It's been a good month for SunRun, the residential solar leasing startup.
The firm just announced a $55 million Round C led by Sequoia Capital, along with existing investors Accel Partners and Foundation Capital. That brings SunRun's VC total to $85 million and project finance total to more than $200 million.
This news comes on the heels of last week's PG&E announcement. PG&E's VC group, Pacific Energy Capital, is making $100 million available to SunRun to finance solar panel installations. Under the deal, SunRun will install solar panels on roofs in California, Arizona, Colorado and two other states and sell electricity to the occupants. The revenue from selling power will then be shared by SunRun and PG&E, freeing PG&E from the obligation of owning or maintaining the panels.
California's Renewable Portfolio Standard (RPS) of 20 percent of by 2010 and 33 percent by 2020 is pushing PG&E, which already ranks as the U.S. utility with the most renewable megawatts, to be creative and aggressive in its clean energy strategy.
Solar's upfront cost remains prohibitively expensive for most homeowners. A residential solar system can cost $20,000 to $50,000, even with generous subsidies. It's like paying your electric bill for the next 20 to 30 years in advance. And if you move or sell the house, what happens to the panels?
SunRun eliminates the biggest barriers to mainstream solar adoption -- high upfront cost and hassle. SunRun's residential Power Purchase Agreement (PPA) means that SunRun owns the solar panels for its customers, which lets them switch to solar electricity for a low initial cost, and then make a predictable monthly payment for solar power. SunRun takes on the responsibilities of owning the solar panels, including maintenance, monitoring, repairs and insurance. SunRun handles most of the paperwork, as well -- and there's plenty of paperwork.
“For cleantech energy to become mainstream, it has to come with both financing and service,” said Warren Hogarth, a Partner at investor Sequoia Capital.
Greentech Media spoke with SunRun's President Lynn Jurich earlier this year. During the interview, she remarked, "Zero upfront cost is the key to the solar adoption."
We checked in with Jurich on Monday morning to learn that the company's total customer base is approaching 5,000 homes and that business has increased 400 percent over last year. The firm is in five states now but expects to be in a few new East Coast states by the end of the year.
Jurich sees her competition as the electric utility rather than other lease providers, and she sounds optimistic about growing her company's scalable model.
In her words, "there's a ton of business."
Two other VC-funded firms compete in this market sector: SolarCity offers residential PPAs while also providing the installation. Sungevity also finances residential solar through Power Purchase Agreements.
I spoke with two of SunRun's VC investors.
Steve Vassallo of Foundation Capital said, "Two years ago, when we first invested, SunRun was still a young startup, but it was clear that Ed Fenster and Lynn Jurich had created something special -- a new business model to change the way residential solar is sold...In the early days, SunRun was selling a couple dozen systems per month and we were thrilled that the model was working. Now SunRun is financing more than ten times that number, and we believe they have only just begun."
Rich Wong of Accel Partners said, "This is absolutely the most interesting part of the solar value chain."