GTM: Sunrun tops SolarCity as lease sales leader, and more residential solar sales stats

Sunrun logo

2017 isn’t quite the banner year for solar that 2016 was. Aside from the trade case drama, it has also been a tumultuous year for the big names in the residential solar space. Three of the largest installers, including NRG Home Solar, Sungevity and Direct Energy Solar, have gone bankrupt or exited the residential sector. Since struggling SolarCity was acquired by Tesla, its residential business has dwindled. But Sunrun, who has seen moderate and consistent deployment growth over the last few years, has worked to fill the gap and serves as a prime example that struggles in the residential solar industry may stem from company-specific failings rather than industry-wide trends. GTM Research saw this coming, and relayed the following stats on the residential solar sector.

sunrun solar city leases

As a residential lease and PPA provider, Q3 earnings presentations indicate that Sunrun has already surpassed SolarCity based on capacity financed so far in 2017. Through the first half of the year, Sunrun narrowly missed the top spot in the TPO market with 27% market share, just behind SolarCity’s 31% share and up considerably from its 18% share in 2016. That difference of 4% market share between SolarCity and Sunrun equated to just 19 MW over two quarters. And in Q3, Sunrun financed 80 MW of systems, while SolarCity financed no more than 59 MW (a ceiling, as some of SolarCity’s systems were from its commercial business), a difference in Sunrun’s favor of more than 20 MW.

Of course, there are other ways to look at the market outside of who is financing systems. Much of SolarCity’s fall as a top residential financier has been due to its deliberate pivot away from TPO financing in order to increase its cash position. Today, nearly half of SolarCity’s systems are sold for cash or loans, and this pivot is inextricably linked to loan provider Mosaic’s prominent position in the loan market.

But looking at the residential market by total deployments (including leases, PPAs, loans and cash sales), GTM says Sunrun likely surpassed SolarCity as the leader in the space for the third quarter of 2017. According to the U.S. Residential Solar Finance Update, SolarCity deployed 233 MW of residential solar in H1 2017, Sunrun deployed 148 MW, and Vivint Solar deployed 93 MW. Yet in Q3 2017, these companies deployed 109 MW, 90 MW, and 47 MW, respectively (SolarCity’s 109 MW includes its commercial business).

So, if 18% or more of SolarCity’s Q3 installations were in its commercial business (which is reasonable given SolarCity’s historic channel mix), then Sunrun would have narrowly out-installed SolarCity in the quarter.

New sales channels and finance offerings

sunrun solar city

Both SolarCity and Vivint have endured high customer acquisition costs as mature markets have become oversaturated, and the companies have been forced to scale back operations in unprofitable markets. Specifically, SolarCity has dropped its door to door sales channel and instead is focusing on acquiring customers through digital leads. Vivint Solar, which has traditionally relied primarily on door to door sales, has added retail sales to its mix. And while these customer acquisition strategy changes are aimed to bring costs down in the long term, the slow-moving transition to these new strategies has had a short term effect of increasing costs and decreasing sales.

Equally important, both SolarCity and Vivint Solar have made concerted efforts to increase cash and loans sales as a portion of their product mixes.

While the companies make better margins off their TPO products, years of selling leases and PPAs (where the companies receive payment from the customer over a 20 year term) have left both companies in dire need of cash in the near term. Cash and loan sales allow the installers to realize immediate payment for systems they install. But even this change comes at a cost. SolarCity and Vivint Solar employ salespeople who have been selling leases and PPAs for more than 10 and 5 years, respectively. The transition to selling loans has been difficult on sales teams that are forced to change their long-honed pitches, contributing to the sales declines by these companies.

But as nearly every other large national installation company has struggled to grow this year, Sunrun is a standout as its growth has outpaced the market. Unlike its largest competitors, Sunrun has seen customer acquisition costs come down in recent quarters. And unlike SolarCity and Vivint Solar, Sunrun services the market both through its direct installation business as well as with Sunrun leases and PPAs delivered through its dealer network. By utilizing a dealer network to deploy systems, Sunrun is able to grow as the long tail of installers in its network grow as well. And while not all long tail installers are growing, Sunrun’s stringent vetting of installer partners weeds out the weaker installation companies who are more likely to go in and out of business with market boom and bust cycles.

Fact: People want solar energy. Here are some stats on why

Is the residential solar financier shakeup here to stay?

As SolarCity and Vivint Solar have deliberately scaled back operations and moved away from employing a strictly vertically-integrated installer and financier model, Sunrun has jumped on the opportunity. Unlike its competitors, Sunrun continues to primarily sell TPO systems through its direct and installer network businesses.

But recent success for Sunrun does not guarantee continued success. While Sunrun is now the leading TPO financier in the residential solar market, questions remain as to the size of that addressable market. As the residential market grows into the future, GTM Research expects the TPO market to stay relatively flat through 2022, putting a ceiling on the market that Sunrun can address. The current transition of the market away from TPO, which, according to GTM Research, will make up just 37% of the residential market in 2017 as compared to 53% in 2016, is primarily due to what leading installers are choosing to sell.

But there is downside risk to the size of the addressable TPO market. As residential system costs continue to decline, consumer-driven demand for TPO financing could become a prevailing force squeezing that market, leaving Sunrun behind the curve. There is certainly ample opportunity for Sunrun to increase its market share with its leases and PPAs, though the company has little room for error in a market with a low ceiling.

— Solar Builder magazine

WATCH: Elon Musk explains SolarCity’s new solar roof product line

In the back lot of Universal Studios Hollywood, Elon Musk took to the stage to debut his latest bet on the future — the solar roof. This is an idea of the future based on a technology that originally hit the scene in 2005, but the Solar City/Tesla architect believes coupling an integrated solar roof with battery storage (like the new Powerwall that also debuted) is what will eventually move solar into its next phase of widespread adoption.

