Director & President, NEXTRACKER INC
The Solar Journey S201: "California Dreamin'" with Howard Wenger of Nextracker
We're kicking off Season 2 of The Solar Journey with solar industry leader Howard Wenger, President of Nextracker!
About Howard Wenger
Howard Wenger, president of Nextracker, said on the podcast "The Solar Journey" that the company had shipped 100 gigawatts cumulative in 11 years, with over 1,000 employees and about $2.5 billion in revenue in the last fiscal year. He stated that Nextracker has localized production with over 80 manufacturing facilities worldwide, achieving 100% domestic content in the US and over 65% in Europe. Wenger expressed mixed feelings about efforts to diversify the solar supply chain away from Chinese manufacturers, noting that Chinese companies have driven costs down. He described interconnection approvals as the biggest bottleneck to US solar growth, citing a queue of about 2.5 terawatts. Wenger said the solar industry needs to grow tenfold to match the size of the oil and gas industry to achieve the energy transition. He noted that the Inflation Reduction Act is fast-tracking renewables in the US with incentives across the value chain. Wenger also discussed Nextracker's acquisition of BrightBox to bring AI and machine learning capabilities to its software, and contrasted US and German corporate cultures, stating that US companies are more willing to acquire others for expertise or market access.
Transcript (56 segments)
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Host0:21
Welcome to a new episode of the Solar Journey. My guest today is Howard Wenger, President of Nextracker, a maker of tracking systems for utility-scale power plants. Welcome, Howard.
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Howard Wenger0:27
Great to be here. Thank you.
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Host0:32
One of Howard's first projects in solar was a PV grid simulation software as part of his master's thesis. Howard Wenger is President of Nextracker Inc., a leading provider of solar trackers and software solutions used in utility-scale and distributed generation projects. He is an accomplished solar industry business leader and executive, spending 35 years in the industry. He brings global commercial and operations management expertise from his prior leadership roles, including President and Board Member of Solaria Corporation, President and CEO of Soventix Corporation, and Executive Vice President at PowerLight Corporation. He also worked at PG&E, a California utility, and at old brands in solar like AstroPower. Welcome again, Howard. How did you get started in solar? What was the trigger moment and the first project?
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Howard Wenger1:40
I grew up in Southern California, and there was a lot of smog alerts. Sometimes we would be in school and have to go inside because there was so much air pollution in the Los Angeles area. I think that was the beginning for me. I became conscious of the environment. There were gasoline shortages in the 1970s. I graduated from high school in 1977, and I was in a line waiting for gas because of the oil embargo by OPEC. There was a shortage of gas, and I was about to go to college, wondering what to study. In one of those gas lines, I thought about alternative energy, not necessarily solar, but the need for energy independence. The final trigger moment was in 1982. I studied Environmental Studies and tried to get a job in solar in 1981 after graduation. There were four photovoltaic companies in the United States, but I could not get a job because I had a non-science background. In those days, it was all about research and development. So I went to the World's Fair in Tennessee, and there I saw a photovoltaic panel powering a telephone booth. I fell in love with photovoltaics. Then I got a graduate degree so I could get a job in photovoltaics.
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Host3:30
Fantastic. I remember those times in Germany, there were weekends where you couldn't drive on the Autobahn to save fuel. Those were the days in the 1970s. You studied environmental science and then moved into general management, sales, and marketing. How did that come about?
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Howard Wenger4:00
The first thing I did was become an engineer. I was not an engineer, but I got a master's degree in engineering. It took me almost five years because I had to take all the courses. That's when I learned programming in Fortran. For my master's thesis, I created a photovoltaic simulation program for large-scale photovoltaic systems. The first program I wrote was around 1984, and that's when I got my first job in photovoltaics. I was really an engineer and a researcher for my first 10 years in photovoltaics. Then I got into the policy and business side after that.
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Host4:58
What was the feeling like working in solar in the 1980s and 1990s compared to now? What has changed for you personally and for the industry?
