Today, our friends at Solar Kismet conclude their series on CitizenRE. The first two parts of this series are available here and here.

The most common response from CitizenRE supporters¹ is that since no money changes hands, no harm is done, even if CitizenRE doesn’t deliver any or is delayed in delivering their promised solar systems or manufacturing plants. “Who cares if CitizenRE fails? At least they tried.”

This is a really limited point of view… At least some of the misgivings about CitizenRE are their isolated, and often naive, approach to transforming the industry. There are a string of stakeholders involved in the development of the evolving solar industry. Other solar businesses, non-profit organizations, investors, the government, and policy makers played an important part in the successful growth of the solar industry to date, and into the future.

CitizenRE could be an amazing success or a total failure. There’s not a lot of information to judge them on, other than what they tell us. I would define their short-term success (the next two years) as building a manufacturing plant and setting up 1,000 or more rental systems. If they can do these two things, which are astronomically lower than their own projections, they will have accomplished something significant. Based on a) their current progress, b) their lack of focus, and c) the high number of “moon shots,” I personally think the delays will continue and the actual accomplishments will be limited.

However, it might be constructive to look at the question of CitizenRE’s impact on the various stakeholders. How does their success or failure affect everyone? In the interest of space, I’ve limited my discussion to four main stakeholders:

Consumers: This is the first stakeholder everyone thinks about, and includes both commercial and residential sectors². Since part 2 was published, I’ve struggled with the passion of the debate on both sides, trying to understand why this company in particular has resulted in such a strong reaction. I think the existing industry is most sensitive to disaffecting residential consumers, and CitizenRE’s apparently hollow marketing effort targeted them first and foremost (September 2007 installation timelines have now been extended into 2008 and beyond). The proverbial black-eye looms potentially large.

No money has changed hands, but goodwill has…CitizenRE’s failure isn’t just one less installation to any one consumer. It is their (and their friends’ and families’) future interest in supporting the technology or additional federal and state policies. CitizenRE’s failure will also create stereotypes in a lot of minds about the viability of solar who never “signed up,” even as the industry changes (You wouldn’t believe the number of people who still cite the solar hot water debacles of the 1980’s.). CitizenRE’s success provides obvious consumer benefits, insurance against electricity price increases, and potentially on a scale and in a sector no one thought was possible.

Interestingly, I don’t see everyone everywhere adopting this rental model, though. Why? Risk and reward. As electricity prices increase and solar prices decrease, you get a greater return from owning a system. Owning a system is an investment rather than an insurance policy.

Installers: Installers represent the market segment who could see the most direct financial repercussions from CitizenRE’s failure by putting their potential customers in a holding pattern. Most of CitizenRE customers may never have purchased their own solar system in the next 6 months…many over the next 2 years. But if 100,000 people “sign-up,” 100,000 “wait and see,” and 10% of those would have considered purchasing a system over the next two years. Thus, 20,000 potential sales were turned away. CitizenRE has now acknowledged this potential and when customers sign up, they are given a greater amount of disclosure about the possibility of delivery delays; it remains to be seen how this issue will play out.

CitizenRE’s success will put some people out of business, but frankly, that’s capitalism. It could also represent a new set of opportunities for existing or new installer businesses. An important part of moving forward is the training and use of certified installers, which CitizenRE has not appeared to immediately address (which is not surprising given all that’s on their plate)³ .

Investors: Investors themselves are probably the market segment that I have the least bit of personal concern over…They need to perform due diligence in determining where to invest their money. But a colossal failure, by CitizenRE or any other major solar endeavor, could create a chill in the ability of future technology and ventures to raise similar capital. Renewable energy is the current investor darling. Everyone is falling over themselves to push money into CleanTech investments, reminiscent of the dot com frenzy. Will an over-exuberance over poorly-thought out companies cause a similar industry correction? CitizenRE’s apparent colossal nature, and the results it does or doesn’t accomplish, makes its current and future peers highly scrutinized targets.

Policy Makers: Solar is a subsidy-driven industry. So is wind energy, coal, petroleum, and natural gas. It is politically much easier to offer carrots than it is to take them away. I guarantee that policy makers are starting to hear about CitizenRE, but their degree of understanding is often limited. “If this company can do free solar, why do you need this tax credit? Rebates? Portfolio standard?” “Why should we start or extend our incentives if they all go to CitizenRE?” CitizenRE needs these incentives as much as anyone else. They aren’t exempt from solar economics, even with their purported vertical integration cost savings. The perception of market readiness can be easily muddied, and their model isn’t terribly repeatable, given the billions of dollars at hand that are needed to get started.

There is the distinct possibility that this flurry of excitement is all for naught. CitizenRE may fade from sight this year, or in five years, and do absolutely nothing. I’m really suspicious about the solvency of their business plan and their ability to execute it. I really don’t appreciate that they’ve created a hollow frenzy in retail consumers before their supply chain and installation structure had any framework. I think they need to focus on doing one or two things well, rather than talking about everything. Or they could prove me entirely wrong…

No matter your opinion, they aren’t going away, and we’ve reached something of a debate impasse. Consumers can read the opinions, largely based on conjecture and one-sided information, and make up their own minds. But until CitizenRE takes concrete and public steps toward their goals or releases verifiable information, not a lot of additional constructive debate can occur (if any of it has thus far been constructive in the first place).

Notes:

1. Interestingly, the most passionate and often argumentative stances don’t appear to come from CitizenRE itself, but from EcoPreneurs and seemingly average consumers. CitizenRE itself has made belated efforts to acknowledge the significance of the existing industry and their desire to respect and integrate within it. However, CitizenRE’s involvement in major solar organizations has been non-existent, even if they are “members” (having registered as the “Citizens Electric Corporation”).
2. If CitizenRE is a business interested in profitability, and that low-hanging fruit represents the best opportunity for stable profits and capturing the best market before a competitor, their major focus on the residential retrofit market is the least profitable approach. CitizenRE is essentially leasing roof space, which is not a particularly limited commodity. Why deal with 100 consumers, contracts, and installations when you can deal with one? Why not work to maximize your most profitable sectors before your competitors do? The most obvious answer is the ready political support that would come from involving average consumers in changing state or national policies. But with bills to pay, can a fledgling company afford this route?
3. The North American Board of Certified Energy Practioners (www.nabcep.org) is a highly recommended pathway for certification.