Sunrun Reports Sales Rebound After Coronavirus Slump, But Expects Slow Quarters Ahead

U.S. residential solar bellwether Sunrun reported solid business in the quarter that ended with the arrival of shelter-in-place orders.

First quarter installations grew 13 percent year-over-year, to 97 megawatts. That performance handily beat rival installer Tesla, which managed to install 26 percent less solar in its first quarter compared to Q1 2019.

That said, coronavirus restrictions only impacted the last few weeks of March. The real test will be the second quarter, which has thus far been consumed with social distancing requirements across the U.S.

Prior to the health crisis, the rooftop solar business relied on face-to-face sales and hours spent at customer homes during installation. When coronavirus prompted social distancing orders around the country, Sunrun revoked its business guidance for the year, switched all sales online in a matter of days and launched solar leases for $1-per-month for the first six months of its contract. Wednesday’s quarterly earnings announcement promised the first opportunity to see how those measures are working.

By the end of March, sales were down 40 percent compared to pre-virus levels, CEO Lynn Jurich told GTM. But after switching to digital operations, sales increased week by week and grew to rival or beat pre-crisis levels. That culminated in Sunrun hitting its all-time high for single-day orders in late April.

“There was that initial shock, but it’s very clear customers still want [solar],” Jurich said. “In many cases, they may want it more in this type of environment.”

Jurich credited some of that April sales uptick to the company’s new offer of leased solar with six months for $1 each. But she cautioned against extrapolating too much from a few good weeks. After pulling 2020 guidance, the company hasn’t offered any new figures on its expectations for 2020.

“It’s hard to say where things will land, because there’s so many external factors like [authorities having jurisdiction] closures and when do the retail stores open,” she explained.

Installations are still on hold in New York State and Boston due to local rules, Jurich said. And installations are held up elsewhere by delays for permitting and inspection.

Resilience bump?

Jurich and others in the solar industry have argued that quarantine makes electricity payments and resilience more salient for homeowners. But the situation is new enough that little evidence has emerged to support that assertion.

To test that hypothesis, Jurich suggested watching battery attachment rates in the Bay Area.

That’s where utility PG&E is gearing up to invoke pre-emptive grid outages to avoid sparking wildfires in the late summer and fall. This year’s shutoffs may be even more impactful than last year’s, due to a dry year and coronavirus-related interruptions to safety preparations. Depending on the course of the virus and its containment measures, safety shutoffs could hit people sheltering in place.

Diesel generators offer backup power, albeit with noise and exhaust fumes. Sunrun pitches its Brightbox solar-plus-storage service as a silent, clean alternative for securing home backup power.

In April, 60 percent of Sunrun’s new direct customers in the Bay Area added battery storage to their solar.

Nationwide, Sunrun has now installed 10,000 Brighbox systems, continuing a trend of upping cumulative installations by 1,000 each quarter. Overall, Sunrun’s direct installation business has seen 50 percent growth in Brightbox business year-over-year.

Finances

Sunrun is better positioned to survive the uncertainty than some of its peers. SunPower had to slash salaries and cut work hours in response to the coronavirus. Sungevity fired hundreds of staff. Vivint Solar was more known for using door-to-door sales.

Sunrun did cut some jobs, though Jurich said on the earnings call that the company has begun recalling furloughed workers.

Net present value will probably come down in Q2 and maybe Q3, Jurich noted on the call. But referring to external estimates that residential solar sales are down 30 to 50 percent compared to projections before the pandemic, Jurich said Sunrun was on the better end of the industry’s spectrum. Net present value of new installations should rise again by the end of the year, barring further setbacks.

“We believe the growth is going to come back, and we want to be in an athletic position to take advantage of that,” Jurich said.

As for financing, Sunrun draws from a mix of tax equity, debt, third party lenders and asset backed securitizations, so it is not tied to any one stream. Nor does it depend on cash from sales to stay afloat, since the company is geared around installations paying back incrementally over a couple decades.

After the first quarter, Sunrun still had tax equity and debt confirmed equivalent to 220 megawatts of new leased projects.

The accumulation of batteries in the field supports Sunrun’s nascent grid services business, which uses fleets of home batteries to fulfill capacity contracts. The company reported $50 million in grid services revenue contracted or in late-stage development.

Local installers also offer batteries, but they have little ability to tap into grid services. The grid value of a home battery fleet grows with the size of the fleet, and it requires sophisticated software to control it and balance profits with customer needs.

That said, Sunrun’s early grid services contracts are pegged to future delivery, so they are unlikely to give a business advantage in the immediate future.