A REVOLUTION IN THE RENEWABLE ENERGY SECTOR: THE JOURNEY OF LIGHTSOURCE BP
Heidrick & Struggles
16 OCT 2019
In this podcast, Heidrick & Struggles’ Claire Skinner speaks with Nick Boyle, founder and CEO of Lightsource BP, the leading global provider of solar and smart energy solutions. Boyle discusses the evolution and meteoric growth of Lightsource BP since its inception just nine years ago and how the company has overcome challenges in the disruptive renewables sector. He also talks about the future of the sector, including the need to move toward cleaner energy at a global scale, and the leadership skills and talent you need to thrive in such a young and rapidly changing industry.
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Claire Skinner: Hello, I’m Claire Skinner, partner in charge of Heidrick & Struggles’ London office and a member of the Industrial Practice. In today’s podcast, I’m speaking to Nick Boyle, founder and group CEO of Lightsource BP, the global leading provider of solar and smart energy solutions. Nick founded Lightsource in 2010 as just a six-person start-up. Within five years, Lightsource became Europe’s largest solar player and operator. Nick, welcome, and thank you for taking the time to speak to us today.
Nick Boyle: You make me sound very impressive.
Claire Skinner: You are terribly impressive. So you founded Lightsource in 2010. Since then, the energy sector has transformed radically, particularly in the UK. How has Lightsource evolved in that period, in the last 10 years?
Nick Boyle: One of the things that we’ve experienced in the UK, and my assumption is it’s probably been similar in other countries, is that in the energy sector, because it’s going through such incredible transition, you constantly have to reinvent yourself. We had to do it probably seven or eight times in the UK alone, and I suppose the difference between the companies that survive and the companies that don’t is how quickly you can adapt to the changing market.
We entered the industry, and I suppose the catalyst to it, from our perspective, was a very, very handsome feed-in tariff. The whole point about a feed-in tariff, or a support regime in a jurisdiction, is to drive a market toward grid parity. The UK had seen that they needed to start the momentum of solar, and therefore they kick-started that with a very attractive tariff. A lot of companies moved in, including us, but unfortunately, from a UK perspective, too many moved in, and therefore they realized the error of their ways and decided that they would significantly cut the tariff. And that leads ultimately to my talk about reinventing yourselves.
On February 11, it was announced that the 33 pence per kilowatt tariff that we were relying on and on which we had focused was, on August 1, going to be cut to 8.5 pence. So, the first reinvention. We changed from a company that was focused on develop, develop, develop to a company that was focused on buy as much as possible because we, having come from a financing background, had raised the money, and therefore what we then did from February to August was find sites that we could buy off other people, build, and connect. So again, reinvention number one. Reinvention number two is to then find how we, in the new world of 8.5 pence per kilowatt, could make solar work.
So the biggest change for us as an organization was that transition from being in a market that is high margin, small volume, which is what the feed-in tariff was, to reinventing ourselves via a number of different iterations to where we are today, which is very much a throughput model. It’s massive volume, small margin. The world doesn’t owe solar a living. Ultimately, we’ve got to compete on the same level playing field as everyone else. If we’re not cheaper, then we don’t deserve a seat at the table. Other jurisdictions and other businesses throughout the world have managed to achieve that.
A really interesting fact is that in 2017 there was more spent on new generation in solar globally than on any other form of energy generation, so more than nuclear, more than wind, more than oil and gas, etc. This is a really interesting thing to have happened from our starting in 2010 and the industry starting not too long before that. We’ve been through the scratching of our head trying to find out how we could constantly drive to be the cheapest form of electricity generation—originally supported and buoyed up by a feed-in tariff where the government stepped in and supported that—but over time, having to stand on our own two feet, to the point where today we’re building in the UK completely subsidy free. And we can do that because of all of our education and all of our familiarity that’s been built up over the years whenever we had a support mechanism in place.
Claire Skinner: How have you found that evolution and reinvention? Because when we look at the market, you’re going to have to continue to do that. What is special about your team that has allowed you to keep that pace and agility?
Nick Boyle: That’s a big question, and there are many facets to that. One of the things that is really interesting about this industry, which is usually a negative but I see it as a positive, is that this is a “we don’t know what we don’t know” industry. And, therefore, I’m not recruiting a guy who’s done it for the last 40 or 50 years and saying, “Hey, can we do it again, only can we do it bigger and shinier?” We’re in an industry where we’re learning as we go. It’s been a cottage industry that’s shifted into an industrialized size now, which is fantastic. I made a statement a couple of years ago that, in the next 50 years, there would be more deployment of solar in applications that we haven’t even thought of yet than in applications that we have, and I think that’s absolutely true.
