Colin Rusch: Thanks so much, guys. Can you talk a little bit about the VPP monetization and the maturity of that model at this point? I guess I’m trying to get a sense of when to start layering some of that revenue into the model going forward?
Mary Powell: Yes. I mean, as I articulated a number of times, we really see this value as growing exponentially in years to come. When you think about how fast we’re scaling, and now how fast we’re scaling with storage, and you put that against the backdrop of the grid challenges as society electrifies, which creates lumpy, uneven load on a grid that’s already strained. So we see programs like what we just did with PG&E as a postcard from the future of what you’re going to start to see all over the country. And that was a program whereby we were providing nearly 30 megawatts every day to the grid during peak times from August through to October. We’re in active discussions with them to upsize the fleet in the future. And our growing experience with grid services increases our conviction that we can realize 2,000 or more in per customer NPV from these types of assets.
So that’s certainly how we’re looking at it. And again, you just see the headlines all over the country where utilities in so many parts of the country are really struggling with keeping up with the load, keeping up with the different climatic events, and I see more and more that utilities are going to need what we proved at a utility way back in 2015 and some have proven since, which is, these provide incredible flexible resources unlike any other to support the grid.
Colin Rusch: Great. [Multiple Speakers]
Danny Abajian: Just to remind. We have previously said over and over again that like, lifetime grid services value could be about $2,000 per customer. And there’s data that it’s maybe even $2,000 per customer [indiscernible].
Colin Rusch: Thank you. I have some follow-ups, but I’ll take it off-line. And thanks for the clarity around some of the inventory on modules and inverters. I’m just curious about some of the racking inventory that you guys may have and other balance of system elements that you’ll need to work through just in terms of the days on hand.
Danny Abajian: Yeah, on racking, We have more direct control over that, just because we do own a racking manufacturing company called Snap and Rack. And we do both distribute that equipment and use it on our installations. I would say, once we get beyond modules, inverters, batteries, racking, as far as inventory is concerned, racking and other balances system becomes much smaller in dollar value. But we have been managing those inventory levels and bringing them down in line with everything else.
Colin Rusch: Great. Thanks so much, guys.
Danny Abajian: Thank you.
Operator: Our next question is from Mark Strauss with JP Morgan. Please proceed.
Unidentified Analyst: Hi, this is [Geron] (ph) from Mark. Thanks for taking our questions. First one, just back on the inventory topic. I think you’ve mentioned that we expect to get back to that 60 day to 80 day level in the early first part of next year and that would be when you can start to expect to see some of the pricing declines come through. With the relatively tapering of the growth outlook here, could there be any headwinds to the first half value creation because of that or am I reading too much into that?
Danny Abajian: I would say the pace of — it’s expensing inventory. So the actual price reductions are already accruing to us on new purchases. It’s just that we’re not purchasing as much as we’re installing. And we’re expensing more expensive inventory that we’ve held. So that’s what the nature of that timeline is. And I’d say, we get it gradually, probably over the next couple of quarters. And then you’d probably see it more significantly after that. But remember, we’ve also cautioned as you look at our creation cost, what you’re also getting concurrently is, each system coming with more and more batteries. And because the battery unit cost is high in relation to all of the solar only equipment, you’re getting an increase in the installation cost due to equipment, although the units of equipment are coming in at a lower unit price.
Just something to keep in mind as you observe that over the next few quarters. But it’s all contributing to a pickup in net subscriber value as we put in higher value storage attaching, get operating cost leverage back as volume paces up.
Unidentified Analyst: Okay, that makes sense. That’s helpful. And then just one quick one on California. Your peer said this morning that they’re having some elongated, I guess, interconnection times with some of the utilities in California, and that’s been a headwind to getting systems into operation. Is that kind of the same for you guys? And does that have anything to do with some — maybe some slowering of installs in California?
Mary Powell: Yes, to a degree, but again, I would say that’s like routinely a challenge for us. But at the same time, we’re also encouraged, again, as a very storage-obsessed company. We’re really encouraged by what we’ve seen with the adoption of meter collars, for instance, with some storage devices, which actually should help accelerate installation times over time. So we’re seeing some good moves in the context of where our focus is, which is whole-home backup with solar.
Unidentified Analyst: Okay, great. Thank you.
Operator: Our final question will be from Philip Shen with Roth MKM. Please proceed.
Philip Shen: Hi, all. Thanks for taking my questions. Just had a quick follow-up on the tax credit monetization discussion. Can you give us a sense of the timing of when your first deal could be? And then how much of your 2024 TPO volumes could be supported by tax credit sales?
Danny Abajian: Yes, so we’ve closed the first transaction. We are in the final stages of completing the transfer element of that fund and will be a heavy user of that fund for the balance of the year. So that’s the status of the transaction generally.
Philip Shen: Great. And do you expect it to be a majority of your financing as it relates to the credit financing for 2024?
Danny Abajian: I think it would be a substantial portion. I don’t know if it’s majority, half. I think over time definitely as these funds are very — it could be very large in size. At some points of the year it might be more transferability. At other points in the year, it might be more traditional tax equity, depending on what we’re utilizing over time. But I think the other thing to keep in mind, just one other thing, similar to the equipment piece, as far as like GAAP treatment, the ITC transfer, the traditional tax equity delivers a lot of income through the non-controlling interest line of our P&L. As we transition to ITC transfer, the treatment of the ITCs will look more like likely contra-depreciation, so it will have impact on the trending of our EPS over time. Just something to keep in mind again as you attract all that activity through our GAAP statements.
Philip Shen: Great. Thanks, Danny. Can you also talk about the growth of your installation costs and why they’re up $0.40 per watt sequentially. Is it due to increased storage penetration? And if so, why are proceeds — why proceeds are going up or why aren’t proceeds going up in line with that? Thanks.
Danny Abajian: Yes, I think the general point about we’re making the transition. So we picked up 18 percentage points — sorry, 15 percentage points on the battery attach over last quarter, we started spending against that and we expect more pickup to come. And the expenditure against the battery install as we’ve been transitioning our mix has been proceeding. So that’s a little bit of a drag. The volume being down a little bit is a negative operating leverage on the non-variable elements to install cost, such as like getting permits and doing site audits etc. So battery equipment, negative operating leverage, the recognition of the subscriber value not coming in as quickly enough, there are a few other elements, but I would say those would be the largest factors.
Philip Shen: Okay, great. Thanks. And then the final question here is around some reports questioning the subscriber count and customer count that EIA uses. So there seems to be a difference. I was wondering if you could break down the disconnect or the difference between the two? Thanks.
