Educate or Die: The Harsh Truth About Solar’s Next Chapter with Erik Holvik

Herve Billiet (00:00) Hey Erik, welcome to the podcast What Solar Installers Need to Know. How are doing? Erik Holvik (00:05) I'm doing well. Thanks for having me. Herve Billiet (00:07) Erik, you've been five years with EnergySage. You're the Director of Corporate Development and Strategy. That's an amazing title. Would you mind explaining to our audience what you do all day and what EnergySage, explain to us what you guys do. Erik Holvik (00:22) Yeah, most definitely. I think before that would like to take a little step further back of what I started at EnergySage and where I am now to give a little bit more context. So I came in and stepped in as Business Development Manager at EnergySage, working with contractors across the country. I was able to build that team to a team of seven at the time and manage that team and worked. I've probably talked with 800 different contractors across the country. In my time at EnergySage on the business development team, on the commercial industrial side, on community solar, residential solar, working with electricians, HVAC contractors, and really hearing their opinions, what their needs are, what they're looking to do. And I still keep in touch with a lot of them today, not 800 of them, but, I have some good relationships still. And what I do now is very much on the strategic side of things. So working with strategic partners to help better improve EnergySage's experience and what we provide to our contractor base but also to our consumer base. Herve Billiet (01:21) Okay. And what does EnergySage provide to contractors? Erik Holvik (01:26) Great question. So EnergySage is very much the kayak version of electrification. And what I mean by that is a homeowner can come onto EnergySage at no cost, compare quotes side by side, and see what the best option is for them. And what it means for contractors is there's a transparent portal for them to show competitive pricing. It doesn't have to be the cheapest, but competitive pricing for that homeowner to be able to compare and really see what works and what doesn't work. EnergySage also has energy advisories that homeowners can call and help advise them throughout their process. They're not pushy sales. They're very much, let me help educate you on what solar means in your specific area and let's help figure out what the right contractor is that fits your needs. So very much how a matchmaker works, but we're expanding into storage, EV chargers, heat pumps the whole electrification gambit and our energy advisors play a very integral role in all of that, which is a really nice value. Herve Billiet (02:25) And of those 800 installers or contractors you've been in contact with, are most companies starting to do every one of the services that you mentioned? Or the PV and battery companies stay like that? Or is everybody doing EV chargers, smart thermostat, like just adding to the mix? Erik Holvik (02:42) It's a little bit of the wild west at the moment, where you'll see some contractors that go straight into roofing. You see some contractors that are trying to get into heat pumps, some contractors that are leaning into smart panels and really leaning into storage, especially if they don't sub out their electrical work and have an in-house electrician makes a lot of those electrical products. a lot easier rather than subbing out that work. And I've seen other contractors that are truly just building a referral network, right? If working with an HVAC company, a roofer and an electrician in their area to very much create that web of referrals that's solar, when it is the right solution, someone else is referring them to them. So like, again, I've seen the whole gambit of what contractors are trying to do right now. I would say mainly a lot of them are trying to lean into TPO, third party ownership, which is leases, power purchase agreements, prepaid power purchase agreements, and figure out navigating those waters of who's the right person to work with, what does this look like as a whole, because that's a product where it's still alive until the end of 2027 and it's not dead yet. Herve Billiet (03:48) So about diversification, let's first speak about what you've seen going well, and then let's speed about a crash and burn where you've probably seen contractors try something and it didn't work. So can you help solar COS and managers listening to our podcast? Yeah, first, what are some lessons learned, what you've seen worked well, and then what they shouldn't be doing? Erik Holvik (04:11) Yeah. So we opened up our heat pump marketplace back in 2022. And the expectation was that solar installers were going to get into heat pumps and that that cross was going to happen. That did not happen at all. We have to go and we have great relationships with HVAC contractors, manufacturers, and it's been great, but there's no real crossover there. You have a subset of electricians, roofers, solar contractors, plumbers, and roofers, right? Like you kind of, everyone has their own segments. And really what's happening right now is the solar installers are the ones that are really by this big, beautiful bill that was signed with ones that are hurting at the moment. And it's very much everyone's picking their own directions, but I've seen a lot of contractors do is get into roofing. And I've seen a lot of people be very successful at that. I've also seen some roofing companies get into solar and being able to cross-sell and offer that as well. But the roofing is, it's a very saturated market already. There's a lot of roofers out there. All of these landscapes are competitive, right? So what you really have to do is look at what your inventory is and what have you sold in the past or referred in the past that has worked well and then build your business off of that. I've also seen folks leaning into storage. I mean, you look at storage only is for leases is what