As soon as you reach the front door, you get a sense that Urban Volt is a company intent on shaking up an old world with new ideas. Its head office is tucked away in a Victorian house in Dublin’s leafy suburb of Ranelagh, yet the electric cars charging at the back signal that those working here are ahead of the average corporate commuter.

Inside, the office of chief executive Kevin Maughan is wallpapered with a floor-to-ceiling black-and-white photograph of a snowy Alpine landscape. Another room features a neon-coloured mural of a robot in a suit and tie. Maughan reckons the office will need to get even more attractive in the future if the company is to compete with multinationals for recruitment.

Maughan founded the business six years ago with friends Graham Deane and Declan Barrett. Together, they had experience in property, finance and logistics. “We were looking at how to combine our expertise into, at this point in our career, something good for the world. We all had children, we wanted to try and do that do use the power of business for good,” he recalls. 

They turned their attention to energy and have since convinced equity and debt backers, including property veteran Stephen Vernon and the state’s Irish Strategic Investment Fund, to pour tens of millions of euro into a business model where customers pay for electricity savings and renewables upgrades through monthly bills, with no upfront investment. 

The Currency has covered other Irish businesses growing the energy savings-as-a-service industry in recent years, such as eEnergy, Crowley Carbon and ECI Energy, but Maughan insists that Urban Volt was first to offer electrical upgrades in this format – and in fact registered the phrase “light as a service” in its trademark as early as 2016. 

In an in-depth interview available in full on this week’s podcast, he explains how it works, where Urban Volt extended its international reach during the pandemic, and what needs to happen to take the energy transition into the mainstream.

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I first ask 53-year-old Maughan to take me back to the company’s beginnings, when the three co-founders turned their idealistic mid-life musings into a business model.

Kevin Maughan (KM): That was in 2015, late 2015. We were looking at the industry heavily. We did some analysis, it took us a few months to get the idea together. Then a lot of things had to happen on the back end when you start securitising light. It’s not a very strong physical asset, it’s difficult to get the right sort of banks involved to provide debt backing for that. So that took us until about Q1 2016 when we actually had a model.

Thomas Hubert (TH): So what kind of a business would have an interest, and who did you start with?

KM: We looked at the industry and we started initially for any kind of commercial entities, but very quickly saw that the most benefit was not office buildings where they don’t have long operating hours – it was warehouses and factories that were our core market, big industrial buildings. Anything with a metal roof and a concrete floor. And that includes big-box retailers as well. 

Those types of lights – they call them high-bay lights – consume between €350 and €500 worth of energy per light per year. They were the chunkiest ones, those that tended to have the longest operating hours. We could bring that consumption down to about €70 or €80 per year per light. That adds up when you’ve got thousands of these lights in the building.

TH: What’s the contract type? What does the customer get and what do they pay?

KM: It’s a service agreement that lasts for a minimum initial term of five years. We provide all the lights, replace the old-fashioned ones with brand-new LED fixtures. The saving is about 80 per cent on average in terms of energy consumption, they pay us for a minimum term of five years, and then they can extend thereafter. 

Typically, in large industrial buildings, the service fee is about 30 to 40 per cent of the actual energy savings. So it’s a win-win for the client and for us: We get long-term recurring revenues, the client gets immediate cash savings.

TH: You went into solar more recently, about a year and a half ago. Why this particular add on?

KM: We always saw ourselves as not just a lighting-as-a-service business but more of an energy-as-a-service company. We always had plans to add on additional types of technologies using this same model where we securitise the long-term revenues to remove the biggest barrier and hurdle for people that is the capital expense of making the initial investment. 

So, we were looking at other technologies. Covid, interestingly enough, accelerated our journey into solar because it was difficult to get inside our chosen type of customer, which is industrial buildings. They were all operating at 150 per cent capacity or they were shut down because of a Covid spread inside. So it was time to start looking at the outside of the buildings and solar, which we had looked at for a long time and tried to create a model that worked very well for the customer. 

We wanted to become a solar utility where the customer is just deciding on “how much I’ll pay for my solar energy,” so our model is quite different to other people’s.

TH: I suppose solar is a longer-term play for a customer. You’re talking about five-year contracts for LED – that’s the payback horizon you’re looking at and the idea you have in your head for lights to be replaced. But solar, how do you work around the timeframe?

KM: Yes, solar is difficult. The thing that had stalled our entry into the solar market was getting the market to a place where you can get critical mass. In terms of doing one, two or three development, you can’t get your cost down on the cost per panel, for the racking to put it up, the inverters – you need to be able to do it at scale. 

Our average solar contract now is about 19.3 years. We offer it as 10 years, 20 years, or 30 years for the client, depending on whether they have a leased building or they own it. Manufacturers prefer much longer plans. So there is a much longer payback for solar in terms of our capital invested and waiting to get it back. 

