Scaling Renewable Solutions: An Interview with King Energy
King Energy: Scaling Renewable Solutions
In the dynamic world of renewable energy, King Energy stands out as a trailblazer in the multi-tenant commercial and industrial solar development sector. King Energy effectively increases solar energy production by utilizing the unused roof space on multi-tenant and industrial buildings, optimizing energy generation without requiring additional land. Their mission is to transform these underutilized rooftops into solar energy hubs, generating substantial environmental and financial benefits. We sat down with John Witchel, CEO of King Energy, and Mike Pundmann, VP of Financial Products, to delve into their innovative solutions and the future of renewable energy.
The Vision Behind King Energy
King Energy wasn’t John Witchel’s first foray into the renewables space. "I got involved in renewables back in 2014 when my startup was acquired by SolarCity, at that time the leader in renewables," Witchel shared. “We were brought in to build the fintech platform for SolarCity. We spent the next three years developing all the software required to manage the three billion dollars worth of assets that SolarCity developed - that's about a quarter million installations - and our software was built to do all the loan, lease, and PPA servicing for those assets.”
During this period, Witchel gained valuable insights that would later influence his next venture. “I was flying into LAX, looking out the window, and saw all these big, flat, beautiful roofs and thought to myself why, in this part of the country, (which is a fairly progressive part of the country) are all these rooftops not covered in solar? The answer was that they were all multi-tenant buildings."
This observation highlighted a critical challenge - and opportunity - in the renewable energy sector: the split incentive problem, which occurs in multi-tenant buildings where the electricity bill is paid by the tenant. In these buildings, the landlord has no incentive to lower the electricity cost of the tenants, and the tenants have no incentive to build solar on a building they don’t own. So no one builds solar on these buildings.
Bridging the Split Incentive Gap
King Energy's solution to this problem is both simple and effective: third-party ownership. By taking on the role of builder, owner, and operator of solar systems, King Energy effectively shares the benefits between landlords and tenants. It's a win for all parties: property owners get a new source of long-term rental income and tenants save money on their electricity bills. This is all managed with the industry’s leading multi-tenant energy billing and payment software.
“There are all these moving parts,” Witchel explains, “ landlords need to have the rent paid, and tenants need a simple invoice showing their reduced energy costs. You have tenants that are onboarding and offboarding all the time. You start dealing with thousands of tenants across hundreds of properties. The result is this impossible-to-deal-with complexity by spreadsheets." The software developed by King Energy is pivotal to their operations, handling everything from energy optimization and billing to tenant onboarding and offboarding. "You can't achieve scale without great software," Witchel noted. "Our software is designed to manage this complexity efficiently."
When a Fintech CTO Becomes a Renewable Energy CEO
"We are a tech-enabled renewables company," Witchel stated.
What sets King Energy apart is their comprehensive approach; they are unique in developing both advanced software and renewable energy projects, whereas other companies typically focus on one or the other. This dual focus on technology and renewables places King Energy in a unique position within the market. Their software not only addresses the logistical challenges of multi-tenant solar installations but also ensures the long-term sustainability and viability of these projects. By optimizing energy use and streamlining administrative processes, King Energy can deliver significant cost savings and environmental benefits.
When we asked what makes a renewables company “tech-enabled”, he said: “Most solar is construction. You build the installation, plug it into an inverter, do annual panel washing and some lightweight monitoring in case of an outage, and that’s that. But if you want to optimize the value of that solar accounting for how different tenants consume energy, coordinating battery charging and discharging strategies, and handling all the intricacies of billing tens of thousands of tenants across hundreds of utilities, accounting for over a thousand tariffs that are constantly changing, then you need some pretty serious enterprise software. That’s what makes King Energy “tech-enabled”.
"When we look at a potential project, we perform a detailed financial analysis to ensure that there's enough value created to make the projects viable for us and our financial partners," Pundmann added. This rigorous approach ensures that every project is financially sound, providing a stable return on investment while contributing to a greener future.
One of the significant hurdles in the renewable energy sector is its inherently regional nature. “Electricity in the United States isn't one thing; it's a regional business, almost a local business," Witchel explained. "How we generate, distribute, and sell energy in New York City is very different from how we do it in rural Colorado."
This regional variation, coupled with the intricacies of solar energy and battery storage, necessitates robust software solutions. “There is no one-stop-shop solution for selling electricity in the United States,” says Witchel, “and when you introduce the complexity of solar that problem becomes explosive in its complexity. You really can't enter the market and achieve scale without software." King Energy’s software helps them navigate the diverse regulatory environments and market conditions across different states, ensuring compliance and optimal performance everywhere they operate.
