5 August 2018

On today’s show, we learn about investing in the renewable energy market. Our guest is Bryan Birsic and he’s the founder of Wunder Capital. His company invests over $100M in the renewable energy market and has a deep understanding of how the market might progress in the future.

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  • How do renewables do as an investment during a recession?
  • What are the bull and the bear case for investors in renewables?
  • Why are electricity prices so volatile, and why are they sometimes negative?
  • What would happen if we took away all subsidies in renewables?


Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

Preston Pysh  0:02  

On today’s show, we talk to the founder of Wunder Capital, Mr. Bryan Birsic. Bryan’s forte is renewable energy. As you’ll quickly see in this conversation, there are many things about renewable energy that are drastically different from fossil fuels and other types of businesses that we typically talk about. If you’re interested in solar, wind or other forms of energy, you will find this discussion quite interesting. 

For example, you will learn about how energy sometimes has a negative price where the producer actually has to pay someone to remove the power off the grid. You will learn whether renewables are a decent investment during recessions. You will also learn about what might happen if subsidies were diminished in the marketplace. 

Without further delay, we hope you enjoy this very thoughtful conversation with the talented Bryan Birsic. 

Intro  0:53  

You are listening to The Investor’s Podcast where we study the financial markets and read the books that influenced self-made billionaires the most. We keep you informed and prepared for the unexpected.

Preston Pysh  1:13  

Welcome to The Investor’s Podcast. We are thrilled to have everyone with us today. Like we said in the introduction, we have Bryan Birsic with us today. 

Bryan, how are you doing? 

Bryan Birsic  1:23  

I’m doing great this morning. 

Preston Pysh  1:25  

That’s fantastic. Well, we are thrilled to have you here with us. I want to start off by setting the foundation of what you’ve accomplished in a very short amount of time. 

You’ve been in business for five years and in that short amount of time, you have rapidly grown your business. You just recently raised $112 million in venture capital. Talk to us about the struggles and talk to us about the passion that you have for renewables.

Bryan Birsic  2:01  

More than a few struggles along the way, as always. It is interesting that you started the interview around the topic of passion because Wunder Capital actually was born from three serial founders in the technology startup space. 

[They] were all looking for something that took what they believed in changes that they wanted to see. [They were also looking into] problems that they were excited about solving and combined it with a background in technology startups and how to build them, how to raise capital, and how to build scalable software.

There was really an outgrowth of us trying to take our backgrounds and combine it with our passions. We really felt as though as people that are of course a part of the company, have to go out and build the startup. The ability to throw yourself into it and get up on a hard day or do that extra leg of travel or get another note from a venture capitalist with a smile and go right back to work. 

It was so much easier, frankly, for us and just comparing this company to some previous companies that I’ve been involved in. We think it’s just a lot easier when you’re making these hard sacrifices and you know exactly why you’re doing it and be really excited about the impact you can have if you solve the problem you’re going after.

Then from a purely kind of Machiavellian standpoint, and I tell this to VCs sometimes when they’re worried about us being a nonprofit in disguise, that today across hiring and across marketing, having an authentic and compelling story about why what you’re doing above and beyond the economics is exciting, enduring, and impactful. We think this is a huge advantage, irrespective of how you feel about those things. 

Just from a pure, as I said, Machiavellian standpoint, it’s not why we do it, but I do think there’s a good argument to be made. It’s actually a huge economic advantage as well. 

So yes, in a lot of ways Wunder was us taking that passion and combining it with things we knew about. In the case of our CTO, it is solar. In my case, it is software-enabled commercial lending. Then putting all those together with our background and in technology startups. That’s basically where Wunder Capital came from.

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Stig Brodersen  4:20  

Do you think that you would be successful with Wunder if you didn’t have the passion for renewable energy? You hear a lot of these CEOs and some of them are saying it doesn’t really matter if it’s a dishwasher, solar, or water balls, whatever it is, because it’s about building a business. How do you see that?

Bryan Birsic  4:47  

I think that that’s really authentic and true for them. I applaud their focus on not the products that the engine creates, but the engine itself, to use that analogy. I think there are some examples of wonderful companies who are doing a lot of good and whose products have little to do with that impact. 

What I worry about is what happens when that market commoditizes this and your profit margins don’t support a bunch of things that actually aren’t core to what you do. What happens when, to choose one of my favorite companies and entrepreneurs, when Yvon Chouinard, God forbid, eventually passes like we all will? Does Patagonia continue to spend on things that they have to if they are maximizing profit margin? I’m not sure. 

