Daniel Lazarus  00:00

There's only a few things in life that's assured. It's just death and taxes. I say death, taxes, and solar maintenance because it became so obvious that every system that has ever been built, and every system that will ever be built in the future, will require maintenance of some point at some time and at some frequency. And so there must be a business model that would satisfy that.

Nico Johnson  00:21

Australia has installed more rooftop solar per capita than just about anywhere else on the planet. For years, that's been celebrated as a success story. But every industry eventually enters its second chapter-not the chapter where assets get built, but the one where somebody has to actually own, operate, maintain, monitor, and make sure those assets are delivering on the promise that was made. That's where things seem to get interesting in this industry, frankly. Because what happens when a company spends millions of dollars on a solar asset and gradually loses visibility into whether or not the darn thing on the roof is actually doing what the sales guy said it was supposed to be doing? I've heard this story so many times here in the United States, but I had a feeling that it was probably something that was more prevalent in more developed markets. Enter Australia. I reached out to a young entrepreneur in Australia who has seen his share of market failures, which, for entrepreneurs like us, look like market opportunities. What happens when nobody remembers how to access the system, or where the monitoring login is, or what the documentation was supposed to be? Australia could give us a glimpse into how these questions are being answered. And as I mentioned, today's guest has front row seat. Daniel Lazarus is the co-founder and CEO of Industrias Services Group, one of Australia's leading solar maintenance and asset management providers. More importantly, he spent several years helping asset owners and even installers navigate what happens after the solar gold rush. If you're new to SunCast, welcome in. I promise you're going to get a ton of value out of this and every other episode. We've got nearly 950 now in the back catalog. I hope you'll take a moment to go check those out. But for now, let's welcome Daniel Lazarus to SunCast. Daniel, Australia has been effectively living with distributed solar longer than most markets. I'm curious, from your perspective, what's happening there today that the rest of us probably haven't experienced yet?

Daniel Lazarus  02:28

Australia's got more solar per capita than any country in the world, and solar has been around here for many, many years, decades. In fact, many parts of solar and the technology we see today were invented and founded in Australia, right near across from here at the University of New South Wales, and so we've seen our fair share. What we call the solar coaster, which is the ups and downs, both from a technology perspective, from a government incentive perspective, and just society navigating their way around this technology. It becomes cost effective, then it doesn't become become cost effective. Challenges legislation and everything in between, and so what we're seeing now, and what you've just you know correctly mentioned, is this tidal wave from you know overall a decade of a construction explosion, which is still continuing today. There is still immense government incentives for solar in Australia very much now. Batteries is very much coming into the fore. The explosion of batteries installs is certainly here across the country, and so that's you know not stopping. But what's becoming obvious from what you've mentioned is what's happening to these systems. A lot of these systems are now 510, years old, if not older, and we're starting to see what happens with these systems as they start to age and wear and tear, and and sort of navigating our way across that.

Nico Johnson  03:55

I'm curious from your investigation into not just how the assets were aging, but what needs to happen to ensure that we keep the promises we've made? What are the problems that seem to only show up when the market matures?

Daniel Lazarus  04:11

What's interesting that you ask that question because we recently did some analysis based on all the work that we've done over the years, and it became very clear that from that analysis, almost 25% of the faults that we identify are performance or safety related. So often, when you go around and you talk to folks, whether it be in residential or commercial world, they consider solar maintenance. They associate that with panel cleaning, and from our experience, panel cleaning is such a minor part of maintenance. In fact, most systems don't need to be cleaned every year. They perform just fine without a clean over a certain period of time. But when you rationalize and talk to people around the fact that. It's an electricity-producing asset on your roof. The discussion around no moving parts doesn't really become relevant when you sort of compare it to that. You say there's millions of electrons that's being produced and moving across your roof. You maintain your air conditioners. You maintain, you know, your cars. You maintain all sorts of stuff which has electrical or safety implications, and for some reason, solar just gets left off. It's one of those things which is on the roof; it's set and forget. You don't really know until something happens, and even when something happens, you might not even know then. And so, it's one of those weird things where it's it's in a location that you don't really see, and its benefit or its output, which is electricity, you don't really-it's not really visceral. You don't really see it; you experience it. Whereas an air conditioner, you feel it's cool air, or you know a dirty floor, you see it, or a tap-you know-you experience that. But it's one of those weird things where if it's not working, unless you're monitoring it or actively see your bills, you don't really know that it's not working until something really serious happens. So we find that that's quite an interesting spot to try and explain to people around. Actually, there is enormous amounts of implications of not maintaining it, and we're only now getting to the stage where enough systems have been inspected across a long enough period of time where we can show people what happens when the system wears and tears. And going to your question, most of those are electrically based or performance based. So it could be something as simple as soiling, as we mentioned, but something that's more high risk, which is around hanging electrical cables, or earth faults, or debris build-up, isolators which which burn, water ingress in various components, inverters that overheat-all these elements that you would typically associate with electrical faults are some of the really critical factors that we see in the system that we maintain.

Nico Johnson  07:01

It's fascinating, right? Especially at the commercial scale, you would you would assume for particularly residential systems, homeowners will certainly start to notice. But it is a once it's kind of a once a month input variable. You notice or you don't that your electric bill reflects what you thought it was going to reflect, and in the commercial and industrial sector, there really it's really not super common that a solar array is offsetting the entire load. And someone in finance, someone in accounting, may have completely been disconnected from the buying decision. For many cases, I assume there are few conversations in between the folks handling the bills and the folks paying to offset the bills with some, you know, energy efficiency or solar. I could see how that disconnect would happen, Daniel. I'm curious when you first started to realize that maintenance wasn't just a service issue, but potentially a whole business category that you could think start thinking about addressing as an entrepreneur.