However, the trade-off is that it’s a much more substantial asset. So the type of back-end funding and the financial model you can wrap around that is cheaper to provide on a cost-of-capital basis. And it gives us much longer, much more secure long-term recurring revenue. So it’s expensive for us, but it’s attractive for us.

TH: The lighting aspect would be for a business not necessarily owning the building – those kinds of features are the responsibility of the operator – but for solar, do you go more into the landlord area? Who are the customers on that side?

KM: They’re typically similar customers to the lighting business. What we found is customers who may not have done the lights with us are doing solar, and then adding the lights afterwards as part of the project because it makes sense, if you’re consuming the power, to use as little as possible.

Fifty to 60 per cent of our clients own their buildings. They would typically be manufacturers and some distributors or logistics providers. The balance would be rented buildings where we may, in some cases, engage with the landlord, if the lease agreement on the building is less than, say, the 10 years as our minimum term.

That then leads us to other buildings that a landlord might have and introduces us to other clients that they have. So it’s a similar customer base, but we are expanding deeper into that supply chain back into the landlord end.

Maughan says Urban Volt now has clients in around ten countries, most of them in the US and Europe. This is thanks to a remote selling model under which the company essentially sells the “as-a-service” concept applied to energy upgrades and the finance to back it, but outsources physical works to local contractors.

“We’re probably three businesses in one,” Maughan says. “We’re a sales and marketing business at the front end – a customer experience business. In the middle, there’s what I would consider the messy bits that people think about, which is the logistics, moving and ordering the goods from manufacturer to sites and screwed into roofs. And then on the back end is the financial modelling of the business to be able to support that kind of capital expense and that investment. The middle piece, we outsource as much as possible.”

By making remote business dealings the norm, the pandemic has facilitated Urban Volt’s entry into new markets. “Covid is actually a benefit for us because the clients now understand and are happy that you can do it without going to visit sites. Pretty much, we can complete projects anywhere,” says Maughan – though he draws the line at countries where geopolitical or financial risk is too high.

The furthest the Dublin-based business has gone to date is New Zealand, where Maughan says an inbound call came through a third party and led to the completion of two projects. “It’s not something we focus on but it was more of a test. And that was actually what drove us to realise that the key to this business, this industry, is to cut your customer acquisition cost and keep it tight,” he adds.

While Urban Volt has no plans to open an office in New Zealand, it’s a different story in the US where the company operates a local subsidiary. Maughan’s brother Jason is a lawyer in Florida and acts as the local equivalent of company secretary. He also set up a trust for undisclosed American-based backers to invest €200,000 alongside the founders at the very start in late 2015, which now stands among Urban Volt’s largest shareholders.

Company records show seed capital in the first few years also came from investors including Jacqueline O’Donnell of Shankill Pharmacy in south Dublin, Paul Brady and Donal Tierney of the Vetpharm Group, and the BVP investment firm run by Elliott Griffin, who sits on the board – as well as a minority stake for rugby star Jamie Heaslip.

The conversation turns to the more substantial funds raised since – a €7 million round led by ISIF (€5 million) and backed by Vernon (€2 million).

KM: I think we’ve been we’ve been very lucky. We completed a series A in early 2020 with some exceptional shareholders. Stephen Vernon, who is just exceptional, came in as chairman. He’s been fantastic for the business. He’s ex-Green Property, he understands the financial model that we’re looking at and the type of growth we’re looking for.

The Irish Strategic Investment Fund came in as a large shareholder, which is effectively the Irish government, so we have a sovereign wealth fund as an investor as well, now. They’ve been very supportive. They’ve been exceptional as well. 

The key for us is to try and find the right capital model to support the growth moving forward. To date, it’s been a mixture of equity, project finance, and a small amount of debt. Now that solar is coming into the mix, I think debt has a bigger role to play.

I think we’ve yet to see how it really works as we aggregate more and more of these solar transactions. Now banks are coming knocking on our door saying, “We’d love to be a part of financing this,” whereas before, I was like a carpetbagger going around to every bank trying to get a few bob out of them to fund things. So, we’re at that point where things have changed.

I think there will be a continued role for equity to support growth. I’m a believer in using equity to fund the growth of the business – the sales and marketing growth – and debt to fund the asset and project side of the business. We should have a few good announcements on the debt and the project finance side moving forward.

TH: At the moment, the main project finance facility you have is with Low Carbon. They agreed up to €55 million, which is huge for a company that had just a few million in business at the time. How did you pull that off?

KM: (laughs) I’m not really sure. I think the people who supported us from the beginning from the project finance side – it was SUSI Partners in Switzerland as well, Low Carbon in London – understood the market and could see that it was going to open up. They could see that the key to this market was having a brand and being able to make it easy for the customers to sign up. You can’t have a 96-page contract, all sales stop. 