What I like about what we do, frankly, relative to some of those things inherently in our business, we do something that I think we all believe is positive. We finance solar projects. If more solar gets built, because we have great financing packages, that is a positive. There’s really no way to divorce that from whoever is running Wunder.

Warren Buffett has that great quote about building a company and investing as if monkeys are running it because eventually they will or something. Maybe that was Munger. That sounds a little ornery. That sounds more like Munger maybe. 

However, there’s a great Berkshire Hathaway Founder quote along those lines and I think companies that inherently buy what they do as something positive are just a little more sustainable in the sense that as long as we’re financing solar, we think that’s positive. 

There’s not really any way to get around that. Whereas, I do think some of those things are luxury items, so to speak, for a corporation that you can afford when you’re growing or you have a defensible moat. 

If you’re in a cutthroat commodity business, which you kind of have to assume at some point, some markets might look like that. Can you support a lot of these extra expenditures? I don’t know. I worry about that pressure. 

That’s how I think about it, but I love what those folks do. They’re really authentic in making that the focus of where they find purpose and not the thing that they make.

Stig Brodersen  6:59  

We have more than 200 episodes and that’s four years on the podcast. I think this is the first time we talked about investing in renewables. We should probably be ashamed because we talk a lot about fossil fuels. We talk about Tesla more from the fan perspective, but really, we are value investors. That’s kind of like our basics, you know?

Warren Buffett, Charlie Munger that you mentioned before so if this is our starting point, we primarily talked about stocks and bonds. Now, how is investing in solar projects different?

Bryan Birsic  7:32  

I think folks are probably familiar with some of the solar stories, both the positive ones and the negative ones in the public markets. There is plenty written about it. 

So this is a market of course that you can go out to, the public equity markets and the public debt markets in some cases, and kind of participate as an investor. 

The analogy that we like to use is akin to real estate. The reason we use real estate is both real estate and solar projects or solar assets generate cash flow, as long as there’s a customer to consume them. They also don’t have a lot of complexity, not a lot of moving parts and not a lot of braking. Therefore, they tend to last a really long time. 

Good solar panels that are being put up now have 25% to 80% production warranties, which means their warranty to produce 80% of their headline number on day one on year 25. I think that is kind of amazing. 

Anyway, the analogy that we like to make is think of betting on the solar cities, the *inaudible* of the world. Of course, solar cities are now Tesla energy, excuse me. Think of those folks as who’s going to build those homes, right? 

That’s the *inaudible* homes or whoever the comp is in the residential home space. Whereas what we’re trying to do is figure out how to invest in that ongoing cash flow,  which is the rent that house could generate, right?

The solar project equivalent of that is taking as your collateral when you’re doing your lending. Basically the electricity generation and therefore the cash flow, like I say, if you can go sell it, that’s associated with that system. 

We are then betting on things like will they continue to pay? Will that system continue to hold value? Because they can produce power that’s cheaper than the utility power in that area.

We’re not betting or our investors aren’t. In our portfolios, who’s going to take market share, right? Which hardware is going to win out? This is really just about who’s on the other side of this contract and who’s purchasing this power from the start? 

Then [we ask] is that solid in both an asset and economic situation? In a place where power is kind of expensive, solar can offer a discount, let’s say. So those are the sorts of things we’re analyzing. It just has a very different risk profile than betting on which technology is going to win out or which installer is going to take market share?

Preston Pysh  9:58  

Bryan, I’m curious what risks profile can we compare your investments to? Are the cash flows variable or are they fairly consistent? For instance, are the investments more like fixed income bonds, where you have a steady cash flow or is it more equity-like?

Bryan Birsic  10:13  

It’s structured a lot of different ways is the long answer. 

The shorter answer is that there are people structuring it in such a way, in most cases, whereby if those systems, however their finance continues to pay, there is some cash flow stream or waterfall such that people are getting paid out on the other side. 

So it’s generally not this kind of corporate guarantee at some holding company level. It’s generally tied to what is the performance of a given portfolio of projects, whether they’re huge ones out in the desert or lots of small ones that are homes. 