Daniel Lazarus  08:06

Well, my background is in solar construction, as what most people probably entering solar would be, and it became very clear that the sole focus was on construction, as I mentioned before, and in fact, maintenance was not really focused on at all, it was really difficult for a solar construction company to implement a maintenance business strategy-one where they could fulfill profitably and at scale. And so often the choice was either we do construction, or that's it. Often because systems weren't old enough, they weren't getting enough inquiries, or they didn't want to deal with maintenance at all, and so they were selling maintenance as not really required. There's not many moving parts to a solar system, but I saw for myself that even systems two years, three years old were starting to prop up with some fairly significant issues, and the owners of those systems either weren't noticing or were surprised by it, and so often it became obvious that you know there's the adage there's only a few things in life that's assured. It's just death and taxes. I say death, taxes, and solar maintenance because it became so obvious that every system that has ever been built and every system that will ever be built in the future will require maintenance of some point at some time and at some frequency, and so there must be a business model that would satisfy that. And I figured, in Australia, which has one of the most disparate populations in the world, where most of our population is at the coast in a country that's the size of the states, you know, would there be a business model that would work? And we believe that we've found one, and we certainly found product market fit on our side. But certainly, at the time, it became very obvious at the commercial and residential scale that every system required some form of maintenance. I mean, let's let's talk about it. Logically, the system is outside 24 hours a day, and this is, by the way, the way I distill it to a lot of conversations I have. It's just a very basic, rational conversation with people. Is to say, okay, let's just you know draw back. This asset is outside 24 hours a day. It's working for 12 to 14 hours to pay a day, depending on where you are, wear and tear is totally natural. Yes, there's implications around if it's installed badly or not, but it's just a rational conversation. And then once people understand that, they say, "Okay, wow, this is this is very interesting. How do we go about it? And that's where experience comes in around having those conversation with folks around, depending on what they do, where they are, what the system is, how they can optimize their system and minimize safety risks on a case by case basis, and how we scope for that.

Nico Johnson  10:50

Daniel, something I keep coming back to, not just in this interview, but Andy McCarthy and many others, is how Australia is simply further along in this journey than certainly the United States, where I'd say the majority, 80% of our listeners reside, your systems are both older; they're larger in some cases. The portfolios, at least, the handoffs between the financing entity and the long-term owner have already happened because that you had a front-row seat as an industry to things that most of us simply haven't seen yet. I'm curious through your eyes, as someone in there at the time early 30s, you're going out, you know, visiting sites, auditing customer locations, having conversations that fundamentally changed the way you thought about the way these assets are being handled. Tell me a story that sort of reflects or represents well for you some of the disconnects that you were seeing. We

Daniel Lazarus  11:48

went to a system there where there was an earth fault on the roof, and I'm trying to not make it too technical and make people sleep during this during this podcast. But essentially, we were there to to address a particular fault, and the panels were installed right next to the edge, and right next to fiberglass sheeting on the roof. And so, when you think about that, it's to say there is no way for us to walk on the roof. There's no way for us to access any panel. There's no way for us to access the roof, and so such a simple example where there's no walkways for us to even access a panel becomes quite interesting because all we needed to do was find a specific, you know, nick and a cable, and it became a multi-day exercise to try and remove a whole bunch of panels, have scissor lifts, a whole bunch of you know large, costly exercise associated with fixing something that's fairly fairly remedial, and so that's an interesting example of maintenance is not something that should be thought about after the system is three or five years old. It should really be thought about at the very beginning of design, and so that was really really interesting. And now that you know, you know, a tangent to that was we went to a concrete factory, and and some of these panels were installed right next to where all the sort of the concrete dust was being emitted.

Nico Johnson  13:07

Yeah, probably probably being cleaned on a daily basis too. I'm sure.

Daniel Lazarus  13:11

Honestly, it was it no, it hadn't been cleaned for three years, and the and the production was essentially 00.

Nico Johnson  13:18

Yeah,

Daniel Lazarus  13:18

and it was a 400 kilowatt system that would have spent millions of dollars on, and you think to yourself, what is going on? Like, how is it that it's not just? I don't blame the people that are. I mean, okay, you you take the the rational conversation in hindsight, but I don't blame the people who bought the system. It's the people who are selling the system, and that's what we're about around this explosion of construction is often a disregard to the maintenance, and we just want to sell the system, and so you're left with not just a system that's not producing, but what we talked about is there's no also documentation anywhere, and that's so commonplace for us. Is you go to a site millions of dollars, or even at the residential level, and whilst documentation is required to be created or passed, no one's got it. No one's got the documentation.

Nico Johnson  14:08

Yeah,

Daniel Lazarus  14:09

you know you get flabbergasted every time because there's documentation to a T around all the other assets that they have. But when it comes to solar, there's just no documentation, and so that's often quite surprising.

Nico Johnson  14:22

Is this an issue with sort of the commercial industrial market and the way that it operates? Is it an issue with solar installers? Is it an issue with regulations at the local level? A mix of all of the above. What do you think?

Daniel Lazarus  14:37

I think from a regulation perspective, people have to have documentation, so naturally you go to the culture of the industry, and you also go to how well managed the monitoring of those legislate of the legislation and the adherence to that legislation is. And I've been pretty vocal with around how Australia. I can't comment on America, but how. Australia manages and monitors quality post install. That we've got basic systems in certain states. We've got voluntary national programs which people can say yes or no to, but it's fairly remedial and fairly small when it comes to a subset of understanding how legislation and and and laws are adhered to. In fact, we did a really large inspection rollout of a whole bunch of residential batteries across one of the states here, in the 1000s, and found that 30% of the systems were substandard, and three to 4% were unsafe, which is on you know at the scale of 1000s, is pretty startling, and it was quite an interesting study because these were all batteries that were installed by different people, but over sort of a 12-month period, so fairly sort of similar time frame, as opposed to blaming different legislations over in a fair, fair lengthy period. And so, what's interesting to talk about people in other countries is to say legislation. Whilst not a fun topic to talk about, is just so interesting to to sort of have that chat about because you've got this legislation around the products themselves, like strong legislations around the products themselves and what's being installed, but very little adherence or at least oversight around the installation or the correct installation of those products and the maintenance and management of those products thereafterwards.

Nico Johnson  16:30

I'm curious if you've developed a perspective of the commercial asset owner. Like, what's something that's most surprising for you about how commercial owners interact with these systems or don't.

