In this episode we will be speaking with Claire Johnson, a co-founder of SunEdison, which at its peak had a market capitalization of $10 Billion and more than 7,000 employees. Sun-Edison is largely attributed as the pioneer of the US solar industry. In this conversation we discuss the origin story of SunEdison, the ‘solar as a service’ and ‘pay as you use model’ which it pioneered, and some of Ms. Johnson’s key learnings during it all. Hope you enjoy our conversation! Topics covered:
1. What led Ms. Johnson to work in solar and get involved in co-founding Sun Edison
2. The process for convincing the first adopters of SunEdison solar systems (aka Whole Foods)
3. SunEdison had 50% of the whole country's regulatory affairs staff
4. Is now the time to start a solar company? 5. Professional piece of advice to give to younger self
00:06 Karan Takhar
Hello everyone. This is Karan Takhar, and welcome to the Zenergy podcast. Over the past decade, India has done an impressive job of integrating renewable energy into its energy mix. For this Fulbright Podcast series, I sought to investigate the enabling factors and potential of India's global leadership in renewable energy with a focus on solar this Fulbright series is broken down into Four Seasons. In this season, through conversations with leaders who have been instrumental in developing the renewable energy sector, we will also explore what these leaders believed the key challenges to be as this sector further develops. In this episode, we will be speaking with Claire Johnson, a co-founder of Sun Edison, which at its peak had a market capitalization of $10 billion and more than 7000 employees. Sun Edison is largely attributed as the pioneer of the US solar industry. In this conversation, we discussed the origin story of Sun Edison, the solar as a service and pay-as-you-use model which it pioneered, and some of Miss. Johnson's key learnings during it all. I hope you enjoyed our conversation. Claire, I really appreciate you taking the time to speak with me, and very excited for this interview and for my research. I was extremely happy as someone who grew up in Maryland and is a Maryland are at heart to learn that Sun Edison, which is largely considered as the Pioneer company of the US, Solar Space, was founded here in Maryland, and I just like to hear if you could please tell us like be sent if your involvement in the renewable energy industry today, what led you to want to work in solar, and how you initially got involved in Co-founding Sun Edison. Could you just provide a brief beat background, but those of us?
02:22 Claire Broido Johnson
That was a lot of questions, but I'm happy to answer and happy to be here. Thank you for inviting me. Me, so Why Maryland first? So I went to Business School was had worked at Enron prior to Business School. Had planned to go to Enron after Business School, but there was no Enron and go back to, so I actually wound. Up at constellation. Power source at the time that was based in. It's there here where I Live Today that I met my husband and, uh, here that I met Jigar Shah through a mutual friend. So Jigar was at BP Solar, and I was a consolation power source, and Jigar had this awesome idea for a power purchase agreement, which is you put solar on somebody's roof that You know that somebody staples or Whole Foods don't own the panels, somebody else who has the tax need does, and the staples or the Whole Foods buys the electricity from the solar panels on the roof. At the time, that was a really creative, unique idea because most people looked at us and said, why would I put 3000 holes in my roof and something that I don't even own? But it really, you know, helped expand the entire solar energy industry, and so why Maryland is simply because Jigar was based in Maryland. He was actually living in DC, working in. Frederick and Linthicum, and I was in Baltimore working consolation power source, and I said I will quit my job the day after you quit yours and that was November 2nd, 2003, and then we went from there to answer your question about why solar, so in the early 2000s you know you have to think back, the window was relatively new, solar was very new, and I knew I don't mean, you know, it's not a new technology. It's actually very old technology, but it was starting to get commercialized, and yet it was still very expensive. So, you know, one of the things that did start happening in the early 2000s is that our rates for continuing to go up, our electricity resources continued to go up, but panel prices were starting to go down, and there are a number of rebates and subsidies available, and so Sun Edison was, you know, at the right place at the right time with the right people and the right tools to make that successful. So you know, we were getting $4.50 a Watt rebates from the state of California when we were first starting our company and charging $9 a lot for our solar systems. You know, which is just unheard of in today, in 2021, but that was what, you know, help precipitate the growth of the energy of the solar energy industry along with accelerated depreciation and tax benefits. Uhm, so that's why we got involved in solar. We were kind of at the right place at the right time, within the really interesting and creative financial structure, and remind me of the third question.
