High energy prices are leading to a solar boom across the world, but in Singapore, many home owners are still hesitant to install solar panels because of the high cost, says Bolong Chew, the founder of Solar AI Technologies. The startup wants to make solar energy more accessible in Southeast Asia with a rent-to-own model that helps customers start saving on their energy bills from the start. It recently raised $1.5 million in seed funding, led by Earth Venture Capital with participation from Undivided Ventures, Investible and climate-tech angel investor David Pardo.
Solar AI was launched three years ago and incubated through Engie Factory, the venture arm of French utility company Engie Group. Chew, who founded the company along with Gérald Chablowski and Luke Ong, said the team realized that one of the barriers to rooftop solar adoption in Southeast Asia is lack of trust and awareness, since significant upfront costs have led to low adoption. As a result, most people don’t know anyone who has already installed a solar system, despite the rising cost of electricity, and the penetration rate of solar systems is still less than 1%.
“The traditional pitch for a rooftop solar system is that you pay $15,000 to $20,000 upfront for it, break even after about seven to eight years and get free electricity for another 20 years,” said Chew. “But when most people don’t know someone who’s already had a solar system for two or three years already, it’s very difficult for customers to take that leap of faith and move ahead. Ultimately, the rental model is a way for us to de-risk solar ownership for these customers.”
Solar AI offers three plans, including a five year plan with 50% down payments, a 10 year plan with zero upfront costs and a traditional upfront purchase. Monthly fees for the rent-to-own plans are about $200 a month, compared to average electricity bills of $250 a month. Chew says this means customers can start saving $50 a month on their energy costs as soon as they get a solar system installed. Excess solar energy generated is exported to the grid and users get paid for it by the grid operator. In Singapore, that is SP Group, which pays customers directly for excess energy regardless of what electricity retailer they use. Solar AI also covers maintenance and warranty costs during the contract period.
Solar AI is currently serving more than 100 customers, and says it has surpassed $3 million SGD on signed rooftop solar contracts.
The rent-to-own model is already prevalent in the United States and Europe, but Solar AI is the first company to offer it in Singapore. When launching the business model, Chew says the team “asked ourselves, are we really ahead of our time or just stupid?” They spoke with traditional industry players who advised the team against rent-to-own from a unit economics perspective. While large-scale rooftop systems are funded through property agreements, unit costs are much higher for smaller scale projects because of the expense of customer acquisition. Chew said one of the advantage that Solar AI has is that a lot of their sales are done through digital channels, which helps drive unit costs down.
Before launching its rent-to-own business, Solar AI had already begun building an audience through educational content on its website. Chew said it is now top ranked in terms of most solar search keywords in Southeast Asia. In Singapore, its web traffic is three times higher than the two other largest solar companies combined. In the Philippines, where it is planning to expand within the next 12 months, its web traffic is five times more than the largest solar company. This helps keep its customer acquisition costs down.
Chew says that over the past one and half years, Solar AI has spent very little on paid marketing, with about 80% of customer segments coming from organic search, including written content on Solar AI’s website and online tools like its instant solar assessment. Potential customers then go into Solar AI’s sales pipeline, where its salespeople have tools to give them a digital picture of the process and send them a proposal. This means the physical part of installing a solar system only comes once a customer has decided they are comfortable proceeding with either a five year or 10 year plan. At that point, Solar AI goes to their property and does a site survey. The other 20% of customer segments comes through referrals.
Other markets Solar AI plans to expand to include Malaysia and the Philippines, where it has already begun working with local partners.
“Ultimately, the reason we built the company is to really try and hyper scale rooftop solar, because we all believe that it’s one of the best climate solutions out there to decarbonize our environment,” Chew said.
In a statement, Investible investment manager Ben Lindsay said, “There is a huge amount of untapped potential for both residential and commercial solar-as-a-service throughout Southeast Asia. The traction and robust pipeline Solar AI team have achieved to date is a strong indicator for their ability to be a leader throughout the region as its development continues to accelerate.”
Source @TechCrunch