Daniel Lazarus  16:47

Like you said before, residential owners-it's a less value system from a value perspective, but they generally are more on top of things. I say the word generally, but with commercial, you've got a number of factors. One, you've got the fact that the asset is millions of dollars in many cases. In many organizations, you've got requirements from a environmental or emissions abatement perspective, and solar is generally one of the biggest factors to reduce that and carbon targets. And you've got a lot more people and a lot more stakeholders associated and and across the particular opportunity, and yet when you find that often it's the result of one champion or one stakeholder in a business, and if that person leaves or moves to another division, it gets completely lost. The handover very rarely from one person to the other, mentions the solar that was installed two years ago, and so it is so commonplace. In fact, I'm dealing with something this morning that we're asking. You know, it's a rollout across the country, and I said, "Do you have documentation for us to even start the proposal process? One one site has the site has nothing. The site has a bill, so it's so decentralized in many cases. And even then, they don't know what they've got, and it's it is it is so startling. And you know, and what's disappointing, and I'm sure we get to this, but what's disappointing is that even if they do find out, there's not many areas that they can turn to. There's not many companies that they can call and say, "What you know? Please come to my system, do an audit, find out what's going on with my system. How do I get access to the monitoring? Very few installers on our end, at least, are motivated to do that. And so the challenge that we all have is around not just understanding and recognizing that maintenance is required. That's the easy part. I can give you all sorts of stats and pictures as to why that is the case, but it's also engaging with stakeholders on the other side to not just incentivize them, but to make them motivated to want to reach out to people and undertake maintenance for their customers, or on behalf of companies like us, and that's the biggest challenge I think I have also for the rest of the world, of which we are starting. That is to say, maintenance is not just about selling the requirement or the need for it. It's around lobbying installers, lobbying government institutions around looking at maintenance, motivating them to actually do something about it, and in many cases mandating that it should be that that it should be the case, which is certainly not happening at this stage.

Nico Johnson  19:29

Before we jump into sort of thinking more specifically about the business of addressing these problems, I'm curious if what you see in the marketplace is as much a technical failure, because we've talked a bit about kind of handoff or operational failure. Like, if I'm a customer, if I'm considering putting solar on, should I be concerned that these assets are just simply destined to fail or stop working? Or there's all kind of. I don't want folks to have the perspective that, gosh, solar. Seems to always go wrong. What do you see showing up in the technical side that I, I hope at least is sort of easily fixable or avoidable? Can you talk about the nature of that?

Daniel Lazarus  20:11

Yeah, and it's a tight balance because it's like selling insurance. You you you don't want to say, "Oh my god, doomsday is happening. You are going to, you know, you know this is needed, but to have a bit of a rational discussion around the fact, as we discussed before, that it's you know electricity producing outside, etc. That that this will happen. It's like selling a car. So I totally understand that balance. But there is again, it's the same conversations around businesses what you can do to mitigate to mitigate that, it's the same conversations as there's a company here that you know there's there's a lot of increased popularity around wellness and longevity with your body and doing things now to prevent ailments in the future. And whilst I talk about that, I'm not doing those those myself myself for sure. But a big part of that is having conversations with asset owners around what they can do now from the design stage, or things that they can do themselves. Look at the look at the the monitoring of the asset. Walk past the inverter once in a while and see if it's got a red light. I mean, I know it sounds so remedial, but it's stuff that's that's not being done at all by anyone, so certainly conversations that we have. Make sure you've got documentation. There's conversations we're having all the time around how people can mitigate things happening, and so a lot of the conversations we're having around is what you can do proactively, and also, funnily enough, you should ask this. A big part of the way that we have discussions is to say if you're doing those things, the the scope or how what you know how we take that proactive maintenance is different versus a system if you're not doing those things or how it was designed or how it was built. So it's often the what you do early can prevent or minimize certain things that can happen at a later stage, but then it's also having those conversations again with other entities, as we've discussed, to try and minimize issues over over the long term.

Nico Johnson  22:12

Daniel, you know, it occurs to me there's a couple things that come to mind. The first is the nature of maintaining these systems is similar to the nature of installing them. It is by definition a local business, but folks prefer to buy from someone they know, like and trust. Which is why, for the for the most part in Australia, as is in the United States, it's been difficult for folks with, let's say, a national footprint in these states would be like a sun run. Sonova just went out of business. I could name a laundry list of companies like Freedom Forever. They've gone out of business trying to set a multi-state national footprint. And you just walked us through a series of steps that, frankly, like even the local operations manager of the facility is most appropriate to sort of maintain because that general maintenance happens across the entire facility, and we're talking for context again about the nature of operations and maintenance for commercial industrial customers as the solar industry scales and takes on sort of the last frontier, which is the the the many millions of square feet of rooftop space, flat rooftop space by and large across the world. So, with that in mind, I'm I'm actually curious, who is your customer?

Daniel Lazarus  23:34

Our customer is anyone who is responsible for maintaining a solar asset, and I know that is such a general, a general answer, but the way that we have structured our business, and the way that the reality is of maintenance is what we do, and what any solar maintenance provider does on site doesn't change. You know whether our client is an asset owner or a facility manager or an insurance provider or a government institution or a REIT or install themselves. We do work as white labeled as as a white labeled supplier for installers. We do work for facility managers, as I mentioned, insurance providers, PPA providers, financiers, anyone who's responsible for one or a multitude of different assets, and the reason why we do that is, you know, we saw the title. We and myself and my co-founder saw that the tidal wave of maintenance coming, as as we mentioned when we were working for that the solar construction company, the EPC. From that side of things, it was around how can we provide a service which is centralized but still localized for on on a national basis. But what we do doesn't change. So how do we go along with the tide? How rather than trying to convince every single asset owner that. They need maintenance because that was that's getting easier now, but a lot more difficult six or seven years ago. How do we either one wait for these systems to fail more and more, which is what's happening, or larger organizations with more governance who require maintenance on all their assets? How do we set up a business that aligns with their requirements, and often they have, as you mentioned, operations managers. They've got facility managers, large companies that are responsible to maintain those assets. So for us, it was around enabling and providing a solution for anyone who is responsible for maintaining any asset, it doesn't have to be the asset owner. It could be anyone responsible for maintaining other people's assets. And very, it became obvious that in many cases, it's actually not the owner that's responsible for for maintaining their asset. It's their facility manager. It's a PPA provider that that owns their assets, but on is on a multitude of different facilities. So the challenge for us, and really for for anyone that you know, those other companies that you talked about, was around how can you deliver a centralized service on a well, in our case, national scale for a multitude of different customers, and motivate our partners to deliver those work in the most professional and high quality way possible. So that was the opportunity we saw.