05:12 Karan Takhar
No, I think you answered the questions. Those are the primary too. I appreciate that.
05:18 Claire Broido Johnson
05:19 Karan Takhar
Also, at the time, the concept of the PPA did not exist. Is that correct? And so, how were you able to convince the early customers to install solar systems? I think I read Whole Foods was like the first customer, so can you walk us through how that process? It should work To convince them to culminate thank you.
05:46 Claire Broido Johnson
Some of it's just brute force, right so Jigar and I knew some of the, you know, some of the employees at, at Whole Foods, and at the time, Whole Foods wasn't really buying renewable energy, I mean It was very early and you know it was talking to senior level managers at Whole Foods and talking to individual, you know, managers of individual buildings so the first solar system we installed was I think 122 KW DC in Edgewater, NJ and that was installed in 2004, and it did take a lot of time and effort to try to get Whole Foods, to be convinced that you know a company run by just a couple early 30s punks had an idea that was interesting enough and creative enough and you know, really they were getting solar panels put on their roof made by BP Solar that so there was, you know, that backing knowing that the panels were good we had contractors who were well-known contractors in the area make the installation of the panels and the big thing that needed, you know, that Whole Foods needed convincing on was, well, there were a couple of things one you know somebody going to put a bunch of holes in my roof, I don't have to pay for the solar panels I can just buy the electricity from the solar panels, but is the installation going to happen and be done well was one of the big things and then two, you know, how can I can be convinced that utility rates aren't going to increase, you know or, I mean, you know, our, I'm sorry, how can I be convinced that, you know, whatever the power purchase agreement price is, is going to be lower than whatever my utility rate in the future is for the next 20 years, and that's really hard to be able to prove but basically we said we're going to fix your utility rate for the solar power that you're buying that's on your roof so Whole Foods was our first but I actually think our first sign contract was in Staples and with both of those companies we really needed a champion at those companies, at Staples It was Mark Buckley and at Whole Foods, it was a guy named Lee Cain and they really were influencers at their companies had been at the company's for a very long time and said you know, it's worth trying this idea out worse worst off, it fails we have the panels on our roof, they're not going to come take the panels off, and we're going to get electricity at a lower rate than what we think is going to be the rates in the feet so that's how we started, but it took, I mean it was not and not an easy sell and it took a very long time.
08:20 Karan Takhar
So just to clarify with regards to the PPA model, was it that essentially, the staples or the Whole Foods would simply be buying the electricity, and then who would be the owner of the solar system?
08:39 Claire Broido Johnson
It was the investor, so Goldman Sachs or whoever our initial investor was that paid for the panels and the way that they got their economics back as you would say, OK, I'm going to put our my upfront capital down, and then I know I'm going to get a 50% makers accelerated depreciation. So I'm going to be able to appreciate the value of that Uhm, that commodity, that product over the next six years, and I'm going to get the tax additional federal tax credit from it, and then I'm going to get the future stream of cash flows from Whole Foods or staples and so it was that investor that had to do that economic analysis to say I believe that staples or Whole Foods is creditworthy for the next 20 years that they're gonna pay their bills and that you know that this program, the federal program is going to exist so that I can continue to get my accelerated depreciation in my tax.
09:29 Karan Takhar
Very interesting, so no other solar companies at the time were executing on these PPA agreements think I've read that at some point early on in the Sun Edison journey, version 32 of the contract, which maybe was this like an innovative financial PPA model, got leaked to the market and then other solar companies were able to like start incorporating this innovative financial contract Is that true or is that just something?
