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Wholesale Banking

Many homeowners in the US lease solar systems for their rooftops , and the trend is now catching on in Germany. At the heart of this shift is German photovoltaics (PV) leasing company Enpal. How exactly is this four-year-old start-up disrupting the green energy market and making homes smarter?

Installation of solar panels

Enpal was founded in 2017, and in that year completed just 30 installations. Four years later, it is the largest German provider of solar solutions for homeowners, with more than 10,000 lease customers in 2021. The company continues to grow rapidly and the time is right for expansion: Germany is looking to achieve carbon neutrality by 2045, and turning the residential energy sector green is going to be an important part of that.

Power to the people

“Fighting the climate crisis is the greatest challenge of our generation. We want to enable every homeowner to join the fight and become energy-independent by giving them the opportunity to produce green energy without any up-front cost,” says Mario Kohle, Enpal’s CEO and founder.

The appetite for renewable energy is also high among the population: research shows that nine out of 10 Germans are in favour of solar rooftop installations.(1) Enpal calls it a “Bürgerbewegung” – a people’s movement to take charge of greener energy supply.

Our goal is to install one million solar systems by the end of the decade.

Cost and complexity threaten the movement

But home solar system expansion has its challenges, chief among which are cost and complexity.

In 2004, the German government promised consumers renewable energy for an extra €1 a month.(2) But consumers have paid more than that. The Düsseldorf Institute for Competition Economics estimates that the cost of the energy transition for the average household has been closer to €42 a month.(3)

Still, this is much cheaper than the cost of the climate crisis. Losses and damages caused by the recent flood catastrophe in Germany alone set the government – and ultimately the taxpayer – back €30 billion.(4)

Electricity prices in Germany are now the highest in the EU,(5) but solar power has become more and more affordable.

So Enpal’s business model – no upfront cost, and low fixed lease payments – is proving popular. Consumers benefit from the green energy generated at home both for their personal use and the sale of excess electricity to the grid at a guaranteed feed-in-tariff. After 20 years, when Enpal’s leasing contracts for the solar installations expire, the systems can be bought by the customer for €1.

9 out of 10 Germans are in favour of solar rooftop installations.

Furthermore, the complexity of connecting a system to the grid has been a deterrent in the past. “One of the challenges for solar power is the lack of standardised digital processes,” says Benjamin Merle, chief product officer at Enpal, adding “There are more than 800 grid operators in Germany, and most of them have their individual process for registering and connecting PV systems.”

Bureaucracy adds to that complexity, according to Merle: “Complex and often-outdated regulation, for instance regarding market integration and grid connection, puts an administrative burden on the development of solar energy in Germany.”

Digital comes to the rescue

Enpal is tackling these challenges with automated digital processes – from onboarding to connecting to the grid and monitoring performance through digital in-house capabilities. It has found efficiencies that speed up systems going online, and manages the process of connecting systems to the grid with the operators on behalf of the customers.

“A fully digital experience allows us to better shape the customer experience at competitive cost levels,” says Benjamin Merle. “It is more convenient for the customer, and enables us to continuously adapt and improve the processes.”

As the energy market changes and cash flows are shifting to services, utilities and energy retailers are vying for the residential customer market share.

In this competitive environment, where customers can change providers quickly and easily, a leasing business model helps to establish the coveted long-term customer relationship. It also allows upselling to new energy and mobility products such as energy home storage, which Enpal has started to roll out in 2021.

“Our battery solution increases our customers’ utilisation of the energy they produce,” says Merle. “We are already seeing customers realising this benefit, and the vast majority of new customers are opting for a solution that includes a battery.”

Modern houses with solar panels

The roof is not the limit

This new battery product, in combination with the PV system, gives homeowners a degree of independence from the grid. Enpal estimates that 80–90% of customers will eventually end up using its PV system in combination with the new battery solution.

“Our goal is to install one million solar systems by the end of the decade,” says Mario Kohle. “But solar is just the beginning: we plan to offer our customers a comprehensive solution for all their energy needs, from solar energy production and storage to smart metering, and electric mobility”.

This year, Enpal raised €275 million in a fifth round of senior debt financing, in which ING acted as the lead advisor. It has also raised up to €70 million of subordinated debt at holding company level to support its next growth stage.

Olaf Beyme, head of Renewables & Power at ING Germany, says that leasing solutions are becoming increasingly popular, and that this additional funding will allow Enpal to significantly expand its customer base and the battery solutions it offers.

“In the future, more residential buildings will become smart homes, which is the main driver for more applications and technology in households,” says Beyme. “Due to the increasing complexity, customers are more likely to entrust one or multiple applications with a full-service company such as Enpal. This will also increase the speed at which residential homes will become part of a smart and integrated network.”

For Beyme, the smart-home revolution is just getting started. “There is still a lot of growth potential in the German market,” he says. “As well as in other European markets.”