Wed Sep 5 07:52:39 2007
I think there might be a few exception.

Wed Sep 5 07:46:29 2007
Are all citizenre minus tomcatino there two posts in this forum concerning citizenre and the solar power instalation that they advertise?

A few members of the solar industry have expressed their concern
about our business model. Here is the response from our CTO:

Response to Re-Markets List on Topica.com
Rob Wills et al, Feb 11, 2007
http://www.citizenre.com/web/index.php?p=leadership

Dear Jeff Wolfe, and fellow Solar Industry members:

Greetings from Citizenre.

We hear your concerns about our business plan. We are responding to
your questions and modifying our plans to address the issues that
you raise.

At this point, Citizenre is a startup company. We are still putting
our management team together. We still have a lot to do. We have not
broken ground yet on our PV plant, but plan to do so soon.

Our goal is to revolutionize the PV industry with:
- Successful end-user marketing
- Financing of end-user systems
- Vertically-integrated product line (i.e., integrated inverters)
- Innovative installation methods
- High volume PV manufacturing

The initial marketing program, as stated on the web site, is a
pilot. It is showing us what can be done, and in some cases, what
not to do. Viral marketing is very powerful, but can suffer from
exaggerated claims as the message passes from one person to another.
We are moving quickly to correct misconceptions.

We believe that, rather than being a threat to the solar industry,
Citizenre will greatly accelerate its growth.

The ideas behind the business plan come in part from work done by
NREL, REPP, and the many NGOs and Environmental Organizations who
have sought to commercialize PV effectively. If we do not succeed in
our full plan, others will follow our path. At some point, someone
will succeed with this plan.

What makes us different is that we are not owned by a multi-national
oil or electric company, and so have a different reason for being in
business – we want to see solar succeed.

Now the answers to your questions:

Sales Targets

Q: Goal of 100,000 sales in first year. Let's call it an average
$20,000 per sale. That's $2 Billion of cost incurred. Various
interviews have indicated that Citizenre has / is getting / will get
(which is it?) $650MM of investment. How does that buy $2BB of
installs, year one?

So after year one, we get to year two. Year two has another $2BB of
equipment installed. More capital required. Debt markets? Sure, just
need to convince them. They will loan against a program like this in
maybe 5 years. Right now, you might get 3 - 5 year loans for part of
it, but not all of it, and not for the terms needed. I'm actually in
the capital markets, although nowhere near this level, and this
stuff does not fall from the trees.

A: From this question, it appears that you are blurring the lines
between the production facility's ultimate nameplate capacity and
the actual output of the facility during the scale-up of production
capabilities.

Roughly nine months after we break ground, Citizenre plans to
produce 100MW of PV. There are incentives built in to our
construction contracts to motivate an earlier start date – as early
as month-6 - and conversely, there are penalties for taking longer.
It will take approximate 15 more months to bring the plant online
fully. Under this phased approach, we expect that it will take 2
years to fully complete our first facility.

Nevertheless, the capacity we expect 9 months after ground breaking
will at minimum produce enough PV for 20,000 systems per year. The
target of 20,000 systems/year is based on our assessment of the
market which assumes an average system size of 4.5 kWp.

Continuing to ramp-up and bring additional phases online will
increase our capacity over the subsequent 15 months. Ultimately, we
will have the ability to deliver to about 100,000 homes each year.

Once we prove the feasibility of the first plant, we will duplicate
the design and bring more capacity online.

You and others have asked: how is this financed? We have commitments
to finance construction of the plant. But as you correctly stated,
construction financing does not finance the "Synthetic Power
Producer" structure that supports the installation of systems on
residential homes. Your estimation of $2 billion per annum is a
little high, which is to be expected if you base your numbers on the
way that the PV industry does business now. The approach that you
should be taking is one that relies on sensible governmental support
and more weight towards supply-chain stability, standardization, and
operational efficiencies. You may also be overlooking the fact that
we have the ability to carry manufacturer's equity in these
financial structures.

The power of Citizenre's innovative business and financial model has
already convinced major investment players of the tremendous
opportunity ahead. The first round of investment will be announced
shortly along with the plant location; subsequent rounds will
underwrite each year's residential installations.

State Incentives

Q: And Citizenre has said that incentives just get in the way.
That's a good thing, because no state incentive program can put up
with this run rate. Outside of CA no one has anything even close,
and at this rate Citizenre would deplete the CSI in a couple of
years. Ok if it gets the solar out there, but not if it then falls
on it's face.

