{"id":12613,"date":"2016-11-04T17:21:57","date_gmt":"2016-11-04T21:21:57","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/residential-solar-installer-sunrun-is-creating-a-planet-run-by-the-sun\/"},"modified":"2016-11-04T17:21:57","modified_gmt":"2016-11-04T21:21:57","slug":"solar-installer-sunrun-is-creating-a-planet-run-by-the-sun","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/solar-installer-sunrun-is-creating-a-planet-run-by-the-sun\/","title":{"rendered":"Solar Installer Sunrun is Creating a Planet \u201cRun by the Sun\u201d"},"content":{"rendered":"
\"Sunrun<\/a>
Source: Sunrun Website<\/figcaption><\/figure>\n

Sunrun is a residential solar installer that has been taking advantage of opportunities created by the sustainable energy movement. Since its founding in 2007, the company has offered homeowners clean, solar energy at a significant discount to traditional utility energy. How are they able to do this? In part, by taking advantage of a regulatory environment that offers significant financial incentives for solar panel installation. Therefore, any significant changes in this regulatory environment could seriously impact the company\u2019s bottom line.<\/p>\n

Sunrun, which went public in 2015, proclaims itself the pioneer of the so-called \u201csolar as a service\u201d model. Suppose you own a home in California, Arizona, or one of the other 14 U.S. states that Sunrun currently operates in. Electricity rates are rising, and Sunrun offers you the opportunity to save up to 20% on your energy bill without any up-front cost. Not only will they send you a free quote, they will design a customized solar solution for your home, and take care of everything from installation, to submitting permits, to working with your city. What\u2019s more, there is no upfront cost, and you can lock in a fixed electricity rate for up to 20 years. So, it sounds like Sunrun is creating a lot of value for their customers, which number nearly 100,000[1], but how are they able to offer all of this to consumers at such a low price?<\/p>\n

Sunrun benefits from favorable regulatory policies at the federal, state and local level. The biggest benefit is the federal solar Investment Tax Credit (ITC), which is a 30% tax credit for solar systems on residential and commercial properties. It allows investors in solar energy property to claim a tax credit worth 30% of the amount of their investment in solar property against their taxable income. Per the Solar Energy Information Association (SEIA), the credit has helped solar installation grow 1600 percent since it was implemented in 2006. In 2020, the credit steps down to 26%; in 2021, to 22%; and after 2023, the residential credit will be 0% while the commercial credit will be fixed at 10%. [2]<\/p>\n

Other regulatory benefits favoring solar panel installation include net metering, solar renewable energy certificates and other state-level incentives. Net metering allows homeowners to offset electricity purchased from a utility by the amount of excess solar energy produced and sold to the utility. A substantial majority of states have net metering policies. In addition, certain states have implemented other incentives for solar capacity additions. [3]<\/p>\n

Maintaining strong relationships with regulatory bodies is an important element of Sunrun\u2019s strategy. In September, the company appointed the former Commissioner of the Maryland Public Service (the utility regulatory body in Maryland), as its Chief Policy Officer. She will be responsible for representing the company in discussions with policymakers, utilities and other stakeholders. [4] Having an industry insider in this type of role is probably a smart move on the company\u2019s part, as it will help them build and maintain relationships with regulators. Being a part of the policy discussion with regulators may help the company shape the future regulatory landscape to their benefit. [5] While public utility commissions are already supportive of renewable energy and customer choice for solar energy [6], it probably doesn\u2019t hurt Sunrun to have a former regulator on board.<\/p>\n

In the near to medium-term, Sunrun has visibility into the tax benefits it will receive from the ITC. Therefore, their goal should be to lower their costs significantly before then, so that by the time the tax credit expires, it will have less impact on the economics of the business anyways. In fact, advances in solar technology are already driving costs down. [7] Sunrun should also continue pursuing volume growth, and take advantage of economies of scale. To that point, one of the company\u2019s greatest challenges is customer awareness, which is quite low today. Sunrun\u2019s marketing strategy should focus on increasing awareness in key markets via low cost channels. One way would be to generate local media buzz around the sustainability angle of their business; today, the marketing message seems to focus more on saving its consumers money than sustainability.<\/p>\n

\"Sunrun<\/a>
Source: Sunrun Website<\/figcaption><\/figure>\n

Overall, it seems like Sunrun\u2019s operating model is creating a lot of value for its customers, but is the company capturing enough value for itself? Since Sunrun is a public company, we know that it had a net loss of about $249 million in 2015. [8] However, the company and its investors are betting on the fact that as the cost of solar energy falls, and the number and lifetime value of new customers increases, the economics of the business will look better and better. [9] (774 words)<\/p>\n

 <\/p>\n

 <\/p>\n

[1] Sunrun, \u201cWhere\u2019s Sunrun,\u201d https:\/\/www.sunrun.com\/solar-by-state<\/a>, accessed November 2016.<\/p>\n

[2] Solar Energy Information Association, \u201cSolar Investment Tax Credit,\u201d http:\/\/www.seia.org\/policy\/finance-tax\/solar-investment-tax-credit<\/a>, accessed November 2016.<\/p>\n

[3] Sunrun, Form 424B4 (filed August 5, 2015), via BamSEC, accessed November 2016.<\/p>\n

[4] \u201cSunrun Appoints Anne Hoskins As Chief Policy Officer,\u201d press release, September 7, 2016, on Sunrun website, https:\/\/www.sunrun.com\/why-sunrun\/about\/news\/press-releases\/sunrun-appoints-anne-hoskins-chief-policy-officer<\/a>, accessed November 2016.<\/p>\n

[5] Marcel W. Brinkman, Nick Hoffman, and Jeremy M. Oppenheim, \u201cHow climate change could affect corporate valuations,\u201d McKinsey & Company, October 2008, http:\/\/www.mckinsey.com\/business-functions\/strategy-and-corporate-finance\/our-insights\/how-climate-change-could-affect-corporate-valuations<\/a>, accessed November 2016.<\/p>\n

[6] Credit Suisse Securities Research & Analytics, \u201cA Solar Platform Leader with Room to RUN; Initiating at Outperform,\u201d August 31, 2015.<\/p>\n

[7] Ibid.<\/p>\n

[8] Sunrun, December 31, 2015 Form 10-K (filed March 11, 2016), via BamSEC, accessed November 2016.<\/p>\n

[9] Credit Suisse Securities Research & Analytics, \u201cAnother Quarter Outshining Peers: Strong Execution with a Consistent Strategy,\u201d August 12, 2016.<\/p>\n","protected":false},"excerpt":{"rendered":"

A look at how Sunrun takes advantage of the U.S. regulatory environment for solar energy<\/p>\n","protected":false},"author":1976,"featured_media":13145,"comment_status":"open","ping_status":"closed","template":"","categories":[1218,1837,699,179,1836,1835],"class_list":["post-12613","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-climate-change","category-net-metering","category-regulation","category-solar-energy","category-solar-investment-tax-credit","category-sunrun"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/climate-change-challenge-2016\/","yoast_head":"\nSolar Installer Sunrun is Creating a Planet \u201cRun by the Sun\u201d - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/solar-installer-sunrun-is-creating-a-planet-run-by-the-sun\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Solar Installer Sunrun is Creating a Planet \u201cRun by the Sun\u201d - 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