Nico Johnson  26:27

You know what what you've described, and what I and many others here in the U.S. have begun to observe is a system that incentivizes, especially as the the price of solar cratered, and now as the price of batteries goes down such that people can simply bolt on more batteries to the same projects is a focus on the install side of the business, which is scalable and almost a forgetfulness on the maintenance. In fact, you probably recall back when this when we were first really commercializing the solar industry and the solar product, many folks made the mistake of saying no moving parts. You know, like 25 year warranty. So, when you think about building a business around this often neglected or forgotten element of of the industry, where in the U.S. by the way, like especially the utility scale side, it's mostly kind of Silicon Valley, so venture capital, private equity that is seeing this opportunity and sort of rolling up regional or local installers. How do you actually find customers to deliver on the promise? We can help you organize the chaos. We can help you make sure these you know fulfill on the promise. A promise made is a promise kept. Talk me through from a business model perspective how you're trying to, or how you have built a business that can have a national footprint on what is essentially a local business.

Daniel Lazarus  27:51

Sure. And by the way, you talked about the 25 year warranty. I always laugh at those because they they make it as inverters, maybe less so, but panels they they make it really they they don't make it easy to to have those have those warranties. And by the way, I know this is a slight digression, but the ultimate irony is that because technology has progressed so far with panels, trying to find a replacement of your panel three or four years ago, good luck, and you you can't exactly replace it like for like. So that's a whole nother challenge that we've experienced around great. You've got a panel warranty. That panel doesn't exist. Now you have to replace an entire string or entire section of your system because the

Nico Johnson  28:29

engineering challenge of one panel swap for the other is is a nightmare.

Daniel Lazarus  28:32

Crazy, yeah, crazy. So yeah, so to go back to to the original question. So for us, going back to to what I mentioned around was around, regardless of who our customers, as I mentioned them before, the motivation is the same. They want to make sure that they can rely on someone to support them, optimizing system production, minimizing downtime, and mitigating safety risks associated with their asset. And that was sort of the revelation: was that people tried to have all these different business models for all these different types of customers, when ultimately they all want the same thing. So yes, okay, there's nuances of you know of course, but you know for us it was around how do we then deliver a centralized approach in a localized way across Australia, and the only way to do that is through a model that was technology led, so unlike installation, which has got an inherent cap, you can only install as much as the people that are installing, or you know, as big as your team, as well as other high risk elements there. So I think that that business model is certainly problematic because it's extremely competitive and not very scalable, and not much annuity. Whereas maintenance provides a scalable model, it provides annuity, and yes, whilst each job the value is much lower, it's far more scalable. But the only way that we were going to grow a business like this is through something that was technology med, and one where we could. Have processes such that we could balance between a internal technician model and a subcontracting model, because it certainly doesn't make any sense to hire people across the country, especially in a country like Australia. And so our belief was that if we could get, you know, if we could make this business model work in Australia, we could make it work anywhere around the globe because high-density populations-that's easy. Try, try, you know, have this this this model work in a disparate population center like Australia, and so for us that was very much the focus, and it became clear that motivations and attention needs to be put on two sides, and ironically enough, neither of those sides were demand. Demand comes because systems will fail, and people will be looking for a a partner. Those two sides was around how can you deliver, or so build and maintain a model and a process that you can grow, especially when ultimately you've got people that do stuff on the ground. So having a back end that improves that process dramatically, and then how can you have a network of teams that are able and willing to do the maintenance work for you, whether that be internal or external, and you've got the processes to support what they do and how they do it, because the traditional model around dealing with subcontractors was an EPC flicking a work order to a team on site, saying, "Here's an inverted problem. Can you please deal with it? You do the scheduling, you do the quoting, and it was just a really cumbersome process, and I really believe that that was a massive reason why, as I mentioned at the beginning, these guys weren't motivated to do it, and so ultimately the customer was just left with an orphan system because there was no model that motivated any side to do anything.

Nico Johnson  31:58

What I hear from you is, and I've seen a few attempts at similar business models. We mentioned our friend Ruth Phillips. He built Pronto 365, which was kind of like the Uber for he defined he defined it kind of as Uber for kind of on demand solar service in phase. Ended up buying that product that company after after about three or four years in operation. So I think, by the way, you are on to something. I think that it's there's definitely a need for it, and that was focused only on the residential sector. What I'm curious about is, you know, there's another thesis. A friend of mine is building a business that is essentially saying there are all these techs in the industry, not businesses, not companies, but techs. You know, 1099s we call them in the United States, independent contractors who have the skills but don't again know how to do origination, don't care to do paperwork, don't want an office or a business. They just want to get out and turn wrenches and do the work. Help me orient to that business model that you've landed on that's working for you to have that national footprint. Kind of how much of your business is direct to customer? How much is white label? One thing interesting that fascinated me from your our prep call was that on some sort of CNI scale tenders, you're effectively the majority of the service provider offer that's going out, and and many and the customer nor the bidders may even know it. So, kind of unpack the business that you've landed on that's working for you in Australia.

Daniel Lazarus  33:19

Your friend Rue, I wasn't sure if that was a marketplace for maintenance and for or for installs. I know a challenge for us. It

Nico Johnson  33:27

was specifically for maintenance. Yeah.

