In the past few years, we having been moving towards a sharing economy- a place where IT allows people and companies to distribute and share goods and services that are in excess capacity (Hamari et al, 2015). Multisided market platforms like Airbnb and Uber have led this trend, creating quickly growing businesses that have other parties provide the product or service and are disrupting existing industries. One industry that has not yet been affected by this growing movement is the energy industry-until now. Enter Yeloha, an Israeli startup that is looking to shake up the US energy market.

Yeloha, has been described as being “like Airbnb, but for solar power.” The company hopes to rapidly expand thanks to a peer-to-peer model. Yeloha’s business model relies on two groups of customers, Yeloha ‘hosts’ and ‘partners’. Hosts are people who have suitable roofs and can apply to have Yeloha install solar panels free-of-charge and who will receive one-third of the energy output free. Partners are customers who would like to benefit from solar energy but do not have a suitable premises to do so and thus can buy energy from Yeloha hosts. Those who opt for long-term contracts can benefit from greater discounts. Yehola is entering the market when at a time where its business model makes a lot of sense. A recent poll revealed that 79% of Americans want the US to develop more solar power. Last year, the US generated a whopping 4.093 billion kWh, however only 7% came from renewable energy and only pitiful 0.4% came from solar. The company is looking to change that and launched its invite-only programme in the solar power-friendly state of Massachusetts just last month, backed by millions of Dollars in venture capital funding.

Yeloha’s business model addresses some of the major issues that hinder the expansion of solar power by reducing these barriers and transaction costs for the customer. One of the biggest barriers is the upfront cost of installing solar panels. By offering them free-of-charge along with free energy, the company hopes to attract a large number of interested customers who would otherwise unwilling or unable to do so themselves. These incentives should help the company quickly grow a large network of hosts by not having to purchase property to hosts solar panels but have customers host them instead. This model has allowed businesses in the sharing economy to grow at astronomical rates. For those who are unable to host solar panels but would like a way to reduce their energy bill or be more environmentally conscious, they can simply buy energy from nearby hosts.

Yehola’s business model, although promising, will have to overcome some potential hurdles, particularly legal ones. Other sharing economy platforms like Airbnb and Uber have recently run into lawsuits, which have cost the firms enormous sums of money as well as negative PR. Some observers are sceptic on the legal arrangements of Yehola’s planned solar installations on apartment buildings and rented premises. Others have noted that it only makes sense in markets where electricity from the grid is very expensive like Hawaii. Nevertheless, the market conditions and timing seem to be in the company’s favour to disrupt an industry that has remained unchanged for too long. 

Sources:

Chernova, Y. (2015) “Peer-to-Peer Solar Network Yeloha Gets $3.5 Million to Launch in U.S.”, April 8, Wall Street Journal, (online) available at: http://blogs.wsj.com/venturecapital/2015/04/08/peer-to-peer-solar-network-yeloha-gets-3-5-million-to-launch-in-u-s/

Hamari, J., Sjöklint, M., & Ukkonen, A. (2015) “The Sharing Economy: Why People Participate in Collaborative Consumption”. Journal of the Association for Information Science and Technology

Whitford, D. (2015) “Here Comes the Airbnb of the Solar Industry”, April 7, Inc., (online) available at: http://www.inc.com/david-whitford/built-from-passion-yeloha.html