extended till 2032, 2035. It's one of those that's still around. You see like light reach coming out with their storage only TPO. You see other partners that are looking to come out with that. Like that is a viable option to get into the VPP world. So I would say like a couple things. HVAC is a pretty tough crossover, storage, smart panels, EV chargers. That's a pretty easier transition for a lot of these contractors, but also taking another approach and getting into the roofing side of things where you're already on someone's roof. You might as well just replace the shingles at that point. Again, I know it's way more complicated than that, but those are kind of easier pathways for, and what I've seen a lot of contractors do. And then also get into the prepaid lease side of things as that's continued to take off recently. Herve Billiet (06:23) Well, the prepaid lease, is it too good to be true? Usually when something is too good to be true, it's kind of raises some eyebrows. I'll give you an example. We have a prepaid lease, the homeowner receives that 30% discount instead of having to wait a year and then fill out some tax paperwork, they get a 30% discount at day one. So actually it's a benefit to them. It's it's great. It's even better than having to file paperwork. And the EPC, some of them have a better installation cost or revenue, depending on who you are. Like you install it at a higher price. So that's also a benefit to them. It's better for the homeowner. It's better for the EPC. So basically it's better than before. So is this too good to be true or not? Is this legal? Erik Holvik (07:10) So it is legal, right? So transferability with the IRS can happen after six years. And essentially, and again, someone chime in if I'm wrong here, but the way it works is the energy that you're producing after those six years offsets with the cash that you already paid upfront that you're able to do that transfer. And yes, it is legal, but what I have seen contractors do, and this I don't think is legal, is telling the customer to set up their own LLC and saying, save your own LLC and great, use, qualify for 48E, the commercial tax credit, and you get 30% off and you get to own all of that. That, don't do that. That's not the path forward. Don't market that. Don't move forward with that whatsoever. It's very much, but the prepaid lease, yes, it is legal. I think there's a lot, like you look at a prepaid lease agreement or a lease agreement and it's like a 40, 50 page document. Like there's a lot of words on paper there that like you need to unpack and I haven't dug into all of it, but it is a viable option. You can do it and you can own the system after six years and still have 30% off your system. Like that, as I know it to today is true and is a great product. I've seen HDM grow tenfold in the last two to three months. I see other companies that are trying to figure out what, how to offer prepaid lease. SunRun's coming back with their prepaid lease. Like Tesla is coming back like all of these players are starting to come back with it because they know that people want to own their system. People want to pay upfront cash, but still want that tax credit. And that's a workaround for it. Herve Billiet (08:57) Yeah, I keep hearing the ASDM name being turned around. Yeah, massive growth. But I think the point is for Solar Installers to keep searching for solutions and alternatives and pivot and try something else. Now, going back to what you mentioned about starting a different division department or sister company, roofing is clearly one. Why do you think several years ago in 2022, Erik Holvik (09:00) Yeah. Yes. Herve Billiet (09:22) What was the reason that you started a heat pump product at an Energy Sage? What were the decisions? What were the telltale signs at that time that make you do that? Erik Holvik (09:31) I think we're a little bit ahead of where the industry and where the market was, if we're being completely honest. I think the way to look at solar and the solar industry as a whole is solar is like the icing on the cake, right? You need to electrify your home and then get solar to offset all of your electrical appliances to truly save money on your overall costs of your energy bill month over month. Right? So what we were trying to get into is really create that lifetime value or life cycle marketing of that customer. Come in, get a heat pump, come and get an EV charger, come and get a smart thermostat, smart power, like whatever that may be. And then let's look at your bill down the road and solar is a viable option for you. Look how much your electric bill has increased. Great. Cool. Now let's decrease that, right? So that was kind of the thinking behind it of why we want to get into it. What we have seen now is heat pumps has continued to grow year over year and continues to grow, which I'm really excited about. You see HVAC contractors all the time, instead of just pitching furnaces and replacing a furnace have you looked into a heat pump, right? And going down that path. And MiniSplits have been great. It's been a great product that has introduced the United States. You see leasing companies that are entering into the space on the heat pump side of things too, which has been really fascinating. I did some research. Leasing's pretty big in Canada and in the UK where people lease their systems instead of own their systems. And honestly, if you look into it, makes a lot of sense because you have the service cost baked into it. So anyways, that's a rabbit hole, but I do believe heat pumps are growing in this space and it's worth either working with someone or figuring it out by yourself because that total addressable market in the United States for residential homes is huge. and the incentives are there, utilities want to push it because that means more people are using their electrical energy rather than oil or gas. Utilities are thrilled about heat pumps. They're less thrilled about