Balancing Financial Risk Vs. Opportunities
Sustainability progress happens when it makes financial sense. Renewables, at their core, are a finance business," Witchel noted. "Transforming the entire energy landscape from fossil fuel burning infrastructure to a renewable photovoltaic and battery-based infrastructure requires trillions of dollars."
This financial challenge demands rigorous planning and execution. "The real challenge is ensuring these investments make sense not just for a few years but over 20 years. It’s not enough to show potential profitability on a spreadsheet; the projects must actually be profitable long-term," Witchel said. "A few bad projects, worth hundreds of millions, can scare away investors from the entire industry." King Energy’s approach involves a detailed financial analysis to ensure each project meets stringent profitability criteria while delivering substantial environmental benefits.
King Energy’s projects appeal to investors by demonstrating how renewable energy can be a profitable venture. Making a meaningful impact on climate change is a core value at King Energy, and to accomplish that aim they focus on ensuring projects attract the necessary capital.
Partnering with Perl Street for better Financial Forecasting
Accurate financial forecasting in the renewable energy market involves juggling numerous variables and assumptions, such as energy market prices and regulatory policies. King Energy's approach is meticulous and data-driven. "Managing hundreds of different financial models with hundreds of assumptions is a complex task," Pundmann noted. "We have to track these assumptions separately and update them manually, which introduces opportunities for human error. While we've managed this process fairly well so far, we are reaching a point where our current methods are becoming inefficient. We need to implement advanced software solutions to handle this complexity.”
To mitigate these challenges, King Energy has partnered with Perl Street, leveraging its software capabilities to streamline financial forecasting and planning. "Perl Street’s software lets us maintain individual project-level Excel functionality while scaling our operations in a way we couldn't before," Pundmann added.
King Energy is excited about its partnership with Perl Street. "What really set Perl Street apart for me is that it's built around Excel, which is the language of finance,” Pundmann explained. “We always need to be able to send an Excel file via email that has all the critical financial information. Perl Street was designed with this in mind. It allows us to download a comprehensive financial model in Excel and share it easily with partners. This means we don’t have to operate within a black box.”
Witchel echoed this sentiment, highlighting the comprehensive nature of Perl Street's solutions. "One of the issues with financial tools is that finance is a deeply interconnected discipline. It’s challenging to design modular financial tools that can solve one problem without solving all the problems of the domain. If you offer a product for tax equity analysis, you’ll need audit capabilities, which of course feeds into a corporate audit, historical reporting, and then scenario planning, which requires versioning, which requires customization, and so on. Solving only part of the problem is never enough. Perl Street was the first organization I saw that had all the pieces: tax domain expertise, modeling expertise, the right software architecture, and excellent software developers. They understood the problem comprehensively and offered a complete solution, making them invaluable in this market."
Future Projects
Looking ahead, King Energy is hoping to expand well beyond its current markets and to act as a key leader in taking distributed third-party ownership (TPO) commercial and industrial (C&I) solar energy mainstream.
“There’s an old saying that the first guy over the wall gets the bloodiest. If you look back at that first wave of solar, around the 2008-2009 timeframe, when solar panels began to produce electricity at a cost comparable to coal, those guys really took the industry from a DIY labor of love and made it something financially viable. The hits those guys took to get that far is incredible, but they did it and because they did it solar energy is now widely accepted and considered a good financial decision. It makes sense for a homeowner. It makes sense for a business. It makes sense for a county, a state, and the country. My hope for King Energy is that we’re remembered as one of the leaders of the second wave - that we help scale the industry from being just financially viable to becoming a major, widespread solution. I want solar panels to be so prominent that any building without them looks odd, and I would like that to be in no small part because of King Energy.”
Driving Sustainability and Financial Viability: A Look at King Energy's Impact
King Energy's innovative approach to solving the split incentive problem in multi-tenant solar installations is transforming the renewable energy landscape. By leveraging cutting-edge software, strategic partnerships, and maintaining a steadfast commitment to ESG principles, they are driving sustainability and financial viability in tandem.
Their journey from inception to becoming a leader in the renewables market underscores the importance of combining technology with a clear mission. As they continue to expand and tackle new challenges, partnerships like the one with Perl Street will play a crucial role in their success.
Through meticulous planning, robust software solutions, and a strong commitment to its mission, King Energy is poised to make a significant impact in the renewable energy sector. Their work not only benefits property owners and tenants but also contributes to a more sustainable future for all.