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Howard Wenger5:11
Nobody in my family or my friends understood what I was doing. They thought I was wandering off, like Howard's a lost soul pursuing the solar dream. Photovoltaics were very small, mainly off-grid, costing $15 to $20 per watt back then, which is probably about $40 to $45 per watt in today's dollars. We were in search of cost-effective applications. We had to focus first on off-grid, then distributed generation because you could sell at the retail level and get that retail price of energy, and then pursue utility scale after that. It's been a progression over 40 years. Our company just celebrated shipping 100 gigawatts. Nextracker was founded in 2013, and we have shipped 100 gigawatts cumulatively in 11 years, which is an amazing feat for any company. It's been very exciting.
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Host6:33
Would you have expected back then that we could come to this cost level? Was it more of a dream or a vision, or could you see the rational path for costs to come down so much?
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Howard Wenger6:51
We saw the rationalization. We had our own projections. There was a consulting company called Strategies Unlimited that followed the solar industry in the 1990s, and they discovered a learning curve for solar. With every doubling of shipments, the price was coming down 18%. We would take that into our curves and projected that by 2010 or 2015, we would be about $2 per watt for an installed system. We've blown through those projections. For me, that was the dream. We thought at $2 per watt, we could proliferate solar everywhere. That was the magic number. Now systems are going in for as low as 50 US cents per watt, including a substation, in places like the Middle East. It's astonishing.
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Host8:00
What lessons or insights from the early days still inform your decisions in 2024?
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Howard Wenger8:13
So many lessons, victories, and challenges inform everyone's journey. Being here at Intersolar in Munich, with over 50,000 people, everyone has their own personal journey. I've always focused on trying to create value—how can I personally add value to whatever I'm doing, to the team, to the company, to the industry. That has guided me throughout my career. It guided me to go into policy because the industry needed to change things like how energy is metered. I co-authored net metering legislation and drove it in the United States. I got involved in the first rebate program for solar in the US, a $4.50 per watt rebate in California in 1996. It's guided me in helping lead companies.
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Host9:29
How do you add value? Did you ever end up in a corner where you knew there was a gap nobody else was filling, so you jumped in, but then realized it wasn't your spot?
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Howard Wenger9:46
I've never experienced that. The gaps have always been so interesting. You are either captivated by photovoltaics or you're not. For me, I'm captivated every time I look at a solar cell. It's the thickness of a human hair or less, light comes in, and power comes out for decades with no pollution and no moving parts. That is the ultimate energy generation technology. If that creates a spark in you, which it has in me, I'm obsessed by it. Dan Shugar, the founder of Nextracker, and I have worked together for 35 years. We have this thing where if you cut us, silicon pours out of our veins. We're obsessed by this technology. If you have that feeling, any gap you jump into is worthwhile, whether technical, growing a business, creating policy, or communicating.
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Host11:03
One can tell that solar spark is still fully alive in you after all these years. Fantastic. How does Nextracker serve the solar industry? Why do your customers choose you over other alternatives?
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Howard Wenger11:20
We have a value proposition that is differentiated. The core thing for strategy—every company needs a strategy. This is a guiding principle I learned from Michael Porter, a Harvard professor. He says strategy is how you create a differentiated competitive advantage that is sustainable. Nextracker has done this through our technology and know-how. The founders, six of whom are still with the company, and the executive management have about 25 years of solar experience on average. We commercialized single-axis trackers back in the 1990s. They were linked row trackers, reliable but with constraints. We took lessons learned from deploying hundreds of megawatts of different tracking technology and created an independent row balance tracker. Every row is monitored and has its own antenna, connected via a wireless mesh network. We can tell exactly what's happening every minute on every tracker row. It's non-linked and self-powered, so it follows the terrain without grading. That's our NX Horizon XTR extreme terrain following tracker. We can control every tracker to maximize energy output. We also use aeronautical-grade fasteners for a lifetime connection. These advantages maximize energy yield and minimize the cost of energy. That's why we're selected.
