There is no question that there is going to be a major move to electric vehicles as the technology continues to become more accessible to the public. And, this doesn’t just include sedans – all terrestrial transportation will soon electrify, with maritime and large parts of airborne transportation already positioned to do the same. Electric ferries are becoming more common and hybrid ships are already here. However, one thing that has become clear is that connecting the required charging infrastructure to the existing hundred-year-old grid using antiquated electrical infrastructure is not going to get it done. The process takes too long, costs too much, and carries too much catastrophic risk when the grid fails.
What is needed is a rapidly deployed and highly scalable EV (electric vehicle) charging infrastructure solution. One that can be deployed in minutes, not months as required by traditional electrical solutions. One that doesn’t cause any disruption when it’s deployed or in operation. One that is immune to blackouts and brown outs. One that is renewably energized. One that carries no transactional cost for fueling. What is needed is a sustainable technology innovation which can replace the age-old way of doing things. And, there is a company that can address all those issues.
In San Diego, California, there is a publicly traded company named Envision Solar (Nasdaq: EVSI) that can provide just such a solution. Moreover, their solution is not a just concept or an idea, it is a reality that is already in service in over 100 municipalities across the US. It is already in use in four nations and in the Caribbean where it survived hurricane category five, 185 mph winds. In fact, its unique and patented sustainable infrastructure products for electric vehicle charging, energy security, and outdoor media, including its EV-ARC™ and Solar Tree® with EnvisionTrak™, is not only durable, it’s likely to become an essential part of our vital energy infrastructure. Actually, it needs to be implemented to ensure national security quickly.
Diversified Product Portfolio Should Accelerate Growth
Already, Envision has shipped millions of dollars-worth of its diversified EV charging infrastructure product line at a time when there were hardly any electric vehicles on the road, with New York City and California being the first and second largest customers of this company. The company’s forward-looking vision may have been early to the party, but over the last ten years they have demonstrated that they can survive, perform, and bring novel solutions to an industry that is finally catching up to require their services. Notably, Envision has never lost an order, nor have they have had a product returned. In fact, on that note, although shares traded down in recent weeks, much of it may be traced to a complete misunderstanding of the company’s Q4 results. More on that later.
On its business front, and from an endorsement of quality perspective, the company enjoys regular repeat orders from some of the largest companies, and geographies, in the world. Their solar-powered product charges NY PD cars during the winter and it charges Googles employee’s cars in California in the summer. The Navy, top-secret government facilities, cities, counties, states and companies like Johnson and Johnson, Genentech, GM, BMW and many others use this product to charge their fleet, employee and guest vehicles. Its innovative solar-generated power designs are flood-proof to 9.5 feet and integrate an emergency power panel so that when the grid goes down, not only do vital vehicles keep moving but first responders can connect to it for life-saving power when they need it most.
Importantly, Envision Solar is already able to provide the needed infrastructure to support this growing market. The company has no debt on the balance sheet, nothing but common stock and some warrants discussed later, and enough cash on hand to operate for two years if it never generates a dime of gross profit. Certainly, unlike many small-cap companies, it has no “going concern” language in its fully audited financials (10k). More than that, though, Envision does generate gross profit at the unit level.
Now, admittedly, the stock has had a rough few weeks, but reading the filing shows nothing to get concerned about. Trading down from $12 per share after an important and extremely valuable patent for curbside charging stations lines, it appears that the stock got caught up in a somewhat imperfect storm.
First, the COVID-19 virus has been relentless on stocks. Moreover, traders are not distinguishing value from fear. Envision will recover from that trade. Second, investors have misunderstood the company cash flow. While the cash burn appeared higher than normal compared to expectations, investors failed to correlate that cash burn to inventory. In this case, it reads as though Envision is only a victim to government contract delays. That does not mean the contracts won’t be honored, it only means that Envision will ship at a later date. And when they do, the cash burn will balance to the cost of goods sold. Consider that inventory is already on hand to fill these contracts.
And, because inventory is on hand, the assumption that the company will need additional cash to fill an order backlog is quite inaccurate. Moving forward, each sale generates an increase to cash flow.
