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California’s NEM 3.0 and the Future of Batteries with Michelle Spina, Sales Education Manager at Sol



Welcome to another episode of The Solar Podcast. Today Dave is talking with Michelle Spina sales education manager at SolarEdge. Join us for a timely discussion about changes to California's net metering program, NEM 3.0, the Future of Battery Solutions, and how SolarEdge's Rate Saver program is making battery installations more cost effective. It all starts now on The Solar Podcast.


Dave Anderson (00:34):

Well, welcome back to The Solar Podcast. This is Dave Anderson. I'm your host. I'm thrilled to be here with Michelle Sina today. She's a 13 year veteran in renewable, specifically in solar. We're definitely going to dive into that. Her most recent role is at SolarEdge where she spent the last six years as a trainer. Obviously is an advocate for the product as well, but I think her experience as a trainer is going to be fantastic for us to dive into, particularly because of many of the things that are going on in the solar industry, NEM 3.0, batteries, these sorts of things becoming increasingly important. Michelle, I'm sure I missed a lot of things in terms of your biography, so I'd love if you wouldn't mind filling our listeners in a little bit more about who you are, Michelle.


Michelle Spina (01:09):

Sure, yeah, so I'm the sales education manager here on the North America side for SolarEdge. In the solar industry in the last 13 years I've been on the sales and training side in large residential companies. So that is my background. I'm based in California, but I go all around the country doing trainings with all states. And Dave, you brought up NEM 3.0 is a hot topic for sure right now, being that we are, we're right on the neck of NEM 3.0.


Dave Anderson (01:37):

Yeah, we're actually literally at the precipice and the changing point from NEM 2.0 To NEM 3.0 as we're recording this. And so we're going to try to get it out as quick as possible because obviously our listeners are going to really want to hear what you have to say because of obviously your experience that you have with SolarEdge and SolarEdge is critical role that it's going to be playing in NEM 3.0, particularly for California Residential Solar. Yeah. So maybe we should just dive right into that. So what do you think the main talking points, our listeners are solar people generally speaking, but if you were to try to categorize or explain NEM 3.0 to a lay person, how would you describe it?


Michelle Spina (02:11):

Yeah, well, so I think there's a couple of things as a part of NEM 3.0 that we need to look out for, but export rates is the thing that is the big talking point. So essentially the utility company has decided that they are going to give homeowners about 75% less in value for the energy that they send back to the grid than what they're actually paying. So if we're talking about homeowners paying 50 cents a kilowatt hour in California, it's a very expensive energy. They're only getting back 5 cents if they are exporting to the grid. So in a NEM 3.0 Environment, what we really need to focus on is not exporting or just exporting at really advantageous times. So that's kind of the shift that we're going to see.


Dave Anderson (02:56):

Yeah, there's a term that's been thrown around by some of the technical folks that I've worked with is this concept of net export rate. So what you're really trying to do is minimize the amount of power that you sell back to the grid. And so the calculation of how much money you're going to save has changed quite a bit as a result of NEM 3.0. So maybe if you wouldn't mind not taking anything for granted, we call it NEM 3.0. It's actually not NEM 3.0, but it's because it's the predecessor to the NEM 2.0 program. So for our listeners, if you wouldn't mind just giving an explanation of how NEM 2.0 worked and then obviously the key difference is this export rate, but maybe diving a little bit more into NEM 2.0 will help to provide additional clarity.

Michelle Spina (03:38):

So NEM 2.0, it's a, it's about net metering. Net metering. When you go solar, you essentially are going to send energy back to the grid, obtain credits from that utility company, and then use those credits during the nighttime hours to offset. Essentially, you're not producing at night, so you're going to offset that energy with the credits that you've built during the day. In NEM 2.0, you got a one-to-one ratio. So if you were sending it back for 30 cents, you were getting back 30 cents in credit, and it allowed us in California to offset the most expensive times of day for our energy and so advantageous in terms of savings.

But with NEM 3.0, because you're not getting that same one for one ratio, you're getting less for that energy. You want to instead store that energy so that you can discharge at the really high rates of electricity, use your stored energy instead. And so I like to think about we are all going to have batteries on our house for the most part in a NEM 3.0 environment, but we're going to be using that battery really as a bucket. It's like a bucket to store that energy during the day and then use it at night to offset those peak rates.


Dave Anderson (05:04):

It's an interesting conversation to have here because we've done a lot of analysis. I've talked to a lot of people that have done pretty extensive analysis in terms of the financial return difference and the financial profile that's going to be different from NEM 3.0 versus NEM 2.0. And you're absolutely right. The idea with batteries is that you get a store power that's generated from the solar and when the solar's not generating, but your home is still producing, you now get to draw electricity, the kilowatt hours you produce with your solar from your battery rather than purchasing it from the more expensive grid.

But it also increases the cost of installing a system and it increases the complexity of a system as well. And so you have to now take into account these added costs relative to the benefits. And in a NEM 2.0 scenario, homeowners would, there wasn't necessarily a financial return for doing batteries, maybe a small one because there were price arbitrage opportunities, but not nearly as significant as it is today. So I'm curious, when you're doing your training, how have you been explaining the financial benefits of batteries relative to not having the batteries and have you tried to quantify that?