A: The main incentive that we need is a consistent net-metering law.
We will work with the States and new Democratic congress to move
towards a National net-metering law.

One of the things provided by our large dedicated customer-base is a
significant lobbying base. We expect that we be able to change state
and federal policy using this power.

Beyond the necessity for reasonable net-metering laws or a blanket
national net-metering law, we will help advocate for 1) meaningful
renewable portfolio standards; 2) carbon and other green-house gas
taxes; 3) the push for a distributed portfolio standard to capture
the economic and national security benefits that the distributed
nature of PV provides; and 4) the continuation of renewable energy
subsidy programs that place more emphasis on production.

Financing

Q: Where's the money? No one invests $650MM without some PR, an
announcement, etc. And no one receives $650MM without an
announcement, PR, etc. This is the most stealth money I've ever not
heard of.
Understand that $650MM is a very significant percentage of all the
money invested in solar to-date. Who are the investors?

A: The investors are large, well-known financial institutions. We
will announce their identity and the location of our first
manufacturing plant shortly.

Financial Model & Solar-Silicon Cost

Q: I've seen various people's attempts to figure out Citizenre's
financial model. No one has made it work. Even if we get the
proposed federal tax credit, the numbers do not work at any
reasonable cost for equipment, sales and G&A. The only way it works
is if Citizenre is somehow able to lose on each sale! Not a great
business model, but could help to get solar out there faster. PV
costs money. Without long term silicon contracts (and those cost
additional huge money) then Citizenre will be paying well over
$60/kg of silicon. This puts a floor price on your modules. You're
not buying glass and aluminum any cheaper than anyone else. So your
product cannot be that much cheaper. Yes, you can cut out the
middleman and slash the installation budget (perhaps), but you
cannot get to half price out of the box, or even in a few years.

Where are you getting silicon? Do you have signed and sealed non-
cancellable long term contracts for 200 to 500 MW?

A: We understand the solar-grade silicon market thoroughly. We also
understand that secure long-term contracts cost $60 to $90/kg now,
and that the spot market price is near $200. We have made
arrangements for supply stability at the SG-Si level as well as for
the other raw materials that are necessary in the production of PV
modules. And although the cost savings are not tremendous – based on
our bulk purchase, they are lower than what the average plant in the
industry now pays. This is simply economy-of-scale.

SEIA and Legislation

Q: Is Citizenre a member of SEIA? Are you contributing money toward
the hiring of very expensive lobbyists? Are you working to get
legislation passed that helps the solar industry? Or are you riding
on the work and money of others?

A: Yes we are a member of SEIA – and ASES, SEPA, IREC, and ACORE.
Yes, we are working to get legislation passed that helps the solar
industry - once again, a large customer base will be the most
powerful tool that the industry has ever had for policy change. We
will devote a considerable part of our profits to supporting SEIA
and the other organizations in their legislative efforts.

We are indeed following the work of many who came before us – going
back to Bill Yerkes and Arco Solar, the foundation build by JPL,
Sandia and SERI (now NREL) and the contributions of all the
manufacturers and installers who have brought us to where we are
now. Most of our senior management has been in the solar business
for more than 20 years.

AC Modules

Q: We've never had a good, inexpensive, reliable AC module (I.E.
micro inverter). Why now? What's new and different and makes this
unit good?
How many hours of field testing has it gone through? Tough
environment on the back of a module. How many hours has it been on
the roof?

A: Please check the definition of "AC Module" in the NEC. (I helped
to write it). I agree that putting an inverter on the back of a
module is a bad idea – we don't plan to do that.

We are still in the development stage for this part of the system,
but do have prototypes running. We have one of the most experienced
inverter design groups in the country – we can make this work.
Nevertheless, the prototype may have unanticipated problems in
manufacturing, in getting into commercial scale production,
particularly at the volumes we anticipate needing. Thus, we have
created a contingency plan for the bulk-purchase of inverters if we
see production delays.

Q: I assume product is at UL for testing (both PV modules and
inverters). If not, CitizenRe cannot make the dates they are
promising to their customers of September installs, since not only
does the equipment need to pass UL, but it also needs to the be
manufactured in volume. Please provide proof that equipment is at UL
for testing, and an estimate of certification date (I realize that's
hard with UL, but everyone has a schedule).

