November 14, 2017 Read More →

Solar Company Shows It’s Possible to Combine Growth and Profitability

Greentech Media:

For a while there, leading residential solar installers had a one-track mind: They could grow or make money, but not both.

The national players opted for growth through the early 2010s, until the deferral of making money started to catch up with them. It took out Sungevity, at one time the No. 3 U.S. residential installer. It led to Tesla’s takeover of market leader SolarCity, and the brand’s subsequent erasure.

Sunrun still stands on its own, though, and it’s out to prove it can do two things at once.

“We’re super bullish — we love our market position,” said CEO Lynn Jurich, in an interview. “Not only are we increasing market share, we’re increasing our margins and generating positive cash.”

Tesla took a different tack, slowing growth to focus on profits. As a result, this quarter may be the first time that Sunrun outpaced SolarCity for residential installations. Tesla reported a combined 109 megawatts, deployed across all market segments.

Sunrun deployed 90 megawatts of residential solar in the third quarter of 2017, up 12 percent year over year. That added up to 1,117 cumulative megawatts deployed, a 39 percent increase from a year ago.

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That’s actually a smaller year-over-year growth than in any of the previous 10 quarters, but it’s still a substantial step forward.

The deployment count means Sunrun, which favors leases over cash deals by a roughly 9-1 ratio, has a growing number of little rooftop cash registers sending money back each month. The company claims $1.2 billion in net earning assets, a 24 percent increase year-over-year.

With regard to making money…

Sunrun is profitable, Jurich said, and will generate $40 million in cash this year.

The core directive is to deploy rooftop solar systems that generate more value than they cost. The company measures this as net present value, which adds up the revenue streams a solar system will produce (including tax credits, rebates, payments from a 20-year customer contract) minus the costs to deploy and operate the asset.

“It really is your purest way to talk about value creation,” Jurich said.

This quarter, Sunrun set a company record for net present value at $1.15 per watt. That adds up to $93 million in total net present value created that quarter, a 21 percent increase from Q3 last year.

Increasing adoption of energy storage boosts value

Sunrun bolsters that net present value with its new killer app: energy storage.

Many companies sell solar paired with batteries, but Sunrun has achieved unique scale in the U.S. — 2,000 units ordered, as of August. The numbers indicate Sunrun sees this technology as more than a trendy deluxe upgrade — it’s becoming a part of the business strategy.

“Attachment rate” measures how many home solar customers opt to include storage, in this case via Sunrun’s BrightBox package that includes LG Chem batteries. Sunrun’s attachment rate among its in-house installers in California doubled in Q3 to more than 10 percent. Sunrun currently does not offer BrightBox through its installer partners in the state.

That means that 10 percent of Californians that contracted directly with Sunrun chose to pay slightly more to add storage, in exchange for backup power and savings opportunities down the road. 

“Already, in much of the market from a today’s savings perspective, it delivers more savings to have a BrightBox than to have solar only,” Jurich said.

In much of the country, it’s still hard to make the economic case for residential solar-plus-storage. California, though, has both high electricity prices and a number of policy incentives for storage deployment.

In Hawaii, all of Sunrun’s systems now come packaged with BrightBox. High levels of solar penetration there prompted the utilities to adopt a tariff, known as Customer Self-Supply, that forbids solar export, meaning new solar customers must undersize their solar system or add storage, with the latter being the preferred option.

BrightBox arrived in Arizona in July, so the company didn’t report data for that newly opened market.

It’s too early to say anyone has cracked the code on residential storage, said GTM Research storage analyst Brett Simon, but Sunrun has made headway by streamlining the sales process.

More: “Sunrun Aims to Prove Solar Installers Can Grow and Make a Profit at the Same Time”

 

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