Blockbuster Sunrun/Vivint Merger Challenges Tesla Solar Ambitions

The rooftop solar industry in America was shocked last week to learn that Sunrun was buying Vivint Solar for $1.46 billion in stock. In addition, Sunrun is agreeing to assume about $1.8 billion in debt owed by Vivint. “Sunrun will be freaking big,” Joe Osha, an analyst at JMP Securities, told Bloomberg News. “They are clearly looking for ways to get scale and efficiency.”

Tech Crunch reports that the combined company will have a value of more than $9 billion and expects to trim costs by $90 million per year thanks to operational efficiencies. With 500,000 customers and more than 3 gigawatts of solar assets, it will also gain more leverage with utility companies when it come to getting approval to connect more customers to the grid.

As impressive as 3 gigawatts sounds, it represents only 3% of the potential market for rooftop solar in America, so there is huge potential for growth. Together, the two companies account for 75% of all new residential solar leases each quarter, with Tesla in a distant third place.

“Americans want clean and resilient energy. Vivint Solar adds an important and high quality sales channel that enables our combined company to reach more households and raise awareness about the benefits of home solar and batteries,” Sunrun CEO and cofounder Lynn Jurich said in a statement. “This transaction will increase our scale and grow our energy services network to help replace centralized, polluting power plants and accelerate the transition to a 100% clean energy future.”

David Bywater, CEO of Vivint Solar, said in a statement, “Vivint Solar and Sunrun have long shared a common goal of bringing clean, affordable, resilient energy to homeowners. Joining forces with Sunrun will allow us to reach a broader set of customers and accelerate the pace of clean energy adoption and grid modernization. We believe this transaction will create value for our customers, our shareholders, and our partners.”

But all is not lost for Tesla, which is promising to get its rooftop solar act together after being largely adrift for the past two years while Elon Musk was off finding other dragons to slay. Many rooftop solar customers also want behind-the-meter storage. Sunrun and Vivint have been offering their customers Tesla Powerwall residential batteries as well as Brightbox home batteries, supplied in partnership with LG Chem.

Murmurings

The announcement came as a surprise to most people in the industry. “We had known about some murmuring of Vivint being sold, being shopped around, but I don’t think any of us really anticipated that the buyer would be another residential solar company and largest residential solar company,” Bryan White, an analyst for Wood Mackenzie, told Inside Climate News. “It has been a surprising turn of events.” Asked how the deal will affect Tesla, he said, “I don’t think Tesla cares much about what its competitors are doing. I don’t think they need to.”

Sunrun and Vivint are competitors in more than 22 US states with strong rooftop solar markets, plus Washington, DC, and Puerto Rico. The only difference is that Sunrun services Wisconsin and Vivint services Virginia. Lynn Jurich, Sunrun’s co-founder and CEO, said in a letter to customers that the acquisition of Vivint is a “transformational opportunity to bring cleaner, affordable energy to more homes and accelerate our mission to create a planet run by the sun.”

Vivint was founded in 2011 with headquarters near Salt Lake City. It became an early leader in residential rooftop solar through the use of door-to-door sales and an emphasis on leasing its products. Leasing lowers upfront costs, which expands the pool of customers who can afford solar. Sunrun, founded in 2007, is based in San Francisco. It also has relied on leasing, but it has not used door-to-door sales as much as Vivint has.

Door-to-door sales are expensive, which is why Tesla worked hard to eliminate them, preferring to market its rooftop solar products online. Elon Musk is a big fan of “one click” shopping in which the customer completes an entire transaction online and Tesla takes care of everything after that — permitting, financing, installation, and system maintenance.

The great unknown in all of this is what Tesla has in mind for its Solarglass roof product, which eliminates rooftop solar panels and racking systems in favor of glass roof tiles that look like ordinary roof shingles but have solar cells embedded in them. With Solarglass, the roof and the solar system are combined into one. Elon Musk insists that although a Solarglass roof costs more to begin with, once the energy savings are figured in, it pencils out to be less expensive than a conventional roof in the long run.

CleanTechnica’s Kyle Field has one on his new home in Southern California. If you are interested in the Solarglass roof, you might want to read his report about his experience. So far, neither Sunrun nor Vivint has an equivalent product, but if Tesla’s solar roof takes off, the new company will need to come up with an answer to the Tesla challenge.