Now, again, that manifests in lots of ways, but I think the reason that we get excited about the comparisons to real estate, which is obviously a really big and liquid financing market compared to solar… You have this dynamic whereby almost irrespective of who’s on the other side of the transaction, you have some kind of asset, that if you did your work well across the portfolio, you should have some nice dynamics as it relates to real estate. 

You’re getting a lot more projected yield than you would get in real estate because solar is a relatively novel asset class.

Stig Brodersen  11:20  

Despite what Elon Musk is doing with his battery pack and all that good stuff, we’re talking about from when the electricity is created until it needs to be consumed. 

Here in the stock market world, we talk about volatility and if a stock drops more than a few percent, it’s extremely volatile. You can see a lot of panic. 

Then whenever you look at the price of power, I used to trade power intraday, so that’s even more volatile. You could see the price change 1,000% within 10 to 20 minutes. You can even talk about negative prices on electricity. 

Can you please explain to us how you, as a salesperson, get a negative price for your goods?

Bryan Birsic  12:13  

Sure. California has been experiencing this a little bit recently, because of solar. Texas has it occasionally because of all the wind in West Texas. 

Effectively, there are costs associated with grounding power and you have to do something with electricity once you generate it. 

If you have meaningfully more supply of electricity than demand, then you actually have to pay someone to do something with it. [It takes a] lot of the time to literally sink it into the ground. There is a market for that and when that market kicks in the price of electricity at the wholesale level, it goes negative. 

Back to the conversation we were just having, it’s a great way to describe probably in a more clear way the difference between avoided cost and sending power back to the grid.

If you’re talking about avoided costs, you’re talking about the avoided cost of retail power. As you know, the retail cost of power is not a liquid market at all. In fact, it is often set on an annual basis between a public utility commission and the utility. 

So the avoided cost of retail power is incredibly consistent. You’ll have a rate card. It might be, for example, an average in the US might be $.10 per kilowatt hour. You might have some kind of demand charge and that does not change. 

When you’re thinking about the avoided cost of power and of that idea of having, “Hey, I used to pay the utility 100 units. Now, I pay them only for 20 units that I might use at night when my solar isn’t producing.”

To your point though, if you look at the wholesale price of power, then what the utilities are dealing with on the wholesale level, both purchasing power from the grid, which is kind of what you’re referring to. However, even just the pricing of the hydrocarbon inputs into their natural gas peaking plants and into their coal plants, etc. that is incredibly powerful. 

When you’re sending power back to the grid in the middle of the day, you’re actually participating in a wildly different market. You’re participating when you’ve avoided power consumption, which as I say, is retail. So that’s actually a great lens through which to explain why I think investors are into solar portfolios. That’s something investors are starting to look into.

Stig Brodersen  14:20  

It’s very interesting speaking to investors, not just investors in a solar project, but also investors in say, fossil fuels. When we start talking about what are the impacts of renewables, someone typically says that you can’t store power. I mean, even though we might walk around with their phone pocket and we are storing a little solar energy, it’s not as effective. It is very little. 

At least, the old truth is that storing is hard. It’s also hard with the power grid. It has a lot of problems with infrastructure of power. It’s not just a question of whether we’re consuming energy. 

Now, we are also creating energy from the sun. There seems to be a mismatch here between the two some structural problems. Could you talk to us about how far we are from solving that problem?

Bryan Birsic  15:14  

It’s a really good question because obviously, we do a lot of things when the sun’s not up. We have never really had cost effective storage, except for the best that we have right now, anecdotally, is pushing water up very large hills. Then releasing it down on turbines when we need the power. That’s our most cost effective storage option right now, which is interesting. 

However, it requires a very unique geography that most places don’t have so it’s not very scalable. The short answer is that you really need to figure out the storage problem, if solar is going to be a complete solution or a near complete solution. 

The somewhat longer answer is that wind and solar, in a really amazing way, complement each other. There’s a great kind of heat map that shows through a 24 hour cycle when wind and solar are produced. It’s almost perfect when solar starts to go down, the wind starts to pick up. Wind blows more at night. As the wind starts to die down, the solar picks up. I do think that wind and solar can complement each other in helpful ways.

You can actually do a decent bit with high voltage transmission lines. Western Europe is the best example of this, but the sun is obviously distributed quite a bit across Europe and North Africa. 

If you can allow those markets to talk to each other, so to speak, you can push around when someone is earlier and later in the day and kind of help a little bit with that. Fundamentally, I think that might get you on maybe only to 75% renewables penetration. I’m not sure if that gets you all the way there.