They understood this from other parts of the business, the securitisation model that you use around project finance. They could see the growth and there was no point in us having to go back to the market every six months to keep looking for more cash. So we would agree a much larger number upfront that we felt that we needed in the short term to support the longer-term growth of the business.

TH: Do you ever see yourself drawing this full €55 million down? Or is it now time to find maybe some cheaper alternatives and other models to fund the projects you’re installing?

KM: I think now we’ve kind of graduated, or are graduating – I don’t know what the right word is to use – into a more secure type of business. We’ve been around almost six years, we have a brand name in the industry. We appear in research reports, people understand what we do. I think a cheaper form of debt is a better way to finance it, obviously, and I think it’s easier now. We will be looking to do that in 2022 and 2023.

Ultimately I can see this industry, the energy efficiency and the solar business, moving to sort of green bonds being issued around them. But nobody to date – except, in the US market, huge corporates like Tesla or Sunrun – has proven a model where they can definitively show that they can aggregate thousands of these projects together on a regular recurring basis. No one in the European market really has proven that yet in commercial rooftop, so we’re hoping to be the first one to do that.

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Where does Urban Volt stand on this route to profitability? Maughan remains guarded when it comes to the latest figures for the business, except to say that it now employs 28 people. While abridged accounts available for 2020 show that it cut losses by more than half to €481,000, these are now well out of date, and revenue and volume sales data have remained confidential.

When pressed, Maughan says: “In 2020, the total installed rooftop solar commercial rooftop capacity in the Irish market was about 28MW. I can tell you that last year, we came close to doubling the total installed capacity. So we’re certainly, at this point, Ireland’s largest solar installer for rooftop commercial solar.”

Assuming an industry ballpark of €1,000 per kW of commercial rooftop installed, 25MW added last year would amount to around €25 million worth of solar assets installed by Urban Volt in its first full year operating in this market.

The development of solar certainly drives revenue. Maughan says Urban Volt will start rolling out this business in the UK this year, and each contract is worth four to five times more than those in lighting.

When it comes to converting this growth into profit, I ask him whether the access to cheaper finance we discussed earlier will provide the margin and the competitive advantage required. “That’s one way of putting it, Maughan replies. “I suppose, internally, that is the route to profitability. However, I think the route to really becoming profitable is making it easier and easier for customers to sign up to this and removing all the barriers to entry.”

Will this include offering services to residential customers? I previously highlighted the need in an article based on my own experience of the challenge involved in researching, financing and troubleshooting the purchase of an electric car. The title was “Climate as a service: let’s bring off-balance-sheet green transition to the masses”.

I ask Maughan whether Urban Volt will soon come to install solar panels on my roof and take all that hassle off my hands through a single contract. “Do we think about it? Yes. Do we have plans for it? Yes. Is it something we’ll execute on? I’m not sure,” he answers. While he fully expects the as-a-service model to become the rule in managing households’ overall energy needs, this would be a strategic decision for the company.

“It’s a trade-off between: Do we want to own the Irish market, do everything in the Irish market and create one large local brand; or do we want to continue in the industrial and commercial sector in multiple markets and specialise in that?” Maughan says, adding that it will take Urban Volt’s board another year or two to decide. 

While he doesn’t see appetite among large utilities to deploy the level of customer engagement needed to cover all residential energy needs as a service, Maughan eventually expects them to acquire smaller businesses capable of doing this. Although he stops short of naming this as a future exit strategy for him and his partners, the possibility is there.

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For the final part of this interview, I want to draw Maughan towards discussing a key player in the heavily regulated electricity industry – the state and the national grid operators it controls, ESB Networks and Eirgrid. I know this is not the most comfortable topic for him, with ISIF as Urban Volt’s largest equity investor.

TH: On the solar side, there’s something new in Ireland coming up this year and it will bring us into more of a policy discussion. The microgeneration scheme is finally happening: As a small business, farm or even a home, you can sell that bit more electricity that you’re not using yourself back into the grid. Is that important? Does that make a difference for your customers and their decision to go with your product?

KM: I suppose I’ve been warned not to get too involved in policy debates or opinions on it. However, yes, I think the country needs a microgeneration scheme badly. The government has announced it now, the rate seems acceptable for people to do it out. I think they’re limiting how many people they’re going to try it with. So it’s actually a trial kind of run.

I can see it making it easier for people to do it. In our business, commercial and industrial rooftop solar, our users will use typically, if they’re on the manufacturing side, use as much power as they can get from a renewable perspective. One of the issues is, to maximise the power in the early part of the year and the later part of the year at the lower part of the production curve, to over-install panels.

Traditionally, there has been a whole lot of wastage of energy at peak months: June, July, August – those peaks, they wouldn’t have been able to consume it. Now that we’ll be able to spill into the grid, I think it’s a fantastic opportunity for the country. You can either spill that peak into your own battery storage, which is a business we’ll be entering later on this year, or you’re able to spill it into the grid.

