(Bloomberg) — Residential solar looked like a generational opportunity to Lynn Jurich back when few American homeowners had panel systems. The cost of solar equipment would fall, she surmised, and utility bills would rise. The economic case for going green would become clear. There was little expectation that her company, Sunrun Inc., would capture new customers as a result of widespread panic triggered by fragile U.S. power grids heaving under the weight of climate calamities. But that’s happening now. Since summer 2020, emergencies have battered or threatened electricity systems in the New York area, California, the Gulf Coast, California again and in February, perhaps the most surprising place of all: Texas, the nation’s energy hub, a place unaccustomed to debilitating winter storms.
“It’s not slowing down, and it’s probably going to be even faster than we have anticipated,” says Jurich, Sunrun’s co-founder and chief executive officer. “To really combat the speed of climate change and extreme weather and what it’s doing to the grid, we need to go faster. We don’t have the luxury to rebuild this over the next 20 to 30 years.”
Climate-induced weather crises aren’t yet a primary catalyst for the growth of Sunrun, the leading residential-solar company in the U.S. But the urgency they foster is helping move the rooftop sector and home batteries into the American zeitgeist. Only about 3% of U.S. homes are equipped with solar, compared to more than 20% in Australia.
“The dynamics in places that haven’t historically been friendly to residential solar are starting to change,” says Joe Osha, an equity analyst at JMP Securities. “In Texas, you’re going to have people looking for resilience.”
America’s climate emergencies are happening at an inflection point: The U.S. residential-solar sector achieved record installations in 2020 despite an historically weak stretch early in the pandemic—and projections from Wood Mackenzie anticipate new highs in each of the next three years.
“If you had asked me in 2008, what’s the chances of weeklong blackouts in California and Texas, I would’ve said they were really low,” says Edward Fenster, a Sunrun co-founder and executive chairman. “The fact that the grid was so ill-equipped to handle modern weather, we missed. And that’s obviously created a real important urgency and opportunity around storage.”
Then there’s the change in administration: President Joe Biden is pushing to make the country’s electric system fully green by 2035, a moonshot ambition that will require a lot of rooftop capacity—as well as billions of dollars in new transmission lines that could take a decade to build to support remote pockets of robust wind and solar power. Biden’s bid will only amplify megatrends that are here to stay, no matter who ultimately succeeds him: decarbonization and the electrification of everything from vehicles to buildings to stoves, as the U.S. tries to eliminate carbon emissions in the decades ahead.
In some ways, Jurich’s company is ideally positioned to meet the moment. San Francisco-based Sunrun was the leading residential company in the U.S. even before it bought rival Vivint Solar Inc. amid the pandemic last year. It has a national brand that, while obviously nowhere near the notoriety of Tesla Inc., is gaining in consumer awareness. It also saw the potential of storage before many of its peers, which could ultimately transform the company from installer and financier to new-age utility. (Sunrun is among the companies that are working with electric-system incumbents to provide some energy from solar-powered battery systems.)
Still, there are challenges. The biggest utilities in California—America’s leading solar state—in March proposed lowering compensation for rooftop customers and adding a new connection charge. Interest rates have ticked up. There’s competition from other companies eager to participate in the electrification of residences, including solar-loan originators and local installers. And bureaucracy continues to stretch out the residential-sales process, contributing to high customer-acquisition costs.
Jurich and her family have been in Utah in recent months, where Vivint is based, while she works on integrating the company into Sunrun. It was from Utah that she watched the Texas crisis unfold, a deep freeze that caused days of blackouts and left millions in the cold and dark. More than 100 people died. “It was shocking,” Jurich says. “A lot of people across the country always like to look at California as, ‘Oh, it’s an exception; oh, it’s California.’ But when you see something so dramatic happen, and so tragic—really happen in another place, it just really makes it that much more personal and that much more visceral that this is not just about cleaner electricity, but it’s about safety and well-being and healthy households.”
Jurich, 41, is an introvert and perpetually on message—basically the opposite of Tesla CEO Elon Musk. She’s a regular on podcasts, and her company has long been one of the most engaged rooftop companies in federal and state policy.
Jurich took up meditation around 2013. “When she’s engaged in something, she’s fully there,” says Diana Chapman, a mentor to Jurich and co-founder of the Conscious Leadership Group, an organization that describes itself as supporting leaders to “build trust and create conscious cultures.”
A venture capital associate before returning to her alma mater, Stanford University, for business school, Jurich and her then-boyfriend, also an aspiring entrepreneur, agreed that the partner with the best business idea would tackle it first. Jurich was already interested in the environment. A trip to China in 2005 for an internship at an investment bank made an impression: Jurich found the pollution so bad that a necklace she had polished one morning was tarnished by evening. “I was convinced that sustainable infrastructure would be the biggest problem of our generation to solve,” she says.
Jurich got married a week before Sunrun launched in 2007, the first spouse out of the gate with a new company. Sunrun was part of a wave of clean-tech startups that came before solar reached the mainstream. The company emerged, as many Silicon Valley companies do, from a connection made at Stanford: Jurich met one of her co-founders, Fenster, at an orientation event at a site that had been billed as a houseboat. (Fenster recalls it was really a floating barge with a port-a-potty). Co-founder Nat Kreamer was a friend of Fenster’s who had come back from the war in Afghanistan and was eager to wean the U.S. off foreign energy.