Stig Brodersen  16:45  

Thanks for that response. It’s very interesting to hear your take on setting the price and talking about renewable energy. It is something that a lot of us really like to talk about and think about, despite all the problems that we have when meeting demand and supply, which is really another issue. We do see more and more renewables. 

Now, a lot of the reasons why we see that, it really also comes from the subsidies that you find in the market. It seems like there are two schools, whenever we’re looking at subsidies. 

You have the economic school that is saying the infant industry argument, right? That you need to support an industry that can’t support itself, especially if it’s good for the environment. There’s typically also a lot of labor involved. So that’s great. 

Then you have the other school of economics who is saying, “Well, if this is not efficient enough. If fossil fuel, for the sake of argument, is just cheaper, it’s a better product, you could store it better… Whatever the argument is, if it’s economically feasible to use fossil fuels, why would you use anything else?” 

What would happen, and I know this is an ungrateful question, but what would happen to the solar industry today, if we just stopped all the subsidies, say in the US?

Bryan Birsic  18:08  

There are quite a few states that would be cost effective without any subsidy. I think the broader question is what kind of confidence can you develop that this will be the solution in the future? 

I think where that confidence lies, for me, is in a curve that looks a lot like Moore’s Law in semiconductors. It is on an algorithmic graph incredibly straight from about 1978 to today. That’s the cost of solar modules, decreasing in price roughly 10% a year for 45 years. 

I think the answer to the question about why we do not stick with fossil fuels, partially because we know eventually they’re going to go away. We would prefer not to go back to the Dark Ages when that painful transition occurs. Hopefully, it’s not so painful if we can scale up renewables. 

However, I think the shorter term answer is that there’s a lot of confidence and a lot of track record does suggest that solar will be dramatically cheaper in a decade. In fact, you’re already seeing solar beat hydrocarbons with regularity at the utility scale in places where it’s quite sunny. That day is already here. 

What we see looking forward on that cost curve, going back to your question about subsidy, is that by 2022, which is when the current subsidy at the federal level is set, stepped down meaningfully. Not actually expired fully, but stepped down meaningfully, by that date. We believe that all 50 states in the US will be cost-effective without any subsidy.

We are within five years, if you continue that cost per per hour analysis of solar standing on its own two feet. If that is to occur, I think there’s a really fair question to be asked about why we seated out our early solar [power] over to China, who has done a spectacular job predicting this growth, getting ahead of it, supporting that industry, and getting to the economies of scale that allow you to win on the cost front.  

Trump’s pretty worthless subsidy aside, US manufacturers are very unlikely to get to at this point. We are likely to be simply consumers of the technology, not the manufacturers.

Preston Pysh  20:27  

When we talk to oil and coal guys, we hear many of them talk about why renewables are going to take a long time and numerous other bearish factors, but I’m kind of curious, how do you see things progressing as we move forward from this point?

Bryan Birsic  20:43  

I think that there’s a lot of power concentrated in not so many hands on the regulatory and on the large utility and large independent power producer fronts that can accelerate or decelerate solar’s adoption and growth, more broadly, renewables’ adoption and growth. 

By keeping what we think is an inevitable transition of the grid from a very fragile, top down, centralized, unidirectional network to a multimodal flexible, bidirectional network. I mean, as a network theorist, if you look at those two models, it’s very clear which is more appealing. 

The only reason we’ve had this centralized and incredibly fragile model is because the economies of scale are burning enormous amounts of coal in the middle of a field, way outside of town, relative to all of us. As funny as it sounds, having little coal facilities on our roofs is pretty compelling when you look at hydrocarbons. 

When you look at solar and moreover, as you look at batteries, they scale down beautifully. They actually kind of have diseconomies of scale almost in the sense that a couple of panels that you buy are relatively cheap. [Then you] throw them up yourself on your roof because it’s a really simple job. It can actually be cheaper on a per kilowatt basis than one of the big commercial systems we do. 

Both of those things scale down beautifully. Iff the costs are relatively similar, what you want is lots and lots of places generating power and that are capable of storing trading and information flow between them. Something that looks a lot more like the Internet of Energy. That is the kind of grid that would accelerate the adoption of renewables and storage. 

By the way, blackouts, there’s no reason for blackouts That’s insane. That’s like a rolling blackout on the internet. Are you kidding me? At one point that if it fails, like 20,000 people don’t have power like that? That’s crazy. That’s not good. 