Daniel Lazarus  33:28

Yeah. Okay. And that's and that's fantastic because often a challenge is you know you're fighting for people's time. You know when it comes to installs versus maintenance, and often especially now with the battery rebate here, they can make great money installing installing batteries and installs, and so it was about finding a business model which enables them to to to want to want to do it. And I think a big part of our business, just to get to to the other side, a big part of our business is having those conversations with our partners, the relationship that we have with our partners, and we've got about more than 120 teams across the country. Is such a moat for our business because the way that we interact with our teams, why they want to work with us, but to and we know we can get to that in a second. But you know, I think you know to to answer your initial question around why customers want to work with us. So, the unique way that we that that we deliver our work is that centralized approach that I've talked about, and and very much technology led. So, you know, we've we've developed a number of proprietary pieces of software that allows us to interact with our customers in in in a very centralized way, and it's around structuring communication, structuring data, so that everything is completely transparent, and everything can be tracked and modeled and reported. And so, every system that we maintain, we detail and track and data point every item, panels, roof access. Water access, inverters, brands, install dates, everything. Jobs can be logged against those. Jobs are classified, subtyped, scoped. Communication is it can be done on on on our portal. It's time stamped. All faults that we identify are digitized and are are classified by specific type and specific description. Quotes are done through our portal, and they are classified. And so, for us, and especially with our partners, the first element is what they see around how much of the system that they didn't see versus how much of the system they now see around all the details around their systems, a full history tracking of every job that they've done, every current job that's still active, all the reports that we compile and associate with those with every specific job which is tracked. There's such visibility across all the work that they do around solar now, meaning not only do they get enormous amount of data that they didn't before, but that handover process that I talked about is so seamless. Even all the documentation that we talked about is attached against specific systems in our portal, and so that handover process is fantastic. Even active monitoring login details. I mean, I'm thinking of things as I'm going along, but everything that you know that you can think of, and because it's grown organically, it's very very relevant, and it's always improved and growing from the feedback that we get from our customers, and so a big part of that value doesn't matter again whether you're a system owner or an asset manager or whatever. It's providing you with such transparency that really has never been seen before from a solar from a solar perspective, and what that means is that let's say if we deliver a white labeled approach. Our customers, which which are the EPCs, see all this transparency, but their customers receive the high quality outcome as a result of all of this. And so, for them, they don't need to spend enormous amounts of money developing this process. It's all done. Our process is here. Our network is there. But they can now sell a maintenance service to their customers, which means a number of things. One is they can have a sense of annuity in a in a fairly capex heavy business. They can dramatically improve the stickiness that they have with their customers because of this maintenance model, they can fill gaps between installs.

Daniel Lazarus  37:23

They have some sort of revenue run weight, but revenue run rate, and also they can now respond to tenders that require maintenance. They can respond to tenders in areas of the country that they traditionally weren't able to, because they now have localized presence for us to be able to maintain those systems. So the benefit from a white labeled approach is enormous, which is why around 50% of our business is that white labeled approach.

Nico Johnson  37:50

Wow, 50%

Daniel Lazarus  37:51

So from our side, that that extend everything from the reports that we deliver to them, we manage all the scheduling for them, we manage all the logistics, the inductions, the data capture on site, the engineering review, the reports compilation, everything we manage. Which, by the way, is also a motivation to our network. So tradition, you know, I know that this is a question, but I thought it was a great segue because you said something so interesting in our pre-interview, which I've now actually mentioned to a few other people from the states, and apparently it's a known thing. I don't know this, which is you talked about staff on airplanes who don't get who don't get financially incent. You don't get paid essentially for the first couple of hours whilst the plane's on the timer. And I thought that it was so analogous to what happens in this space, which was dealing with partners on site, where the traditional approach, as I mentioned, which is EPCs just passing them a work order and saying deal with it, they wouldn't accept the partner or the subcontractor charging for the time as it takes to quote and to schedule and to prepare and all the travel and all that sort of stuff, and so again, you know, it's so analogous because our partners, most of that, they don't have to do that dealing with us, and for our partners on both sides, so that partner, you know, our partners that are delivered don't have to deal with that, and our customers know that what we provide to them is all inclusive as well. There's no, oh, by the way, it's an extra this for scheduling, or if it's an extra this for that. It's just we try to make it as seamless as possible on both sides.

Nico Johnson  39:28

You mentioned earlier that there are really only a couple of companies, you and like one other competitor attempting to do this nationally in Australia. Why aren't there 20?

Daniel Lazarus  39:36

Because it's hard. As as as as you know, is a very short statement. What we do is hard, and and I and I'm very transparent with people around that. What it you know

Nico Johnson  39:46

what is it that looks easy on the outside that would tempt people to start, but then they aren't able to complete.

Daniel Lazarus  39:53

So I do I liken that to a duck. You know, have you heard of the analogy of a duck, which looks calm on the top but is like frantic at the bottom? You know, it's it's. Can ask 667, years to get to this point, and I'll say to people who are wanting to enter this industry is to say, you know, a big part is around ensuring you can engage with your customer in a centralized manner. As soon as you are focusing on spreadsheets and emails, you're done. You know, a company cannot scale, and I'm not talking about AI. I'm talking about software and automation specifically around how can you track things in a centralized and pattern

Nico Johnson  40:30

recognition. Yeah, understanding

Daniel Lazarus  40:32

exactly right. Getting things away as much as you can, obviously not totally, but from spreadsheets and emails to something which is more transparent and having a trusted network that you are able to deliver this work for, because it is it is hard.

Nico Johnson  40:45

With with AI, though, to your point, even things like email have that pattern recognition because now AI can scan your email. It can automatically process the email into the system you've built to say it's you know you have a system that says something. I would assume, like customer just called, this is the problem. A note is taken, and then boom, like there's a whole bunch of sort of pattern matching that happens to diagnose the issue. It feels like we're getting to the place with the amount of experience in the industry that a lot of the of the issues can be sort of identified, not not not just remotely and addressed, but identified in the communication chain, especially using AI. I'm curious, what do you what do you think someone looking from the outside at Industrias would underestimate?

Daniel Lazarus  41:39

They would certainly underestimate the effort that goes into analyzing every tiny process that we do. Everything, every process on the back end has such secondary and third implications. Sort of, sort of like a like a domino effect, and so simple things that we you know, try to optimize is around communication. You know, providing clarity. We get requests from the customer which aren't aren't necessarily clear. And how do we make that process more clear for our technician, for example? Or you know, we're setting up a rollout to maintain it. We need to get all this documentation, or at least the system information and access to the monitoring portals and all these things to try and make the eventual maintenance of these products as seamless as possible. Or, you know, analyzing you know you you might have a solution around communication that has gone down here. You know, there's an is an interesting a company that went out of business and now now you have to work out how do you replace those items, and there's not a like for like replacements and delivery from those solutions. And so, enormous amounts of time and energy goes into optimizing the tiny, the tiniest of process, which people don't really consider. Even compiling reports, and people sometimes want to report next day, and it's to say, well, you know, you can talk about AI and machine learning, but ultimately, you know, the analysis of pictures AI is still, you know, more in its empathy than than than in text than text heavy based. But we want to make sure that we're reviewing the reports and we're providing really useful feedback, and sometimes that can take a bit of time. And so, how are we optimizing the process around capturing those images and minimizing the time that it takes for us to review that through automating the tiniest pieces of things? So it's all about the one percenters that accumulate over time in a business like ours when you're doing 1000s of jobs.