Michelle Spina (06:11):

Yeah, so we're doing a lot of modeling. We have a tool called Designer, and on the backend we have uploaded and imported all of the rate schedules for PG&E, SCE, SDG&E. Everyone that's involved with NEM 3.0 done several analysis based on different customer profiles. And you're right, I think in the solar industry forever, a lot of us, even in California, we're selling against batteries and now we are in a market where we have to have a battery. But the really interesting mindset shift in NEM 3.0 is that you're going to get a better return on investment with a battery than if you are going solar only in a lot of cases what we're finding, because what you want to do in this environment is you want to be able to take advantage of those export times that are beneficial. So what I didn't mention earlier was that there's two hours in September that you're actually going to get over $3 a kilowatt hour.

So you're paying 40 to 50 cents, you're getting $3 back, so it's a bounty. And when you have a battery solution in NEM 3.0, this allows you to leverage that situation where you can discharge your battery during these times where you could actually make money. And it's really just a different energy management than what we're used to in terms of how we use our batteries in a standard NEM 2.0 environment.

And so what SolarEdge is doing is we actually offer three different scenarios. We have a full home backup scenario, we have a essential loads backup scenario, and then we have what's called a rate saver solution, which is a battery, but as I mentioned earlier, kind of using it as a bucket to store energy but doesn't have backup capabilities. So it's a less expensive option, it's a less expensive installation. And that's really for us, we see it as the new solar only solution with a better return on investment for homeowners. So to answer your question, we're seeing with our modeling seven to eight year payback on cash deals usually and 15 to 30% monthly savings if you're doing like a loan PPA scenario with that rate saver solution.


Dave Anderson (08:35):

Yeah, I'd love, if you wouldn't mind just going into each of those three different options and explaining who the ideal customer customer might be for each of those different configurations.


Michelle Spina (08:46):

Well, Dave, how's your power in terms of stability at your house?


Dave Anderson (08:51):

Well, I'm recording this from Salt Lake, so we have fairly stable power.


Michelle Spina (08:55):

Oh, so yeah, that's true.


Dave Anderson (08:56):

But I'm a solar battery guy, so I also have the backup situation, so I'm all in on solar.


Michelle Spina (09:03):

Well, yeah. And Utah is actually a huge battery state. It's one of our biggest battery states for sure.


Dave Anderson (09:08):

Mm-hmm. For probably different reasons. But yeah.


Michelle Spina (09:10):

Yeah I go around the whole country and states pretty much laugh at California still because they're saying, "Wait, you have the most expensive energy and they turn off your power if you have high winds or risk of wildfires?" We have a lot of outages here in California. And so to go back to those three different scenarios, a customer who needs power in an outage because maybe they work from home or they have critical needs in their house where they need power all of the time, or they're in situations where they have extended outages. Even last year I had a three day outage just it's a commonplace thing. It's crazy. Full home backup, multiple batteries, that's one solution that would allow that homeowner to back up their entire house to say, "I want the ability to power anything and everything in my house if a power goes out."

Then we have essential loads backup. That's one, two batteries. That's allowing the homeowners to say, "I want eight to 10 critical things to turn on in my house during an extended outage." Of course, it's like the refrigerator, lights, computer, wifi, garage door maybe, portable AC heater, that type of thing, smaller loads and the ability to just have essential loads up. That rate saver solution is for the homeowner who doesn't have blackouts. So that homeowner that says, "I don't really need power in an outage because I don't have outages very often, but I want the best value for my solar system. I want the best return on investment for my solar system." That rate saver solution will have a battery on it, but it's not going to be backup capable.


Dave Anderson (11:06):

And from a technical perspective, can you explain why that would be the case?


Michelle Spina (11:10):

Yeah, let's nerd out. So backup interface. So a backup interface is what disconnects the home from the grid, an auto transfer switch. So easiest thing to know is if you have a backup battery solution, you'll have a battery, an inverter, and this backup interface that allows you to disconnect from the grid. If you take out that backup interface from that equation, then that says, "I'm not going to disconnect my home from the grid."

And so you're not going to have to do a critical loads panel, you're not going to have to do the backup interface and it's going to essentially that battery is now just a heavy box on the wall that's serving as a bucket to store energy that you can use at night. So it's allowing you to really use the battery, kind of how we were using the grid in NEM 2.0. It was like we were sending the energy back and we were using at night, we're doing that, but we're becoming our own power plant and that battery's going to allow us to do that. So technical backup interface is gone. Critical loads panel is gone. You don't have to think about the critical loads anymore at all. It's just this is a battery that we're going to use for a storage.


Dave Anderson (12:28):

Yeah. But because you don't have that additional panel, that transfer switch that disconnects you from the grid, essentially the solar and the battery have to be turned off, easiest explanation, have to be turned off when there's a power outage. And that's by requirements of the net energy metering agreements. Frankly, you can't have a power generation station generating power when the grid is disconnected or turned off. You can't be back if you need the grid.


Michelle Spina (12:56):

Yep.


Dave Anderson (12:56):

Awesome. And so you said one other term I want to hit on. You said these homes have to have battery. So what sorts of attachment rates are you expecting in California specifically as a result of NEM 3.0?


Michelle Spina (13:11):

That's a good question. I want to reiterate, they don't technically have to have a battery. The solar will still work without a battery. It's just going to be a better return on investment with a battery because you're going to be storing that energy and leveraging those good times of year where you want to export. So attach rates, we are looking at right now 10% in NEM 2.0, 10 to 15% usually like in NEM 2.0, some of our customers are selling much higher than that, 30 to 40%. But with NEM 3.0 we're thinking, and it's probably going to take some ramp up time, but 60 to 70% more so. We can look at Hawaii. So Hawaii is 40% solar right now about 90% of those homes that are going solar have a battery. So 90%. So I think that pretty conservatively we're going to see 60 to 70% pretty soon in California.