The kind of grid that we think we’re going to have in 2050 would not have those kinds of characteristics because of its dynamism and multimodal dynamics. 

So the question we think is that the future that we start seeing in 2020? Because folks are kind of thoughtful and progressive in a literal sense, not a political sense, about the new resources we have and reimagining the grid for that purpose. Or do they stick to what they’ve always done in a relatively staid industry for 100 years? I worry it’s the latter. 

Stig Brodersen  23:23  

Interesting. So, Bryan, if you’re sitting there as an investor and you’re considering diversifying into renewables one way or the other as part of your portfolio. Now, you’re sitting here at the top of the market cycle, or at least what we think is the top of the market cycle. We look at stocks which are expensive and bonds which are also expensive. 

How do renewables correlate with stocks and bonds? Do you have any data on that and what happened during the last financial crisis?

Bryan Birsic  23:53  

Yeah, totally. One of the unfortunate things about being a relatively new asset class is that a lot of times, even though there’s some data on the last credit cycle, the portfolios in the industry are kind of apples to oranges, relative to nine years ago. 

Unfortunately, we’re one of those asset classes that is young enough that we haven’t been through a couple. Like I say, talking back to that 10% per year price decrease, you go back to 2009 and some of the portfolio’s that they were working on that might have been built in 2006 or 2007. 

We’re talking about literally something like two to three x more expensive solar. So the financial burden on those systems, relative to what they were producing, was literally two to three x more. It’s then really hard to try to back into and also the volume was literally orders of magnitude less. 

There’s not a lot of great data. It’s more of do you believe this series of positions or pieces of data, and do you believe this will lead to a positive outcome in a credit cycle? I think combined with how much cushion based on adopting a relatively new asset class, your loss rate math is default percentage multiplied by recovery value gross loss rate. 

I would not make the argument that solar is somehow special in that we’re going to have lower default rates than you’d see in other places that have assets behind them, because no one wants to default on something that they’ve already paid off some principal on. 

I do think most of the defaults are going to be not strategic defaults, but actual “I don’t have the cash to come up with it” kind of defaults. If that’s the case, solar shouldn’t have some huge advantage. 

I think where you want to focus your attention is on those recovery values. What is the most recent data we have as to when someone defaults on the original contract, whatever form that took? The financing entity has to take ownership of the system, what kind of recovery has been achieved? 

Solar City published the first public data that I’m aware of in 2014, their first public securitization. They took a leave as a 2011 portfolio and securitized it in 2014. We took it out to the market successfully in three different issuances. They reported on their recovery value. They call it contract reassignment because they have an original contract, and then they reassigned it to a new homeowner, if it’s broken the first time, but they reported $0.81 on the dollar recovery with these assets, which is fairly spectacular. 

In my opinion, if you have 10% default raise, which would be relatively high on any kind of credit worthy portfolio, and you’re only seeing 2% loss rates, because you’re getting $.80 on the dollar back, that’s a very strong place to be in the next credit cycle. 

This goes back to if you’re going to dig into this space, I would suggest that you really understand what these portfolio values are and where it comes from. Is it behind the meter? Is it avoided cost? 

Did they think of building this portfolio with that asset in mind, doing things like not putting systems on really old buildings that are crumbling and who someone might not move into? Not putting systems on special real estate that are a lot harder to fill like a brewery than general real estate, or commercial office space, that is easy to fill? 

So I think these are the kinds of questions that investors should be interested in if they’re interested in solar. The reason I think you get excited about solar is because you believe, going back to that real estate comp, that there’s this asset sitting behind it. 

It has some really nice characteristics and some really good early data that in this next credit cycle, we think and project will benefit from a flight to quality and not be hurt by it. At least we think that’s what the fundamentals will show.

Stig Brodersen  27:35  

If you look at something like renewables, if I’m looking at energy, it seems like the demand would still be somewhat stable and please correct me if I’m wrong. I’m not talking really during the day because you have peak hours, when people are getting up, going to work, when they come back, heat up the stove, and turn on the TV… You have your peaks during the day. 

However, if you look at this like in the grand scheme of things is, one of the moving parts really on the demand side and what’s happening to the supply side, say that if we see a crash, then you will also see a crash on the oil price that might be more sensitive to this, which will then, in relative terms, make solar more interesting than renewables. 

