Home solar industry still growing, but installers lose money.
Two top vendors lost combined $500M in first 9 months of 2020
The home solar business is growing fast as thousands of homeowners install panels on their roofs to save money. Yet the biggest companies that install and finance home solar systems are reporting hundreds of millions of dollars in losses.
Those losses are an ominous reminder of how hard it can be to make money in an industry widely viewed by political leaders and business executives as an important part of the global effort to address climate change. Solving this problem could help determine whether the use of residential solar power is quickly and widely adopted.
“There have been very few success stories,” said Vikram Aggarwal, founder and chief executive of EnergySage, which helps consumers compare solar installers. “Practically everyone who has tried this has failed. The road is littered with dead bodies.”
Sunrun and Sunnova, two of the nation’s biggest home solar companies, lost a combined $500 million in the first nine months of 2020, and their operations and purchases of solar systems collectively used up $1.3 billion in cash. The companies and their Wall Street supporters say the losses are occurring because solar installations are growing rapidly and require a lot of upfront investment, and because investors in the companies get to use the losses to offset their tax liabilities. Still, residential solar is a fiercely competitive and expensive business, and Sunrun and Sunnova must contend with hundreds of smaller rivals, many of which have been turning a profit for years.
For now, Wall Street investors are bidding up the companies’ stocks in the belief that solar companies will be able to borrow cheaply and cover their losses and cash outflows for some time. They also expect sales to grow fast as homeowners buy larger solar systems and home batteries to protect themselves from blackouts and to power electric vehicles. Investors are also expecting the incoming Biden administration to do more to spur the use of renewable energy through tax credits and other incentives.
“You are always going to be negative if you are growing,” Lynn Jurich, chief executive of Sunrun, said. Sunrun acquired Vivint, which was the country’s second-biggest residential solar installer, in a deal announced in July. That acquisition has helped push Sunrun’s stock up more than 400% in 2020. Sunnova’s stock was up more than 300%.
The success of the two companies and Tesla’s solar business, once the leading residential solar installer, matters beyond the stock market. If these companies grow and gain the same sort of name recognition that Tesla did for its luxury electric cars, or Amazon did for online shopping, they could help accelerate a shift away from fossil fuels.
New home solar installations, measured by their power capacity, are expected to grow 7% this year despite the coronavirus pandemic, according to the Solar Energy Industries Association and Wood Mackenzie, a research and consulting firm. Wood Mackenzie expects strong growth over the next five years.
“We’re having discussions as
by SFAI’s board and executive officers.”
In a statement, the institute described the allegations of poor leadership as “a gross mischaracterization,” saying that nearly all of its board members joined the school after the debt was incurred.
The Rivera mural is intertwined with the legacy of SFAI, which claims to be the oldest art school west of the Mississippi River and
counts artists like Annie Leibovitz, Catherine Opie and Kehinde Wiley among its former students. Selling the mural after it has become such a significant part of the institute’s identity over the last 90 years risks alienating the students, alumni and faculty who appreciate it.
“It’s insulting and heartbreaking,” said Kate Laster, an institute alumna who produced student exhibitions in a gallery housing the mural before graduating in 2019. “Selling the mural is an impractical option when considering the
school’s duty to protect its own historical legacy.”
Aaron Peskin, an elected official in the district where the institute resides, also opposes the sale. “The notion of anybody, much less the University of California, selling this off, is heresy,” he recently told the Mission Local news site, which first reported the deal with the regents on Dec. 30. “It would be a crime against art and the city’s heritage. Educational institutions should teach art, not sell it.”
Money woes for the institute originate from a 2016 loan that funded the construction of its new Fort Mason campus. Collateral for the loan included the school’s older campus on Chestnut Street and 19 artworks. Last year, the financial burden caused school leaders to consider permanently closing; it stayed open, in a limited capacity, after receiving $4 million in donations.
But it wasn’t enough. In July, Boston Private Bank & Trust Co. notified the institute that it had violated the loan’s terms of agreement by failing to pay off an annual $3 million line of credit needed to renew the loan. The bank issued a public notice of sale in October, listing the collateral, which includes the Rivera mural and frescoes including ones by Victor Arnautoff, whose paintings have been threatened with destruction elsewhere in San Francisco.
The Board of Regents prevented the sale by purchasing the institute’s debt that month. Through the new agreement, the public university system acquired the institute’s deed and became its landlord. Administrators at SFAI have six years to repurchase the property; if they don’t, the University of California would take possession of the campus.
And if the institute loses its home, school administrators would have more tough decisions to make about the mural’s future. “If it does come to SFAI leaving the Chestnut Street Campus for good, we would need to potentially move the Diego Rivera mural,” Fitzmaurice said. “We have been informed that such a potential move could be a multiyear process and so we have begun to investigate what is possible if it comes to that.”