solar because they're not making as much money. Herve Billiet (11:41) Yeah. And my story about heat pumps is that at a time where Ipsun, my solo company was running, there was a management team in place. I was one day kind of listening on my chair, wondering like, what the heck am going to do today? I have nothing to do, really nothing to do. And I started doing two things at the same time. One was building the first version of Sunvoy. And then the other piece is like looking into heat pumps. So I did like an entire business analysis about Erik Holvik (11:54) Yeah. Herve Billiet (12:08) heat pumps and the first idea was that well it's a technical sale. When you do solar you have it's a technical sale with batteries so can people that sell solar and batteries also do a technical sale with heat pumps and the other thing you need is like crews, warehouse, engineers, design and and electricians and so on like yeah we have all of that so we could do this so looking into it more I was not by myself There are other solar companies that already fully do this revision with a fortunate I was on a previous podcast spoke about this. So they do this for years. And the breakthrough to me was like, if I take over heating in a house, I need to be on call 24/7. That's a big responsibility. Fortunat told me that like, why don't you do additional heating and cooling? You don't have to do the entire main home. You could just have an additional source, keep another one as a backup for example, so complementary heating and cooling. I installed a few systems myself. I passed my licenses. And what I realized is that it's a very mature industry. The parts and brands, like the part numbers are like this massive amount of parts everywhere. And you cannot just ask an electrician that's installing solar, by the way, just here is the installation manual. I need you to go do this. Erik Holvik (13:16) Yes. Herve Billiet (13:28) It is just not the same. Those skills don't easily transfer. Similar where you have an electrician, you know, once they get a certain age, it's harder to work in the field, they need to transition in the office. That transition is not easy. Similar transition to start doing HVAC. But you can hire people that have done HVAC for like 10, 20 years easily. So bring them in house. And that's what I would have done. But then I couldn't do everything at once. But I went down the path of heat pumps because it's a super, super cool technology. And there is a real demand for it. Selling like a dirt cheap gas furnace or like a more expensive heat pump system that is a bit newer. They don't have as much experience with it. They don't have all the parts in the warehouse because it's kind of new. Erik Holvik (13:59) Mm-hmm. Herve Billiet (14:17) Yeah, they just go with the low. I mean, if you're a salesperson, it's always easier to sell them the low price items. So I think the age of industry has a hard time adjusting to that. Erik Holvik (14:27) You also have to understand they are generational companies. Heating and cooling in the United States has been a thing for decades. Heating and cooling is a need, it is not a want. Solar is a want, not a need. There's a big difference there in how you sell. However, we're getting to the third generation of these companies where... Herve Billiet (14:40) So where is the bond? Erik Holvik (14:49) a lot of these folks where it's the grandson or the granddaughter or the grandkid of the founder of this HVAC company that services five zip codes is now interested in exploring heat pumps and pushing that further. So like you're starting to see a shift in the industry, especially in the HVAC industry of people more adopting heat pumps as a whole, like five years ago, heat pumps mini splits, like they're still pretty new. Like you go and ask anyone what a heat pump is and they're like, I have no idea. Right? Like your refrigerator is a heat pump, right? Like heat pumps are just one it's branded terribly. Mindset is really shifting for a lot of folks where you can say a mini split and most people walking along the street will understand what you're talking about. Herve Billiet (15:35) Well, in the morning, at least with my son driving into school now. And this morning was about the difference between temperature and heat. And so talking about heat pumps, it pumps the heat from one place to another. AC's the cooling. The reverse of AC is a heat pump just in reverse. So no, it's fascinating technology. It's great. Going back to the different items. You have roofing, HVAC. I think there's always one that we keep missing. I think it's insulation. If you're gonna do an energy, if you're gonna be an energy consultant, I think one of the first things you should be doing is insulation. Maybe after the roofing company went by and walked into your attic and installed it, then add your insulation. Erik Holvik (16:04) Yeah. ⁓ But look, if you're going door to door and you're knocking and you're trying to sell solar, why not sell and do a home energy audit for the customer? Right? Like why not get into that space? I think you're totally right. Let me do an audit. Let's do installation first. Great. Cool. Now we've fully insulated your home. It's efficient on like retaining heat and cold. Let's say out of MiniSplit, right? your utility bill went up. Great. Cool. Like now all of a sudden you're building on top of it, right? Like it's, let me advise you and let me walk you through this process rather than let me tell you what you need. Right. And I think we, as an industry need to one diversify what you were talking about, but also not be pushy sales. Be, let me hold your hand and walk alongside you on this electrification journey. And I will help you along the way or connect you with someone who can also help you and create that referral network. Who will just pass it right back to you. Like referrals are going to be big now more than ever before. Demand is crashing in solar. it is. And EnergySage