Can you talk us through like your train of thought in the demand side and the supply side? Sorry, I guess that’s a long-winded question here.

Bryan Birsic  28:28  

On the demand side, you’re obviously right that there’s some distribution through the day. People leave their homes, if there’s not people staying at home, then that goes down, but then they light up 30 minutes later at their office. 

So that kind of bidirectional network that I described before should be able to fairly easily handle kind of pushing power around to where people are. We all need to be cooled and kind of fed. Occasionally, we wash our hands and all the good stuff has light wherever we are. 

They’re actually across the whole grid, as I’m sure, from the wholesale markets. There’s not a wild amount of variation besides that driven by kind of weather and hydrocarbons deal with as well. That’s why we have natural gas and peaking plants that have to spin up. 

I think on the demand side, what’s interesting and somewhat unprecedented is, for the first time ever, GDP growth and electricity consumption have been divorced. This is obviously going to the macro level. 

You have seen energy efficiency take a bit of a cut into the growth of total electricity demand. We think that will roughly continue. We do think the low hanging fruit on energy efficiency has already been had. Therefore, in each incremental decrease, there’s probably some kind of flattening of the returns. Those kinds of spins. 

The other huge question, and this definitely also gets to what kind of strain there’s going to be on the grid at different times of day, do electric vehicles penetrate in such a way that you see the energy consumption that’s currently focused on oil transition to the electricity grid? 

If you look at just pure energy units, transportations roughly the size of the entire electricity grid… So moving in a significant way onto the grid would create a need for literally an unprecedented amount of new electricity capacity build, that we haven’t seen since the early days of the industry and people electrifying various industries. I think that is a huge lever as to what the grid looks like and the demand side looks like in over the next 10 to 20 years. 

You mentioned Tesla earlier but we’ve seen some pretty compelling signs in the last two to three years from other automakers that they think the industry is going electric over a 10 to 20 year timeframe. We think there’s some real possibility there. 

It’s also worth pointing out that these EVs (electric vehicles) are batteries on wheels. When they are sitting in different places, you can use them as storage in a way that incrementally people aren’t actually paying for, which is to say if you go and buy a Tesla Model 3, when they finally make the base model for $36,000, you’re not pricing into that the value of a battery in the grids. For example, midday usage while you’re parked at the office and you opt into some program. 

There’s also this really interesting way in which EVs might change the dynamics of battery economics because it is kind of two-for-one on the battery. These batteries show up so to speak, because people are buying EVs, not because they need to be on the grid, but you can tap them into the grid. That’s the demand side.

On the supply side, there are I think more and more signs that coal is going away. Natural gas has put a little bit of pricing pressure. Frankly, even the non-climate change environmental dynamics have gotten kind of more and more challenging. On price, they’re simply not competing. 

With an asset that might last 35 or 40 years, I think people are increasingly uncomfortable, including big insurance companies that have recently made announcements to this effect. But they’re uncomfortable betting that there won’t be some kind of carbon tax or there won’t be some kind of additional price on coal in such a way that it’s not economically competitive. The trend lines on coal are I think the writing’s on the wall, that it’s not going to be a huge part of the future.

Preston Pysh  32:13  

Bryan, when we think about the energy market, we all know it’s very cyclical. For Big Oil, they saw enormous price swings back in the 2008 to 2009 timeframe. Then again, in the 2014 to 2015 timeframe. From an R&D perspective, this can be really difficult stuff for making investment decisions. So since you’re an investor in this space, how do you think through those factors, and just kind of what’s your thought process with respect to that?

Bryan Birsic  32:44  

Again, going back to retail versus the wholesale dynamic, it’s worth understanding that if you’re a solo researcher, some of *inaudible* controls R&D. All of the distributed solar, both the very large residential market and the growing commercial market, their pricing and their competitiveness is going to be based on retail electricity prices, not based on what’s going on in the wholesale market. It doesn’t matter what’s going on with coal, natural gas, or oil. It’s $.12 or whatever it might be in Wisconsin. 

If you make an investment from an R&D perspective that contributes towards distributed solar, the likelihood that that you know, and again, it’s the most boring graph of all time, retail electricity pricing goes up 2% to 4% a year… The bet you’re making that in 5 years or 10 years, it’s not going to be below $.12 has historically been a good bet. 

