Sunrun gives Tesla strong competition for home solar units
As SolarCity has struggled since it was absorbed into Elon Musk’s Tesla empire two years ago, its biggest competition is now coming from Sunrun, an installer of residential solar panels and energy storage that is capturing a growing amount of what had been SolarCity’s signature market.
“It is all but guaranteed that Sunrun will emerge as the top residential solar installer in the U.S.,” said Allison Mond, a senior analyst at Wood Mackenzie, which provides consulting on various issues including energy and renewables. “Tesla’s residential solar business is in rapid decline as the company has cut many sales channels.”
Wood Mackenzie, which tracks and supplies solar data for the Solar Energy Industries Association, says Tesla accounts for 9.3 percent of residential solar installations nationwide this year, followed by Sunrun at 9.0 percent, in a fragmented industry. In 2015, San Mateo’s SolarCity had one-third of the market while Sunrun had 5 percent.
Since the acquisition of SolarCity, Tesla has worked to present itself as a one-stop shop for a homeowner’s needs — an electric car in the garage, solar panels on the roof, and a battery called the Powerwall
storing energy to help power both the car and the home. Tesla also makes a battery system it sells commercially and to utilities, called the Powerpack. The Powerpack stores energy from the electric grid as well as power collected from solar arrays larger than systems designed for home use.
In the third quarter, the company’s noncar battery business, as measured in megawatts, more than doubled from the same quarter a year earlier. But its solar installations, also measured in megawatts, have declined sharply. To match last year’s installations, Tesla would have to sell twice as much in the fourth quarter as it did in the first three quarters combined.
San Francisco’s Sunrun says it has already surpassed Tesla, if the installations it finances through third-party contractors are counted. That could bring Sunrun’s market share for residential installations to as much as 15 percent.
Sunrun says it has sold more than $3 billion in installed solar systems. Lynn Jurich, Sunrun’s co-founder and chief executive, said her company recently expanded into seven new markets and now has a presence in 22 states, the District of Columbia and Puerto Rico.
Part of Sunrun’s strategy has been to stay focused on financing and installing solar panels and batteries rather than producing those products itself.
Jurich said, “Manufacturing, that’s not our core competency.”
New opportunities for both companies are opening up, especially in California, which is already the nation’s leader in solar installations and is adding new mandates and incentives.
Under a policy approved in May, all newhome construction in California must include solar power by Jan. 1, 2020. And Gov. Jerry Brown recently signed a bill that allocates $800 million to a program providing rebates for home energy-storage systems. Florida also has new policies supporting residential solar power.
Analysts say prices for comparable residential solar systems at Sunrun and Tesla are about the same. But as they move to take advantage of the growing appeal of home solar power, the companies are pursuing divergent paths.
The approach of using Tesla stores to promote solar products has replaced a long-established sales strategy that focused on a partnership with Home Depot, in which Tesla representatives sold solar panels at the hardware giant’s retail outlets. Tesla says selling its products under one roof “will save money and enable our colleagues to work together more effectively and efficiently.”
But the partnership approach seems to suit Sunrun, which lacks its own showrooms and has struck a relationship with Costco.
Neither Sunrun nor Tesla makes its own solar panels. Tesla has a deal with Panasonic to make panels at Tesla’s Gigafactory 2 in Buffalo, N.Y., but uses other suppliers as well. Tesla manufactures all of its other products, including parts for installing the systems.
The foreign origin of many panels has been a handicap for the industry since President Trump imposed tariffs on their import this year. Sunrun says that the tariffs have not slowed its business, while Tesla declined to comment about the effect.
Sunrun’s revenue in 2017 was $533 million, up from $477 million in 2016. Tesla’s revenue from electricity generation and storage last year was $1.1 billion, but that includes some commercial and utility-scale products.
Even with the traction that Sunrun has gotten, Tesla says it is intent on pushing ideas that are untested or have yet to gain widespread adoption or success.
And it is building out its leadership team with the recent arrival of Sanjay Shah, who helped with growth and development at Dell and Amazon, as the senior vice president of Tesla Energy.
“Competition is always healthy,” Shah said in an interview, but he said Tesla and Sunrun are fundamentally different.
“Instead of focusing on the competition and the markets, we are focusing on where the world is going,” he said. “The growth in terms of market share is just a matter of time. Our energy business will continue to grow, and it will be as big as our auto business.”
But Vikram Aggarwal, co-founder and chief executive of EnergySage, a solar comparisonshopping service, said Tesla’s self-contained approach had made it challenging for Musk to execute his vision.
“They wanted to be a fully vertically integrated product, manufacturing and installation company,” Aggarwal said. “That is a very, very expensive strategy to implement where you have so many components. For one company to be really good at all of it is very difficult.”
Shah described the changes as strategic moves to improve efficiency. Customers, he said, will ultimately visit and keep returning to Tesla stores because of the experience they will find in search of products to power their lives.
“When customers think renewable energy, they should think about electric vehicles, solar and battery — not just solar and a battery,” he said.
While Tesla announced a 9 percent job reduction across all its businesses in June, it has been hiring more installers and electricians to bolster its solar power and energy storage business.
The crown jewel of Tesla’s solar products was supposed to be glass solar shingles that would be more visually appealing than the rectangular panels that sit on rooftops. Many people find boxy solar panels unattractive on roofs with ceramic barrel tiles, or simply don’t like puncturing holes in their shingles to install panels.
Musk promised to deliver the shingles at a price comparable to replacing a normal roof. But like other Tesla products, the shingles have been delayed, which the company attributed to their complexity. It said last week that it expected to increase production in the first half of next year.