'A new kind of utility will dominate the market within 10 years'

5 MINUTES with Philipp Schröder, managing director of Sonnen

Sonnen managing director Philipp Schröder spoke to Recharge about the solar storage specialist's plans to transform itself into a 'utility of the future' that offers energy services connecting individual storage systems to a kind of swarm that can provide system functions and much cheaper power prices.

After Chinese energy company Envision recently took a stake in Sonnen, the German company is now also contemplating holding an IPO within the next two years  – but only if it can remain independent.

How important is Envision taking a stake in Sonnen for your expansion?

It has been extremely important for Sonnen to stay independent so we can focus the management and our resources to the business plan. The business plan is to build the utility of the future. We have not only energy storage, but also energy services combined in one compelling package.

The key reason why Envision is important for us is that it is a company that invested on a high evaluation that is completely in line with our business plan.

We want to remain independent in the next 24 months to execute our business strategy. Envision is a partner that believes in our strategy, and can ensure and help us to remain independent.

In what timeframe do you want to decide whether you will carry out an IPO?

An IPO is for us an instrument to acquire money, to deliver on our vision, which is to build the utility of the future. If this instrument helps us to remain independent and to get there, we will use it.

But it’s not that we see a necessity of an IPO just for the sake of it. Since this is an option on the table, we are at the moment considering it. It might be that within the next 24 months you would see us IPO.

But if we don’t remain independent, we can’t deliver on our vision. If we can reach that goal with private investors, financial investors, then this might be just as feasible as an IPO.

"Tesla's business model is to build a battery box that is cheap. We are about interconnecting those boxes"
Philipp Schröder

Could you explain how the Sonnen Community platform works? How many people are participating on it?

We believe that the price per kWh is not the essential factor for competitiveness in energy storage in the future.

Our strategy is not to have the cheapest available price in kWh, but to utilise those kWh best, so that you have the highest usage and utilisation for your system possible. This will essentially lower the cost much more than a 30% decrease in hardware cost.

Coming from that approach, the Sonnen Community is allowing you to share excess electricity that you produce but can’t use with people within the community. So electricity that you don’t need for your home can be shared with others who have storage at their home, or who have a need of surplus electricity.

What is the difference to net metering?

Net metering is a regulated function, and if you are allowed to bring in electricity at the same price, you could bring it back out. In a market where you have net metering you would not need our product, because it’s free to feed into the grid.

But in a market like Europe, where it’s not free to feed into the grid, it’s kind of a virtual net metering. We allow our customers on a very price competitive range to exchange electricity that they don’t need or that they actually need because they don’t have enough.

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What potential do you see for the community? Could this disrupt our power distribution system as we know it, and if so, why?

We absolutely believe that these kinds of business models will disrupt the energy sector. We will move from a centralised to a decentralised energy production, and we will move from conventional utilities to a sharing economy.

We believe that this will be the new kind of utility that will be dominating the market, at least in Germany, within the next ten years. We will have more customers in business models like this in ten years than in conventional retail electricity. Sonnen aims for ten million customers by 2026.

Could you also explain the idea behind virtual storage pools?

The second layer of our concept is to increase the utilisation of your storage product. If you are part of the Sonnen Community, you can opt in into our frequency regulation model. That means that your storage is being part of crowd of storage systems that stabilise the grid under pressure.

When there is too much electricity in it, or not enough, we use those storage units to stabilise the grid. We have an average income for a storage system of €450 a year ($470/year) just by bringing it in to those frequency regulation models.

How do you assess the competition of Tesla and other car companies that are now pushing into the storage market such as Daimler?

They follow the typical hardware approach. Their business model is to build a battery box that is cheap and very affordable. We are about interconnecting those boxes. We don’t care who is building the battery set. We are all about interconnecting and utilising storage, no matter where they come from.

sonnenBatterie-pro-3.jpg A Sonnen system

The Sonnen Flat is saving the customer in the first ten years (during the product guarantee), €5,500 for an average home, because they get residual electricity for free. This means, we can always compensate price advantages of, for example, Tesla, as we have more intelligence in the system.

Let’s assume we are 30% more expensive in the market than any other competitor, that doesn’t matter, because we have much more value for the customer in terms of total electricity saving and utilisation of the asset that he is using.

What is your PV storage system production capacity now? And do you have plans to expand it through new factories?

Currently, we have a global production capacity of 2,000 units per month, with one facility in San José, California, and the other in Bavaria, Germany.

In our current facilities, we can more than double our production output and are completely fine to increase our capacity to 4,000-5000 per month without new factories.

The production of our lithium cells is outsourced to our supplier Sony as we are focussing on the assembly of our integrated storage product.

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