I think we can’t, as a country, meet any of our targets unless we can get these commercial entities spilling back into the grid, because they’re far more predictable in terms of the timings of the energy entering the grid than, say, thousands of homes spilling a bit here and a bit there. It’s much better to have, I would think, large industrial buildings where you’ve predictable amounts of energy that you can depend on every year coming into the grid. So I think it can only be good and I see it as a start.

TH: It’s raising an aspect, which is the beauty of the simplicity of your two initial services. You install LED lights, you save so much electricity, and that’s an obvious number, easy to understand. Or you put up solar panels, and Urban Volt sells you the electricity from your own roof into your electrical meter. So that’s a very easy-to-understand system as well.

If we’re getting into spilling over into the grid, battery storage, as you just said, will you be able to keep that simple offer of one rate – a kilowatt-hour unit is worth so much in your contract for the next five, ten 15 years? Or will you have to go into maybe more complex marketing and different ways of pricing?

KM: That is a very, very, very good question. Because it’s something that keeps me awake at night, trying to get ahead of the market and see how do I keep this as simple as it’s been to date. Because that is the key to our success, it’s the simplicity for the customer.

It’s a question we get from a lot of clients: What if I have excess energy or what if we build out more, can we do a deal where we get some, you get some? The simplest model that I can see for us moving forward will be that we will charge you, let’s say, 10 cents for for every kilowatt-hour you consume. If energy is spilled into the grid, we will give you a credit of 5 cents for it and then we will be taking the revenue for what goes into the grid. That will help offset that increased capital expense to over-build the initial installation.

That to me is a simple way of doing it. That’s how they do it in the US, which I think is in some ways more advanced in some states, not all. That sort of net metering where you spill some into the grid, so you get a credit back for that.

In reality, in the industrial sector in particular, not many people will be spilling much energy into the grid all year long, it will be in two to three months a year. If we over-build the capacity, they would probably be able to reduce their energy bill through net-metering credits by maybe 20 per cent. It’s meaningful. And the upside for us is that we build more capacity on their roofs, so they’re consuming more energy in the off months, the lower months. So we would have those higher revenues on an annualised basis.

Then the benefit for the country as a whole is that these industrial consumers are not using fossil fuels. They’re using energy they produce on their own roof and they’re spilling excess renewable energy for the grid. So I think it’s a win-win-win for society as a whole, the individual operator who runs the business underneath the roof, and for providers like us who are trying to provide power and become a solar utility.

TH: Now that you’re in more and more countries, what’s your experience of those choices? Whether we allow consumers to spill over, whether we pay them, planning, smart metering? What’s working well in Ireland, or elsewhere that we could import and is not so good here?

KM: I think that net metering via the use of smart meters has opened the most doors because it’s easily measurable what everybody is consuming, and what the benefit is not just to the end users, but to society. Everyone starts like this.

One of the issues we see in Germany is if you become a producer as well as a consumer of energy, there’s suddenly an excess tax that goes on if you produce more than a certain amount, because they’re seeing this credit you’re getting from the grid as revenue that should be taxed. And that gets very messy. The German market has different regions, different taxation about it, different ways of doing it.

What could be such a simple and pure industry becomes quite messy when governments initially step in and help it off the go, but then they step back in and try to make it more complicated than it needs to be. My view of that is that they need to keep it simple if you want it to take off. 

I have seen a lot of our clients in the German market – it gets too confusing around the taxation, and they’re terrified of where that will leave them. They just go: "You know what, I’ll just just keep using fossil fuels for a few years until it becomes clearer." So it’s usually smaller points like that are the things that deter people from doing this.

TH: In terms of dealing with utilities, whether it’s the network operator for connections, or electricity suppliers, how does Ireland rate?

KM: I think Ireland rates pretty poorly in terms of being able to connect into the grid and spill energy in. it’s incredibly expensive to do anything with the grid and time-consuming. They have lots of reasons why it’s so difficult, yet in the UK, you can just plug in and spill into the grid whenever you want for your energy, it’s incredibly easy. Consequently, they’re getting a huge boon from from that and renewable energy flowing into the grid from excess capacity of other people’s installations.

In fact, private enterprise is paying for this excess capacity that we’re building out. Urban Volt is paying for building out, ultimately, gigawatts of solar energy that can begin spilling into the grid. It’s not costing the grid anything in terms of having to build power stations or do any of those things. So, I think we need to just keep it simple. And the grid operators need to open up and make it far simpler for people.

A tidal wave is coming. You can only hold it back for as long as possible. In effect, I believe that they have been artificially slowing down the growth of renewable energy in the country. I don’t think I’m the only one who thinks that.

Further reading

New Year, new climate: Irish innovators raring to go in a post-COP26 world