One of the gating factors for getting more homeowners to make the switch to solar energy has been that solar, as a business, is hard one to get right, with many a company failing when they've been unable to strike the right balance between the technology working as it should, provisioning services in a cost-effective way, providing good customer service, and handling their own overhead. Today, a startup that believes it has squared some of these problems away is announcing a big funding round as it gears up for growth.
Enpal -- a solar startup out of Berlin, Germany, that uses AI for provisioning and installing services, and then a subscription-style model for homeowners to pay for it (you might even call it a SaaS model: solar-as-a-service) -- has raised €150 million ($174 million) from SoftBank Vision Fund 2.
The funding closes out its Series C at €250 million ($290 million), including €100 million that Enpal raised earlier this year from investors that included HV Capital and SolarCity co-founder Peter Rive. The investment values Enpal at €950 million ($1.1 billion) post-money, the company has confirmed.
To date, Enpal has raised around $360 million in equity, with another $406 million in debt.
The company has some 10,000 customers in Germany, and the plan will be to continue growing in its home market, as well as make its first efforts to expand to new ones. Ultimately Enpal's goal, CEO Mario Kohle said, is to make using renewable energy a realistic option for everyone and everything.
"Our plan is to go beyond Germany because the climate crisis goes beyond our boarders," Kohle said in an interview. "We also think that this small thing that we invented could also expand into e-mobility and community-based energy distribution."
Founded in 2017 with Viktor Wingert and Jochen Ziervogel, Kohle said the original idea was to build a new startup that could be more proactive about the climate crisis. His previous company, a sales lead-generation startup that he sold to PE firm General Atlantic, happened to have a number of customers that came from the solar market. Kohle liked what they were trying to do, but he saw them fail time and time again. He started to do some research into why, and found that it wasn't the solar technology per se, but all of the hurdles in selling and provisioning it efficiently. The business model just didn't add up for most of them.
So this is where Enpal -- which is a portmanteau of "energy" and "pal", Kohle said -- put all of its focus.
It first built an AI-based algorithm that lets users take pictures of their roofs, and then uses computer vision and other techniques to determine the size and positioning of the installation required. The whole provisioning part of the installation is done remotely, with technicians only visiting the house at the point of installation, meaning a faster service at a lower cost.
From there, customers use an IoT app to measure their energy gathering, storage (on lithium iron phosphate cells also supplied by Enpal) and consumption, and to pay for services. Customers do not pay for the energy they use, but they pay rent on the solar panels and for the all-round service -- which include installation, maintenance, repair if necessary, and insurance. Users sign on for 20-year contracts and are able to purchase their panels for 1 euro at the end of that period.
While a number of energy-focused green-tech companies in the market today are focused on innovations in how to generate energy or consume less of it, or with a smaller impact on our environment, Enpal is part of an emerging group that are leaning on those innovations, but are themselves more focused on how to make scaling those solutions more practical and profitable.
Another startup called Aurora Solar is tackling this as a B2B2C problem: in May, it raised a $250 million Series C of its own earlier this year for technology that also uses computer vision (along with satellite mapping and other data), which it sells to solar companies to help them automate home installation designs and cost estimates, thereby also reducing the huge costs associated with that.
Moonshots, of course, come with risks. Aurora's focus on selling software to the solar industry means that it doesn't control the full business model and its success is predicated on its customers continuing to grow (and not failing because of the many other challenges in running a solar business).
Enpal has a different kind of challenge, which is that it needs to make sure it doesn't find itself over-leveraged with the number of solar installations it has out in the market subsidized by Enpal itself, with perhaps those customers not buying as much solar energy as they'd been projected to buy. And while you might argue that there are hundreds of tech companies that essentially follow similar principles -- any company that supplies a device to a customer so that the customer pays for a service on that device -- at an estimated cost of between $15,000 and $40,000 for a solar power system for a 2,000 square-foot house, this hardware is typically two orders of magnitude more expensive than, say, a set-top box. That basic model subsidizing panels is one reason the company has taken on so much debt.
Kohle believes the chances of that playing out in a tough way for the company are low simply because the model so compelling. The company is not yet profitable, but "We have a positive contribution margin from the beginning" because of the SaaS model, he said. "That's something the customers are paying, and it means we are cash flow positive from the beginning. And what customers like is that they are paying less and getting a solar system for free."
Investors also seem to agree.
"Rising electricity prices and increasing demand mean renewable energy adoption is rapidly becoming mainstream," said Yanni Pipilis, managing partner for SoftBank Investment Advisers, in a statement. "We believe Enpal offers customers an all-in-one solar solution, lowering the barriers to entry for consumers. It's great to be working with Mario and the Enpal team to make more households energy independent."
Updated to correct how customers pay for the service: it's a flat rental fee per month, not based on usage.