Dave Anderson (14:19):

A lot of the battery requirements there are mandated though by the utility. So you don't quite have the same flexibility in the Hawaii market to go solar only that you do in California and some of the rate saver solution, that likely would not be an available option in Hawaii would it?


Michelle Spina (14:41):

We're not looking at it for Hawaii right now. We are looking at it for other states. So there's Indiana and the Carolinas are thinking about doing the same situation. So we are seeing this probably coming to be more prevalent in other states coming up.


Dave Anderson (14:57):

I think when you have a net energy metering program where you disconnect the export and the import rates, in other words, they're not the same. Those are the instances where a rate saver program or a rate saver solution are going to make the most medicine. I actually live in Salt Lake area I should say. And here in Utah our export rates and our import rates are different. So that's a market probably where the rate saver solution offered by SolarEdge is one that would probably make a lot of sense.

Where we also have reasonable grid stability, not a lot of power outages. And so the battery backup is important for many, however, and generally I would say for most people, something that they would at a minimum want to consider for the not huge incremental cost difference to add that transfer switch on at the installation. Awesome. And in terms of California, so you're talking about eventually getting to a 60 or 70%, where did the word eventually come from? Why do you think it's not going to just be overnight 60 to 70%? It might sound like a loaded question because I certainly have some follow ups based on what you say.


Michelle Spina (16:05):

Well, I think in the beginning I mentioned that a lot of us have been selling against batteries, and I don't put myself in that equation. When I was selling, I sold batteries quite a bit, but we see all sorts of installers, companies that haven't really dipped their feet into batteries yet. And so that will take a transition, that will take a bit of time to get there. We're helping them get there, we're trying to certify as many people as we can. We're getting them on that wagon, but it does take some infrastructure to implement. And so I think that there's just going to...

And by the way, one other thing is this NEM 2.0 thing when NEM 3.0 was announced, between that time and today, we pretty much had what's called what we've been calling the solar gold rush. People were selling more than they ever have because people wanted to get into NEM 2.0, be grandfathered in. And so a lot of what we're seeing right now is just a really big backlog of installations that we're hearing is going to take a lot of our customers three to four months to install and get through the pipeline. And so I think that there will be a focus on those installations and then there's going to be a really big jump over to batteries.


Dave Anderson (17:37):

Yeah, no, certainly from an installations perspective, there's going to be a delay in terms of, because you're right, there's a big backlog of customers that tried to rush to get in to NEM 2.0 as opposed to NEM 3.0 because the benefits are so much more significantly higher. But just in terms of the sales attached rates, I'm curious in your own internal modeling, if you wouldn't mind sharing with us or if you have it tip of tongue, what the benefit from a financial perspective is on a rate saver program versus a PB only for the average customer in California?


Michelle Spina (18:15):

Yeah, so we're seeing a long return on investment on solar only, so 15 to 18 years on a solar only solution. And of course that depends on the finance option that you're offering and how big the system size is, everything like that. There's those caveats. But usually when we're talking to homeowners, they want to talk about savings. And if we're talking about savings at all in California, now it's going to be with a battery solution, which is the exact opposite, which I think you brought up, the exact opposite of what salespeople and I train salespeople all day, so I've heard this kind of shock in the system where they're like, "There's no way homeowners can save money with a battery." And so that is a mindset shift that they're having to really adjust to.


Dave Anderson (19:14):

And the guidance was, and again, you can't really talk about NEM 2.0 and NEM 3.0 without being a little bit technical in the details, but the guidance that we always saw was, and the big opponents of NEM 3.0 were the people that were signaling that there was going to be a huge slowdown to the most stable and strongest solar market in the country, which was the California market almost overnight because of how extreme the difference between NEM 2.0 and NEM 3.0 was.

And the other thing, and this is one where I'm going to love to get SolarEdge's perspective on this is one of the major arguments against it was is in an industry that was already struggling as a result of the pandemic and other things struggling with supply chain, how do you now introduce a shock in a system where all of a sudden we have to source an order of magnitude more batteries in a market that isn't used to selling batteries, frankly. Is that something that SolarEdge is concerned about in any way, shape or form in terms of just being able to source materials and to be able to meet demand and to be able to grow with the market? And how do you guys think about that?


Michelle Spina (20:24):

Yeah, that's a great question mean, so SolarEdge is a global company. We actually acquired a company Kokam about four years ago to manufacture our battery, they're a top five global battery leader. We have a two gigawatt hour manufacturing plant for our battery and we are focused solely on the residential battery right now. So we're not competing with car batteries, et cetera, in our same facility. We are well equipped to handle the supply. Currently right now we've forecasted it for California specifically because we knew this was coming. So we are not seeing supply challenges on the battery side of things. There's just in industry wide and having to deal with competing with car batteries and scarcity of resources all the time. But I think that now is, there's a point where there's multiple chemistries in the market right now for batteries, things like that. So we're seeing more resource sources come out a bit. And I think if SolarEdge, at least I know we don't have a supply challenge on this battery for a NEM 3.0.


Dave Anderson (21:33):

So anyone that attended RE+, which is the largest industry show for our industry, obviously they would've seen , a lot of talk around batteries probably partly because of this NEM 2.0, NEM 3.0 conversation. And if you walk the floor, you saw huge ranges in pricing. Where do you see the battery pricing going? I think solar, the one thing that has to be said about NEM 3.0 is one of the big problems with the California market, as strong as it was, it's the most expensive solar in the world.

