Palmetto and Progress in the Energy Transition: What’s Next?
At our Lerer Hippeau Summit, we spoke with Chris Kemper, founder and CEO of Palmetto, the leading clean energy company making going solar easy and affordable. LH Managing Partner Graham Brown and Chris spoke about the company’s progress and big vision and the energy transition broadly (how it’s going and what’s coming next), as well as Chris’ personal journey into climate work. Read below for a condensed version of their conversation.
Graham Brown: You’ve been working in climate tech and renewable energy for [two decades] — long before investors cared about it or were tracking it as closely as they are now. Why did you make this your life’s mission? What lessons have you learned, in broad strokes, over two decades in this work?
Chris Kemper: As a young person, I tried to do investment banking, but my family said no — they wanted me to be a physician. I ended up spending time during graduate school in India. Around that time, there was a big tsunami in Sri Lanka, and there was a wide call for volunteers, which I responded to. It was a galvanizing moment. I saw the direct impact the environment can have on people and what can happen when you don’t listen to it. The immediate question for me was, “How can I help?”
GB: Since then, you’ve served in many climate-related positions, including at the United Nations and many other influential organizations, and you’ve worked on a wide array of clean energy projects in developing countries, primarily in Asia and Latin America. You also founded Palmetto in 2009, which is now a hugely successful and growing business. I could speak to Palmetto’s many achievements, but one thing in particular stands out for us as investors: Palmetto has an incredibly engaged culture. How have you managed to scale that culture through the pandemic and amid rapid growth for the company? How big is the team now?
CK: At Palmetto, culture is king. People say cash is king, but really culture is king. If you can find a common, galvanizing goal you can rally people around, you can make a significant impact. You have the ability to overcome any problem, however insurmountable. At our company, we rally around the questions, “How can we build scalable solutions to combat climate change? How can we help get clean energy into homes, while also thinking much bigger than individual rooftop solar installations?” We have immensely talented people from different backgrounds across technology, sales, and energy, who chose to join Palmetto because they want to use their skill sets to make their own impact stopping climate change. We now have hundreds of employees across Palmetto, the parent company, and the companies we’ve acquired.
At the early stages, with 0–20 employees, it feels like a family. When you have 50 employees and above, it begins to get difficult. With more than 100, and you’re corporate. And it becomes harder and harder to maintain a culture. The COVID pandemic blew things up entirely. We developed a leading metric — one metric or goal that we could aspire to — something that was actionable. Then the question was, “What can each of us do to contribute in the effort toward this goal?” In the earliest days, we’d have a Monday “Standup” session. We still have a company-wide meeting on a weekly basis on Mondays. It’s different from the first iteration of the meeting, but we continue the tradition. Our culture has changed. And we have to track along that evolutionary path. But I think we’ve succeeded in scaling the culture.
GB: Let’s talk about scale in the business. Where are you in your growth cycle? What is your cash flow like? What about cash burn? How do you think about what it means to build a platform in climate tech?
CK: So my biggest regret was starting the company in the UK and not in the US. It was impossibly difficult to raise capital in the UK. We were really forced to bootstrap the company and fund our growth with cash flow. We became especially careful with our spending. Hyperconscious.
Of course, that changed after we raised money with Lerer Hippeau. Having cash on the balance sheet, after a decade of bootstrapping the company, was an unnatural feeling. But it also opened up this huge opportunity to really pursue our big ideas, to grow our team and expand our verticals. At this stage, we’re asset-light. We’ve moved offices. We’re going back to our roots.
Today, Palmetto installs in over 126 utilities, and does consumer financing in multiples of that, with a service area of over 72 million households. Our technology has mapped and calculated the solar energy potential of over 85% of American rooftops. To date, our platform has facilitated over $1 billion in clean energy transactions, making hundreds of millions of IRA tax credit dollars available to qualifying homeowners. Our goal is to become the largest utility on the planet.
GB: In addition to your role at Palmetto, you’ve also been angel investing. Climate tech has historically been a challenging area for investment. Now there’s a lot of interest. What are some of the areas of opportunity?
CK: There’s an incredible amount of opportunity. There are so many growth vectors that can be pursued. Post-IRA, the Europeans are still winning. The US is still a very nascent market. There are a lot of developing economies that do climate tech better than we do. With the proliferation of US investors interested in climate, it’s critical that they back the right tech. For the wider goal of a green economy, you need a number of investors to support the entrepreneurs who can tackle this. It’s important to have the right companies in place.
GB: What are the challenges and opportunities you see right now in clean energy/climate tech, when interest rates are so high and so many solar installers are struggling?
CK: There’s a lot of turmoil happening in the solar industry right now — the “solar coaster,” as I like to call it. While there are incredible opportunities right now for climate tech investments and innovations, we’re seeing traditional solar companies really struggle in response to high interest rates, a tight labor market, and supply chain uncertainties. At Palmetto, we’ve responded to this by creating a few new services for our solar partners, including launching a new partnership model to help solar installers reduce costs and stabilize cash flows, and offering a new financing option for homeowners that allows them to start leasing solar energy with zero upfront cost.
GB: Tell me more about that …we have seen some bad press lately around some other large solar incumbents.
CK: Yes, we’re seeing bad actors — mostly dinosaur incumbents which I say are part of “CleanTech 1.0,” and also “solar bros” as they’ve been coined — in the solar industry that are causing market toxicity and skepticism of solar companies in general. This is at a moment when it’s really critical to accelerate our country even faster towards clean energy adoption. At Palmetto, we’re focused on CleanTech 2.0, which is centered around best-in-class consumer experiences (pricing, service, etc) and grounded in values and principles. There’s a lot of renewable energy products on the market but that market is totally fractured. We want to meet consumers where they are, giving them the information so they can make better and more informed energy choices for their households.
GB: What are some of your predictions for 2024?
CK: A few things: One; while the inflation may soften and the interest rate environment may improve, we don’t believe that it will return to anywhere near the ‘normalcy’ that the solar market expects and the weakest balance sheets will trigger a wave of insolvencies. In this industry, the most undercapitalized companies are installers, unfortunately. Two; It’s an election year, and the climate discussion and the IRA are likely to be big topics this year; unfortunately, we expect political noise is going to outweigh market fundamentals in these discussions. Three; I think CleanTech 2.0 companies are going to emerge as the leaders long-term and we will see that shift happen in a big way this year.