10:09 Claire Broido Johnson
I've never heard that story, but it's entirely possible it's true. I mean, I'm I am confident that our contract got leaked at some point, and I am more than confident that there were at least 32 versions cause I worked on a bunch of them, and I mean, it was a complicated contract, right? Because it's a 20-year contract at a fixed wait, but you have to think about renewable energy credits and accelerated depreciation and what's going to happen over the next 20 years and what do you talk doing with operations and maintenance and measurement and verification and did you know, do does the building have Wi-Fi what happens if the inverter shuts off because there's some sort of power you know, fault in the electrical grid who is going to turn the inverter back on I mean, there's a lot of, you know, pretty technical and financial details that needed to get worked out so did it get leaked? I'm sure I don't know if it was that person or not, but I mean, we were trying to sell to every Fortune 500 company in the country. I mean, one of the once I spent several years on that we didn't end up selling was IKEA in Emeryville, CA, and we never got to, you know, fruition with IKEA, and of course, now they have solar panels installed by one of our competitors, but It was not I mean, it was very early days, and people didn't really understand solar, and they didn't know that you know, even if it doesn't move Is going to produce energy and they didn't understand what it looked like or how it was going to really benefit Themis It's a long time ago and so there was a lot for the industry to learn and there was a lot for us to learn about how to sell to the.
11:36 Karan Takhar
Was it one of those situations where once you were able to convince the first few customers, then it just became significantly easier because we're able to?
11:45 Claire Broido Johnson
It became significantly easier through time, yeah, and certainly, I mean our business strategy was fined as staples or Whole Foods or Kohl's or Target that has hundreds of stores and then offer our PPE In as many states as possible, but a lot of what I worked on was portfolio diversification and expanding to new markets, right so I mean which new markets do you go into we started in California, in New Jersey at the time But, you know, one of the things about government risk and regulatory risk is it's quite binary you get a new governor, or you get some new administrator that doesn't like solar, and all of a sudden your rebate programs go on and you have to go to a new state, so you spent a lot of time trying to get us into Connecticut and into Massachusetts and into all the markets that everybody knows about now, but there was not a renewable energy credit market at the time, and so we had to create a, create the first solar renewable energy credit contracts so yeah, a lot of work.
12:37 Karan Takhar
Yeah. That's another like super interesting fact that I found while I was engaging in research for this discussion was that some medicine at one point in time had 50% of the whole country, some like solar regulatory affairs staff working for the company.
12:57 Claire Broido Johnson
Ah, that's probably true. 0506. That's probably right. Maybe 07. I mean, I don't. I. That's ancient history now never, but yeah, yeah, I mean, we had a big regulatory affairs staff because a lot of what we did was going entering and creating new markets. It was, it was not just entering new markets but creating new markets where there was a renewable portfolio standard with a solar carve out.
13:22 Karan Takhar
What would that process look like? You would reach out to the state Government, and then you would maybe point to some like regulatory like proposals that were in place in California, and you'd show, this is what we're doing here. We think this would help your state, or do you expand a little bit on how that would look like?
13:45 Claire Broido Johnson
I mean, of course, every state is different so it would be the Public Service Commission or the Department of Environmental Protection or, you know, a variety of different entities and yes, I mean, it was exactly that we'd have to go in and say, here's the solar Energy industry association It couldn't just be Sun Edison It was a coalition of people you know Tom Lydon from power like there's a lot of people we worked with over the years who were working together as a solar coalition to try to build a solar market and it was talking to lots of legislators and regulators about how to create a renewable portfolio standard, why a solar carve out was important how many jobs would be created how the Federal tax credit worked would there be a state tax credit explaining to them what a solar renewable energy credit is and how to create a market for that and certainly some states were easier to work with than others I mean it took years, years to create markets and it's you know still in process in some states you know 16 years later so you you know but as with finding customers once the 1st 5,10,20 States are doing something it's much easier to join on.
15:06 Karan Takhar
Yeah, I'm just trying to put myself in like your shoes and the shoes of the other Co-founders and, like, how were you guys very optimistic that it's gonna work out because I feel like it required a lot of legwork simply to even just get a few customers because you could go through the government, then you to go through the customer like what are you very optimistic or like what can you point to that like allowed you guys to just push through and establish these markets?
15:41 Claire Broido Johnson
Yeah, I get asked this question.
15:41 Karan Takhar
That make sense?
