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I'll Follow the Sun

12/20/2012 --

A background in wind energy helps Tim Derrick, MBA '00, blow solar power in a different direction.

Tim Derrick, MBA '00, didn't see himself as an entrepreneur during his MBA years. But if you're in the right place at the right time, with the right idea and the right team, sometimes entrepreneurship can just happen.

Derrick co-founded Axio Power Inc. in 2007 because he saw an opportunity to rethink how solar energy was produced and sold. And now, as the head of North American operations at Sun Edison, he brings an entrepreneurial spirit to an industry leader.

"The solar industry is still nascent. I apply a lot of entrepreneurial values to an area of rapid growth and dynamic change at SunEdison," says Derrick, who sold Axio Power to MEMC/Sun Edison in 2011.

After the sale, Derrick initially led Sun Edison's global services business, a small team that felt like a startup within the larger organization. "I was excited because operating and maintaining solar projects was something I had never done before," he says. "I had always been focused on the front end of developing and building new projects."

In February 2012, Derrick was tapped to be the president and general manager for Sun Edison's North American solar businesses. Today, he oversees the company's utility scale business (large solar projects that are sold to utilities); the distributed generation business (building projects on rooftops and other customer sites); and a rapidly growing residential business. Derrick has embraced this increased responsibility. "I remember [former U-M business school dean] Joe White telling us that real learning happens when you push students outside their comfort zone. That has definitely stuck with me, especially in this role during the past year."

House of the Rising Sun
When Derrick launched Axio Power nearly six years ago, the standard for the fledgling industry was distributed generation, meaning solar panels were installed at the point of use — be it a commercial or residential location. Axio sought to expand the use of solar energy and make it more cost-effective by creating solar power plants that sold energy to utility companies, who would then sell it to customers.

The business model mirrors that of more conventional energy sources such as coal and natural gas. But for the solar industry, it was a new concept. Solar photovoltaic technology had been far too expensive to consider generating power in one place and transmitting it over the power grid to population centers. But in the late 2000s, the cost of solar energy was poised for a rapid fall, and utilities adopted aggressive targets to acquire renewables. "There has been a massive scaling of the solar industry, with the cost of solar equipment dropping well over 50 percent since 2007," Derrick says. "We saw this writing on the wall and wanted to be one of the first guys out of the gate."

As the cost of solar power production dropped, the cost of fossil fuels was trending upward — a combination ripe for disruptive change "straight out of corporate strategy class," says Derrick. The federal and state political atmosphere also had warmed to alternative energy, and it garnered support from both ends of the political spectrum.

"The result was a really dynamic and changing energy marketplace where solar suddenly became more viable," Derrick says. "The success of Axio Power stemmed from the convergence of a lot of things going right at the same time."

Derrick and his partner, Kevin Christy, drew inspiration from a background in both wind and solar energy development and financing. Derrick had worked at both Enron Wind and GE Wind Energy before moving to solar at 3 Phases Energy. The lessons from wind were highly transferable to solar. Derrick and Christy secured options to buy land in some of the sunniest areas of the Southwest and acquired the rights to transmit solar power. "In the early days of solar, very few companies knew how to apply the lessons from wind to solar development," Derrick says. "We used our experience in wind to show clients that we knew what we were doing."

Another key differentiator of Axio was its focus on the renewable use of land. Axio acquired the rights to old landfills or other brownfields — industrial or commercial properties that are abandoned and often environmentally contaminated — and converted them to solar fields. It was a win-win proposition for customers like municipalities, who struggle to balance their budgets but want to deploy solar on open space like covered landfills. "We could build a power plant that reduced their power bill, provided tax revenue and lease payments from otherwise unusable land, and provided satisfaction to the community for hosting a clean solar power project," Derrick says. The practice often offered a smoother road for Axio, which faced the same controversies as other developers, ranging from neighbors who say, "Not in my backyard" to discoveries of an endangered species that derailed projects. "There are very few opponents to projects that are built on unused brownfield properties," says Derrick.

Westward-Ho
That Derrick is navigating solar technology, desert tortoise habitat, and all points in between is remarkable given that not even two decades ago he was the coach of the U.S. Olympic biathlon team and an officer in the U.S. Army Reserve. He came to U-M not knowing exactly what he wanted to do next, but figured an MBA was a great platform for launching a meaningful business career.

At heart, Derrick knew he wanted to combine business education with his passion for the outdoors and the environment, and the CEMP Program (now the Erb Institute for Global Sustainable Enterprise) attracted him to Michigan. But the opportunity to stay for a third year and earn a dual degree was overshadowed by the draw of the dot-com bubble. "1999 and 2000 was a weird time to be in business school," he says. "We had distorted expectations of what we could and should be doing as recently minted MBAs. If you weren't loading up your car and pointing it toward San Francisco, then you weren't living." When a full-time offer came from Apple, he jumped at what he figured was his dream job. But as the technology bubble burst in the summer of 2000, so did the dream. And Derrick and his loaded-up car were unemployed before he even set foot in Apple.

The setback was an opportunity for self-reflection. As he read more about the growth of renewable energy, Derrick discovered his path, and he became an associate at Enron Wind. While 2001 wasn't the best time to arrive at the infamous firm, Derrick landed on his feet and built a career in his new field. "Working in renewable energy development and finance is one of the single greatest ways I can contribute to a sustainable energy future," he says.

A Bright Future
Like any good idea, the solar energy market became crowded. "If your only advantage is that you thought of the idea first, then as soon as somebody watches you do it, you've got a competitor," Derrick says. "Part of what made our experience at Axio so fun is that we didn't do it with a huge amount of money from a VC. We took a small amount of money, used it as efficiently as we could, and built some real enduring value. But in the end, successful solar project development comes down to a question of speed and access to capital."

When MEMC/Sun Edison came calling, Derrick and Christy decided the time was right to sell, but little did they know how right they were. "There's no question the solar industry has gone through a bit of a bubble," Derrick says. "There was some irrational exuberance in public markets as the idea of green jobs and renewable energy really took hold with investors and voters."

After many firms crowded into the industry, well-publicized bankruptcies involving Solyndra, A123 Systems, and others helped the bubble burst in a politicized way, and Derrick acknowledges that the trickle-down effect has meant closer scrutiny of the solar industry. "The fundamentals of our business remain strong, and we are still growing rapidly. The bursting of the solar bubble has been a necessary and healthy correction in our industry."

The long-term strategy, however, remains solid. "We are now building our business for the long haul in an effort to be one of the 'last companies standing' in the solar industry. Every day we become more competitive with conventional sources of power generation, and the price of solar energy is on an irreversible downward trajectory. We are quickly taking our place alongside gas, coal, hydro, and nuclear as a key source of electricity in the world today."

And as one of the early movers in the industry, Derrick, too, likely is in it for the long haul.

— Amy Spooner



For more information, contact:
Amy Spooner, 734-615-5068, aschulz@umich.edu