Sunrun has formally joined with REC's residential solar unit. Sunrun announced the news this morning. We reported it last week.
Sunrun acquired REC Solar's Residential Division (solar sales, design, and installation), AEE Solar (distribution) and SnapNrack (mounting systems). The value of the transaction was not disclosed.
That makes Sunrun a vertically integrated solar installer and financier with a direct sales force like SolarCity and Vivint. You can't go public in solar without trucks.
According to a release, "Lynn Jurich will lead the company as Chief Executive Officer, while co-Founder Ed Fenster will continue in his operating role under the new title of Chairman. Tom Holland assumes the role of President and will guide the company's strategy and execution. Mainstream Energy CEO Paul Winnowski joins Sunrun as Chief Operating Officer and Timothy Ball, Chairman of Mainstream Energy Corp., will join Sunrun's board of directors."
REC's commercial unit continues under the REC name with a new CEO, Paul Detering, formerly of Tioga Energy.
It's a deal that has the potential to change the landscape in a dynamic and fast-growing residential solar market. REC already has an existing relationship with Sunrun.
The U.S. residential solar market continues to be a volatile scene, as evidenced by our recent coverage of SolarCity, Vivint, and CPF and the solar customer acquisition battle.
REC Solar had a national residential market share of 2.6 percent for the first three quarters of 2013, according to GTM Research's PV Leaderboard. This move gets Sunrun access to a large, established direct-installer channel, but also places a bit of tension between the company and Sunrun's existing dealer network. Will Sunrun move to an all-direct-sales model? Will Sunrun emulate SolarCity and Vivint, thus jeopardizing its relationship with its current clients, all of which compete with REC?
REC, a sixteen-year installation veteran, has more than 100 outside sales reps in twenty offices across seven states. In a recent article, we noted that REC Solar’s 65 percent year-on-year growth from Q3 2012 to Q3 2013 beats the overall U.S. residential solar industry’s 49 percent growth by a wide margin.
In residential solar, it all comes down to acquiring customers, and this move toward a direct-sales model is one of the ways Sunrun can get to lower customer acquisition costs. According to GTM Research solar analyst Nicole Litvak, "Residential solar customer acquisition currently costs installers $0.49 per watt. Over the next four years, this cost will fall to $0.35 per watt, saving the industry a total of $619 million between 2014 and 2017.”
In June of last year, we reported that Sunrun had won $630 million from three new funds. As Sunrun co-CEO Edward Fenster explained at the time, “These three funds, closed over the last few months, are for the installation of $630 million in solar facilities." VC investors in Sunrun include Sequoia Capital, Accel Partners, and Foundation Capital -- three respected names in that curious business.
Joe Miller, EVP at Solar Universe, tells GTM, “Today’s acquisition is proof that the solar industry linchpin is not merely financing, but also downstream installation and customer support." He adds, "There is no question that today’s Sunrun announcement will shake up the solar market. The question is less about who will control solar and more about who is going to increase consumer access."