Over the last several months after founding LCOE.ai, my co-founders and I have interviewed hundreds of experts across the solar and storage industry.

We've spoken with independent power producers (IPPs), private asset owners, financiers (debt), investors (equity), insurance, EPCs, developers, etc. We've spoken to CEOs, CTOs, CFOs, VPs, Directors, and even technicians and analysts—from operations, asset management, design, construction, finance, and beyond.

Over those hundreds of conversations deep diving the challenges and pains they've experienced, we've categorized them into 4 buckets—"themes" as I like to call them.

Let's dive in.

Fragmented and Siloed Data

Perhaps it's my experience as a consultant to Fortune 500 companies and a technologist in startups selling and building products to high tech that I have an appreciation for data. Or, perhaps it's from my past and undergrad at Georgia Tech where the concept of being objective and leveraging data are so important in driving decisions. In any case, no matter where I've gone, fragmentation of data and the siloed nature of systems plague so many industries. Solar is a big one.

This industry has been growing so fast over the last 10-15 years, especially, that I liken this industry to manufacturing—perhaps 15-20 years behind. The data here is incredibly fragmented. The stories and cases I've heard of how technical systems and tools are countless. Most tools and applications in the space that have any traction really found success, in most cases, "accidentally".

Specifically, systems were designed just out of the necessity to do a job (a "function"). However, given the relative newness of the industry (the "solar-coaster"), the tools serving this industry were built based on the requirements of very technical experts. They were software engineers or UX professionals… but, they built a tool that did the Job-to-be-Done ("JTBD") and it worked well enough that they caught fire.

Fast-forward to today, those tools have been around for a while but built on legacy infrastructure, technical UI and UX, and oh, they don't talk to other applications. They work. They work well. But, they do a job for a function, and… well, that's about it.

Though, you might also find some tools saying they do more—or, at least, at the company-level. This may be true if only because many companies are betting on having the suite of tools to rule them all. What you get is a hodgepodge of tools that kinda work, still overly technical, and still don't pass data across the gaps.

Limited Understanding of Project-Level Financials

What? No, that's not possible, Daryl. How can there be limited understanding of project-level financials when this industry is all about financials? With IRR / hurdle rates, large investments, little way to continue expanding revenue once a project is in the ground (or on the roof), isn't it all about financials? Yes. And here's the funny part…

What we've uncovered from executive and financiers is that they may know two things: 1. Power. Everyone speaks in energy—kWh or MWh. It's the default language. However, speaking finance in terms of costs / expenses, IRR, etc., it's much more specific to the finance roles. But go outside this group, and financial terms and true ROI are everywhere and nowhere.

The focus on POWER or ENERGY continues, especially, as well-funded companies continue to focus on building more and more. The story has been told that as long as organizations like IPPs grow their portfolio, the larger portfolio diversifies and balances out the bigger underperformers.

Though, we're starting to see investors starting to ask questions about returns…

Wasted and Hard-to-Determine Capital / Operational Investments

Going hand-in-hand with project-level financials, we have heard a number of sides of the industry talk about the waste and the unknown of where to invest their resources. Part of this is driven by the rapacious appetite to build, buid, build, build that which supply chain constraints puts engineering and procurement on a specific path that may not necessarily be the best option for performance and reliability.

Another case of this could be the very nature of this quickly evolving industry ["solar coaster"] where technologies and manufacturers are constantly coming and going. Not long along, everyone was focused on PERC. Now, it's TOPCon. There's new technologies like HJT… perovskite… the list goes on. Then, you throw in the rapid implementation of batteries, and you've got a hodgepodge of guessing what works best.

On the O&M side of the world, it comes down to education. Many EPCs who also sell O&M services discuss how they typically don't sell O&M with a new site, yet. Most customers—especially in residential and C&I—do not understand the value of O&M. This could be thought of as longer warranties after buying a car. Solar has been thought of as "set it and forget"; though, practiioners know this is far from the truth. Luckily, this, too, is starting to change where more savvy customers are coming to the table knowing that to ensure performance, you must invest in O&M.

Low Margin, Big Stack

For years, everyone has been beholden to the "margin stack"—referred to by one racking manufacturer. Oftake is already capped at market rates, and when you consider the number of categories of vendors to develop, design, engineer, procure, construct, run, etc. a solar project, you run into many hands trying to grab what money is available.

Now, the tax transferability helped in a big way where organizations are starting to blur the lines between categories—from developers to owner operators, and so far. We've also seen more EPCs try to own more of the stack. In supply chains, this is the vertical supply chain—owning more phases of the supply chain. In a solar projects, we're talking about project lifecycles. In fact, the racking manufacturer I mentioned above, they were acquired by an EPC. And this EPC has also been building out more O&M services.

This is all to address the margin stack. Companies are evolving to take on more of the lifecycle to drive higher margins—profitability.

Concluding…

The industry is growing fast. But, it's also maturing fast. This industry reminds me a lot of more mature industries like energy (fossil fuel, nuclear, hydro) and other asset-intensive industries like manufacturing—just 10-15 years behind.

It's clear that many folks in this industry are passionate about the shift to cleaner, renewable energy. It's also clear that many folks continue to think themselves and what they know / have as their "secret sauces". As the market matures and more of the labor force becomes not only more experienced but also hop-jump-and-skip, there will be more homogeneity and secret sauce will be found out to not really be a thing.

What will shake out is how companies' cultures stand as the competitive advantage, and how organizations both leverage and democratize data to drive higher results and manage expectations.