Now what’s that got to do with the question that you asked? The way we’ve differentiated ourselves is by recruiting and empowering smart, like-minded individuals. If you do that, they don’t tend to leave, and if they don’t tend to leave, then that’s why you get this constant in the business, which is a senior management team that are educated and rounded in their views but also have the experience.
We’re a business that’s only nine years old. That’s not an old business, but in the solar world, it really is an old business. We now have a relationship with BP, and it’s really funny, you go around the room and you meet a number of senior people in BP and they say, “I’ve been with BP 27 years,” “I’ve been with BP 30 years,” 33 years, or whatever. Someone who’s been with Lightsource for five years is an old-timer, but that’s the industry that we’re in. And the reason why we’ve kept good individuals is because we treat them right and we look after them, But, more importantly, it’s about empowering those individuals, in a world where the decisions haven’t been made yet, to create a solution. We had a situation where we had people running departments of 20 or 30 people, and they were not even 30 years old yet, because they were the right individuals for the job.
Claire Skinner: So you talked about BP, and, having followed you and worked with you for some time, you’re a business that has grown through partnership, and most notably, of course, with BP. Can you tell us your thinking about the BP deal? It catapulted you from a UK player with a small international footprint to truly one where the world is your oyster.
Nick Boyle: This is 2016/2017. We were sizable enough, a quarter-billion-pound business, which sounds big if you think about it from a UK perspective, given we’d built that from a standing start and bought out the entity that had financially supported us to get to that point. We were the largest business in Europe, just under 300 projects built and connected in a very short period of time, so we knew that our methodologies, our systems, our controls, etc. were really, really good. But we said, “Hang on a second here. What do we do? We’ve done well. Do we sit back and flick peanuts in our mouths and lie on a beach with the success that we’ve enjoyed?” And you know me very well; it’s not quite my sort of way to spend the day. Or do we say, “Hang on a second here. Is there something more we can do?”
We looked at the world, and while we had been successful in the jurisdiction that we had focused ourselves on, we looked around and realized that the UK was not the only place that had gone through that exponential growth over the preceding years; the rest of the world had twigged onto solar as well. And, therefore, we asked ourselves: Are the skill sets and methodologies and systems transferable? Are we a one-trick pony? In other words, do we only lend ourselves to the UK market, or could we do something different? And the BP deal was the second step. The first step was saying, “If we looked to take our skill set into a number of different markets, could we be successful?”
Our hypothesis was, within the solar farm fence, how different can it be? We’re not splitting the atom here; we’re knocking a bit of metal into the ground, we’re sticking a frame on it, and putting a solar panel on it, connecting it up and connecting it to the grid. It’s more installation than it is manufacturing; the manufacturing is done in China or wherever they’re making the solar panel. So how different can it be if you’re doing that in Timbuktu or wherever? Our hypothesis was that it was exactly the same. And even outside the fence, what’s it about? It’s about grid, it’s about land, and it’s about whatever legislations are required in order to make sure that you adhere to the rules so that you can export your electricity. So inside the fence, very similar, and even outside the fence, while the local nuances might twist it in a particular way, it’s the same principles. That was our hypothesis.
So we reckoned if we’re going to look at the world and decide whether or not we want to take another step, then what countries do we have to look at to quickly get us a view as to whether or not we have a business that could be potentially globalized? And so we decided to choose some very different markets. We had Europe with the UK. So we decided to go for India and the US, because we reckoned that if you had India, the US, and the UK, you pretty much had an indication as to whether or not you could be successful elsewhere. India is a very challenging market but huge potential. The US is actually not one market; it’s states. And what we found out really, really quickly, and not surprisingly, was it’s exactly the same; I mean, it really is. There’s little tweaks of differences, but it’s exactly the same.
And, therefore, what that taught us was that, if we decided we wanted to go to the next level and go from a local European player to a global player, the barriers to entry were more financial than they were of intellect or skill set. So we went to Rothschild [financial advisory group] and said, “We want someone that gives us global reach, gravitas, financial wherewithal,” all of those bits and pieces that we were lacking. We had all the skills in the world, we had all the experience in the world—well, not in the world, as it turns out, but in the UK—in terms of building solar parks and operating them efficiently, but we needed the other elements to truly go global.
We had about 14 different bidders, which was shocking for us. They fell into two distinct groups, pretty much 50/50. So half of them were your pension funds, whether it was the Canadians, the Singaporeans, etc., so those entities that said, “Solar producers are really predictable, a long-data income stream with a bankable counterparty, so therefore that feels like an annuity; I want to get into that.” So that’s why they were interested, but that for us felt like we were just working for them rather that working for ourselves.