Therefore, I think it is worth separating something like wind that only operates at the utility scale level and is enormously impacted by swings, really more in coal and natural gas than oil. However, there’s some correlation between the hydrocarbons from a trading perspective, although that seems to be less coupled than it used to be. I think partially because of this dynamic I’m describing which is oil is really a transportation fuel. 

There’s not much oil being used to create electricity, setting aside places like Hawaii. Natural gas and coal are really the prices you’re looking to. So something like wind or utility scale solar, right? The folks are going out and building these enormous systems in the desert, they’re very much impacted by those prices. 

The other thing I’ll say, and you’ll obviously understand this, given your background, volatility has a cost. One of the great things about these solar systems and part of the reason I think they’re winning some of these bids is because there are not input costs once you build these systems

The sun is going to show up every morning for you and you’re not going to have to send it any cash to get out of bed. Whereas, your input costs with coal and natural gas are obviously, as you say, can vary wildly and really change over time. 

Knowing that I’ve got this big upfront cost, I’m going to build this solar system, but then I have no input costs. I can model this in a really predictable way. At least this relates to the generation of electricity. I don’t have to worry about spikes in coal costs, violence or political unrest in places that inconveniently have a lot of hydrocarbons, which there’s obviously this very inconvenient correlation between not particularly well-run governments and places with hydrocarbons. 

I think there are a couple ways to slice that up, but I do think solar benefits enormously from the fact that we get to bet on retail prices being consistent, and at least that portion of the market will be there for you, so to speak, if you’re a technology investor or an R&D director.

Stig Brodersen  35:20  

Bryan, you’re clearly a wealth of information when it comes to not only renewables, but also investing in renewables. What kind of resource can you recommend if the listener sitting out there wants to learn more? 

They might not be interested in specific investment for them right here and right now, but more to really understand the sector as a whole so when they will eventually invest in something, they will have a deeper understanding of what is really the underlying mechanisms of what they’re investing in.

Bryan Birsic  35:52  

Yeah, absolutely. I’m always a fan of nerding out and going deep in an industry and developing some instincts of my own and some intuitions before getting there. So, thanks for the prompts. I think it’s a great question. 

I’m a big fan of podcasts. Greentech Media actually has a great one called Energy Gang by this guy named Steven Lacey. A couple of other good ones I really like is called Energy Transition, coming out of Rocky Mountain Institute. 

I would look to places like Rocky Mountain Institute and NGOs that are leading some of this work. That’s kind of the universe of folks that I’d probably get onto a distribution list or subscribe to the podcast. I don’t think you’d miss anything big happening and probably get a really good sense of the industry if you followed all those.

Stig Brodersen  36:37  

All right, that’s definitely noted. We’ll make sure to embed those links in the show notes. 

Bryan, I would definitely also like to give you a chance to talk a bit more about yourself and where people can know more about you and your company Wunder Capital.

Bryan Birsic  36:54  

As I mentioned, I’m a repeat founder. I spent four years in venture capital investing into the space of software *inaudible* lending. What we really think of ourselves as doing at Wunder is bringing a lot of software to an industry that we didn’t see a lot of software deployed into, which is getting really compelling financing offers quickly and efficiently to as many businesses, municipalities, schools, hospitals as we can around the country. So that’s what we do. 

That’s how we try to accelerate the clean energy industry and bend down the carbon curve. I am fairly active on Twitter at @birsic. We have a lot of ways to get in touch with us on the site. So come check us out at wundercapital.com, if you’re interested in either putting up solar or investing in one of our solar funds. Besides that, folks can reach out to me, really anywhere they can find me online. I’m on LinkedIn and all the typical places.

Preston Pysh  37:47  

Bryan, thanks so much for taking time out of your day to share your knowledge with our community. I know I learned a ton. I’m sure other people out there learned a ton too. Stig and I just thoroughly enjoyed this conversation. Thanks so much for coming on the show.

Bryan Birsic  38:01  

Thank you. I really appreciate it.

Stig Brodersen  38:03  

All right guys. That was all that Preston and I had for this week’s episode of The Investor’s Podcast. We will see each other again next week. 

Outro  38:10  

Thanks for listening to TIP. To access the show notes, courses or forums, go to theinvestorspodcast.com. To get your questions played on the show, go to asktheinvestors.com and win a free subscription to any of our courses on TIP Academy. 

This show is for entertainment purposes only. Before making investment decisions, consult a professional. This show is copyrighted by the TIP Network. Written permission must be granted before syndication or rebroadcasting. 


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