SunRun Snags $18M

The solar financial solarprovider wants to step up its marketing efforts in order to competewith cities that also are offering financial help to homeowners whocan’t afford the upfront installation costs.

Most greentech companies see governments as helpful, rich big brothers. SunRun sees them as scary competitors.

Launched in 2007, SunRuncame up with a way to provide financing to consumers who couldn’totherwise afford to plunk down more than $20,000 for a system. The SanFrancisco company, which focuses on the residential market, has sinceexpanded to Massachusetts and Arizona and signed financing contractswith more than 1,000 customers.

But the company is facing a new breed of competitors, and they arenot other startups looking to replicate SunRun’s strategy. Instead,they are cities and counties who are selling bonds and amending theirreal estate tax codes to help their residents go solar. Berkeley is apioneer in this area (see Berkeley to Launch Solar Financing Program).

The growing competition from cities and even counties is a keyreason SunRun decided to raise $18 million in a second round offinancing, said Lynn Jurich, president of SunRun, during an interviewMonday. Accel Partners, which leadthe second round, will also potentially help SunRun better capitalizeon social networking, Jurich said. Accel’s most high-profiledinvestment in that arena is Facebook (SunRun advertises on Facebook). 

Accel’s "knowledge on social networking sites will help us get theword out," Jurich said. "We are the more efficient way of deployingsolar."

Foundation Capital, who invested in a previous, $12 million round announced in June last year, also invested in the second round.

Affordability has always been a major hurdle for average consumersto embrace solar. If they want to buy a 3-kilowatt system out right,they could spend on average around $23,000 (based on California SolarInitiative’s data of the residential systems sold over the past month,according to SunRun). The cost would go down by roughly 44 percent inCalifornia thanks to the state’s solar rebate and the 30 percentfederal tax investment tax credit.

Still, the incentives doesn’t make owning solar power systems asaffordable as, say, a TV. A 3-kilowatt solar system in San Francisco,including all of the rebates, still costs around $13,000 and payofftakes 8 years or more.

SunRun gets around the high capital costs by not having consumersbuy their solar systems. Instead, consumer pay $1,000 up front to helpfoot the cost of putting solar panels on their rooftops. After that,they send SunRun a monthly payment based on a fixed rate that laststhrough an 18-year contract. This type of power purchase agreements areavailable to customers in Massachusetts and California (except LosAngeles).

In Arizona and in Los Angeles, SunRun offers a leasing plan forregulatory reasons. Customers who opt for the lease would pay a monthlyfee that is not based on the amount of power generated by theirsystems, and they may not get the full maintenance and repair servicesthat would come with a power purchase agreement.

"I came from the consumer market myself, and a lot of servicebusiness is about making it simple, turnkey and easy for consumers,"said Rich Wong of Accel. Wong, who began his career as a brand managerat Procter & Gamble, will serve on SunRun’s board of directors."SunRun is a clear leader in that space."

Last November, SunRun said it had gotten a commitment from the U.S.Bank to provide up to $105 million to finance installations andservices to SunRun’s customers. This pot of money serves a differentpurpose than the $18 million that SunRun just raised for corporateexpenses such as business development. Nine installers have signed upfor SunRun’s services, including Akeena Solar, groSolar and AlterisRenewables.

SunRun isn’t alone in providing financing to consumers. SolarCity,based in Foster City, Calif., also has a leasing program. SolarCityalso is an installer, however, and serves both the residential andcommercial markets.

But the biggest competitors are turning out to be cities andcounties that are creating a special tax district to financeinstallations for their residents.

Berkeley, which launched its pilot project at the end of last year,sold bonds to finance the upfront installation costs. Residents repaythe city back (with interest) via their property tax bills – a line isadded to the bills and only those who signed up and installed solarwould have to pay.

Sonoma County, meanwhile, is using its general fund to financeinstallations of solar and other renewable energy and energy efficiencyprojects for its residents. The county started the program in spring this year, and it would get the paybacks via property tax payments.

Jurich said SunRun could offer better services to consumers thanlocal governments could. SunRun offers competitive interest rates, andit provides monitoring and repair service, which is crucial forensuring that a solar energy system works as promise over a typicallifespan of 20 years.

Consumers usually don’t have the time or inclination to regularlymonitor their systems’ performance, even though their systems come withsoftware for web-based monitoring.

Some of them have been surprised to find that they didn’t save muchin electricity costs because they didn’t realize their systems weren’tworking properly (see Having Solar Energy System Trouble? Don’t Call Your Utilities).

SunRun plans to spruce up is website to attract more consumers, Jurich said. She also hopes to partner with local governments.

The company is looking at expanding its business to other states,most likely in the East Coast, but Jurich declined to say more.