can throw installers a lifeline, like demand is going to crash in 2026. Herve Billiet (17:33) Why do you say that? Because demand, I think, if it's not just about policy, lot of people don't even follow the policies or they know there's like some subsidy of 30 something percent, but they don't know all the details. It's when they contacted installer that they learn about all the, I think that the policy intricacies, but don't you also have the electrification of pretty much everything? Like, and that also... drives demand for electricity and then you want to have electricity at a cheapest rate, which is then solar. So, and before the call, we also spoke about how AI may also influence demand of electricity and price. do you really think demand for solar is going to crash or not? Erik Holvik (18:14) 100% I think and the reason why I say that is look my utility bill can increase by 50% and What it goes up 50 bucks a month 75 bucks a month, right? again, I live in a smaller home, but like and that's different for other folks, but like Utility rates typically have an escalation rate of 2 to 5% year over year. What we're expecting is 20 to 40% rate in the next like two years. That's a pretty big bump. However, some people just don't even realize. Like they're still just paying their bill, right? And like that, that's just business as normal for them. And then someone comes in and says, look, I can sell you this, but If you want to own your system, you have to pay this. And if you want to lease it, this is monthly, but like you don't own it for six plus years. Like it's, I think demand will somewhat shrink a little bit because there's less people investing in the solar industry to help increase that demand. As the market contracts, the solar industry, right? We're expecting that to go down 30%. And I think large, medium and small companies are all going to get hit by this. And when that demand contracts, that's less people that are reaching out to homeowners, less people that are educating homeowners, right? You might see sales organizations that are like, I'm out of here. I'm going into the roofing space where I'm going into another space, right? Like there's less buzz going around about the solar industry and we're going to continue to see that. And that's why I say demand will go down, but the cost to actually acquire and sell that customer is going to go up, because it is now a harder sell. It's not here, pay upfront cash or get a great loan from your local credit union and you get a 30% tax credit. It is now, you want to own your system? Great, you have to pay full price. There's not a lot I can do here, but let me show you this prepaid lease and this other lease that's 50 page contract, and you need to climb up over that hill. That's why I'm saying demand will go down because the market's contracting because sales is going to be harder. When sales is harder, people leave the space or shut their doors, which then... decreases the buzz on the solar side of things, which gets people less and less interested. Because if I look at my utility bill, the first thing that's going to my mind is not solar. It's just, well, I have to pay this before they shut off the lights. Right? Like that's kind of the thought process behind it. It's people aren't thinking the way that you and I are thinking of. see solar array and you're like, that's a great array over there. want solar to my home. Right? those thoughts don't cross everybody's minds. We're not like the normal people that are walking across the streets every day. Like we're in this industry and we have a bias and we need to drop our bias, meet the homeowners where they are and figure out how to walk alongside them to educate them throughout this process. Herve Billiet (21:10) I had a rather large installer and their sales January of 2025 was way higher than they expected. And then February was again way higher, March way higher. So I reached out to them like, what's going on? What do you guys do to have such massive increase in sales? At the time was like, is it post policy related? What's going on? And it's like, no, a lot of people's utility bills hit $500 a month. Once it hits $500 a month, that auto pay that they don't really care about, you're getting paid, suddenly they start noticing it. And they place a call to the solar company. Like, I have a high utility bill. Can you do something about it? So I think you're a hundred percent right. We're biased, but I think What the buy is, I think, from solar installers is that we are too worried about policy. And I think a lot of homeowners, they don't know about a policy. They may be like, oh, this is some subsidy. Well, in the past, it's like, yeah, 30%. Now you say, well, no, there was no subsidy. Let me show you your payback time and be more energy independent with the grid. Aging being more difficult. I spoke with a Spanish solar installer, also our client, that they kind of want to have it as an insurance plan. You think the grid is going to get really expensive? Like, this is a way to insure yourself against that price increase. So we'll see in one year from now. Erik, why don't we talk again one year from now, seeing what happened. Like we don't have a crystal ball. Is it a man going to actually crash? Erik Holvik (22:50) No one has a crystal ball. Everyone thinks that they do and it's really foggy and not clear. And no one actually knows what's going to happen next year. Right? Like it is very much, when I said the Wild West, it is the Wild West here. it's everyone saying the market is planning to contract around 30%. I'd love to be proven wrong. I would love for this industry to grow. I love this industry. I'm here in this industry. I want to see this work. It is an uphill battle, but if we can sell the right way, we can educate the customers and we can be transparent enough, that is what will grow this industry. If we're just trying to get a quick buck and cash out, that is what will continue to