Then the other half of the bidders were strategics, and all of them were oil and gas, or previously oil and gas. And it was really, really interesting because it was counterintuitive to us that a company that pumps stuff out of the ground and sticks a match to it would necessarily see this as a natural progression. But if you think about it in its simplest form, for the last 100-odd years, the energy companies of the world have been oil and gas companies. And no one complained about it not being green and everything else then, because if the option was having energy or not having energy, people had energy; that was what the choice was. So if for the last 100 years these businesses have been building themselves up into this position where they are basically the energy companies that drive the world, they’re not likely to want to give up that position lightly. But what they’re also not is stupid. They realize that, in 2017, as I said earlier, there was more spent on new generation in solar than anything else. They realize that the cheapest form of electricity generation now is solar, and, therefore, if they want to continue to be the energy supplier or the big energy companies of the world over the next 100 years, they need to get themselves in front of solar.
Actually, there’s a stepping stone before that. If you look at electricity as a subset of the overall energy piece globally for the last 100 years, and you compare it to how relevant electricity is going to be as the deliverer of energy globally, it’s becoming more and more relevant. Why? Overall energy demand is going to increase by 2%, but electricity is going to increase by significantly more, and there are really simple explanations: electric vehicles, transportation, energy in the home, heating in the home, etc. These are all moving toward electricity. So if you’re moving toward electricity as a larger part of the energy mix, and solar as a subset of electricity generation is the cheapest form of generation, then it’s not too surprising that all of those strategic bidders were oil and gas companies, who didn’t understand renewables but thought, “I better sit up and get an understanding of it.”
Claire Skinner: And with the pledge of the UK government on net zero greenhouse emissions by 2050, do you think that’s going to accelerate investment in renewables? Do you think that’s going to impact the corporate PPA [power purchase agreement] market?
Nick Boyle: This is a definite. There’s absolutely no question. It’s a when, not an if. There is absolutely no question that there is a huge amount of renewables coming, absolutely more than anyone thinks, because the speed of change will only gather momentum. Interestingly, while that’s great from our perspective, it creates some significant challenges in terms of balancing the grid, in terms of storage, in terms of solar’s not too hot at night, last time I checked. There’s all of these different challenges, but the prize, ultimately, is huge.
Claire Skinner: And given how big the scale of the market opportunity is and the opportunity for solar and renewables, and of course storage and EV [electric vehicles] coming through as well, how do you prioritize where you and your team spend your time? How are you thinking that through as a business?
Nick Boyle: The first thing that we’re focusing on is building critical mass in countries. The way that we look at the world has sort of changed since the deal. Originally, we would have, had we not done a deal with an oil and gas company, looked at the world through a solar lens. So the radiation in a country—sunny is better than not sunny, the price of the electricity that we’re competing with, the legislation in place, the availability of land, etc., so all of the attributes that are required in order to build a large solar business in a country, that’s the first lens.
The second lens, which is the new one, is a BP lens. BP is in 90 countries globally; why would we go to a country where they’re not? It makes no sense. When we get to the 90 countries, OK, number 91 will be a country where they’re not. There’s nothing like an unfair advantage. If I’m looking to build significant volume in a country, why would I not go to one where I already have the advantage of having infrastructure, offices, employees, connectivity with government, the regulator, etc.? And those are the invisible positives that BP affords us that other companies, which are maybe competing with us, perhaps don’t have access to.
Claire Skinner: You’ve talked about the agility and the challenges you’ve had to overcome to pivot and change and reinvent yourself to be where you are now. Looking forward over the next five years, is there anything that’s worrying you, that’s really going to knock you off your stride, whether it’s trade issues or economic policy, continuing challenges of some of the groups not recognizing climate change?
Nick Boyle: They are a constant, but we’re part of the solution. So in a funny way, if something hugely negatively affects us, it hugely negatively affects everyone else like us, and, therefore, the trajectory is changed. And I don’t think the trajectory is likely to get changed. Renewables are going to become an ever more important part of the energy mix; that’s a fact. Yes, there will be turns in the road in certain jurisdictions, but you deal with them. It’s not like we’re being picked on. Everyone’s in exactly the same boat, and therefore the relative attractiveness in the pricing that you can get to is affected, but it’s the same for all; it’s a level playing field. The world has moved to a bidding scenario where you submit a tender. We’re now in a situation where we just won a tender in Brazil, and it was the cheapest price ever transacted for renewables—in Brazil! It’s incredible. This is where the industry, the world is going. Yes, it’s going to create challenges in terms of imbalance and all the other bits and pieces, but, ultimately, the core of what we do, which is producing cheap, green electricity, that’s not going to go out of fashion.