15:43 Claire Broido Johnson
Yeah, I got asked this question a lot I mean I think, sure, every entrepreneur has to, by default be optimistic, right I mean I today you know looking back from now that it's May of 2021 and I invest in early stage companies you know and lots of different industries, you have to be an optimist If you're an entrepreneur right, you're trying to create something new that doesn't whether it's a software as a service platform or technology or a laugh you know, whatever it is, you have to believe that somebody wants what you're creating so you have to be an optimist, but I also think it was having the right team at the right time with the right tools in our toolbox so I mean, I really feel very strongly and I talk about this a lot with people as you know, just gathering as many tools as you can in your toolbox so when an opportunity arises, you have the right tool to take advantage of it Uhm, and so yes, of course, it was hard and of course, there were many times when we thought we were going to run out of money and, you know, second mortgages on houses and, you know, all sorts of things and, you know, eating a lot of peanut butter and Jelly sandwiches and not paying ourselves for a bunch of years I mean, that's often what happens with entrepreneurs but, you know, there were enough positive things that were going on along the way we you know, started the company and then got our first round of project financing from Goldman Sachs in June of 2005 so I had, you know, the entire staff of Sun Edison at my wedding in August of 2005 because there were only four of us at the time and their wives and and and now my husband and you know, there were enough good points that we knew how to move forward.
17:27 Karan Takhar
So with Goldman already investing in solar Space at this time, or was Sun Edison the first company that they invested in?
17:36 Claire Broido Johnson
I believe we were the first, but certainly not the last. I mean, they're certainly investing in lots of things they were we were invested in by the Goldman Special Situations Group, which sounds like secret spy stuff but is basically, you know, trying to find tax advantages and Goldman, you know, charged us 17.65% for their project financing, which today is, you know, laughable but at the time it was very highly risky, and you know, you had to pull off a bunch of pieces all together so yeah, I mean It was a trip.
18:11 Karan Takhar
Do you remember, like, can you point to any times like early on where you just look back, and you're like, that's when we sort of made it, and things just got significantly easier after that point in time and like how long within that journey since like starting to that point would you say you could like you were more secure?
18:37 Claire Broido Johnson
I mean, signing those first contracts with Staples and Whole Foods Foods were huge, as was getting an initial investment, equity investment, you know, in our company, not in our projects by Jesse Fink at Mission Point Capital. He believed in the US, and he thought we had it there, there, and he was dumb. He was incredibly influential and a real, real reason why I'm doing what I'm doing now, which is supporting early-stage investors as they grow their companies. I mean, I think it's, you know, it's a tool in your toolbox, I mean, but it's having people around you who are really, Uhm, brilliant entrepreneurs that are giving you advice and making sure you're making good decisions.
19:21 Karan Takhar
And so I know there are four Co-founders, and as someone who's young and potentially like starting to go on this path of sustainable energy and thinking about maybe starting a company and thinking about whether like one can go on this journey alone or whether working with other people and like bringing on Co-founders Is the right way to go what are your thoughts?
19:55 Claire Broido Johnson
Yeah, yeah so I am a big fan of collaborating I, you know, I think everybody is a little bit different but I learn a lot by working with other people I really strongly believe that the way to make a good company is to have people with different viewpoints and I do strongly believe that you need someone who is an influencer and a visionary, and you also need someone who's an operator there's actually a really good book called Rocket Fuel by Gino Wickman and Mark Winters, which is about that concept that you know the combination of two people, one who is the influencer visionary person and one who's the operator execution person that makes things successful and Jigar is certainly a visionary and I am definitely an operator executor and I think that combination was really important you know, being a CEO or being a founder or really lonely, it can be very lonely, right you're responsible for everything, and there's a lot of times when people say no to you whether it's, you know you're trying to get money or you're trying to develop a partnership or whatever it is and so I'm a big fan of working with other people and I honestly can't think of a company that has been successful where it's just one person that's starting it up I do think you know being a CEO requires different skills at different stages of the company also, you know, I think you know it boils down to or you know, being a good manager, knowing how to delegate well a lot of CEOs who start their companies are terrible delegators they really, they don't trust anyone else they think they can do everything better than everyone else can, and that's simply not sustainable, right If your company gets bigger, you by default can't do all of the stuff you did before and so I find that CEOs often are terrible delegators and that they need to learn how to do that, or they need to step aside so I mean, we could have a very long conversation about this and there's tons of Business School case studies about it but I mean, if you're asking me, would I start a company on my own in the future, no, I would want a business partner hands down.