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Host14:55
What about wear parts in such tracking systems? In the early days, there was an argument against tracking because it's beautiful if you don't have to touch the module. With trackers, you have bearings that might need maintenance. What is it like today?
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Howard Wenger15:26
We use brushless motors versus brushed motors that some other providers use. We use lithium-ion batteries versus lead acid. Our lithium-ion batteries might need replacement once during the life of the project. We have minimized O&M costs to be the lowest O&M provider of trackers in the world, validated by third parties. Trackers have moving parts, but most of the time they are just rotating slowly throughout the day. There aren't many parts that will wear out. The additional cost versus fixed tilt can yield up to 25% or even 30% more annual energy. It does require more land, so there are trade-offs. Fixed tilt is a good solution for certain applications.
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Host16:58
Can you give us an idea of the size of Nextracker—number of employees, revenue, regions of operation, and customer base?
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Howard Wenger17:13
We are a public company, and our financials are available online at nextracker.com. Last fiscal year, ending March 31, we had about $2.5 billion in US revenue. About two-thirds of that revenue is in the US, one-third outside. We have over 1,000 employees. Our headquarters is in California in the San Francisco Bay Area, with offices in Nashville, Tennessee, and India, where we have over 300 people. We have a big center in Brazil. In Europe, we have over 60 people, with our main office in Madrid. We also have a great presence in Australia. We have been growing historically about 30% per year for the last six or seven years.
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Host18:26
Your title is President. What do you do day-to-day?
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Howard Wenger18:31
I believe in the inverted organization chart where I'm at the bottom and the rest of the company is above me. Dan Shugar is the CEO, and we partner and divide and conquer. My focus is on R&D, product development, marketing, and sales, and getting those products to market. We have a team, including Alex, our CTO, driving innovation. I manage turning that into a real product in the field, and then sales and marketing. I'm also on the board, helping with general management and decision-making.
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Host19:38
Before Nextracker, you had experience at SunPower, PowerLight, and other companies. What is the biggest management learning for you, and what advice would you give someone starting a business?
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Howard Wenger20:03
For employees, find your passion—something you are truly passionate about, because that drives you. Then find something you can personally add value to the team. Act with TRE: trust, respect, and empathy for your fellow employees. For someone starting a business, it goes back to strategy. What can you uniquely add? We don't need another photovoltaic panel. If you are starting a solar cell or panel company, maybe you have a unique invention. Have the whole industry in mind and how you can pull it forward. On the management side, I am quite religious about plan versus actual. Have a plan and execute to it, whether in product development or sales. That has served Nextracker well. We have had five earnings calls and are executing to plan. Always put the customer first. We walk over broken glass for our customers. They give you amazing insights on product, sales, fulfillment, and warranty. Listen to your customers. I tell people to have two ears and one mouth for a reason. Two-thirds of the time with a customer, listen.
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Host22:53
How do you handle customization versus standard products? When do you decide to customize for a specific project or turn it into a new product line?
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Howard Wenger23:28
That's the critical interface. It's a challenge because you can become defocused with so many great ideas. There's agrivoltaics, floating systems, and extreme weather like hail. We listen to our customers. We announced a new product last year that stows at 75 degrees for hail resistance. You have to be data-driven but go with your gut. It's a balance. So far, we are doing okay, but we have many parallel efforts.
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Host24:56
Are business decisions more on the art side, like gut feel, or the science side?
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Howard Wenger25:10
In the end, it's 50/50. You have to go with your gut because there is only so much data. There is always uncertainty. If you are a skier, sometimes the light is flat, the sun is obscured by fog, and you can't see the terrain. You have to leap off the mountain and trust you'll make your way down. That's where the gut comes in.
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Host25:56
Much of your experience is in the US solar market. We are in Europe at Intersolar 2024. How would you describe the tracker uptake in Europe? Is the mentality different?
