The Sunrun CEO weighs in on the industry in an interview with Stephen Lacey at the GTM Solar Summit
Feeling blue about the solar industry? Half an hour of Lynn Jurich, CEO of Sunrun, should perk you up.
Jurich has a way of inspiring and energizing. Her passion is contagious, and she has the facts to back it up.
She didn’t disappoint in an interview conducted by Stephen Lacey, Editor-in-Chief of Greentech Media, at this week’s Solar Summit.
The state of the industry
Lacey himself had served up a pretty dark summary of the state of the solar industry earlier this week, in advance of the Summit. There’s plenty of cause for concern: bankruptcies, political uncertainty, stubborn customer acquisition costs, trade wars. Lacey didn’t mince words with Jurich in their interview, pointing to the decline in residential installs this year, particularly in key solar states.
But Jurich wasn’t daunted.
This is still early days for solar, she said. We’re still seeing solid growth. And if we look at it as the decades-long business that it is, she said, we can see many positive trends. The bigger story, according to Jurich, is:
- Costs continue to come down.
- Consumers continue to want solar.
- Regulators are seeing the value of distributed assets and a new way of generating electricity.
Storage, she said, completely changes the game and makes distributed solar inevitable — in addition to driving long-term growth.
Not many people are talking these days, as they did a year or two ago, about the benefits of natural consolidation in the industry. But Jurich insisted that it’s resetting the industry now and making it healthier.
She pointed to debt capital and project finance markets being stronger than ever, and private equity getting back into the market. Sunrun, she noted, has delivered growth while holding a cash balance over $200 million for several quarters in a row.
A key to Sunrun’s success, Jurich suggested, has been building a sustainable business. They haven’t pursued growth at all costs, realizing it was more important to grow sustainably while focusing on the customer experience and their employees. She also touted the benefits of balance — in embracing both vertical integration and the long tail (even when vertical integration was all the rage), and both loans and leases. Sunrun, she said, “stayed a little balanced on not going after the flavor of the day.”
Loans vs leases
Speaking of loans and leases, while Sunrun does offer both, their customers still skew toward third-party-ownership options. “We offer what the customer wants,” said Jurich.
Leases and PPAs, Jurich said, offer a better value for the customer — which is why only about 10% – 15% of their customers choose ownership. Unlike Greentech Media, she believes that will hold, with a majority of about 80% sticking with TPO.
Jurich had an unusual take on customer acquisition costs. “We’re in the zone,” she claimed.
Investors in SaaS companies, she said, look for a ratio of customer acquisition costs compared to lifetime value of 3:1. That’s right where the solar industry is. (See more on this in her blog post.) Jurich didn’t stop there. She added: If you believe your contracts have value after 20 years, and you can sell your customers more products (like storage), you could even argue that we should be spending more.
Jurich also said this doesn’t mean there’s no room to bring down customer acquisition costs. But we don’t need to be apologizing for where they are.
Where most in the industry will agree with Jurich is on her preferred customer acquisition strategy. While direct sales, retail partnerships, and other tactics have a place — as in any industry — in solar, referrals still rule. So it’s key to maintain a company’s reputation in the community. Being aggressive doesn’t serve the industry — and it results in not only spending more money but also damaging your best source of referrals.
Rate design and net metering
Net metering works, said Jurich. “Let’s leave something that’s working alone, for a second!” Net metering adds value to everyone on the grid — solar is the solution to increasing costs, not the problem.
Of course, rate design is a significant factor for solar customers. Jurich is a fan of time of use rates. “If there’s a time of day where it costs everyone more money,” she said, “let’s price that in.” Market and tech should solve the problem. How TOU rates will affect solar, though, is hard to say when some rates are not established. In some areas, Jurich noted, the TOU peak is not yet significant enough to start load shifting.
Looking to the future
What makes Jurich fearful for 2017, and what’s she most excited about? “I gave up fear a long time ago,” said Jurich. “In terms of 2017, I’m very optimistic that we can be a leader in this industry, we can prove that these are sustainable models that add value to our customers and to our shareholders.”
As she said earlier about the solar industry, “We operate in way too defensive of a posture. We are doing the right thing. We are going to win. We have history on our side. We have technology on our side. We have consumer choice on our side.”
There’s a lot to be said for all those things. Let’s hope she’s right.