As the domestic oil and gas industry moves into what will likely become one of the worst busts in modern times, it’s important to recognize that not all energy-related sectors are suffering a similar fate. Thus, it was a timely opportunity to be able to sit down for an interview in early March with John Berger, the Chairman, Founder and CEO of Sunnova Energy International Inc.
Based in Houston, Sunnova (NYSE: NOVA) is a residential solar and battery storage service provider that has developed a multi-faceted strategy that enables homeowners to power their homes with affordable solar energy, offering savings to solar-only customers, compared to utility-based retail rates with little to no up-front expense to the customer, benefits that have been features of home solar for many years now. Sunnova takes the concept further, combining home solar systems with energy storage systems (ESS), or batteries, to provide energy resiliency and reliability to its solar plus battery storage customers.
“We’re mostly buying Tesla Powerwalls now,” Berger told me, adding that Sunnova had just completed an agreement with Generac (NAS: GNRC), who recently developed and launched their own battery storage system. “Take two of these batteries, stack them on top of each other on the outside of your home or against the wall of your garage, and depending on where you live, the size of your home and your energy consumption, that should get you through the night and then you just charge it up again the next day.”
Obviously, there are a lot of moving parts here, but it’s a pretty elegant solution for those looking to reduce or eliminate reliance on what is in many parts of the country an increasingly unreliable power grid. Berger emphasized that aspect of the business. “If you’re in southern California my answer to you about the economics of signing up as a customer is that if you haven’t signed up yet you might as well just light some of the money in your wallet on fire,” he told me with a laugh.
“I mean, why would you not sign up for a solar and storage service? Because when you look at the reliability issues in California where utilities are shutting power lines off because of the wildfire issues, paired with utility prices continuing to rise, it should be a no-brainer. If you live in Hawaii, California, or if you live in Puerto Rico and you haven’t signed up yet, what are you waiting for?”
“We look at each home as a nano-grid.”
It’s a good question, and not one isolated to those areas. The fact is that baseload-heavy power grids have suffered major impacts in recent years from fires, storm events and other natural disasters. Even where I live, south of Fort Worth in Tarrant County, Texas, we suffer frequent power outages from thunderstorms that blow tree limbs onto power lines.
The rapidly increasing populations in Texas and other sunbelt states renders maintenance and expansion of above-ground power lines a difficult challenge. This reality results in increasingly fertile ground for providers like Sunnova who can offer many homeowners an ability to power their own energy independence and, with the offering of battery, keep the power on when the power grid goes down. This is especially true as technology improves and costs of both solar and storage drop.
“We look at each home as a nano-grid,” Berger told me, “We’re providing a combination of solar and storage and pairing it with control technologies so that the customer can get the highest energy benefit. We’re operating like a utility does in a service territory. So, we’re taking a utility’s territory, shrinking it down to your household, and we’re operating and optimizing those assets.”
“…you’re actually impeding the flow of capital”
Interestingly, Berger and Sunnova have not been fans of the federal investment tax credit program, and actively lobbied against its renewal in Washington, DC in December of 2015. “It was kind of funny. I spent no money,” he said. “We went up there and said get rid of all these subsidies. Reform the power business, give consumers choices like we have here in Texas and restructure the entire power industry and let the market choose.”
When I asked why he had opposed the credit program at that time, his answer was interesting: “My view of this has been that you’re actually impeding the flow of capital” into the solar business. “Because a lot of people back in 2015 would say ‘I’m not touching your industry John, because it’s all set up for subsidies and you could be out after the next election, so I’m not going to put my money in solar.’ So, it froze the formation of capital. At the end of the day, what we want is a consumer choice-driven electric industry where the playing field is level with monopolies and free market companies like Sunnova. We say, ‘Let the consumer decide.’ Unfortunately, we have made zero progress since 2015 on this worthy goal, so we need the tax credit until change is made.”
He continued: “I think you can spark innovation with the tax credits and government involvement. But over time it should be that you look at restructuring the industry so that the consumer, the market, chooses the winners and losers – not only the technologies, but the companies. And I think everybody’s better off.”
“I’m not an ‘alternative,’ What I am is energy.”
In essence, Berger is a guy whose outlook is that “energy is energy,” and he wants the markets to work and determine how the energy mix evolves over time. Because of that, he has a problem with solar being labeled as an “alternative” energy source. “I’m not an ‘alternative,’ What I am is energy. Also, don’t keep referring to the oil and gas business as the ‘energy business,’ because there’s a broader definition out there that includes solar, wind etc. Everybody still calls it that, and I tell them, you know, I’m in the energy business too. I just have a different dynamic because I’m growing my business and I’m doing things differently; I have technology that’s different than oil and gas.”
That outlook and his view that energy, regardless of the source, is energy, led Berger to offer an innovative approach the federal government could take to help the suffering domestic oil and gas business. Berger sees proposals to provide loans to keep struggling operators in business as a failing strategy, saying “Are you really going to give loans to a bunch of folks losing money, and expect to get paid back? No bank is going to loan money to them, so why would the federal government?”
Instead, based on the probably correct assumption that the investment tax credit program is not going away anytime soon, he suggests expanding the program to include oil and gas produced in the U.S.: “What we’re proposing is, let’s all be equal in this. We have the investment tax credit, so let’s extend it and give it to the oil and gas guys too. Now, you have to produce all your barrels in the United States – can’t have a bunch of foreign oil barrels getting US tax credits.” He further explained that the credit could apply on a well-by-well basis, so that even international producers would qualify on their domestic production.
Advocates for the oil and gas industry have complained for years about the tilted playing field created by the renewable investment tax credit program and have called for its elimination. Here we have a renewable provider advocating that the best way to level the playing field – and to help out a key domestic business sector that is facing devastation on multiple fronts – is to expand the credit to allow producers of domestic oil and gas access to it.
Every crisis creates a need for innovation and leaders who can think outside of the box. John Berger certainly qualifies in that regard, and the energy sector as a whole could use more leaders like him.