If you want to get solar installed in California, it's three to four times more expensive in California than if you were to get solar installed in Australia where they enjoy 30 to 40% market penetration relative to the United States that has something like three or a little bit above 3% market penetration. So battery costs are an issue and if you compare the battery costs on a per kilowatt hour basis in the solar industry relative to the auto industry, it's significantly higher in the solar industry. Where do you see battery prices going and over what period of time do you see or hopefully see the decline of the cost of the batteries?


Michelle Spina (22:41):

I think the challenge is exactly what we mentioned before about demand. Demand is not getting any lower. If anything, it's rapidly increasing. And so of course we know the supply and demand equation. And typically what that means is price is not going down substantially and quickly. Because demand is much higher right now we're not seeing the price of batteries go down as dramatically as people would like. I mean that's the biggest question we get all the time is when is the price of batteries going to go down?

So that's why we built these things like Rate Saver so that we can help with the cost of battery installations in general. But I do think that what we're going to see a lot, and I know Utah already has one of these too, is all these incentives. So I think we're going to see a lot more incentives come out, especially with demand response incentives where the utility company can pull from that homeowner's battery during peak times of day and we'll actually give them an incentive for that. Usually it's upfront incentive, we're going to see a lot more of those because what's interesting when utilities kind of go into this type of situation like NEM 3.0 where it's not advantageous to export, they're promoting batteries into the market, the next step is really that they can leverage those batteries and pull from them with demand response.


Dave Anderson (24:06):

Yeah. And do all of the solutions that SolarEdge offer, are they going to be capable of being able to monetize, take advantage of those demand response charges and the guidance was, and again-


Michelle Spina (24:20):

Yeah, so every single-


Dave Anderson (24:21):

You can't really talk about-


Michelle Spina (24:22):

...time a demand response incentive comes out-


Dave Anderson (24:24):

... without being a little bit technical in the details-


Michelle Spina (24:26):

... the actual battery manufacturer has to apply for it-


Dave Anderson (24:27):

... but the guidance that we always saw was-


Michelle Spina (24:28):

... so they have to go in and they have to apply to be on the list. So we have a full department focused-


Dave Anderson (24:34):

... and the big opponents of NEM 3.0 were the people that were signaling that there was going to be a huge slow down for the most stable and strongest solar market in the country which was the California market-


Michelle Spina (24:42):

... on getting incentives. So I am really happy that we're on all of the major incentives right now for demand response. One of the big benefits of our battery too is it has a higher continuous power so a lot of times that-


Dave Anderson (24:53):

... almost over night because of how extreme the difference That the other thing, and this is one where I'm going to love to get SolarEdge's perspective on this-


Michelle Spina (24:53):

... works to our advantage when it comes to these demand response incentives-


Dave Anderson (24:55):

... the other one of the major arguments against it was is in an industry that was already-


Michelle Spina (24:58):

... So yeah, we are on the biggest one right now-


Dave Anderson (24:58):

... struggling as result of the pandemic and other things struggling with the supply chain-


Michelle Spina (25:02):

... and we're working on even the ones that are coming out right now more broadly.


Dave Anderson (25:04):

... how do you now introduce a shock in a system where all of a sudden we have to source an order of magnitude more batteries in a market that isn't used to selling batteries, frankly. Is that something that SolarEdge is concerned about in any way, shape or form in terms of just being able to source materials and to be able to meet demand and to be able to grow with the market? And how do you guys think about that's perspective-


Michelle Spina (25:26):

Yeah, that's a great question. So-


Dave Anderson (25:27):

Then there's also another curve that needs to get talked about on the battery side which-


Michelle Spina (25:30):

... SolarEdge is a global company. We actually acquired a company Kokum about four years to manufacture our battery, they're a-


Dave Anderson (25:36):

... is the innovation and the disruption. So obviously with the increased demand-


Michelle Spina (25:37):

... top five global battery leader.


Dave Anderson (25:38):

... there's also new players coming into the space-


Michelle Spina (25:39):

We have a two gigawatt hour manufacturing plant for our battery-


Dave Anderson (25:41):

... to try to produce additional batteries as well. And they're trying to be disruptive both in terms of technology-


Michelle Spina (25:43):

... and we are focused solely on the residential battery so we are not competing with car battery-


Dave Anderson (25:46):

... they're also trying to be disruptive in terms of pricing.


Michelle Spina (25:49):

...et cetera in our same facility-


Dave Anderson (25:50):

So where does SolarEdge sort of position itself as this new batter war is starting to take place.


Michelle Spina (25:51):

We are well equipped to handle the supply. Currently right now we've forecasted it for California specifically because we knew this was coming. So we are not seeing supply challenges on the battery side of things. There's just in industry wide and having to deal with competing with car batteries, it's scarcity of resources all the time. But I think that now there's a point where there's multiple chemistries in the market right now for batteries, things like that.

So we're seeing more resources come out a bit. And I think a SolarEdge, at least I know we don't have a supply challenge on this battery for an NEM 3.0. The experienced ones, the ones that have been in the industry, the ones that have the safest battery, we have UL 9540A, that's very important for us to have a safe battery, one that is consistent. We also have unlimited cycles as a part of our battery. So you can charge and discharge as many times as you need to and you can stack, so you can stack up to nine batteries per backup interface. So we want to remain competitive on pricing for sure. And there's obviously big players, I don't need to name them, everyone knows them. We are staying competitive with them on our pricing, but we definitely don't want to be seen and are not one of these new players in the market. And


Dave Anderson (27:20):

I don't mind mentioning Enphase at all. So I know that you're probably not out there trying to say their name a lot, but-


Michelle Spina (27:25):

I was thinking of a different battery that's a little bit more prominent.