Nico Johnson  43:37

If you're seven years in, what's the part that took the longest to figure out

Daniel Lazarus  43:40

engagement with the our network.

Nico Johnson  43:45

Yeah,

Daniel Lazarus  43:46

what's the best way that we can engage? What is their key motivations? What is they building

Nico Johnson  43:51

the network or engaging like keeping them happy? Well, both.

Daniel Lazarus  43:54

It's all it's all part part and parcel. Yeah, but the building the network was definitely harder than anticipated. We've gone through about 500 teams to get to the 130, 140 place that we aren't. So when people come in and say, "Oh, you know, all these all these teams that we can do, it's it is it takes six years to develop this network, but we've gone through those because it's taken us time to understand their motivations, to understand what they need from us, what we need from them, who are the types of people that are likely to want to do maintenance? I mean, here's a great something that I've learned, which came more of a surprise to me than my co-founder, who's an electrician. But you know, early 30s is like retirement for an installer. They've been carrying panels their entire lives, you know, they don't want to do it anymore. And so, when when doing maintenance, it's often it's a great chance for either someone in their apprenticeship or someone who's a little older, call it 30s, 40s, even 50s, to still engage in the industry and still really enjoy what they do, but in a slight. Different feel where they don't have to necessarily carry panels every day, all day. And whilst again in slower itself that's obvious, that was a revelation to me. And I think something which is becoming more present within our partner base to saying, "Wow, maintenance is actually really enjoyable to do because of the injuries I have, or because I want to do different jobs on different days, have more variety in my day. So that was coming. That was really interesting that we've learned over time.

Nico Johnson  45:26

I'd like to pull a thread here on moat of everything you've built: the software processes, partner network, the operating model. What do you think is the hardest to replicate for someone who would want to compete against you tomorrow?

Daniel Lazarus  45:39

Two things would be our our portal that we talked about because that has grown organically. There is no way that someone could just come in and just build that from scratch because there is no way that certain elements of that they would know to do unless they experience it for themselves or got feedback from customers, from a multitude of different stakeholders. So that would be a critical thing around, and it also interacts with active monitoring stuff, all sorts of external toolsets. So it's not so much what the

Nico Johnson  46:08

software can do; it is actually what I hear you saying. It's not so much what the software can do; it is how you have not through an AI format, but trained into it the customer behavior and connected it to the various resources.

Daniel Lazarus  46:24

Correct. Yeah. And so there's that, and the the the network that we have.

Nico Johnson  46:29

The network, yeah, which

Daniel Lazarus  46:30

means that when you talk about the network and about maintenance, it's really exciting to to talk to to understand the next frontier as things as things as things age, so yes, there's inspections and reactive work and active monitoring. Batteries are coming up now, but the tidal waves of system replacements are coming. They are coming, and it's around utilizing that network for all these different things that are coming because it's the same people that will be doing all those different types of jobs as well.

Nico Johnson  47:00

Interesting, and thinking about how you can incentivize them to now start to originate new opportunities that they get to go out and work on, which is self fulfilling from a cash perspective. I think correct. What will be what will be really interesting is in the U.S. we saw the sales teams for installers. There was a a long period, probably almost 10 years, where the sales teams broke away and created these sales orgs because they were good at one thing, knocking on doors and getting people to sign contracts. They weren't installers. They weren't, and they and they were able to do it at scale in a way that installers were not able to actually keep up. So the sales teams were like, "I don't want to slow down because you can't keep up. I'll just go originate opportunities and sell it to the person that's ready. So my mind is racing now on just the ways that this business model can expand. You know, one of the things that I'm curious your perspective on, sort of from the inside, knowing what the codebase looks like. What are you currently now? I think AI is a moat for you because that the value of AI is to train it on, is to train the model on, and that's what we're based on the base of data. And correct a new entrant doesn't have the data the data base that you have. They don't have the head start of of time that you have. They don't have the 100. They don't have the network. What would you build differently because of AI? And what are you using it on today?

Daniel Lazarus  48:20

So, what are we using on today? Is probably an easier question, or at least to start with. Yeah, it's interesting because we both utilize our own AI that we built, as well as utilizing third parties' AI to that use our data. So, for example, internally we use Slack. For example, so the power that we're getting from that AI from Slack is great, but the power is really in all the data and the discussions and the documentation that comes from an enormous amount of conversational thread from that. Okay, when you say

Nico Johnson  48:51

when you say the AI you've built, do you mean like an open claw, or do you mean that you've actually like coded your own AI? No, it's

Daniel Lazarus  48:59

using it's using third parties like either yeah like like Claude or Copilot etc. But we've integrated that within our platform and we continue basically loaded

Nico Johnson  49:09

it on a on a local device to yeah to manage your data yeah

Daniel Lazarus  49:12

correct correct so we've also built our own level our own automations and things like that but from an AI basis we use third parties to analyze that, but for the exact reason that you've just correctly mentioned, it's around the data that we have because it's all split and tagged and noted and associated with different things. Providing analysis around that data is extremely powerful. So, because we've got that portal, we've got the ability to do that, and we've also got the ability to utilize AI platforms and third parties to obtain results and reporting that no other organization could anywhere near. So the one that I talked about, so we, you know, the the stat that I mentioned, 25% of our jobs are performance or safety related. Here's another interesting one. So the number of perform uh uh. Performance and safety related issues from first to second inspection halve. So from first to second it halves, and then from second to third to fourth it slowly reduces, but it'll never go down to zero because of wear and tear. Now that stat took me about 10 minutes to find that stat. Now you would never ever get anywhere near that stat without the level of sub data, even if you knew what jobs you did, you need to understand the different faults. Sub, you know, analyzing what what the fault types were. I could say that the soiling was about you know eight to 10% So all this level of data is the critical factor. So I'm so happy that you that you describe it as that because we're not building our own large language model itself, but the data that we have enables us to deliver results and potentially, not potentially, and monetize that data moving forward for sure.