Many of the startups at that time focused on making futuristic solar technologies. Sunrun followed a different route: using finance to deploy proven technology atop rooftops. The enormous investment in polysilicon that had already taken place meant that Sunrun could finance pools of rooftops and offer them to homeowners via long-term leases—a key product in the mainstreaming of rooftop systems.“We have all of the technology we need to make massive change—that was our original thesis,” Jurich says.
Her focus during the company’s startup days covered a lot of terrain—operations, strategy, boosting the efficiency of the company’s installers, fundraising, even putting flyers on cars parked at Bay Area Rapid Transit train stations. “It was a real hustle,” Jurich recalls. Fenster was the company’s initial CEO.
Sunrun spent part of 2008 trying to line up financing and closed a deal with US Bancorp as the financial markets went into free fall. “Lynn and Ed felt like the last helicopter over Saigon,” recalls Steve Vassallo, general partner at Foundation Capital, which had invested $8 million in the startup.
Jurich’s company was an early mover, but SolarCity Corp.—whose biggest shareholder was Musk, its chairman—went public first and was growing faster.
Sunrun went public in 2015. By then, Jurich was sole CEO and she had a month-old baby. “One of my favorite all-time images from our industry is that of Lynn Jurich on the day Sunrun went public,” recalls Emily Kirsch, founder and managing partner of Powerhouse Ventures, a clean-energy and mobility venture fund. “She’s surrounded by men in mostly gray blazers. She’s wearing a bright-yellow blazer while holding her newborn in her arms while she’s ringing the opening bell, as confetti falls from the sky.”
SolarCity, meanwhile, deployed 272 megawatts of systems in the final period of 2015, a high-water quarterly mark that no company has come close to matching. (Sunrun deployed 68 megawatts during that period). But the Musk-backed company was also debt-burdened. SolarCity was acquired in 2016 by Tesla—and soon began ceding market-share to Sunrun.
As panel prices continued falling, the sector firmed up its footing in California but less so in regions that boasted low power prices—thanks, in part, to the shale gas boom. Nationally, the status of federal subsidies often swayed total annual installations. Some companies “were focused completely on deploying megawatts and didn’t fully understand the economics of what they were doing,” JMP’s Osha says. “What distinguished Sunrun: They had a very good understanding of the financial implications of what they were doing. They weren’t just growing for growth’s sake.”
The SolarCity brand may be gone, but Tesla’s residential-solar business, as Osha puts it, “is back from the dead.” It’s on the upswing with a standardized, web-based approach that cuts down on customer-acquisition costs. The automaker deployed 86 megawatts of solar during the final three months of last year, its best period since third-quarter 2018. This was half Sunrun’s output in that quarter. On an earnings call in January, Musk said he expects Tesla expects to become the market leader. “But they have a long, long way to go,” Osha says. Tesla didn’t respond to a request for comment.
Jurich says the more awareness and investment in decarbonizing the system, the better. One of her mantras: “All people and all circumstances are my allies,” she says. “Even the existing, more fossil-fuel based companies and people who have worked in those industries, they deserve credit …They helped the quality of life, they played a really important role in the development of the world. And now it’s time to evolve and switch over to using decarbonized technologies.”
Residential solar companies attribute the sector’s slow market penetration in the U.S. partly to permitting delays, which help keep customer-acquisition costs stubbornly high. So the industry is pushing to streamline government approvals. “Some of the states, like California, that claim to be pro-solar are some of the worst for soft costs and permitting,” Osha says. In Australia, some residential systems cost less than $3,000 (after subsidy) and can be installed within weeks following purchase, according to Hugh Bromley, an analyst at BloombergNEF, a clean-energy research group.
But selling rooftop solar can be low-tech, and often involves heavy marketing expenses. Door-to-door sales were a sector mainstay before the pandemic struck. Sunrun’s sales and marketing costs for last year’s first quarter exceeded benchmarks for national companies and local installers. The company believes its customer-acquisition costs are competitive at the market level and deliver strong returns, contending that if it doesn’t spend the next dollar to acquire the next incremental customer, it will leave business on the table.
The promise of getting at least some blackout-proofing with solar panels and batteries is changing the sales pitch. For some homeowners, the climate crises have become effective advertisements for those products, as well as for generators.
“Inertia can take hold until things are too painful, where people now are motivated to change,” Jurich says. “I believe we’re at the beginning of that now.”
Battery demand “is so high that it has outstripped supply since late last year,” according to a Goldman Sachs Group Inc. research note in March. Five U.S. power outages have affected at least 1 million people since 2019, according to Pavel Molchanov, an analyst at Raymond James. The Texas crisis was particularly visible, and Sunrun experienced a 350% jump in web traffic in Texas in February. Its peers saw big surges, too.
“There’s something very empowering about being able to make your own decision and control your own electricity,” Jurich says. “We’re really innovating on turning the home into an energy asset.”