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Howard Wenger26:12
The energy is amazing. The amount of activity is still really strong. Comparing last year to this year, there is more activity. New markets are evolving, like Romania. Tempering this exuberance, the solar industry can be like a field of locusts, moving very fast. The technology is quite simple. A single company can build 10 megawatts in a week. We talked to a company installing 10 megawatts in a day. We can create excess energy quickly with solar, so it's important that other technologies like battery storage come along to provide a 24/7 product.
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Host28:04
Is Nextracker looking into these areas to extend your portfolio beyond steel, software, and sensors?
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Howard Wenger28:24
Trackers are still the core. We view the tracker as the spinal cord and neural system of the power plant. But yes, we are looking at potentially doing more. Our customers would like us to do more. Looking at the industry evolution, companies 20 years ago had a tendency to do more than just make panels. At SunPower, we vertically integrated to load factories. As the industry scaled, companies became more specialized. I never thought I would see more than 10 tracker companies at a show. But you might see a reintegration to a more complete solution in the future.
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Host29:47
The solar supply chain has been a big topic. You have been active in localizing production, particularly in the US and Australia. How do you see that playing out globally, and what volumes make sense for local production?
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Howard Wenger30:20
This is a pendulum. There was a tendency to have all manufacturing come from Asia, but before that it was more local. Now there is more localization. Nextracker has over 80 manufacturing facilities around the world. We enabled over 20 facilities in the US in two and a half years. Before three years ago, we were importing almost everything. Now we can hit 100% domestic content in the US. In Europe, we can achieve more than 65% local product. In Brazil, a very high percentage. In Australia, a very good percentage. In India, over 80% localization. The pandemic taught us that logistics can be incredibly disruptive. That was a catalyst for Nextracker to localize in the US, not the Inflation Reduction Act, although that has accelerated it.
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Host32:13
Local production of PV cells and modules is at the core of discussions here at Intersolar. Based on your experience, how do you think efforts to diversify the supply chain for cells and modules will play out?
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Howard Wenger32:58
I have mixed feelings. As someone who has worked in solar for 40 years, I wanted that cost curve to come down because we are competing against the grid. The industry owes a huge debt of gratitude to companies in China that scaled massively and drove costs out of the panel, with solid warranties and performance. They have done a really good job. You can argue about the government's role, but I am fixated on mainstreaming solar. It has been very good for the industry. Now in the US, tariffs are placed on this product because the federal government wants to localize solar cell and panel manufacturing. I think this can work. Global players are coming to the US to make it work. With policy, technology, and economics working together, other countries can learn from the Inflation Reduction Act, which is fast-tracking renewables for the whole value chain.
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Host35:17
New tariffs on importing modules to the US—what is the impact on cost? Will it slow down growth?
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Howard Wenger35:44
I don't think it will slow down because US manufacturers are scaling up their factories. It's still a competitive situation, though a couple of dominant US players are benefiting from trade policy. Pricing will either be steady or increase some. But the Inflation Reduction Act's tax credits—a 30% investment tax credit plus a 10% bonus—can offset that. If there is a $1 per watt increase, 40 cents is taken away through incentives. Dozens of new factories have been announced in the US, and investment is happening. It's not helpful for growth, but we will still grow, maybe not as fast. The biggest governor to growth is interconnection approvals. In the US, the generating capacity is about 1.3 terawatts. The interconnection queue is about 2.5 terawatts, double the existing capacity. 90% of that is renewable energy, and solar and storage is 60% of that queue. Getting these projects interconnected to the transmission system is the biggest governor, but it's happening. Our company is growing 30% per year.
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Host39:18
Is the bottleneck technical or bureaucratic?
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Howard Wenger39:32
All of the above. It takes time to get permits and studies. There are technical constraints, but they have not been reached yet. There is plenty of substation and transmission capacity in a lot of the US, but more transmission needs to be installed. Reconductoring is quite easy. These things will happen.
