Badri Kothandaraman: Yes, we do take a look at a number of companies all the time, every week. I have an M&A meeting. There are a lot of companies that come. We are very careful, especially in these times, to not buy something in a hurry. We’re also careful of making sure that that company is aligned, of course, in terms of strategic fit and cultural fit. The former is extremely important. The latter is practically even more important. So the areas that we usually look for are more in the energy management software, sometimes in home automation, for example, small commercial solar, any innovation in batteries. We look for these. Usually we like smaller companies, bolt-on acquisitions. That’s what we have done till now. But I mean, we are looking at all kinds of companies. Please stay tuned. If we are going to move on something, it won’t be without you knowing.
Mark Strouse: Okay, thanks, Badri. And then just a real quick follow-up. I apologize if I missed this, but was there an update on the small commercial product, the timing or any color there?
Badri Kothandaraman: Yes, yes, there was. We are right now doing beta installations as we speak. The product is working great. We expect to introduce this product in this quarter, current quarter, and we expect to make some reasonable revenue out of this product in Q4.
Mark Strouse: Okay, thanks, Badri.
Operator: Our next question will come from Steve Fleishman with Wolfe Research. Please go ahead.
Steve Fleishman: Yes, hi, thank you. The 150 million of undershipped [Ph] that you’re talking about, could you break that out between the U.S. and Europe?
Badri Kothandaraman: I would say approximately equal between the two.
Steve Fleishman: Thank you. And then in Europe, the impact of, you mentioned two things, the weaker demand, and then also the issues with the distributors, de-stocking and the like. Could you just give some flavor of what, when you look at the weakness, you started to see what, are they about equal drivers? Is one kind of dominating the other?
Badri Kothandaraman: Yes, actually, to tell you the truth, every country is a little bit different. Clubbing them together under macroeconomics will not do justice, but there are a few factors, let me tell you, overall thing that can be generalized. It’s basically, if you rewind to last year, all distributors, installers, consumers, were a lot more aggressive due to the Ukraine crisis. The Ukraine crisis, the shortage of natural gas, caused many countries to be very aggressive, to pull in their plans for renewables. And we saw a huge spike in virtually every country in Europe. Solar plus storage, everybody started stocking up a lot. And we also profited from that. Our revenue also peaked. But then that enthusiasm is a little bit tempered right now.
And because of that, what’s happening is the distributors are suddenly realizing that they got more on their hands. And also, earlier, maybe a year and a half back, the product availability wasn’t that high because of that increase in demand. But now, all of the suppliers have geared up, especially panels. Product availability of panels is very high. So a lot of over-inventory, particularly on the panels, has happened. That is putting pressure on the distributors because they’ve purchased inventory at high prices before. And now the prices have collapsed on panels. So there is some financial weakness there. But again, they are conservative now. And they want to hold as less inventory as possible. So that’s kind of a macroeconomic. Now let’s come to Netherlands, our biggest market.
Netherlands has got a very interesting dynamic that when I went there two weeks ago, because I went there, when I heard that our demand was dropping, I got concerned. I went there. And when I looked at it, the Netherlands situation is actually not so bad. If you see, their payback is about six years. But they had a scare recently, maybe two or three months ago, where an energy company called Vandebron basically said that to the consumer, saying, we are going to charge you a penalty to export solar back into the grid. And Vandebron is a very small fraction. There are about 35 energy companies I think in Netherlands. It’s a deregulated market. Vandebron is one of them. They serve about 3% of customers. They basically said that, oh, we’re going to charge you an export penalty.
All they were trying to do is to put some pressure on the government, saying, you need to help us with net metering. Because the simple fact of the matter is Netherlands has got wind. It’s got solar. There’s 2.2 million homes with solar out of 7 million homes. These, if they start to export solar energy in a random manner, the energy companies are finding they cannot handle that easily. So they are putting pressure on the government to say, okay net metering needs to evolve into something where the customers have self-consumption, which is solar plus storage. And so it’s actually extremely good for us there. But the way they are doing it is, of course, a little bit disruptive. So the government is going to respond once it is in place. Now there is an election happening.
Net metering clarity is going to come probably after that. But the way it’s going to evolve is this market. Net metering will still last until 2025. So we are covered for the next two years with good payback. And then the payback will be maintained after that with the combination of solar plus storage plus dynamic tariffs, which is getting popular there. So that’s the big picture in Netherlands. Many of the European countries are evolving in a similar way. Many of them have gotten dynamic tariffs. Germany is a little bit ahead. They don’t have dynamic tariffs, but they introduced feed-in tariffs early, which is very similar to net metering. Export is not paid as much as import. In fact, it’s only a fraction. That is why Germany, you find 80% attach rate on batteries.
So long answer to your question, but that’s the color of Europe.
Steve Fleishman: I guess just to wrap the topic up overall, just let’s say we continue to move away from the kind of Ukraine energy crisis conditions, but we do have these markets each put in these changes. Just does your kind of expectation of Europe and kind of improving, can it be driven just by these market by market changes or do you need you need to see some kind of move up in energy prices again.
Badri Kothandaraman: I didn’t talk about energy prices, energy prices have also increased. In places like France the energy prices are also going up. So I mean energy prices are going to help us. The utility rates are increasing. And so that is definitely going to be a tailwind. But make no mistake. Despite all of this in a place like Netherlands, two gigawatts of solar in a place like France the payback is extremely good still five to six years where can you get that, even just for solar. It’s going to evolve into solar plus storage with the payback up maybe seven to eight years but still very good for a 25-year product. So there is a small dislocation right now due to inventory issues due to these, but that’s why we expect the ramp-up normalized — I wouldn’t say normalization, revenue recovery, a quick revenue recovery at least to some level in Europe.
