Could Oil’s Crisis Be Solar’s Opportunity?
April 11, 2020
Emotions run high amid all the uncertainty that comes with a global pandemic, but Bret Biggart said renewable energy could help ease some of that.
As the oil and gas industry appears more volatile than ever, one solar industry CEO is urging disaffected energy investors to look on the bright side.
Some on Wall Street were wary of the oil and gas industry long before last month’s price plunge, seeing massive debt loads and a lack of discipline among management as too risky a bet. Now, with prices too low to make it profitable to drill and the oil industry this week seeing its first major bankruptcy of the downturn, more investors may be looking to abandon ship.
If that’s the case, they could leave the oil market without abandoning the energy industry entirely. A recent Wood MacKenzie analysis found that, at $35 per barrel, oil has a lower rate of return than the renewable industry, whereas typically oil’s returns are double that of the renewable industry at a price of $60 per barrel. U.S. oil futures were trading at about $25 per barrel Thursday.
“Investors don’t like that volatility,” Bret Biggart, CEO of Austin-based Freedom Solar, told the Business Journal. “And that volatility has become very clear to everyone as people have lost a ton of money in the oil and gas industry.
“Solar projects, on the other hand, not only provide a predictable rate of return of 5% to 10% — according to Wood MacKenzie — but they do so over 25 years, Biggart said.
“If you were to tell me from an investor perspective, I’m going to give you a 10% return on your money with very low volatility, that’s a pretty good investment thesis,” he said. “It’s hard to do that particularly given the alternative is the stock market today or specifically in oil and gas.”
As for the impact that the novel coronavirus pandemic has had on his business, Biggart said Freedom Solar is still receiving as many phone calls from those interested in installing rooftop panels. His sales team’s ability to set up virtual meetings with prospective clients has declined, however, perhaps because businesses are busy dealing with their own virus-related crises.
Freedom Solar also hasn’t closed on as many sales of solar installations as usual, either because building owners are tightening their belts or because virtual meetings don’t have the sales effect that person-to-person contact does, Biggart said.
One area that Freedom Solar has seen an uptick in recently is the sale of batteries to existing customers. The company, which has been in business since 2007, recently made its largest purchase of Tesla Powerwalls.
“Whenever you have fear in the market, and there’s fear about people’s health, there’s fear about the economy, there’s fear about utility grid infrastructure, [then] there’s fear about the price of power,” Biggart said. “People are trying to mitigate that fear” by buying solar storage, he said.
Though the price of those batteries is dropping, investors shouldn’t expect the overall price of solar to decline as well, Biggart. It’s another reason why they should invest sooner, rather than later, he said.
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“Anytime you look at the power market over any extended period of time — and we’re talking about an investment that lasts 25 years — you’ve got to look at this investment from a long-term horizon,” Biggart said. “If you just think about the price of these natural resources over any extended period of time, … the price has come up not down.”
Besides its two Austin locations, Freedom Solar has offices in San Antonio, Houston and Irving. Locally, the company has installed solar panels at Alamo Candy Co., a funeral home and some apartment buildings in and around the Rim.