As usual, the presentation is still mostly about vision and not as much on details, like cell efficiency, the warranty, costs or when it will be available to customers. But we do know the solar roof will be offered in four styles (Textured Glass Tile, Slate Glass Tile, Tuscan Glass Tile, and Smooth Glass Tile) and production is slated to being in mid-2017.

The video above will likely not be enough to win over skeptics, but anything SolarCity needs to be monitored because its failures/successes drive a lot of mainstream industry coverage and could have ramifications on industry perception.

RELATED: SunTegra looks to ramp up its solar roof sales, hires new director 

— Solar Builder magazine

Airbnb, SolarCity partner to offer customer rebates on solar installs

Solar CityAs if conjured directly from a thinkpiece on millennials, Airbnb and SolarCity Corp. are partnering on a rebate program. The idea is to connect Airbnb hosts and guests with an affordable and sustainable way to power their homes with solar energy and further drive the connection between the environment and the sharing economy.

Through the partnership, SolarCity will offer members of the Airbnb community a rebate – up to $1,000 cash back – on all solar panel systems. The rebate is available to Airbnb members in each market where SolarCity currently operates, and homeowners can choose the solar option that works for their homes. Additionally, new and current SolarCity customers who become Airbnb hosts will receive a $100 Airbnb travel credit.

RELATED: Panasonic might produce PV modules for SolarCity at new plant 

Home sharing is a more environmentally sustainable way to travel. Based on methodology developed by Cleantech Group1, Airbnb estimates that over the last year, by choosing Airbnb instead of hotels, Airbnb travelers in the US have reduced:

  • Water consumption by 4.2 billion liters, the equivalent of 1,700 Olympic size swimming pools
  • Greenhouse gas emissions equivalent to keeping 560,000 cars off the road for a year
  • Waste generated by 37,000 metric tons
  • Energy consumption equivalent to the amount used by 280,000 homes in one year

When homeowners go solar with SolarCity, they can take control of their energy needs by using solar electricity that costs less than they would pay for utility power. Solar power also enables them to secure predictable monthly costs for years into the future. As a full service provider, SolarCity makes going solar easy for homeowners by handling everything from financing and permitting to installation and maintenance.

— Solar Builder magazine

Panasonic might produce PV modules for SolarCity at new plant

PanasonicPanasonic Corp. is making bigger and bigger moves in the solar industry. The company already had a relationship with Tesla Motors as a battery partner, but will now is in discussions to manufacture its PV cells and modules at the big new SolarCity facility planned for Buffalo, N.Y., pending the Tesla/SolarCity merger becoming official, of course. Panasonic is already pushing out a nice solar installer training program with its own branded high efficiency modules, and working with SolarCity could obviously really ramp up its penetration in the U.S.

Details from Panasonic: On Oct. 17, 2016, Panasonic has signed a non-binding letter of intent with Tesla to discuss about possible collaboration on the production of PV cells and modules for the North American market at a factory in Buffalo, New York, under the umbrella of Tesla.

Panasonic will look at a collaboration that utilizes the strengths of both companies, creating a synergy between Panasonic’s technological and manufacturing expertise in PV cells and modules and Tesla’s strong sales capacity.
Panasonic produces and sells its HIT PV modules with unique silicon heterojunction structure composed of crystalline silicon substrate and amorphous silicon layers. With industry-leading conversion efficiency and excellent temperature coefficient characteristics, Panasonic’s HIT achieves high power generation even in a limited space.

Panasonic is one of the few vertically integrated PV manufacturers in the world, with in-house production of ingots, cells and modules to inverters, providing high-quality products.

This Buffalo plant is being built with assistance from New York, and is going to be the largest producer of photovoltaic panels in North America. SolarCity delayed the opening of this plant when questions started to pop up about its future. The speculation now is this deal with Panasonic could be the extra financial boost the company needs to get this going. From Forbes:

SolarCity, under pressure to secure additional funds prior, earlier this year delayed the opening of the Buffalo plant, pushing it back to about the second quarter of 2017, according to the Buffalo News. That’s raised concerns among both New York state officials and investors about the fate of the facility.

“Panasonic’s support could mitigate, in our view, some of the capex required to launch the Buffalo facility,” Brian Johnson, an equity analyst for Barclays who has an “underweight” rating on Tesla shares, said in a research note today.

— Solar Builder magazine

SolarCity launching two funds to back $347 million in new solar projects

SolarCity Corp. has partnered with Citi to create two separate funds to finance more than $347 million in solar projects. The first fund is expected to finance more than $284 million in residential solar projects across the U.S. The second fund is expected to finance approximately $63 million in projects for small and medium-sized businesses (SMB) throughout California.

Solar City“Citi is proud to support SolarCity on its mission to expand access to clean solar power for households and small businesses across the United States,” said Marshal Salant, Global Head of Alternative Energy Finance at Citi. “These funds, which will contribute to Citi’s goal to lend, invest and facilitate a total of $100 billion within the next 10 years to activities that reduce the impacts of climate change, clearly illustrate our strong commitment to sustainable growth and clean renewable energy.”

“We highly value repeat investors given our consistent pace of solar asset origination,” said Radford Small, Chief Financial Officer at SolarCity. “This latest investment with Citi is a testament to how our solar assets continue to perform in the field, and in the capital markets.”

This financing makes it possible for many homeowners and small and medium-sized businesses to install solar panels with no upfront cost and pay less for solar electricity than they currently pay for utility bills. The new fund follows a $305 million cash equity financing closed earlier this month.

— Solar Builder magazine