Dave Anderson (27:29):

BYD?


Michelle Spina (27:30):

Tesla, come on. Come on Dave.


Dave Anderson (27:33):

Fair, Tesla. But on the residential side, Badri, the CEO of Enphase has been very bullish about battery, his position in the battery market. And one of the things that he's talked a lot about, and so I'm pretty familiar with Enphase's position on domestic content. So obviously we talk a lot about the Inflation Reduction Act here on The Solar Podcast because it's the biggest piece of legislation that's ever existed for renewables, probably globally, but certainly in the United States. And there's this piece, this domestic content piece that allows manufacturers to be able to bring their manufacturing here to the United States. And there are huge, you talk about the subsidies, there's huge manufacturing subsidies for people that want to try to take on domestic content and domestic production. And so I'd love to the extent that you you're want to talk about that, I'd love to dive into a little bit about where SolarEdge sees itself from a domestic content perspective and in terms of US manufacturing and if that's something that's important to SolarEdge and it's something you guys are wanting to take advantage of as well.


Michelle Spina (28:36):

So on our last earnings call, we did announce that we're also looking at domestic manufacturing at a very fast pace. So just like you said, IRA, it's important to get that done quickly as well. You can't wait very long to get into the domestic manufacturing. If you're going to do it, you got to do it pretty fast.

We announced that we are taking that initiative very seriously. I can't talk about exactly when we're announcing or where we're going to be at, but the good news about our manufacturing facilities is they can very easily be started up because we own the manufacturing of all of our processes at what those assembly lines look like, et cetera. We can actually copy those and make them pretty easy to put into another manufacturing facility. We saw that in the last couple of years because we were having to, you brought up supply challenges. We had supply challenges because we were having to ship things overseas and we could actually see the ships at port that we couldn't unload. And what SolarEdge did very quickly to offset that was open a manufacturing facility in Guadalajara, Mexico so we could just drive it over the border. We see this domestic manufacturing piece is that same sense of urgency where we're going to get it done fast, but can't really say where we're going to be on that.


Dave Anderson (30:02):

Yeah, no, no problem. Yeah, I think when you're talking about shipping things, the one thing that you can't deny is these batteries are big and heavy. And so the logistics of installing batteries is something that residential installers are having to figure out. There's some other innovators in the space that have some pretty cool battery products and I won't try to go through all of them at that. I don't think it does us any good to do that, but some of these battery systems that are fully self-contained are like 350lbs+ plus to install pretty significant. So how much of what SolarEdge has done has been to try to be innovative in terms of trying to minimize the cost of the labor to install them, not just on the cost of the batteries themselves?


Michelle Spina (30:50):

I think the big focus in terms of minimizing labor, you're totally right at they're heavy that we have handles that you can actually put on that are reusable, that are easier to put up on the wall. But I think that one of the things that is super important to us is commissioning time. What we hear from installers is the most expensive part of a battery installation is that team having to be on site for commissioning of that battery. So our focus has really been, and some of the batteries on the market right now have in some cases a one to two day commissioning time. Our commissioning right now is down to 30 minutes and our goal is 15 minutes. So that has been our really big focus in terms of battery ease of installation.


Dave Anderson (31:37):

Yeah. I think that's important. So one of the things that on the residential side that anyone that's ever done installations, it's trying to minimize truck rolls and if you have to go back to a house even once it increases the cost basis of the installation pretty significantly. So being able to cut things down, like commissioning time, being able to cut things down, just the general labor and installation, the moving of the product, the setting the product, these things are important as well. And it's one of the things that a lot of battery manufacturers talk about as well is the form factor is such that it's easy to install and everyone has the reasons why. I love the built-in reusable handles. But thinking a little bit broader and a little bit bigger beyond just NEM 2.0 and NEM 3.0, I'd love to get your perspective on just the general outlook of solar and what sorts of things you're excited about for the future.


Michelle Spina (32:29):

Yeah, I mean I think going back to form factor, I think we are probably going to see batteries get smaller, modular, let's hope 10 years from now the battery's the size of our phone. That's what I'm hoping for, but I think that that's what all manufacturers are looking to make them more modular, smaller, easier to install. And that's probably what we'll see. And I would love your perspective on this too, Dave, I don't mean to interview you, but it's so interesting and ironic that we're seeing solar modules get larger, but we're seeing we want the batteries to be smaller.

]So right now, it's so interesting to me that we have some residential customers that are installing 500 watt modules right now that are big honking things. And so we're seeing more powerful modules and we're seeing batteries, we're seeing EV charging. I think the thing that's most exciting to me is it's not really just all about solar anymore. It's about smart energy. It's about an ecosystem that homeowner can manage. They fully understand what their electricity is. When I started solar, it was like doomsday preppers that were looking for solar and we had to talk to them about how solar even worked. Homeowners now can intelligently manage their whole energy ecosystem from an app and that's what we're getting to. Schedule your EV charger, manage your export, turn on and off the load controllers from your phone. These are all things that we're getting to and that's really exciting for me.


