Sunrun pushes battery storage as home solar market slows

However, the company is not immune from a major slowdown in home solar sales. The crisis was enough to force a competitor, SunPower, to file for bankruptcy protection this month. SunPower cited a combination of high interest rates and a change in policy in California, the nation’s largest solar market. The company was also very strong and struggled to raise more capital after some financial reporting errors.

In June, analysts at Wood Mackenzie estimated that homeowners nationwide will install 14 percent less solar in 2024 than they did in 2023, marking the first time the market has contracted in five years. Zoë Gaston, principal analyst in Wood Mackenzie’s U.S. distributed solar team, said the decline is likely to be even greater after SunPower and another leading installer, Titan Solar, exit the industry.

Triggering the recession is a new “net metering” policy in California, where homeowners are paid less for sending electricity to the grid. Analysts predict the California market will contract 40 percent this year after a mad dash to install solar before those changes take effect in April 2023.

High interest rates don’t help either. Most homeowners finance their solar systems with a lease or loan from companies like Sunrun. Higher rates on those long-term leases and loans mean less money saved on monthly utility bills, making solar less attractive.

“The days of easy money and low interest rates have provided a lot of stimulus for demand,” Brett Castelli, clean energy equity analyst at Morningstar, told Business Insider.

Those days are over, he added, so some residential solar companies are focusing less on growth and more on cash flow after operating in the red.

Powell told Business Insider that Sunrun has focused on cash growth and a “battery-first” strategy to weather headwinds in the solar market. Sunrun targets $200 million to $500 million in cash flow this year; historically it has been negative.

She described this year’s residential solar market as “distorted” because of last year’s massive surge in demand in California. But she speculated it would adjust and then grow at least 10 percent a year.

“Utilities don’t have a solution for the future,” Powell said, adding that customers pay more for power, but reliability gets worse. “This creates a systemic demand for solar and battery storage.”

Powell said regulators are pushing utilities to use residential renewable energy to stabilize the grid during periods of high demand, while homeowners want to have backup power as outages become more frequent due to extreme weather.

Powell pointed to Sunrun’s pilot projects in Texas, California and Puerto Rico, where the company monitors its customers’ stored solar energy and sends it to the grid during periods of high demand. Customers are paid for the energy, while Sunrun is paid for shipping the batteries. In Maryland, Sunrun partnered with three owners of electric Ford F-150s who charge at home to test how EV batteries can serve as backup power.

Castelli agreed with Powell’s prediction that residential solar will grow over the long term, pointing to rising utility rates, falling equipment costs and the likelihood of lower interest rates. But if states follow California’s lead by making it less profitable for homeowners to send electricity to the grid, demand could slow.

“The bottom line is that the rooftop solar industry needs to become more efficient,” Castelli said. “The United States has by far the highest cost of rooftop solar in the world. Through these changes and headwinds, companies go out of business and that makes the industry more efficient.”