knowing that there is this impact that you are creating. And I feel that shows even in the talent that we hire and the teams that we built, I believe there is that extra will that people have. Because everybody carries that burden on their shoulders that, hey, what we are doing is important not just for ourselves, but for the planet, for India. And so I believe it's a huge responsibility and huge honor to be doing what we're doing right now.
Cody Simms (52:02):
Shreya, what else should we have talked about that we haven't covered? We've covered so much.
Shreya Mishra (52:06):
I guess, about just consumers in India and how that electricity consumption is evolving. I think that's an interesting aspect for India as well. So India is one of the lowest air conditioner penetrations in the world. Less than 5% Indian homes have air conditioners, and India is going to be worse affected by heat waves and a rising temperatures climate change, et cetera. And so an average Indian middle class family can no longer survive without an air conditioner. With that, the electricity consumption per capita in India for middle class homeowners is going to increase by 15% giga. Which is massive. Which means in 10 years this family, which has a three kilowatt rooftop solar, not even 10, in seven years, they'll actually need six kilowatts.
(52:49):
As India GDP is growing, electricity consumption per capita is growing. Decarbonizing homes is that much more important because we are going to feel it the most, right, in terms of heat waves and climate change. So I think that that's also a very interesting aspect. If you compare India to other parts of the world, I think in US an average family for them, solar system, rooftop solar is about seven kilowatts. In India, that's just about three and a half kilowatts, but the pace at which India's average solar per home is going to increase is just going to be massive given how... Of course EV penetration is another aspect, but how air conditioner penetration is going to drive solar and solar panel requirements in India.
Cody Simms (53:29):
Do you foresee a future where SolarSquare might bundle solar panel installation with air conditioner or HVAC work?
Shreya Mishra (53:38):
Yeah, I think we'll steer away from anything that not good for the planet. So we like to call ourselves as the future home energy brand of India. I think we want to do everything home energy and sustainability related. So we probably will be with solar, we'll do batteries. We will do EV chargers. Because more and more Indian consumers are realizing that EV, if you're charging it with coal base electricity, it's pretty pointless. You've done nothing for the planet. So if you are buying EV, it's clean only when it is charged through clean electricity, which is solar. So natural extension is to bundle EV chargers. Heat pumps seems like an interesting and more... Rather than air conditioners, heat pumps seems like to be an interesting opportunity as well though India doesn't have heat pumps right now. I mean, so probably that category if it picks up. But all things that allow a home to take control of their energy to live more sustainably, to save on their energy costs, we want to get into all of that. And who knows, maybe even air filters, air purifiers and all of those things.
Cody Simms (54:39):
Well, it's a big vision for sure, for a country that is only going to continue to grow in its consumption needs. Clearly, India really has just seen just incredible economic growth over the last decade, which I think many expect will continue into the decades to come.
Shreya Mishra (54:54):
Yeah, absolutely. It's an exciting time to be building in India.
Cody Simms (54:58):
Shreya, I appreciate you so much for joining us. You even, I think, cut your vacation short to come join us and be part of My Climate Journey pod. I know I learned a ton. I'm sure all of those listening here have as well. And I guess the last thing I'll ask you is anyone who's interested, wants to learn more, wants to dig in, wants to find a way that maybe they can even get involved or help, where are you looking for that sort of assistance today?
Shreya Mishra (55:21):
We are hiring. We are hiring for a lot of positions at SolarSquare, so please do write to us. We are in India if you want to work in the climate tech space. I think the very exciting opportunity, and we are a bunch of missionaries, so anybody who deeply care about sustainability will really enjoy the purity of purpose with which we do things at SolarSquare. And I say that with all honesty, that's of course one aspect. I think, yeah, so we are looking to hire and we are not yet looking to raise funds. So if there are investors listening in, that's for next year maybe. But yeah.
Cody Simms (55:53):
Awesome. Well, Shreya, thank you so much and look forward to talking with you soon and tracking your progress as you go.
Shreya Mishra (55:59):
Absolutely, absolutely. Thanks a lot, Cody. It was really pleasure being here, and I'm a big fan of what you guys are doing. It's important work and it's really done well. The conversations are really good, so hope to hear many more of them and very happy to be here today.
Cody Simms (56:12):
Well, you're one of us now too. Thanks, Shreya.
Shreya Mishra (56:15):
Thanks. Thanks a lot, Cody.
Jason Jacobs (56:17):
Thanks again for joining us on My Climate Journey podcast. At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity. If you'd like to learn more about MCJ Collective, visit us at mcjcollective.com. And if you have a guest suggestion, let us know that via Twitter @mcjpod
Yin Lu (56:44):
For weekly climate op-eds jobs, community events, and investment announcements from our MCJ venture funds, be sure to subscribe to our newsletter on our website.
Jason Jacobs (56:53):
Thanks, and see you next episode.