Nico Johnson  50:51

Oh, how how do you monetize the data?

Daniel Lazarus  50:54

So a couple of a couple of ways. One is that, for example, the level of data that we have from a fault perspective, it's very easy. From a as a sales as a salesperson myself, the lowest hanging fruit is identifying opportunities to sell contracted work. So from this level of data, we know exactly all the systems and we know the faults. So we we can say, okay, based on this fault, you need to do inspect. You need to do inspections, and here's a five year here here's a five-year maintenance contract. So, at the at the lowest level, the data can be used to identify opportunities from a contracted maintenance perspective. That's that's that's one. Two is and that's more

Nico Johnson  51:32

predictive. That's like predictive maintenance. Yeah,

Daniel Lazarus  51:34

correct. That's predictive maintenance, contracted predictive maintenance. So, from a sales perspective, is there another opportunity is trends from different inverter manufacturers or different panel manufacturers? Trends around

Nico Johnson  51:49

homogenizing the data and then selling it back to the OEMs.

Daniel Lazarus  51:52

Potentially, yes. There's also geographic, so we can see elements around geography. So where where are certain issues happening on specific geographies. We can say, okay, well, this is is more cleaning happening here, so let's engage that, or system replacements. So eventually, we will be able to identify specific issues over time and be able to recommend particular system replacements, or to you know, and that's where the real money starts to eventuate. Is now you're turning into a a construction business. You're entering a construction side with basically no CAC. It's like no cost of acquisition because you know exactly what needs to happen.

Nico Johnson  52:31

You've you've thought of this for sure. I'm just thinking out loud along with you here. But what had just occurred to me is if you bolt on a traditional mailer business where you send out just a standard piece of mail post. Any time you see an issue pop up in a neighborhood, so what tends to happen? This is true just about anywhere, but certainly true in solar. Is the first domino is the oldest system. It was the first system installed in an area, and it's where people go. Aha! People are buying over in that municipality now. I'm going to go sell to at least sell to every business owner. If you know factory A starts to show signs of wear and tear and aging and needs a repowering, you already have a vector for directing a physical mailer to every business around, which would look something like this. Hey, we were just recently addressing an issue on what was the oldest system in your area. If you've if you've got solar, this is probably happening to you as well. Oh, and if you, by the way, you didn't go solar yet. There's never been a better time than today. Like it's such a dual use tool that you you already have the reason. You can say you can give data. Like here's what we did to fix this. If this is if you haven't checked your system in at least six months, here are the four ways that we think we could optimize the system for you. Give us a no obligation call. Gosh, there's, I mean, an enterprising sales org would want to partner with you to monetize that data

Daniel Lazarus  54:01

totally, and you know what's also interesting? It's one of the few industries where you could go to Google Maps and find and find your your your prospects, right? Yeah. Unlike a solar construction company, where you say, "Oh, every roof's an opportunity, but that doesn't mean it's an opportunity. If they're solar, it is a it is their prospect, and you can and from it and from and from Google Maps, you can see, or from you know other types of sort of map software, you can see how old the software. And with computer

Nico Johnson  54:26

and with computer vision and the level of of imagery that we're getting today, you can easily use AI to surface the exact address.

Daniel Lazarus  54:41

Totally, totally. So, from a sales doing that,

Nico Johnson  54:43

somebody's got to be doing that.

Daniel Lazarus  54:45

Well, I don't know who's doing that. That's a good question. If you're listening to the

Nico Johnson  54:48

show, I want to know. Call me if you're listening. That's a good question.

Daniel Lazarus  54:50

But you know, before that happens, you go to your local warehousing or industrial precinct, see all the solar, and say that's a prospect. That's a prospect. And as I mentioned at the very beginning, every solar that has ever been built or will ever be built will need maintenance, and so it is not a waste of your time to approach them because most of the time they'll be like, "Well, no one maintains my system, and even if nothing's even if nothing is wrong with the system now, you leave them a card, you whatever something will happen, and they will call you,

Nico Johnson  55:19

Daniel. When you look back over this journey and think about all of the decisions that you and your cofounder had to make, what do you think you got right early that you didn't really fully appreciate at the time?

Daniel Lazarus  55:30

Two things. One is how important a complementary partner is in business. My partner is an electrician, and I'm in sales, and how important that was for the development of our business. If we were both technical or both in sales, it just would not have worked. So that became obvious very early on. And another interesting one is starting in COVID was actually really great because we didn't have the operational costs that were slammed during COVID, we didn't have to worry about staff or working from home or changing our business model or anything like that. As you can imagine, with COVID, there was a huge amount of solar maintenance, at least in the peak of it. So, at least we had that time to develop our business model and our process and do some some pieces we did at the beginning to get the business off the off the ground because we you know we completely bootstrap, but that actually was fantastic. Whilst others were doing it hard, we were sort of in our homes, sort of trying to build the business model. So I think those are two things.

Nico Johnson  56:36

What do you think is a lesson that you learned the hard way?

Daniel Lazarus  56:39

So important to have redundancy in areas, in maintenance areas. We at the beginning just had one technician in certain locations. That technician either went out of business, or you know, for whatever reason, retired, and we suddenly didn't have a location in a certain area where we might have been contracted to fulfill that work.

Nico Johnson  57:00

So not sole sourcing a region to a specific vendor as much

Daniel Lazarus  57:04

as possible, correct? And so that's why we've got as many teams as we do because there's a lot, there's a fair amount of redundancy in a lot of areas, and that has been built over time. And I feel like that's a critical question. I'm going

Nico Johnson  57:17

to go back then to how you have engaged and kept over 100 service providers in your network, and you have you know sort of figured out their motivations. Part of people's motivation as business folks are having some sort of moat and channel that's a unique channel of of sort of lead flow and origination to them. How do you language that to the service provider that you're trying to bring into the network that they might not have any sort of exclusivity on a on a town or a zip code?

