SunRun, one of several companies that installs residential rooftop solar systems for a small fee in order to sell the power to consumers, has raised an impressive $90 million more in tax equity from a subsidiary of U.S. Bancorp to encourage more homeowners to convert to solar for a low price.
Tax equity is an investment in which the investor receives tax benefits as its main return. Mostly, its a tool used to finance cleantech companies like SunRun that receive support from the government. This funding boost will allow the San Francisco-based company to make its solar power even more affordable for average people — the key to its business model. In order for homeowners to be willing to convert to solar, it needs to be price competitive with the energy they currently buy. In the west, this energy is generated by natural-gas fired plants, in the east by coal. So far, the company is doing a pretty good job making solar a practical alternative.
SunRun, which competes with the likes of Solar City, allows consumers to install rooftop solar panels for a one-time fee of $1,000 followed by low, monthly fees for energy. As part of the deal, SunRun takes care of all maintenance, monitoring and repairs. At these prices, SunRun argues that almost any household can afford to switch over to solar power. All it will take for wide adoption is more aggressive marketing and public education says SunRun president and co-founder Lynn Jurich.
“We have a viral product — in order to grow we need to make our customer very happy,” she says. To do so, the company is tapping its second round investor Accel Partners, which helps many of its portfolio companies with social network marketing strategies. “That’s how this industry really grows — politicians and other people telling their constituents that they can switch to solar for almost nothing.”
The $90 million from USB will help SunRun expand its product to thousands of new homes, Jurich says. This will continue a strong trend of growth for the company, which has been doubling in size year over year. Right now, its systems are being installed in four states, a number that will increase sizeably in the next year. SunRun has emerged as the largest owner of residential photovoltaic systems in the U.S., no small feat.
“Our growth has been a great testament to the power purchase agreements model,” Jurich says. “Those and leases are really emerging as the preferred ways for consumers to get solar.” People increasingly feel like they can begin using solar power virtually risk free. In just the last two years, power purchase agreements have been used to pay for 2,700 residential solar installations in California — a new market creating 400 green collar jobs.
But further growth is necessary, she emphasizes, if SunRun is to keep its edge over competitors. “We don’t need to find 20,000 new homes, we need hundreds of thousands of new homes.”
SunRun has previously raised $30 million from Foundation Capital, Accel and individuals Gregory Avis and Parker Well. The new U.S. Bancorp funding will afford it a couple years of runway to evangelize for its business model, which represents one of the most promising tactics to get average people to choose solar power. The company could also play a pivotal role in helping California hit its target of generating 33 percent of its electricity from renewable sources by 2020.