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9 GW of virtual power plant potential in California, Sunrun CEO says

Battery-backed distributed solar arrays that store energy for later use and provide additional power grid services are a massive, untapped opportunity for "virtual power plants" that could total 9,000 MW in California alone, said Lynn Jurich, CEO of home solar specialist Sunrun Inc.

"This is the equivalent of 50 fossil fuel power plants or four times the size of the Diablo Canyon nuclear plant slated to retire in 2025," Jurich said on an Aug. 7 earnings call with investment analysts.

In July, East Bay Community Energy awarded the San Francisco-based company a contract as part of a portfolio of resources to replace a jet fuel-fired peaking power plant in Oakland, Calif. Under the 10-year agreement, Sunrun will provide 500 kW of capacity, harnessed from several megawatts of solar and more than 2 MWh of battery storage, to be installed on roughly 500 low-income housing units.

Also in July, the city council of Glendale, Calif., a suburb of Los Angeles, authorized municipal utility Glendale Water & Power to continue negotiations with Sunrun under a similar portfolio model for fossil-fuel replacement.

SNL Image

Solar homes, like these in Hawaii, can be coupled with batteries
and aggregated into a virtual power plant.
Source: S&P Global Market Intelligence

Sunrun is far from the only company betting on virtual power plants. Advanced Microgrid Solutions is supplying one in Southern California, consisting of an aggregated network of commercial buildings with behind-the-meter batteries. Others are under contract in Northern California and Southern California.

"We are really encouraged by the movement in on-grid services with utilities ... but it's going to take a little while to build," Jurich said.

Despite the recent progress in Sunrun's home state, the Northeast "is crushing California on this," she added.

In February, Sunrun secured a bid to supply 20 MW of capacity to the ISO New England from around 5,000 residential solar-plus-storage customers starting in 2022. Utilities in Vermont, Long Island and Massachusetts also are collaborating with grid operators to offer programs "that enable batteries to participate in capacity markets and other grid services revenue streams," Jurich said.

'Short-term headwinds'

The CEO said Sunrun continues to invest in its residential battery platform, known as Brightbox, "even though it is causing short-term headwinds from slower install times, an immature supply chain, and permitting and interconnection obstructions." Prioritizing solar with batteries, however, is "the right long-term decision," Jurich added.

After recently expanding into Texas, the company, which has installed more than 6,000 battery systems for its approximately 255,000 customers, now offers Brightbox in nine states and Puerto Rico. Excluding sales by Sunrun's external partners, more than 10% of the company's new customers overall — and 25% in California — purchase batteries, the CEO said.

For the second quarter of 2019, Sunrun posted an adjusted net loss of 1 cent per share, compared to earnings per share of 6 cents a year ago, missing the S&P Global Market Intelligence consensus normalized EPS estimate of 7 cents.

Sunrun's surprise loss pushed its Nasdaq-listed share 6.2% lower in Aug. 8 trading, closing at $18.74 per share. The stock's value has gained more than 80% in 2019.

Sunrun boosted its revenues 20% to $204.6 million from a year ago on 103 MW of installations, beating S&P Global Market Intelligence's consensus estimate. After installing an estimated 107 MW to 110 MW in the third quarter, Sunrun expects deployments to grow 16% to 18% for the full year.