Brad Ideas - citizenre - Comments

Demand for electricity is

Orion — Fri, 09 May 2008 18:10:08 -0700

Demand for electricity is only going to go UP so to meet that demand utility companies will either have to build new plants or buy power from someone else. Citizenre et al = "someone else". In effect these alternative energy companies offset the long-term capital expenditures that utility companies pay to satify their customers.

Most utility companies would rather be distributors rather than generators anyway. That is, they charge the players a monthly fee to connect to the grid, and let someone else move power across their grid. "Commercial" solar installations pay a monthly connection fee while, at the moment, "residential" solar installations don't and that raises a red flag with me for this kind of scheme. It would take a very small change in policy to declare a scheme like Citizenre's a commercial solar enterprise and start billing the homeowners for access to the grid. That could blow their business model all to smithereens, leaving the company bankrupt and the homeowners with obsolete grid-tied solar systems on their roofs that they can't legally keep connected to the grid.

Citizenre-Solar

Anonymous — Mon, 14 Apr 2008 19:12:06 -0700

What I can't find anywhere is what happens if solar does really catch on. Eventually, peak demand will be at nighttime when everyone has to buy. Also too many secretes scares me. A ligitimate company with a great plan could share a lot more facts and info.

CitizenRe

andreea360 — Sat, 16 Feb 2008 04:40:52 -0800

And the most fundamental question is, is CitizenRe out to put all other solar businesses out of business, is it beneficial since who will “buy” a system when they can just pay the electric bill at whatever level they are at?

Pretty simple

brad — Sun, 16 Dec 2007 13:15:31 -0800

While there are a fair number who will spend more on their power to "do the right thing" environmentally, they are still too few to make the real difference that must be made. Thus, unfortunately, what really matters is making it economically competitive. Cheaper than fossil fuels is best, though something can be done if you get nearer to them, especially if the fossil fuels get externality taxes put on them.

cost to me vs cost to enviornment

Anonymous — Sat, 15 Dec 2007 12:34:52 -0800

It seems that most of the comments revolve around whether or not the consumer will save money. For me, that is not even a consideration. I cannot afford to risk many thousands of dollars on a solar installation. But, an experiment with low cost that moves some of my own use from grid-supported to solar-supported, is a very attractive option! If I pay a little more, the same, or less than the utility company charges, that is not important. Reducing my impact on the environment is! Why not see if it will work?

Very Concerned

Truik — Sun, 21 Oct 2007 20:31:00 -0700

I came across a CitizenRE rep at the state fair this weekend and spoke with him for a while before giving him my name and address for more information. I received an email this evening saying my new account has been set up and I can log in to review my account. The following is a cut and paste of some of the information in that email:

"you will have the ability to view your system's operating status in near-real-time. Data is updated on a daily basis. Use this feature to see how much electricity your REnU has generated for you and at what time of the day, how much of it you used and when, and how much you delivered to your utility. Even see how much energy you took back from the local utility and when. Additionally, this daily data translates directly into your monthly bill"

Ok, so I logged into my "new account" and guess what I found...a "contract status" section indicating that I had requested a 25 year contract and that it was pending (I had, in fact, told the rep I specifically would NOT sign the 25 year contract but may consider the one or five-year contract). There was also a section of graphs headed up with my personal information, a contract number and colorful displays of my current energy consumption, energy generated by the panels, energy sold and energy bought back...all with colorful displays. Keep in mind, no one has been to my house to even consider a solar installation let alone begin any type of solar installation. THERE ARE NO SOLAR PANELS INSTALLED ON MY HOUSE.

If this is the data that will be comprising my bill and the data is fabricated, as it must be since CitizenRE has no record of my energy usage today and, especially, since they have data on my solar energy production when I have no solar energy system, I am deeply concerned.

I also noticed, in the contract information displayed on the "account" I logged into, that there may be additional fees as outlined in section 1.2 of the contract. Under section 1.2 of the contract, it simply has the word (reserved) in parenthesis and nothing more. Who would agree to such a contract?!