Dave Anderson (34:08):

Because you asked, I will tell you that, so on the solar side of things, on the panels themselves, there's been these really large panels typically for utility scale type projects, 96 cells as opposed to the 60 or 72 cells that you're more commonly going to see on a residential project. And the main reasons you didn't see the big 96 cell modules being used on residential homes is it's kind of like playing Tetris. So you have this really gigantic panel that you're putting on, not always a square surface. Sometimes you get a triangle roof and so the smaller sized panels that you could install made it a little bit easier to cover and fill the space. That's part of it. The other part of it is that solar panels from the ground, people don't fully appreciate how big they are. They're like five feet tall and three feet wide ish and they're fit 50 pounds.

And so keeping it under that 50 pounds is actually fairly important so that a single person can use a panel. If you're standing on a roof that has a pitch and you're holding something that looks like a sail and the wind picks up a little bit, it can be pretty hard to hang onto those things. So the ability I think getting bigger and working with 96 cell or something that's like six feet or seven feet tall and three or four or five feet wide, it gets to where it's two people have to handle every single panel.

And if you're talking about labor costs on a per watt basis, you actually start to get a pretty precipitous decline in terms of the amount of labor that you have to put into installing those modules. But the other part of it too though, I think it is an important delineation is that the modular part of the battery is going to be important because right now the most common sizes you're seeing are kind of like 10 kilowatt hours and then you see this jump to 20 kilowatt hours, jump to 30 kilowatt hours, and maybe those are the right increments, but there are other battery manufacturers that are trying to go up by maybe three kilowatt hours, six kilowatt hours, nine kilowatt hours, and so on and so on.

And when you're trying to optimize for price and because of the cost of these batteries, it's possible that smaller increments are going to be better, if you're really debating between jumping from a 10 kilowatt hour to a 20 kilowatt hour battery and the cost difference might be several, several thousand dollars to make that jump, it's a little bit harder than if you had those incremental steps. So on the solar side, going up 10 kilowatts, it wouldn't be 10 kilowatts, but if you had to jump up by a kilowatt or two kilowatts, I think oftentimes one more panel is really all you need. And so that's one of the nice things about the residential side. But I will say I think that in the next handful of years, most panels are going to be trying to flirt, well I say handful of years, within the next decade I think most panels are going to try to be putting 500 watts out.


Michelle Spina (36:55):

You think they're going to be smaller though?


Dave Anderson (36:57):

That's a great question. I think that the form factor is probably right. I think that you're probably going to see that three by five panel kind of being the standard panel that just under 50 pounds single person can handle and install. I think that's probably the form factor that's going to stick around for a while. But that's the fun part about being in an industry with a lot of technology around it is there's opportunities to innovate. And so I'm excited to see what sorts of new innovations come out, both batteries, panels and otherwise. Some of that is the form factor. The other part of it too though, and man, this is the most technical solar podcast we've ever done, I'm sure of it.

But the other part of it though is that when you're talking about things like optimizers it with SolarEdge or with the microinverters that exist out there, there's a sweet spot between the amount of watts you put out per panel and the number of different types of optimizers that SolarEdge would have to make. And there's a little bit of an interplay there. And I guess SolarEdge, you guys are responsive to what the market does in terms of your optimizers, but I think for the most part, if you're a new entrant or if you're a person that's selling solar panels, you don't want to have something that's so materially different that it doesn't work with the incumbent inverters, for example. And so the other part of it is that unless you're going to do an inverter slash panel all combined, which has its own risks like doing a VCR/DVD combo, then I think you have to stick to the form factors generally that exist in the marketplace.


Michelle Spina (38:40):

You bring up a good point too about that compatibility. It's like as we're seeing more form factors come out, more things come out, compatibility becomes somewhat of an issue. And with solar, we really want to make sure that we have a whole ecosystem that is compatible with one another. That's why we're trying to focus into getting into batteries and EV charging and load controllers all within our same ecosystem of inverters and optimizers so that everything talks to each other. You don't have to look at other vendors for these other products as the innovations are changing.


Dave Anderson (39:18):

Yeah. What role does SolarEdge see itself playing in the EV charging space?


Michelle Spina (39:23):

Yeah, we have an EV charger right now, so it's pretty cool because it can integrate directly into the inverter. So it allows you to charge directly from excess PV energy if you have it. Obviously it's going to pull from the grid as well. It's a fast charger. We are in our next iteration doing the bidirectional charging piece, which a lot of people ask for allowing your home to power your house. So our next EV charger will have that as well. And so yeah, the residential charger in a lot of cases makes a lot of sense because when you pair it with solar, that homeowner's able to get the ITC. On it as a salesperson or an installer, you can add two to three kw more solar to that system because that's what you need for charging your car. And it's fully integrated into the same app. So you're scheduling it right on the app you are managing your solar system on.


Dave Anderson (40:20):

So in terms of the charging and the bidirectional charging. So I think the main benefit, and this is another term that is getting talked about more and more is, and you've been in solar long enough, it used to be, and when I first started doing solar 12 years ago, we used to talk about the efficiency of the inverter a lot. Now inverters are pretty efficient, so we don't really talk about it. Most inverters are in the 98 plus percent efficiency range, but now that we're talking about batteries and AC versus DC, AC coupling, DC coupling, a term that's becoming increasingly important is this one about roundtrip efficiency. And so if you're charging from solar panels directly to your car, it's a more efficient path for the electrons to take. You're going to get more electricity going directly into the car than if you have to go DC to AC into the house, into the supercharger, into the car, the roundtrip efficiency. You lose kilowatt hours when you do that. But in terms of the bidirectional charging, how much of that is a limitation on the cars, however?


Michelle Spina (41:30):

A lot, about 99% of it.