A: UL's own estimate for passing the full set of 1547.1 tests is 3
calendar months. The module plant start-up will be approximately 12
months, so we will have enough time for field testing.

Manufacturing Plant

Q: Where is the PV manufacturing plant and where is the inverter
manufacturing plant? Ground must be broken by now. How about some
photos of construction? A 500MW plant (with only 100MW built out in
the first year) is not a small place. It's also not cheap. My best
guess is about $200MM for phase one. Of course, we have another
numbers problem here.
If the plant is only built out to 100MW, and you sell 100,000
systems at 2kW each (would you sell smaller, on average?) then that
requires 200MW of capacity. It just seems like Citizenre's
statements throw out big numbers, but the big numbers do not match
each other. That means that the numbers are just being made up, that
there is no plan. Please indicate what the real installation goals
and manufacturing capacities will be for year one and two.

A: As stated above, we have not broken ground on the manufacturing
plant; what's more, we will not even be able to break ground
immediately after the location is announced. We will have, however,
a fast-track permitting process and hope to begin shipments at a
rate just over 8 MW per month roughly 9 months after ground-
breaking. That means delivering nearly 25 MW to the industry in Year-
1 alone. The scaling up of the plant to 500MWp capacity over Year-2
will give us another 250 MW in addition to the existing 100MW. With
the announcement now expected by mid-March, that places the first
installations in December 2007. Translated to systems, this gives us
an estimated maximum of 5000 installs Year-1, 70,000 installs Year-2.

The numbers may not "match up", as you put it, because there are
other parts to the equation that either have not yet been described,
or may never be, because they represent proprietary solutions that
reduce our costs well beyond the industry's current experience.

Installation

Q: I hear that the installs take half a day. Amazing. Even with AC
modules (so no inverter hook up per se), one still has to rack and
install modules. I could believe a day in some areas (1 story, low
slope roofs, simple electrical entrance). But this means that the
systems must be sized to avoid main taps, cannot be on tile roofs,
and have to be within 20 minutes of the shop. It takes time to
simply get the ladders unstrapped from the truck and leaned against
the house. Telling people half a day is, in my opinion, completely
unachievable, except for a very small (two panel?) system that has
UF wire connecting it to a breaker. (UF wire for 20 years outside?)

A: We know how much work goes in to a conventional PV installation.
There are ways, however, to cut the installation time dramatically
using clever design, standardized components and lifting equipment.

The half-day install is for small systems (2kW and the like). Larger
systems will take longer. At the size most customers will require –
4 and 5 KWp, we expect that the installation time will be a full
day. We allow for this in our business models.

Sales Training

Q: The CitizenRe site indicates that the sales people need to go
through training before selling, as do the installers. All well and
good, however, the sales people that we've spoken with do not,
basically, know a thing about PV. Shading analysis? Building
permits? Bill analysis? Nothing. Just sign up now and we'll get you
solar in September. How is CitizenRe going to correct this?

A: The first roll-out of the marketing plan is a pilot. We have
learned much from this.
All current and new sales people will undergo a much higher level of
training. Many present sales people will drop out because of this.

We are just as committed to ensuring the survival of the solar
industry as you. We understand the necessity for each of our
associates to have a high level of core knowledge and will institute
this requirement this month.

One point to note, nonetheless, is the different roles our sales and
installation people have. Even when trained to the new standards,
the independent sales associates are not expected to do a shading
analysis or deal with building permits. Citizenre's model
anticipates that different types of customer interactions require
different skills. The sales associates are adept at building
customer relationships and explaining the product at a basic level.
The nuts and bolts of the installations, however, will be left to
the installers who have completed NABCEP training and certification,
as a minimum.

For the customer, there will be on-going reality-checks with regards
to delivery time and business plans. For example, we are integrating
a new tool on our web site to predict actual site review and
delivery times. Part of the training will be to help the customer
understand the issues that may arise – even the risk that customers
may not receive a system if all of our requirements are not met.

Q: The site also indicates that the sales strategy is pure MLM
(multi-level marketing - think Amway). Yes, this marketing method
can work, but it can also have a life of it's own and create major
problems for customers in terms of fulfillment. How is CitizenRe
going to avoid the problems inherent in this sales method? I saw
that in a few states, sales people are prohibited from buying more
than about $495 of "sales aids" in the first 6 months of their
employment. How much does the average sales person outside of these
limiting states purchase in "sales aids" in the first six months? Is
this a major revenue stream for CitizenRe at this point?