Daniel Lazarus  57:50

There's a couple of ways. One is when we describe to them our process and say to them that they don't have to do the scheduling with the customer, they don't have to do the rapport creation. They use our digital capture software on site, and they just you know do the scope from start to finish. They first see that it's a far easier process than traditional, and it also means that the time that they spend on the work is billable, as opposed to necessitating non-billable work. So that is that is is certainly part of it. There's another part where they might have again younger or older staff which are wanting or really motivated to do maintenance, we also talk to them around. They've often got gaps that they need to fill between installs because things get delayed or there might be rain delays, and so they soon find out that maintenance can be a great way to fill gaps between installs or to do internal work when it might be raining, and also some predictability and annuity in their revenue as we start to sort of build momentum. Now, some areas, very regional areas, of course, we don't have as much scale as in capital or major regional centers or capital cities, but they still see these benefits that that arise, and I think through all of those and having those conversations is a huge motivating factor. Plus, we can now say to them, "Hey, we've done this with 120 other teams been around for six years. They trust that we know the process. That doesn't mean we're not improving, but we we've done this enough to know that we won't be sort of messing around with them,

Nico Johnson  59:21

Daniel. You've spent years looking at one of the most mature distributed solar markets in the world. I'm curious, what's one lesson that you think the rest of us as entrepreneurs still have time to learn early? If I'm thinking about the services side of the business, what advice would help me avoid the most pain?

Daniel Lazarus  59:40

The first is depending on talking to. If it's an install, an entrepreneur installer, I would say consider offering maintenance and considering offering quick. We we provide support to our partners to support their administrative function to maintain their for them to maintain their own fleet so they can utilize. Our process to support them doing that, but they can do it themselves either way. I would definitely encourage them to think about maintenance. It is a tidal wave that is coming up, and all the benefits that we've talked about: annuity, system replacements coming up, stickiness of customers, especially in the residential sector. Any area that you can find stickiness and excuses to continue interact with your customers or to promote word of mouth, I think, is so critical in that area. So definitely start think about it. But specifically, if someone wanted to start a maintenance level business, is around start with a specific area and focus on process. It's all around process. Build a process in the back end that, or think about a process in the back end that doesn't rely on email or Excel, and how that process can be built over time. I think, ironically enough, the big factor of why we are successful, why we're here today, is because we were bootstrapped. I think if we got investment at the beginning, then we would have built something that might not have been as much of a product market fit, or not been able to grow as organically as it has, which now you know provides enormous value in the market. Having money now, of course, you know, yes, we we you know we keen to to raise and expand and do a whole bunch of stuff, but I think really focus on your process at the beginning, because sometimes people focus on capital raising way too quickly, and then it just you know stuff just grows beyond, and product market fits starts to slip. And that would be my sort of recommendation,

Nico Johnson  1:01:32

Daniel. Before I let you go, I have a question, and I also want to make sure that if folks are interested in connecting with you, if they've liked what they've heard, if they just want to geek out about what's happening in Australia and want a friend across across the pond. How do you like to be found? How can folks reach out?

Daniel Lazarus  1:01:47

So please look me on LinkedIn, Daniel Lazarus at Industrias Services Group with an A S I N D U S T R I A S. Yeah, please search me on on LinkedIn. Send me message. There's also feel free to email me on there, daniellas@Industrias.com.au. But a message on LinkedIn is is fantastic. Really keen to hear from people all around the country and the world.

Nico Johnson  1:02:09

When you look out, you know, 510 years, what are the trends that you expect that are attached not to solar installation but to solar maintenance as a category,

Daniel Lazarus  1:02:21

sure. And I think often when people talk about the trends, they focus on the technologies, on the panels and the inverters and the batteries. And I think that's one portion of it, but an enormous part of the forecast around our industry is around what happens to the existing systems. And I think what becomes really interesting is around the, as I mentioned before, the tidal wave of of maintenance requirements, I see an enormously growing amount of orphans systems, systems which don't have anywhere. I mean, you touched on it before with your friends, and that number is only going to grow. I feel like as systems start to age, more failures will occur. Old legislation will will will show its its its ugly face in regards to wear and tear on systems over time. We've already seen that with solar fires happening on on old technology. I think system replacements will become just exponentially grow, and that will necessarily lead to the ability to design and interact with customers around system replacements. So system removals become relevant. Recycling becomes becomes a lot more relevant, and we're just not seeing enough attention, in my opinion, around a lot of these things. Certainly, in Australia, recycling is still very much in in its infancy. In fact, you know, you have to pay the recycler, you know, to take it away and to recycle themselves. And so, you know, to me, a lot more attention needs to be put on that and quick because we see more and more not just residential large cell commercial systems being removed, whether it be out which whether it be end of life or panels having a systemic issue with them and being recalled, and so that becomes a tremendous opportunity. So it's the maintenance providers like us that will be on the forefront of identifying those really early, but also supporting other installers out there to do their own maintenance work as well. So I think that level of proliferation will become enormous over the next five or 10 years.

Nico Johnson  1:04:15

Well, Daniel, you've given us a fascinating hour of discussion. I think what I appreciate most is that you've given a glimpse into a part of the solar industry that doesn't really get as much attention as the deployment and financing, even the technologies you mentioned. Australia is certainly one of the most mature distributed solar markets in the world, and it's clear that there are lessons emerging there that the rest of us can learn from. I'm grateful for you coming on to share your journey, some of the hard-earned lessons from building your business, and I am super thankful for you joining for this episode of SunCast.

Daniel Lazarus  1:04:54

Thanks so much, Nico. I really appreciate the time and having me on.

Nico Johnson  1:04:57

And I want to thank all of you who have given. Of your time for tuning in here today, as you always do. As always, you can find resources from this conversation and ways to connect with Daniel and all of our past guests in the show notes. If you're watching on YouTube, we'll link it in the description. If you're on Spotify or Apple or even on YouTube, please let us know that you like the show by leaving us a rating, a review, a comment, hit the like button, subscribe to the show so that you will know the next time we release an episode, which is usually twice a week, with founders on the front lines of the energy transition, just like Daniel. It's so smart of you to be here. It tells me the kind of person that you are, and the way that you're investing in your own education to help us build the infrastructure that is building the future for our children and making the world a cleaner place to live. Thank you. Our sponsors, thank you. They want you to hear this material, so they pay the bills and help us keep the lights on. All they ask is for you to pay attention. I'm honored that you've done that today, you know. I always say, you are what you listen to. Thanks again for showing up, Solar Warrior. It's half the battle.

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