Inventory, New Contracts, And Gross Profit
This is unique…every time Envision ships a product the gross profit extends its cash. A quick look at the company’s press releases allow investors to do a bit of back of the napkin calculating to show that cash flow positive is within its reach – well before it runs out of money. In fact, it looks as though about $10 to $11M in annual revenues will generate enough gross profit to overcome the overheads and generate some free cash flow, which means no more worrying about raising capital.
Also worth noting is that there are about $15M in warrants, priced below market right now, which were a part of the public offering and listing on NASDAQ last year. Those warrants might execute at $12 to $15 providing the company with another $15M in cash without dilution or institutional fees.
The stock was trading at $12.50 before COVID hit. And speaking of COVID, this is a company that sells a fueling and disaster preparedness infrastructure products primarily through government contracts. The US government is considering a massive $2Trillion infrastructure bill as a stimulus for the COVID economy, and Envision’s ability to provide a shovel-ready, American made product that has already passed the scrutiny of New York City and 100 other municipal, county, state, and federal government agencies could make it a good contender for some of that money. Also, it’s renewably energized so it fits with the green aspirations of the Democrats agenda. Further, it’s a disaster preparedness necessity, and is made in the US so it sits well with the Republicans too.
More specifically, here’s why the solar, off-grid, zero construction solution provided by Envision could overcome some of the hurdles most commonly cited by critics of the industry.
Addressing The Misconceptions of Solar Power
There are a lot of misconceptions surrounding electric vehicles, how they will be used, and how they will be fueled. When reading some of these ideas it’s almost immediately apparent whether the debate is between someone who drives an EV or someone who doesn’t. The industry has been rapidly developing over the years and some of the criticisms commonly cited in investor blogs and news bits no longer hold any water.
One of the most common misconceptions is that electric vehicles are simply too expensive. While it’s true that the sticker price for an EV is, today, often higher than a comparably equipped internal combustion engined car (ICE), the total cost of ownership is already lower for an EV than an internal combustion engine in almost every situation, except for those who only very rarely use their cars, when fuel and maintenance costs are included.
Another misguided criticism of the EV market is that these vehicles aren’t truly powerful and are no more than “boring golf carts.” This opinion primarily comes from people who haven’t driven an EV and is a feeling they will soon get over once given an opportunity behind the wheel in even the most pedestrian of available products. Electric motors are capable of near instantaneous torque which means that EVs burst off the line with racing car vigor. Dollar for dollar, drivers say that there is no more fun vehicle than an EV and there is something very satisfying about beating an expensive and flashy Porsche from the lights when driving a Chevy hatchback like a Bolt (unless it’s an electric Porsche of course – in which case the Bolt is toast).
A bigger case for Envision Solar comes from outside sporty electric vehicles.
Grid Failure Should Be A Real Fear For Governments
Consider for a moment what the impact of a blackout will be on an electrified transportation sector. If we are totally reliant on the grid to fuel transportation, then a black-out will mean a collapse of very large parts of the transportation sector. Commerce will suffer, Johnny won’t get to football, Janey won’t get to the doctor, and mom and dad won’t get to work. In fact, a major blackout like we saw for four days during hurricane Sandy will cause the greatest transportation collapse in history. Why will the grid go down? The US grid is the largest machine ever built by man. It is a very impressive, 100-year-old solution upon which we are all dependent, yet it is highly vulnerable to centralized points of failure.
Here’s the BIG issue – Take out a power plant and you’ve taken out all the consumers who rely on it in one quick swoop. Take out a transmission line and everyone downstream is in the dark.
There are over 55,000 substations in the US, and they form a vital link between the power station, transmission line, and the distribution infrastructure that brings power to your plug. Take out any one of those sub stations and a neighborhood or business park goes dark. Take out a few well considered substations (11 to be precise) and you can turn the whole nation dark. This is because of cascading effects – as each substation is shut down, it causes others to shut down to protect themselves from overload. If the wrong ones are to go down, the toppling dominoes can shut down the whole show. It just doesn’t seem right that the network we rely on so heavily for everything we do is so vulnerable to centralized failure.
Preparedness may be the lesson learned from the COVID-19 pandemic. According to the Department of Energy, grid interruptions are more common than at any time in our history and cost US businesses about $200B a year. That is a scary thought.