A: We prefer to call this "Direct Sales". We do not emphasize the
multi-level aspect (the purpose for signing up is to sell solar, not
to enlist downstream sales reps), and are taking steps to make sure
that the sales royalty stream is fair.

There is no cash contribution required from a sales rep – just time
and a willingness to learn about solar electricity. We actively
discourage sales reps from spending their own money for advertising
(although a few are). We have several cooperative marketing
agreements with non-profits and other companies to drive customers
to us. These qualified leads are given to our associates to respond
to – without charge. We have refrained from bringing this channel
online and from starting our PR program at this point specifically
because we know now that our sales team needs another level of
training. We want to make certain that the first interaction
customers have with the PV industry is a good one. As a last point,
unlike MLM organizations, we ask for no money from our sales
associates, and do not sell advertising or training materials.

Another way of putting this is that your grandmother could tell her
friends about the possibility of solar electricity, and qualify
leads. It's the franchised installer who makes the final decision as
to the viability of the site and system size.

A Threat to the Solar Industry?

Q: And the most fundamental question is, is CitizenRe out to put all
other solar businesses out of business, since who will "buy" a
system when they can just pay the electric bill at whatever level
they are at?
($0.07 anyone?) Yes, we'll all be able to install for CitizenRe. Not
the profitable business we've all been trying to build. Especially
if we're only going to get paid for 1/2 day per job! But more
importantly, if CitizenRe succeeds in stealing all the customers for
the next 6 months, then fails, we'll have the double hit that many
dealers will go under (no sales is bad for business) and then
CitizenRe will not deliver (from what I see, highly probable). So
here we are with one firm playing Russian Roulette with the entire
industry, and perhaps the future of the US.

A: We understand very well that there is a great deal at stake here,
and that Citizenre's actions will have significant ripple effects
for the industry and for the country.

We share the conviction that widespread solar implementation is an
urgent part of the solution. It is not our intention to put the rest
of the solar industry out of business—far from it. However, it IS
our mission to change the trajectory of the solar and distributed
generation industry. We plan to bring solar into the mainstream in a
way that has never been possible before.

We understand that we are committing ourselves to a strategy that
has some very big risks. Is it our intention to "play Russian
roulette with the entire industry"? Of course not. Do we understand
that competing against this strategy is going to be very difficult
for the bulk of the existing industry? That it will inflict upon
them the need to dramatically change their own business models in
order to survive? Yes, we understand that. Yet we also know that the
future landscape of the solar industry can't be predicted with any
certainty. In that sense, all of us – big companies and small, old
and new – face the same challenge. We must all do the best we can to
anticipate the future's competitive challenges, and either adapt and
survive, or fail in the attempt.

If Citizenre does not move ahead with its business plan, others will
follow. The solar industry is about to change in very positive ways.
There will not be a shortage of jobs – quite the contrary – there
are opportunities in this business model for all of us, and many new
people. We need people to handle logistics and distribution. We need
a network of good installers ranging from large contracting firms in
city areas to "one-person" shops in more remote areas. Our first PV
plant alone will employ 1600 people.

Conclusion

Ok, that's a good start. Nothing hard to answer here, nothing that
takes research on the part of the company. Just real hard questions
that will tell us if there is anything behind the smoke. Thanks for
your time in answering this Rob.

And thank you for asking. Now I would like to ask you a question:

Is it better to try for a quantum leap that results in PV power
costing less than retail electricity? Or should we sit back doing
business as usual, letting the government tell us they are
supporting solar while they spend many times the annual SAI budget
every week in Iraq.

Please give us a chance to move ahead and to succeed. There is a
huge amount of effort that has gone into forming Citizenre.

It's easy to attack a new idea, and to be fearful of the
consequences of change. There are many in the industry who support
us wholeheartedly and look forward to a time when PV has cost parity
with other forms of electric generation.

There will be plenty or work for all of us. Solar Energy is abundant.

Dr. Robert Wills, P.E.
CTO, Citizenre

For your information, if you would like to understand more about our
business plan, we would recommend beginning with the following
documents:

"Solar Energy: from Perennial Promise to Competitive Alternative"
(Greenpeace/KPMG)

"Financing Large-Scale Increases in PV Production Capacity through
Innovative Risk Management Structures and Contracts" (REPP), and

"What the Solar Power Industry Can Learn from Google and
Salesforce.com" (The Topline Strategy Group).

All are available on the web via Google search.
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