By TODD WOODY/NYTimes
SunRun, a San Francisco start-up that leases rooftop solar arrays to homeowners, said Tuesday it had raised $55 million from investors.
The equity investment led by Sequoia Capital, a prominent Silicon Valley venture firm, is one of the largest made in a solar leasing firm and a sign that companies are poised for a major expansion beyond the industry’s core market in California.
The investment follows a $100 million tax equity fund PG&E Corporation, the utility holding company, created last week to finance residential solar installations for SunRun customers. PG&E Corporation in January formed a $60 million financing pool for SolarCity, a Silicon Valley competitor to SunRun. SolarCity is also tapping $190 million in tax equity funds created over the past year for the company by U.S. Bancorp.
“If the $55 million is going to actual corporate expansion, it is one of the largest corporate fund-raisings we’ve seen for that purpose in this space,” said Nathaniel Bullard, a solar analyst with Bloomberg New Energy Finance. “It speaks to the opportunity outside of California, in the Southwest and the Northeast.”
“We’re seeing early signs of an inflection point in the market where the cost of offering a solar solution is becoming cheaper than utility pricing,” said Warren Hogarth, a partner at Sequoia Capital, an early investor in Apple, Google and Yahoo. “We’re moving from people buying solar because it’s a nice thing to do to buying solar because it makes economic sense.”
Over the past year, photovoltaic module prices have fallen about 40 percent due to oversupply and increasing competition with Chinese companies.
Edward Fenster, SunRun’s chief executive, said the company would tap the new investment to expand into three additional states this year. SunRun currently operates in Arizona, California, Colorado, Massachusetts and New Jersey.
“We’ll use the capital for some operational elements, improving software and services as well as strengthen our balance sheet as we buy a greater number of assets over time,” Mr. Fenster said.
Start-ups like SunRun and SolarCity are essentially finance companies, funding the installation of rooftop photovoltaic systems for homeowners in exchange for a monthly payment that fixes the cost of their electricity bills for the life of the lease. Procurement and installation of the solar array is usually outsourced to third parties.
In May, SolarCity acquired an energy-efficiency retrofitting firm to expand the services it offers homeowners. Mr. Bullard said that as solar leasing continues to become more popular, start-ups like SunRun themselves could prove attractive acquisition targets for larger firms.
“You could see an energy services company would want to acquire a third-party leasing enterprise because it would be way to crack a growing market in which they’re not active,” he said.