Preparedness Will Rule The Day
Smart companies are prepared, though. The telco networks that we use have far higher service level requirements than the grid does – that’s why telcos have back-up generators. They know that they have to keep operating when the grid goes down and that the current EV charging infrastructure will not be able to support itself with generators and UPSs. The loads are too great, and the number of generators you would need, not to mention the fuel to run them, would bankrupt any EV charging network operator. The only way to have a secure electrified transportation sector is to have a large percentage of the charging infrastructure be independent of the grid. Locally generated and stored electricity will be vital to a secure charging infrastructure.
Yes, societal transition to EV will be expensive. And, although that cost is inevitable, it also sets up an opportunity for a lucrative return for Envision Solar.
There will certainly be a lot of demand for this sort of infrastructure when the worlds 1.2 billion cars are electric. Using current solutions, working to install EV chargers on just any curb would be as good as impossible. The complexity of digging up sidewalks, identifying the nearest source of power, getting leases and easements, negotiating with the building owner or tenant, or finding the closest building with power would obviously be expensive and time consuming.
Notably, this process takes the City of New York 24 months on average – there are environmental impact studies and other treats to make sure that those 24 months are busy. The state of California takes an average of 18 months to do the same thing. Once you get all the permits, the construction and electrical work can start. And, that’s after a bid package is put together, three prices from separate contractors are collected, and then a choice is made to choose the company that seems least painful.
Starting the process proactively is the only strategy that makes sense.
The Sun Provides Ultimate Power
One of the largest debates of EVs and charging involves the argument that there is no reason to spend any money on charging infrastructure if solar panels will one day power EVs. The problem is in efficiency.
The sun, in optimum conditions, might put about 2kW onto a square meter of the earth’s surface. The best solar panels are about 25% efficient, so you might get about half a kilowatt of usable electricity per square meter. Let’s say you can get 3 square meters of solar onto your car which would give you 1.5 kW of electricity. A kilowatt is about 1.3 horsepower so you’d have less than 2 ½ HP. You aren’t going to move a car and a man’s weight with 2 ½ horsepower.
Even if solar panels became 100% efficient, which is theoretically impossible, you’d still end up with under 6 horsepower in your car. Therefore, fully solar powered cars will not be a reality. However, there is a way to use nothing but solar to power a car, and that is to put some battery storage between the vehicle and the solar generation. This allows an owner to fill up the batteries relatively slowly with solar and then take the power quickly when you need it to move the car around.
Electrify America, may change the landscape.
Power Through Electrify America
Electrify America, a Volkswagen subsidiary, which has been highlighted in major automotive blogs Motortrend and Carbuzz, will provide sustainable charging for EVs in rural areas, which has historically been a barrier to entry as Americans continue to switch their ICEs to EVs. These chargers, provided by Envision Solar, will require no special substructure and can be set up in minutes – a far cry from the traditionally-powered EV parking lot scenario described above.
The weather-proof Arc solar panels provided by Envision track the sun so that energy may be generated as efficiently as possible, and can be rotated to fit into angled, perpendicular, and parallel parking spaces. The chargers are able to power up to 225 miles of EV driving in a single day (the average U.S. sedan drives 30.4 miles per day according to the DoT), and its off-grid functionality is revolutionary when compared to the electrical on-grid parking lot scenario described above. Truthfully, these aforementioned barriers to entry in incentivizing the societal shift to EV usage may only prove difficult when choosing to work with existing, antiquated electric power solutions.
The bottom line is apparent… Envision Solar is a sustainable technology innovation company that is providing solutions that can overcome some of the most commonly cited barriers to entry in bringing EVs to the mainstream market. And, from a valuation perspective, investors may have really missed the mark when evaluating its most recent quarterly results. But, that misunderstanding creates opportunity.
The extremely rapid development and innovation within both the EV and alternative energy market have worked to completely bust some of the most pervasive myths about the future of this technology. Companies like Envision Solar are already in business providing innovative solutions to thousands of customers, and the easy scalability and off-grid capabilities of their technology will only work to keep the company at the head of the pack in meeting the growing needs of EV owners. As these vehicles continue to become more and more affordable, demand for accessible and affordable charging stations will continue to rise until it will become apparent that traditional electric utility grid solutions will no longer be able to meet the needs of the market
Envision Solar may have been early to the market, but this anticipatory development will most certainly serve them and other innovative sustainable energy platforms well in securing a lead spot in providing these soon-to-be essential power services.
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