
[Update 1/3/08: CitizenRE has two competitors...]
[Update 2/21/07: Media Articles]
[Update 2/8/07: update about half-way down]
Here is an email I wrote to someone on CitizenRE yesterday that probably says some of the same things as before, but organized differently:
There is a lot of internet website, blog, and marketing materials flying around about CitizenRE, a multi-level marketing company out of Delaware. Unfortunately, most of it is either coming straight from the company or being reiterated by people interested in and theorizing about the concept, but not necessarily having any additional information beyond speculation. Any critical analysis is generally overwhelmed by the hype (and exclamation points!!!!). Why are they marketing it long before they have any product to offer? I have read that they will be making more announcements in the coming weeks, probably about their new manufacturing plant.
The premise is a service oriented, vertically integrated solar installation company on the residential scale – consumers want green electricity and economic value, not to actually own a solar system. CitizenRE intends to build a large solar manufacturing plant and develop a network of salespeople and installers across the country. Rather than buying the panels themselves, consumers will sign a rental contract with the company for little or no money down at a rate equal to or less than their current electricity price in markets where they pay 7 cents/kWh or more. I question their ability to operate in more than a few states with higher incentives and rates but they claim anywhere with net metering and at least that rate.
Example:
Consumer signs a 25 year contract at 9 cents/kWh with CitizenRE, with a waived down-payment because of the long-term contract. Their monthly “rental fee” is equal to the solar system’s production at the contract rate - maybe $30/month for a 3 kW system (actual amount depends on your production amount). If the consumer is paying 10 cents/kWh retail to their utility, they pocket 1 cents/kWh difference as immediate savings ($3+/month) but if it’s equal to their retail cost, they only save on future utility cost increases as a hedge. If rates go up 2 cents/kWh the next year, they save $6+/month. If they install a 3 kW system and it offsets 50% of their annual consumption, they’ve hedged that much against future increases, but not all of their consumption. This is not green pricing because they’re not paying more and they are offsetting their onsite consumption. Consumers can move once and have their system reinstalled elsewhere for free (theoretically) or pass along the contract to the next owner. CitizenRE takes the tax credits, the rebates, potentially low costs from vertical integration, and probably the renewable energy credits (if legal under net metering, which isn’t the case in every state).
This is not actually a new concept. SunEdison, MMA Renewable Ventures, and Solar Power Partners offer this in limited markets (NJ, CA, CO, i.e. incentives) on big commercial systems (500 kW or larger). CitizenRE is jumping two steps by offering it to residential consumers and offering it in all states with net metering, again theoretically.
Everything is theoretical because even though they have reportedly signed up thousands of consumers, their target date to start installations is fall 2007. But, to my knowledge, they haven’t built the 500 MW manufacturing plant, UL listed the panels, CEC certified the panels, trained installers, etc. They are talking about spending $650 million dollars as if that’s not a big deal to get this going – somebody like the Google Foundation has to be behind this to make it work (you heard it here first), but that doesn’t seem to be the case given the poor execution. They haven’t announced where the plant is going to be located yet either and no one in the solar industry has heard of them or this plant. Where are they getting the silicon which is really expensive and scarce right now? Do they have inverter deals or are they building their own? Just this manufacturing issue alone would seem to delay them at least another 2 years.
There are also obviously issues with installing all of these systems too – certified installers, priority in the queue, variable profitability across markets with different electric rates, systems malfunctioning, quality control, inspection, interconnection, delays, etc.
The September install time is extremely naive (or I am severely underestimating something) and consumers will become dissatisfied as things get delayed. If they have a secret manufacturing plant or are partnering with one currently under construction, that changes some things but fall is still too ambitious. If the federal tax credit dies in 2007, their model is dead.
Having said all this about CitizenRE in particular, which I am severely skeptical of, I think this business model is coming over the next 5-10 years. Consumers will be able to effectively reduce their consumption by 20-50% with little or no risk on their part, but they aren’t pocketing all that as savings (remember, the monthly rental fee negates most of the savings, and instead you gain a hedge against future cost increases). What companies do it and when is an open question…If CitizenRE made all these announcements and were saying 2009 or 2010, I wouldn’t be this critical necessarily. But they are putting their marketing horse before the product cart, which is suspicious.
2/8/07 UPDATE: CitizenRE internal information leaked
Apparently some CitizenRE internal information has been leaked by an EcoPreneur (click here to download):
“Citizenre Warnings & Red Flags: Immediate Action Required to Prevent a Complete Loss of Confidence and Severe Negative PR”
1. Overall: “Powur of Citizenre Network Completely Out of Control” (page 2)
- Exponential Demand Growth with Production Supply Constraints
- Training inadequate and tests compromised
- Looming PR Disaster
- Deceptive income claims…with no prospect for any significant return for >95% of ecopreneurs
- Risk of Regulatory Investigations and Sanctions
- Excessive unethical behavior driven by lack of training, skewed incentives, and lack of controls
- Excessive Secrecy & Lack of Verification
2. February Sales Won’t Be Installed Until January 2008 (page 10)
3. Security Deposit (page 16):
- $1,452 (that’s over $14 million for 10,000 systems)
- 13.5% qualify for no money down
4. Big Issues ( page 18, 19, and 61):
- >90% of sales force pitching free installations and cheap solar with expectation of Sept 2007 installations
- Current path is unsustainable and risks severe alienation of customers and the loss of >80% of associates
- It is unethical to encourage associates to make marketing investments in regions where they cannot expect installations in 2007 or the 1st half of 2008?
- If there really is $650 Million Invested, Citizenre’s Executives and Officers Are Accountable to Both the Board of Directors and the Investors
5. Sales Force - EcoPreneurs (page 20 and 51)
- Sales force training completely inadequate and missing
- Get 30,000 associates who have no hope of ever being successful
- Complete lack of renewable energy and solar product knowledge
- Horde of inadequately trained associates polluting internet with Citizenre spam and creating a potential PR nightmare
- Please explain to us why rapidly expanding the size of the network is in the interest of anyone but the handful of
individuals at the top of the pyramid?
- The median associate sells 0 per month, and the average sales per associate is below 1 per month.
6. Who’s making money? (page 35, 43, 44, and 48)
- Possibly greater than 80% of funds go to those at the top
- Very clever marketing but how does operating a pyramid scheme where only the 20 to 50 individuals at the top of the pyramid obtain the vast majority of the cashflow make you any different from the other MLMs?
- Very few Ecopreneurs will ever achieve residual income on thousands of homes, especially given the 2007 and 2008 production constraints. So why are you pushing deceptive view of the opportunity?
- The compensation plan does tell lot about the company – a pyramid is a pyramid…
7. Marketing (page 43, 55, and 57)
- Hype the opportunity but zero discussion of the risks and real returns for anyone that sign up
- If >30% of customers are part of the Powur network, the Federal Trade Commission would sanction Citizenre for being a Pyramid Scheme
- Citizenre has a major snowballing problem with trust and its image