22:03 Karan Takhar
And I know we only a few minutes left. I have two final questions along the same lines. One of them is so if you could go back in time or give one piece of advice to you in the founding team initially at Sun Edison just now that you have a lot more experience. Is there anything specific that you would like to say to your younger self at times, period?
22:33 Claire Broido Johnson
Yeah, I love that question, so a couple of things one, I would have stuck up for myself personally; I'm a lot more. I think oftentimes the loudest voice is the one that gets whatever he or she wants, and the loudest voice isn't necessarily the right voice. It's just the loudest voice, so I think, UM, sticking up for myself, I would have done much better, and that the company could have done much better Uhm, that would be one, and then #2, I, you know, it's a hard way too, it's hard to say it, but I just think
you know, humility and listening is really, really important, and finding really good mentors who are not just mentors, but there are people who are supporting you along the way, which is what a mentor Is but also like a decision maker who can help make sure that you're making the right partnerships and developing the right relationships which I think we did pretty good job at Sun Edison, but I think listening more and you know communicating more with more people would have helped.
23:44 Karan Takhar
Thank you so much for that, and now just my final question. So obviously, the solar industry has changed a lot since some medicine was founded, and now I feel like I want to hear your thoughts on whether like you think it is a good time to start for a company like some medicine today in terms of like, is the macro environment favorable for solar companies today If someone were to get involved in that Space, do you think today is a good time for the solar industry and to start a company and why or why not?
24:24 Claire Broido Johnson
I don't think it's a good time, yeah, I don't think it's a good time to start a solar development company, and there are hundreds, thousands of them. I think there. I looked it up. There's at least 100 just in the state of Maryland. So it's becoming a commodity business, which is wonderful. That's exactly what I would have dreamed, you know, in 2003 when we were starting this company. I mean, solar has expanded beyond our wildest dreams, just fantastic, but I would not start a new solar developer now, today, because you know you're talking at talking about single cents per watt and who can get, you know who can convince so that's already having jurisdiction to give you more land and it's just it's this very complicated business, and it's a very, very competitive Business today, and it's just, it's simply a commodity and certainly there's a lot of people who are making money in it now so I wouldn't create another solar development business no, I would go work for one of the myriad of businesses that exist today.
25:21 Karan Takhar
Are there any like is there any space to create the company in the solar industry more generally like, not necessarily as a solar developer, but maybe as a company that serves the industry, and if so, like what would your thoughts be on which area?
25:38 Claire Broido Johnson
Sure. I mean, Sky's the limit, right? I mean, there's always new technology to be developed. I mean, the panels that we use today are really not dramatically different from the panels we used 30,50 years ago. I mean they've obviously got more efficient and they've got much cheaper, but the base technology is really pretty similar for the, you know for a very long time, but there's tons of companies that are working on inverters, and making inverters more efficient there's grid interoperability tools now that are really interesting there's working the inner workings between batteries and solar and microgrids and you know, your electric vehicle charging your solar panels and vice versa, and the interaction between our utilities and microgrids, there's a lot, you know electric vehicle bus, you know buses, there's so many things that are going on there I think you know, solar panels in water is really interesting, right and how you're getting, I mean there's just so many really interesting things and then the services that provide, you know, that are providing things to the solar industry, project finance tools that make project financing easier, you know, in different platforms, I mean skies want the solar industry is here and it's growing and it's going to continue to grow and there's lots of exciting things going on.
26:56 Karan Takhar
Thank you so much for your time, Claire, really appreciate it. I hope you enjoyed that episode, and do check out the show notes. For more information on my guest, see you next time.
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