US residential solar start-up raises $12 million
SAN FRANCISCO, June 24
SAN FRANCISCO, June 24 (Reuters) - SunRun Inc, a start-up that sells cheap solar power to homeowners, has raised $12 million from venture capitalists, the company and lead investor Foundation Capital said on Tuesday.
The year-and-a-half old start-up, based in San Francisco, is one of several solar power companies that see a business in pushing alternatives to traditional electricity as consumers increasingly seek out more environment-friendly options.
Yet many people have shied away from using solar power because it is too expensive. The average cost of buying and installing a residential solar power system is $30,000, said Nat Kreamer, SunRun's co-founder and chief operating officer.
One of the reasons for that is that most people have to buy the photovoltaic panels that capture sunlight, he said.
SunRun, on the other hand, owns the panels that it installs. Customers pay upfront to guarantee electricity supply, locking in a per-unit rate for the power they consume for a specified time period -- usually about 20 years.
The upfront payment is about one-third the amount people would have to pay to install solar panels, Kreamer said.
The few hundred California homes that buy solar power from SunRun pay between 13.50 cents and 16 cents per unit, Kreamer said, while the average cost per unit of traditional electricity is 24 cents, he added.
"People are used to paying on a per kilowatt-hour basis," Kreamer said. "I don't want to own the road in front of my home, and I don't want to own the hardware that supports my electrical infrastructure."
SunRun's "full-service business model brings a cost-effective product to an underserved market," said Parker Weil, who heads Merrill Lynch's clean energy investment banking practice.
Forty-five percent of respondents who earn less than $100,000 a year would buy solar power this way in the next 12 months if it were available where they lived, according to a study of 1,100 California homeowners by Wilson Research Group.
Overall, the market for photovoltaic panels -- the primary way of harvesting solar power -- is expected to grow to about $69 billion by 2016, nearly three times the $15 billion market opportunity it was in 2006, according to a report by Clean Edge.
SunRun is not the only company aware of the potential demand. Akeena Solar Inc AKNS.O sells commercial and residential solar power systems, as do privately held SolarCity and Helio Micro Utility Inc, among others.
Helio earlier this month began selling solar power to some locations in California at rates lower than what people pay for traditional utilities, the company said recently.
SunRun plans to use the $12 million to "get the message out on solar," Kreamer said. The company also plans to expand its service outside California, he added.
SunRun's "solar as a service" model will appeal to a wider swathe of the residential market, especially given skyrocketing natural gas prices, said Steve Vassallo, a principal at Foundation Capital.
"We're always looking for exciting opportunities to make these clean technologies accessible and deployable to real people and not just rich people," Vassallo said.
Silicon Valley-based Foundation, which has about $2.5 billion under management, is a technology and clean-technology focused venture capital firm.
Known for backing EnerNOC Inc (ENOC.O), one of the few publicly listed U.S. energy efficiency companies, Foundation raised a $750 million fund in April, and said it would invest roughly one-third of that amount into clean technology start-ups.
(Editing by Erica Billingham)