Dave Anderson (41:33):

So it's a really awesome idea that people have, but it's not a simple problem to solve is the point I'm trying to make.


Michelle Spina (41:39):

Yeah. So I think it will become a simple problem to solve, but it's really on the car manufacturers to make that decision right now. And that's why we don't have it out yet is because there's really two cars that you can do that with right now. And we figure let's wait until the manufacturers of those vehicles decide they're going to go into bidirectional charging so that we are compatible with all EVs. And then it becomes the question on the warranty of the car. It's like, well, that battery wasn't meant to power a house. So where does that go?

I think that there's a lot of questions that are more complex than people are thinking about when it comes to bidirectional charging. Also in a power outage, your car has to be in the garage, you're relying on best case scenario in mostly worst case scenario situations, that your car is fully charged, that it can be plugged in the garage in a power outage. So I think it's a great feature. We want it for sure. And if I were to make a prediction, I think that it's going to be more like we use generators today a bit where it's the solar battery can be plan A for outage scenarios where you need backup and it's a reliable form that's just going to automatically turn on. And then if you need a plan B, it could be your vehicle for additional support, kind of how we use generators today.


Dave Anderson (43:16):

Yeah, I think that's probably a great way of thinking about it. The nice thing about most cars, most electric vehicles is that they hold so much more power than most of the home battery solutions do at this, at least presently, which is great. So you talked a little bit about the future of solar and in terms of smart energy for our houses, but what are some of the things that you're excited about more sort of industry wide, and what are some of the things that you find are that you think are either unnecessary challenges that the industry faces because we just can't it out of our own way or challenges that we still have to overcome generally?


Michelle Spina (43:52):

Gosh, that's such a good question. And of course I'm going to throw it on the utility company, giving us hard times. That's always going to be my thing. I feel like if we didn't have to fight those battles all the time and we had a bit more support nationally from the utility companies that we'd be a little bit further along, although we are very far along at this point, especially, you and I being in the industry for this long, we've seen it grow a lot.

But I think that what makes me excited that's coming down the pipe are these load controllers, the things that's going to make it easier for homeowners to go with a battery solution and to be able to automatically turn on and off the heavier loads so that an installer can back up the whole house without doing critical loads panel, things like that. So I think that that is what the next step is because we need to simplify the battery installation a bit more and that's going to allow for that. And I also think that EV charging is just kind of a no-brainer for pairing with solar. And I have seen a lot of our installation partners sell EV chargers on 80% of their deals because it just makes sense with solar, alongside solar.


Dave Anderson (45:19):

And I have to admit, given how long I've been in solar, people ask me all the time about solar, and I've been very bullish on batteries for a very long time. And so my answer was never, batteries are bad or batteries are good. It was like batteries will make sense eventually for everyone. So it's really a matter of timing. It's not a matter of if you're going to have batteries, and I still stand by that. There are certain markets where I think in order to be able to get high penetration with renewable solar power, which I think is the most important thing out of the gate, is to get high adoption within a community. And then eventually as power rates continue to increase or for whatever reason, solar batteries will make increasing amount of sense. And for homeowners, and it's one of those things where I have yet to meet someone that has solar that isn't a huge promoter of solar.

Everyone that has solar loves it. That doesn't mean that it was a great process getting it installed or they love the process of going solar, but nobody that has solar doesn't love it. And I would say the same thing about batteries generally. Anyone that has batteries on their house, they love it. There's a level of security that is accompanied with just the ownership of the batteries that you just don't have if you don't have the batteries. And so people that have batteries love them generally, and we're going to see an increased number of homeowners across the country, not just legislatively want to add batteries to their solutions for sure.


Michelle Spina (46:47):

Agree. Yeah, definitely. It gives you full energy independence like homeowners want. Oh, and a big point too is a lot of times when homeowners are looking into solar, their misconception is when they have solar, when their power goes out, they will have power in an outage without a battery. So why not just sell them what they want? We do have that option. It's with a battery, so just sell them that one. I agree it's going to be the thing that is commonplace in solar. I think that's just really the next stage.


Dave Anderson (47:22):

Yeah, no, I couldn't agree more. And we live in an interesting economy, so each state is its own state and is its own sort of testing ground for the right way to do solar. And every state has its own utility commission. California Public Utility Commission is the one that ultimately gave in and accepted and approved the rates for an NEM 3.0. But each state have their own utility commissions and the rules are different, one state to the next. And then you've got these really fantastic federal tailwinds with the Inflation Reduction Act that are really advancing the ball on the renewable energy space. But then you have the local jurisdictions and the utilities that seem to fight against it pretty aggressively.

And that's one of the things that's really interesting about the United States solar market, and it's probably true across the world as well, but certainly in the United States, it's one of the things that's definitely true. What are some of the challenges that you think, we're at three 4% market penetration across the country. Why is it with solar being so inexpensive, one of the least expensive costs of residential power, why is it that we continue to still sit at that 3%, just barely over 3% market penetration rate on the residential side of the United States?


Michelle Spina (48:34):

Well, yeah, I think that's the great question and you bring it up. A lot of it aligns with these utility companies in some states that are not as supportive because that 3% is a national number, but if you're looking at some of these very solar states, it's quite a bit higher than that. And so we have this very interesting dichotomy in this country where some of them are really great, some states haven't even started adopting it.