make this industry contract. Herve Billiet (23:33) Yeah. You track a lot of the numbers of our industry through your intelligence report. Once a quarter, believe, EnergySage brings that report out. I think it's a valuable report. Can you tell us how you generate that report? Is every market in the US represented? Who's creating that? Erik Holvik (23:52) Yeah, I think one, it's so it comes out twice a year. And I would very much again, you can download that report for free. You don't have to pay for it. It's energysage.com/data. Go through and look through it. We explain a lot of different numbers in there of what we're seeing. It is across the industry and across the market as a whole. So we partner with manufacturers who help distribute it to their partners. Very much making sure that it's touching everybody and everyone's getting a chance to really dive into this survey and really give us their feedback of where they are in the market. So I would say it's, it's a very good glimpse of what is happening in the industry. we all know what's happening with Sunrun, right? So I would take Sunrun out of that, but like we see what's happening with Sunrun. We all read their quarterly earnings reports and what's happening there. like a lot of the publicly traded companies aren't really going in participating in all of this. Again, not all of them, but we were seeing TPO continue to increase, right? We were seeing that prices remain very low, but we saw storage increase, right? So we have a pretty good sense of what's happening. And the way I view EnergySage has been really great, actually, in the sense of what we see that happens on our platform. If the data shifts... We usually see that happen in real life six months later, which is pretty fun to just be on the sidelines and watch it. Like we saw when Solarge was dominating the market, we saw EnergySage start to take away and chip away at that market share. Like six months later. So it's what we present and what we put out very much is a leading indicator of what happens in the market. And as we expand our TPO offering, again, third party ownership, as we expand that offering and making sure we're accurately showing that, our data will get even better, which we're really thrilled about. Herve Billiet (25:37) But is a big difference between having a founder lead the company compared to be part of a larger entity. Erik Holvik (25:43) Yeah, it's what we have now that we didn't have before is unlimited resources, which is very nice to have. And we very much have to. hunker down and say these are our forecasts and these are the numbers that we are looking to hit and this is how we get there. We have to be very structured with that approach and it has been very good for our business of bringing that through. And what I would say is like, look, we were doing that before, but we loved good sidequests. We love going down a rabbit hole and saying, about this? What about this? And our investors back then were like, yeah, sure, go for it. Right. now it's like, why? Like explain your reasoning of why. I was here pre-acquisition and post-acquisition. So both have been great. They have their pros and cons. Don't get me wrong, but like it is very much more of a structured play of how we approach everything and very much let's look at it from a 10,000 foot view and then let's bake out the details. Herve Billiet (26:42) You also said, Angie Sage is there to help contractors. And so I was wondering what keeps you up at night? What are the things that you are thinking about? Maybe some hurdles you want to jump over or like as the director of corporate development and strategy, what are you strategizing about? Do you have some, can you enlighten us about that? Erik Holvik (27:01) I have lost so much sleep over TPO in the last six months. It has been unbelievable. I really don't want history to repeat itself. I'm like crossing my fingers that it doesn't happen. Like what happened with solar city? This has happened. And we need to learn from those mistakes. And my fear is 2026 rolls around and we see people getting greedy and spending more than they have and draining their capital and delaying payments. It affects the small guys, affects the big guys, it affects everyone. And when those delayed payments go out or people shut their doors, the industry starts to crumble. And that has got me up at night is who are the right partners? What does this look like? And doing due diligence to make sure that like, I am checking the pulse of everything that is happening on EnergySage with financing that we're doing right by our customers and by our contractors. Cause the last thing that I want to see is a customer to go solar on EnergySage. That TPO provider go out of business or file for chapter 11 bankruptcy six months later, that contractor shuts their doors because they were relying on those payments and that customer comes back to us saying, help me, and we don't own the system so there's not a lot we can do. That to me is a nightmare situation that we are very much monitoring and making sure that we are educating contractors on these are the right choices. We're educating consumers and we're working with all these financing providers as well to make sure we're doing right by everybody. So that's what keeps me up at night. is just the history of the industry and hoping that we learn from our mistakes. Herve Billiet (28:35) I think those are some nice words, Erik. So we spoke about diversification, what Solar Installers can do. We spoke about if demand for solar is going to go up and down, we'll see in a year from now where we stand. I wish every solar installer listening to this good luck. And yeah, let's talk about it in a year from now and do this all over again. Erik Holvik (28:54) I look forward to it. I hope I'm wrong. I hope demand goes up and the industry grows and we're all winning from it. But we'll check in a year from now. We got it. Herve Billiet (29:02) Thanks Erik.