I want to make all of you aware I am posting this message to inform you of my current experience with the company CitizenRE and to allow Rob or any other representative of their company to explain what is going on and why I am seeing the data I am seeing in the "account" created for me.

I have been hesitant in responding to comments made about CitizenRE until this point because I have been trying to be positive in thinking they may actually be a legitimate company, however, I am rapidly deciding to agree with the nay-sayers and look forward from a response from CitizenRE which would actually make me consider doing otherwise.

One further comment to CitizenRE: If I receive a bill, invoice or collection statement of any kind, you will see legal action and media activity that will give your company more attention than any rep at the state fair.

Thanks for your attention to this matter.

CitizenRE has a competitor...

SolarKismet — Mon, 27 Aug 2007 09:50:20 -0700

CitizenRE now has a competitor, and they'll install the first solar panel before CitizenRE does...

Downside risk

Chris Dudley — Thu, 23 Aug 2007 09:39:40 -0700

I thought that was what you meant. I agree that solar is the only developed technology that could substantially reduce grid costs. In some sense CR could be a victim of its own success. I think for a contract written today, there is not much of a worry. Solar has to come down further in price and be much more widely deployed to see a big effect on rates and since monetary policy attempts to keep a couple of percentage points of inflation, in 25 years, even reduced real grid costs may not be lower in inflated dolars than a rate offered today. And, one would expect to see the largest effects where grid rates are currently the highest and systems are paid off the soonest, i.e. where natural gas is being displaced. A system that is payed off sooner has basically fulfilled its mission and moving it to the after market is just gravy since the cost of removal is included in the contract in the case of early termination. As to new technology, if it works in a distributed generation model, CR plans to offer it so this also covers risk. I don't think we'll be seeing any widely deployed new central generation technology in the next 20 years that is much cheaper than distributed solar will be just because there is nothing on the horizon now and a break through tomorrow would still require a long development timescale in a central generation model.

The biggest risk I see is that net metering goes away. If that happens before low cost storage is available there could be a problem. But, if in 15 years net metering is ended without paying attention to customer's stranded costs (bait-and-switch governmental practices), and grid rates are also higher than at present, it may be possible to offer a storage solution at a price that still saves customers money relative to the grid. Customers will certainly be ticked off enough in that situation to consider disconnecting from the grid I think.

There are risks in any business but one of the things that CR seems to be doing is managing that risk and at the same time reducing risk for customers. It is not the same as ownership, but it does have some advantages.

Why grid power could go down.

brad — Wed, 22 Aug 2007 23:31:15 -0700

Quite simply, if solar power becomes cheap to buy and put on a house, it also starts becoming cheap to buy and put in a power plant not too far from the house. If you could generate solar for 5 cents/kwh, why would you burn a fossil fuel that ended up costing more? If grid power is 40 cents/kwh and solar is 10, then people will just put up solar plants on the grid.

Now there are ways it's not quite that simple. Grid power suffers from grid losses and the cost of the grid. The closer you can put your plant to the customer, the better. Home solar takes advantage of a "free roof" and "free land" and power plant solar doesn't do that as easily -- though it might well be able to lease existing land being used for parking lots, or otherwise wasted roofs.

Solar only provides power when sunny. You have to have a grid for cloudy days and for night, and that grid has to come from power that works reliably then, such as hydro and fossil fuels. However, there might be enough of them.

But in the end, grid power can't get vastly more expensive than solar. And new techs will appear on the grid as well.

For Dr. George

Frank Knight — Wed, 22 Aug 2007 16:37:59 -0700

Howdy Dr. George,
I have copied the only response you will get for now. I got it from our internal Forums with permission of course.
Peace,
Frank Knight

Here is Rob Stylers post:

Some people (ie Richard George) have posted critiques of our press release claiming that we will not be able to deliver because of the stock market, etc. At first, we were planning to spend the time with Brown Rudnick and our other partners to refute all of those concerns, but upon reflection we decided that this would just take more time and could easily turn into a waste of "no you can't," "YES, we can."

If it was one simple response, no big deal...but once you engage, it often creates a life of its own that consumes an ever increasing amount of energy.