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Host40:12
Nextracker started as a tracker system company focused on smart structures based on steel, then added more software. How did you move from a hardware engineering company to a software engineering company?
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Howard Wenger40:44
There was a bit of an issue. We purchased a company called BrightBox that had AI and machine learning capability about five or six years ago because we didn't have that technical know-how. We injected that DNA into the company. We translated that knowledge into managing every single tracker row to maximize energy yield through software called TrueCapture. With the advent of split-cell panels, we added Split Boost, which allows the bottom half to be shaded at certain times while the top half is fully illuminated. We optimize every moment of every day through software. That came from the acquisition, which provided the algorithms and know-how. Now we have a full performance team that keeps evolving the software.
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Host42:39
It seems US companies are more ready to acquire a company if they lack know-how, whereas in Germany, there is a tendency to do it ourselves. Have you observed that, and why?
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Howard Wenger43:28
It's organic versus inorganic growth. You can do it organically by hiring expertise or rerouting existing people, but there are competing priorities. Sometimes a company can't dedicate the resources needed to expand. In companies I've been in, we acquire a company to find a synergy—something we're not doing that fits culturally. In Germany, maybe there is a concern about culture fit. Often it doesn't work in the US either. It's like marriages—maybe 50/50.
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Host44:53
There is also a different approach to valuation. In Germany, it's based on past EBITDA, while in the US, it's about multiples and future potential. Have you observed that?
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Howard Wenger45:41
Yes. As a public company, Nextracker is held to a different standard. Traditional financial metrics like multiples are important, but more important is the value proposition of the company we're acquiring. Will it help us be more differentiated and engender customer loyalty? Will the culture match? Are they maniacally driven like us? Those are the things we look at, but we also adhere to metrics. I don't have as much experience with European companies.
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Host47:30
Big exits in the US would never be possible in Europe. Why is that?
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Howard Wenger47:52
It's very different. Look at WhatsApp—a team of engineers valued at a crazy amount because you look into the future. You would rarely see that in Germany. The VC culture is super different, and California is the ultimate space for that. There are also a disproportionate number of casualties in the US. I had the fortunate experience of working with Total, the giant energy company out of France. They were a 60% owner of SunPower. They made investments in storage and bought a retail energy company in Belgium. They were very thoughtful and forward-leaning. That was caused by Total's leadership, driving the company to be a leading green energy company. We need these energy giants to move in. Nextracker has an $8 billion market cap. These energy companies are 50 times our market cap. The industry needs to greatly expand. Our company needs to go 10x to a $100 billion market cap. The industry needs to become where oil and gas is today.
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Host50:36
Why hasn't oil and gas moved in with full speed earlier?
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Howard Wenger50:54
They are making tremendous amounts of money selling oil and gas. They earned huge profits during the pandemic and are doing well now. Shareholders focus on profitability. Some are investing big time. We work with most of the large energy companies in solar and wind. We want them to do more, but we need to go 10x in renewables.
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Host51:51
Why do we need to do that?
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Howard Wenger51:58
We have something going on with our climate, and we need to protect the basis for our life. That's the core of the mission that binds the 50,000 people at Intersolar.
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Host52:17
What's required to take solar to the next level?
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Howard Wenger52:34
It's going to happen with or without these energy companies. It's inevitable, unstoppable, undeniable. Look at the interconnection queue in the US and in Europe. The energy transition is happening. It's a foregone conclusion. We need more hybrid systems and to solve the storage problem. With electric vehicles and lithium-ion costs coming down, California has installed 10 gigawatts of battery storage in four years. It's happening. It's super exciting.
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Host53:37
Thank you so much for this interview. Thanks for joining and sharing your personal solar journey and insights. I wish you all the best for Nextracker and enjoy the rest of the days here at Intersolar.
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Howard Wenger53:49
I really appreciate it. The name of your podcast, The Solar Journey, is spot on. It's been a journey. Thank you.