28-year-old and a 32-year-old, raising your first $20 million in tax equity, was a challenge…When they were able to close their first tax equity fund with U.S. Bancorp, it felt a little bit like we were the last helicopter out of Saigon. It may have been the only tax equity solar deal done in that quarter.”
Part of SunRun’s success landing U.S. Bancorp, according to Jurich, lay in the innovative way the company “sliced and diced” the tax credits, depreciation, local subsidies, and 20-year power contracts. But traditional engineering played a big part, too. I talked with Matt Eggers, SunRun’s vice president of operations, who described all the work SunRun does to make sure that the thousands of systems it has now installs actually keep producing power.
“We’re basically a utility with thousands of power plants,” Eggers says. “Solar is a very reliable technology, but when you have a lot of systems you have failures.”
To minimize those failures, each rooftop system is outfitted with a wireless smart meter that takes readings every 15 minutes and uploads the collected data to SunRun’s servers four times a day. “If one capacitor goes on one panel, [the homeowner] will never know—there is enough variability due to weather,” says Eggers. “But we are monitoring all of those power plants and comparing them to each other, so we have a pretty accurate sense of where the problems are. We can wash out the effects of weather and detect dirty panels, or quickly notice when an inverter has been disconnected or a squirrel has chewed through some wires.” Sometimes that means rolling a truck; sometimes the company decides it can afford to wait until more dust or grime accumulates on the panels.
Building the monitoring system wasn’t just an efficiency measure, according to Jurich: it was key to winning project financing. “Figuring out the systems to keep those assets up and running and to bill against them—we had to build all that information technology so that the banks would feel comfortable,” she says.
And there was one more ingredient needed to help SunRun expand into all of the states with significant solar-related grants, rebates, and tax incentives: a way to generate automated price quotes. Not only are the subsidies in each district different, but utility commissions regulate the amount of power providers can charge. Figuring out all of that by hand for every zip code in all seven of the states SunRun covers would be “impossible to scale,” says Eggers. So the company built a “pricing engine” that takes into account everything from local tax laws to the pitch of the homeowner’s roof and spits out a price quote on the fly. (Consumers can even decide whether they want to pay a higher down payment in return for a fixed price per kilowatt hour of electricity used, or a lower down payment and an escalating price.) Between January and October, the pricing engine generated 168,000 proposals, according to Eggers.
Software engineers make up the biggest chunk of SunRun’s staff of 75. (Much of the company’s sales effort and all of the actual solar installation work is outsourced to local contractors.) The big investment in software is necessary, according to Jurich, because other companies will eventually figure out how to slice and dice tax equity investments just as SunRun has. “Ultimately, that will become more and more commoditized, and that’s why the other things we’re building—like the software systems to bring down transaction costs, having smart pricing models, building a consumer brand, getting the best distribution—are going to be the better long-term value for the company,” she says.
SunRun has how raised $85 million in venture funding from Foundation, Accel Partners, and Sequoia Capital, and this June it lined up a second tax equity investor in the form of Pacific Energy Capital, a unit of Pacific Gas & Electric. The company got some good news last week: the tax bill passed by Congress and signed by President Obama contained a one-year extension of a stimulus-bill program that provides cash grants in lieu of solar investment tax credits. Solar industry lobbyists had argued that the grants were partly responsible for the industry’s 100 percent growth in 2010, and SunRun says that the program’s continuation will enable it to build 36,000 more residential solar installations than it could have otherwise.
So the future looks sunny for this company full of engineers, both financial and classical. “SunRun has gotten rid of every excuse someone might have not to put solar on the roof,” says Vassallo. “It’s a special company—and I say that having spent enough time in venture to know that you’re lucky to have two or three special companies in any one portfolio.”