The best use of our time right now is to focus on delivering, not arguing with those who say we can't.

One of my favorite quotes is, "Those who say it can't be done, annoy those of us doing it."

We don't have much longer before all of these concerns will be mute.

We will continue to release more information.

Thanks for your patience and for hanging tough.

Rob

Citizenre Financial Team

Chris Dudley — Wed, 22 Aug 2007 07:30:28 -0700

Brad,

mdsolar from slashdot here (a disclosure). I notice in you last comment that you probably meant that the risk is that electricity rates would fall rather than rise. I would say that so long as this is a local phenomenon, the risk can be managed. If electricity rates nationwide fall faster than the cost of solar is falling I would be very suprised because electricity is currently dominated by sources that will have flat (hydro) or increasing costs (coal, nuclear and gas). Wind tends to moderate rates and it has a high growth rate, but its cost curve is less favorable than solar's.

I also think that you may be confusing Begleys. Might want to check that. Ed's show had been renewed for a second season and shooting of CR's first installation was completed last week in under a day, despite retakes, for inclusion in the show.

You have been hoping for more information from CR. They have announced their finance team and there is a news item linked at my Real Energy blog (repeated here). I think you'll agree that the timing could not be better given the flight of money from real estate. Other, more secure, structured finance sectors should be finding reduced costs in the near term.

Citizenre Financial Team Press Release

Dr. Richard — Wed, 22 Aug 2007 07:17:35 -0700

Yesterday, Citizenre released a press release announcing their “financing team” that will help them raise funding. Citizenre does not have any funding. You don't make this announcement if you have already closed financing. If you have funding, this is not news.

My analysis from six months ago that Citizenre is a highly unethical attempt to prove that there is sufficient demand (e.g. FRAs) to justify financing remains valid. Unfortunately, Citizenre's timing is lousy and they are extemely vulnerable because they tried to sell first and only after they succeeded in selling, finance and build long-lead time infrastructure (PV and inverter manufacturing plant; thousands of installations dependent on equipment made in the plant).

We are several weeks into the worst credit crunch since 1973 and possibly 1929/1930. Lending has largely stoped - particularly for sub-prime and alt-a mortgages, jumbo mortgages, asset-backed securities, junk bonds, commercial paper, M&A takeovers, and pretty much all lending below AA or AAA. Major banks and investment banks have several hundred billion worth of loans made in the last couple of months (mostly for M&A deals and asset securitization deals) that they are unable to sell to investors without taking major losses. Everyone is scared and pulling back right now. For the little bit of lending that is available, credit spreads have increased by several hundred basis points. This means that if you were expecting a 5% interest rate in July, you may be paying 7% or 7.5% in August if you can still get the loan. Any assumptions about financing that are more than two weeks old have to be revisited. A month ago, GE Money was willing to finance PV systems for single family homes at rates between 7.5% and 14+%, but wanted 5 to 7 year terms. However, even then, they were more interested in commercial PV loans than residential loans. GE is still trying to value the collateral value of home PV systems - there are a lot of technical challenges and costs associated with removing PV systems and a used system may only have value for the first five years.

For Citizenre, they have the assumption that they can essentially give low interest, no documentation, 25 year loans to their customers (a lender's view of the FRA cashflows). This is essentially a sub-prime, unsecured loan, and any asset-backed security based on a pool of these FRAs would be extremely hard to value right now. The default rate on FRA's is unknown. Likewise, the cancellation rate and the effective duration of the FRA stream (e.g. how long the average customer has the system on their roof given the easy cancellation terms) are also unknown. Right now, investors do not trust the investment bank valuations of asset-backed securities because 1) there is really no liquid market for these, 2) everything is marked-to-model (where the model is an investment bank spreadsheet) based on investment bank assumptions that may be questionable and overly optimistic, 3) there are major conflicts of interest by the rating agencies and investment banks, and 4) there has been way too much fraud in this space (as much as 50% of all sub-prime loans may have been tainted by frauds committed by one or more of the parties involved - the borrower, the broker, the originator, the rating agency, the investment bank, the appraiser).