Claire Skinner: As a leader in the market, who do you look to, whether it’s individuals or businesses or sectors, for your inspiration?
Nick Boyle: I probably look around at other companies that are doing something similar, such as Enel, Total Eren, etc. I’m not sure whether I’m looking at them for inspiration, but if I’m the only one paddling my canoe in this direction, maybe I’m getting it wrong, so it’s nice to see some others paddling alongside us—though we want to be in the lead while paddling. So looking around at the other entities and making sure that we’re not missing something.
Claire Skinner: As a disrupter in the industry, are there other sectors that you look to that have been as disruptive as you have been to the market, or part of a segment that is really disrupting the market?
Nick Boyle: I’m not sure we’ve been disruptive. I think we’ve taken advantage of the disruption, but the disruption was caused, in my opinion, by a Chinese chap getting on a plane in 2006/2007, flying to Germany, buying a solar panel, bringing it home, and taking it to bits and mass producing it. That’s the reason why today we sit where we are. We’re buying solar panels today at 5% of what we were buying them for 10 years ago, so a 95% reduction. That’s what has caused the revolution—nothing else. Ultimately, it’s about price competitiveness. If we don’t have price competitiveness, we have nothing. The reason why solar has gone so well is because we can offer something at a price that is cheaper than conventional forms of generation, and that’s because of the Chinese mass production.
Now there are other factors. We build a solar part today very, very differently from how we built it 10 years ago. Today we’re just pushing the envelope to drive down price. And that’s because, ultimately, in this bidding scenario that we’re in, this auction scenario, if you’re one inch cheaper than everyone else, you win everything, but if you’re an inch dearer than everyone else, you win nothing. That drives the right behavior. It makes sure that we’re constantly looking to drive our efficiency, and, ultimately, that means that the customer gets cheaper electricity.
Claire Skinner: So pivoting to you, Nick. You’re a serial entrepreneur now. Lightsource is your most recent venture, but I know you invest in other things as well. What advice would you give to budding entrepreneurs as they look to replicate, not necessarily in the sector?
Nick Boyle: I have this story that I find funnier than anyone else does, but it illustrates the point. And it’s not so much entrepreneur; it’s more that I think you always run the risk of rushing, thinking you’re ready to be CEO before you are.
Basically, Picasso is sitting on Montmartre, and this American woman comes up and says, “Oh, Picasso, I love you. Will you paint me?” And he says, “Go away, madam.” I’m going to shorten this, given the fact we’re on a podcast. But she goes on and on and on at him, “Please paint me.” He eventually gives in, and he sits her down and takes a piece of paper and, with four swishes of the brush, is completed. And she comes around and looks at it, and she says, “Oh my god, that’s amazing. That is absolutely fantastic.” And she goes on and on about it. And then she says, “How much do I owe you?” And he says, “One million francs.” And she says, “But it only took you two minutes.” And he says, “No, madam, it took me all my life.”
And I think we’re all too fond of thinking, “I like the idea of being an entrepreneur; I’m going to be a CEO.” I promise you, it’s not fun if you haven’t got a little bit of experience. This is the first one that I’ve done as CEO on my own, in my own right. Because it took me all my life to get to that position. I’d done the managing director, I’d done the sales director, I’d done all of those bits, and I think we are the sum of our experiences, ultimately. People can rush in and get loads and loads of bits right, but get one bit wrong, and it falls on its face.
What I would definitely say to the budding entrepreneur is become a budding businessman and understand what makes a business tick. No matter how good your idea is, it’ll never get out of the starting blocks if, ultimately, you don’t have a business that is well founded, well funded, and everything else. And the other thing that, for me, is absolutely the most important point is that I always make this joke about I’m good at very little—someone said to me once that a CEO is a veneer of understanding of everything and a deep understanding of nothing, which is probably accurate in my case—but one of the things that I do well, and I don’t do many things very well, is I’m good at surrounding myself with people who are better than me. And I mean better than me in the areas in which they’re expert. So my job is to manage those individuals’ expertise to form a fully rounded business. And sometimes people rush in and forget that if you don’t have all the building blocks in place, you’re not going to get very far.
Claire Skinner: So what would you like your legacy to be? I know you’re cringing at this, but as a leader, what would you like to be known for?
Nick Boyle: We’ve said that the reason why we went from the UK, sort of Europe-focused, to global is that we wanted to drive the solar revolution and be part of that. And for me, it would be great if Lightsource, not me but Lightsource, was seen as one of the architects of that solar revolution, not only in Europe but globally. That would just be an amazing thing to be part of.
Claire Skinner: Nick, thank you for taking the time to speak to us today.
Nick Boyle: Pleasure.
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