But I think it is really in a lot of these cases when you are entering these newer markets, it's essentially kind of starting over, starting from the very beginning, and you have the early adopters and then you have all everybody else. And so I think that it just takes a bit to really penetrate these markets and it takes installers and companies that are very resilient to stay in the know with all of these utility changes and be able to overcome them. Obviously solar is an industry that's dynamic and changes quite a bit, and so there's new innovations that come out, et cetera, and it's really these early adopters that we kind of start with in these states that we're just barely penetrating and it takes a while for them to get upstarted. What do you think, though? I would love your perspective on that too.


Dave Anderson (50:10):

Yeah, well, it's an interesting one. So I'll tell you an interesting analog. So we have a fairly new and large entrant into the solar residential space with EverBrite, which is a great finance product and it's gained quite a lot of attraction owned by NextEra, the very large 100 billion plus market cap company. And under that same umbrella, they also own Florida Power and Light, which is the Florida Utility company. And I can't imagine what those board meetings look like because Florida Power and Light has been sort of enemy number one against solar in Florida. And then obviously you have EverBrite, which is a great financing product and a disruptor in the financing side to help ease and help more customers go solar.

And so just even within one company, you have an analog of what sort of exists in the United States market. I think that we're still in a place across the country where people remain curious. I saw a study recently that said that somewhere around 46%, it was a Gallup poll that said something about 46% of homeowners across the country that's not just in the pro solar markets as a lot of people want to refer to, but across the country are actively considering solar. I thought that was a fantastic study or are interested in solar or actively pursuing it.

And then you add the 3%, you're talking about probably half of Americans have a fairly active interest in reducing their energy bills and going solar. And certainly unless you live in a cave, you're going to hear about renewable energy. This Inflation Reduction Act has really brought it to the forefront of people's minds. Some people are becoming, as a result of it, opponents of renewable energy, which is crazy to me and to many of the listeners of this podcast for sure. But I think that there's an awareness about solar that's never existed before in the world's history. And the thing that I get the most excited about, we've talked a lot about it on this podcast, is that here in the United States is we continue to drive the cost of residential solar down. There's a benefit to the world, which is there's almost a billion people in this world that don't have access to electricity.

And as we innovate in this market, it has a benefit of, and if we were to start over today, if there was no electrical system here in the United States, if we were to start over today, there's no way in the world we would rebuild the grid the way that we have it today. And so some of these emerging markets have the benefit of setting it up differently and better than the way that we have it set up. And so much of what we do and so much of the resistance to solar is really less a resistance to solar and more a fight to try to keep the grid the way that it is and it doesn't make sense to do that.

So lots of things to unpack in that. And you could probably do 15 podcasts based off of those specific topics. And in fact, we probably have done 15 podcasts talking about those specific things. But well just, I'd love to get Michelle, some of your, in the next five to 10 years, some of your bold predictions for solar. Obviously you can talk about it from SolarEdge's perspective, but as a 13 year veteran, I'm sure you have a lot of ideas of where you think the solar industry's going to be in the next five to 10 years.


Michelle Spina (53:31):

I think we talked about a lot of it and the interesting case is everywhere in the country when I go travel around and do all of these trainings, it is a very consistent message. The utility companies are increasing their rates, there's more blackouts and like you mentioned, solar's getting less expensive, more attainable. There's financing options that really are attainable for any homeowner and in whatever type they want to go with. And so the growth is going to be there. In solar in general, I think we're going to see states that are coming onto the market. The Midwest right now I think is surprising us a lot in that they are becoming high adopters of solar when we haven't seen that in the past, but we're seeing a lot of interest in the Midwest. Batteries I think is going to be a much higher attach rate nationally.

And then there's going to be a lot more pairing of the smart energy devices, larger system sizes as a result, because if these electric vehicles are really taking shape in a lot of these states, there's even policies around electric vehicle adoption in a lot of states as those come onto the grid and the electrification of the homes are becoming even more prevalent, we're going to see larger solar systems on roofs. And we're already seeing that. The average system size 10 to 11 KW in some states where they were six to seven just a couple years ago. So I think we're going to see the need for larger systems and even more systems because of the electrification of the house in general.


Dave Anderson (55:18):

Yeah, no, there's no doubt about that. And we didn't get into it at all but this Inflation Reduction Act, there's obviously a lot of incentives for that electrification of the home around heat pumps and these sorts of things. And those things I think are exciting for our industry generally, but exciting for the world because it's the right thing to do. It's moving into a more renewable place in terms of how we power our vehicles, how we power our lives, how we heat and cool our homes. And this is something that I think is just really generally good for everybody, but it's obviously exciting for the solar industry specifically. The fastest growing, certainly one of the biggest employers across the country, and that's obviously going to grow globally as well. So Michelle, it's been an absolute pleasure to visit with you. I think your perspective is fantastic.

I know that you're out visiting with many, many residential solar companies, and so you get to hear all of their concerns, their questions, and to get your perspective, particularly at this time where we're at that again, change point with NEM 2.0, 3.0 and SolarEdge playing a key role as a huge battery manufacturer in the United States, but specifically for the California market. There was a big splash obviously that with the press release that you came out talking about your new Rate Saver Solution. And I know that most residential solar companies are really keen to try to take advantage of that because again, slightly easier installation than a standard battery whole home backup, faster installations probably better economics for the homeowner. These are all things that are important for us to help the solar industry not to have a huge disruption. So Michelle, thank you so much for coming on and visiting with us today.


Michelle Spina (56:46):

Dave, thank you so much. It was so great.


Ben Kramer (56:51):

Thanks for listening to The Solar Podcast. Please don't forget to rate, review and share us with your colleagues and friends who are passionate about solar, renewable energy, and the future of the environment. We'll talk to you soon.


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