If you change the assumptions, Citizenre's model will break down. There are four major vulnerabilities to Citizenre in this credit crunch:

a) Customer Credit Worthiness Risk: Since no customers have completed credit checks, we don't know what percentage of them have prime credit. A significant portion of the 19,700+ customers may not have acceptable credit scores and their FRAs may not be financeable.

b) Interest Rate Risk: If Citizenre has to pay higher interest rates, their margins will decrease, making the service uneconomic for them to offer in some locations. This means that they either a) have to raise the rates they charge (which could make the KWH cost of electricity higher for their customers than they pay their utilities) and/or b) have to exit certain markets - particularly those with low interest rates. Again, a large percentage of customers could be lost if entire states have to be abandoned or if Citizenre is forced to change the rates promised.

c) Geographic Risk: Lenders may avoid investing in asset-backed security loans from certain regions that are particularly hard hit by real estate mortgage foreclosures. 50% of the sub-prime mortgages in the past three years were issued in California and Florida. Unfortunately, California is the most attractive solar market in the country (~80% of the US solar market).

d) Contract Language Risk: Lenders may object to certain terms in the FRA contract and require changes. The financing term has the greatest impact on the economics of FRAs. If lenders require shorter terms (e.g. 5 to 7 years, instead of 25 years), Citizenre cannot offer FRAs at their current rates.

Even if we assume that this deal was fundable in the second quarter of this year, today it is toxic and unfundable given the credit crunch. When one adds the other risks in the deal (execution, inexperienced management team, technology risks, manufacturing risks, MLM marketing scheme), it becomes even less likely to get funded.

Finally, Structured Growth Partners is a no-name, two-person fundraising company with no history or verifiable information. It is unlikely that they are registered with the SEC as a broker-dealer (legally required if they take commissions or success fees from Citizenre on any funds raised). If you are trying to raise hundreds of millions or billions of dollars, you don't use a no-name firm, you use either a major investment bank or specialty boutique (energy) investment bank with a proven track record in the field. The little advisors are typically used by startups and small businesses to help them get between several hundred thousand and several million dollars. They also frequently want excessive fees that scare away legitimate investors - particularly venture capital firms.

citizenre

bc — Mon, 20 Aug 2007 16:06:49 -0700

Talk about open minds. Open your mind to the real world of business and manufacturing. MS never made claims like this company is making, they worked on their products and built them over the course of a number of years to get to where they were the dominant player in an emerging marketplace.
Citizenre is making outlandish claims to be able to do more in less time than any other corporation of any type in history. It is a great idea, and something everyone would like to see some day, but to be selling people on this futures market is more than troublesome. It is great to have dreams but you have to face the facts.
They claim they can get financing, locate a building site, put together all the building plans, go through all the submittals required for building permits wherever the location will be, actually obtain the permits, build the massive manufacturing facility, hire all the people required to man it, then produce more PV modules and inverters than have been installed in this country in total, over the last 30 years. All of this and still allow for hiring installation companies to install all this product, contract the customers, apply for local permits (and for the credits in the states that offer the cash subsidy), get the approvals and permits, and have it installed, all within one year from however many months ago they started making this absurd claim. This is more than any major multi-national corporation has been able to accomplish, after pouring many, many, millions of dollars into R&D, manufacturing and marketing.
If anyone can show me a company that has gone from zero to several billion dollars of completed manufactured product and installation within one year or even five years, please show me verifiable facts. No dreams - reality.

General Motors, Staples and

Anonymous — Fri, 13 Jul 2007 09:03:47 -0700

General Motors, Staples and SunEdison are doing this. General Electric Energy Fund is a major player in this arena already. Many large companies are seeing benefits from soalr energy and are using the "Solar Services Model" to their advantage.

Any recent news?

CORK! — Mon, 02 Jul 2007 06:52:44 -0700

Does anyone (I include Rob here...) have any recent news on the program? I am just wondering if ground has been broken on the manufacturing facility, if investors were announced, if they anyone even knows WHERE the plant will be, etc. Seems like there have been no new developments since February as far as I can tell.