This article is edited from New Times Securities "American Stock Tenbagger Series II: thoughts on the Business Model of distributed Photovoltaic operators Sunrun and Vivint Solar-- and VPP of Virtual Power Plant"

The concept of "photovoltaic" in US stocks soared.

Shares of US household photovoltaic operators Sunrun and VivintSolar continue to soar to record highs, both of which have more than quadrupled since the start of the year. Industry ETF$Solar ETF-Guggenheim (TAN.US) $Has doubled this year.

On July 6, 2020, Sunrun announced that it would buy a controlling stake in its biggest rival VivintSolar for $3.2 billion in all-stock.If the acquisition is finally settled, Sunrun will integrate VivintSolar channel sales resources, which is expected to save $90 million in operating expenses and annual sales will exceed $1.2 billion.After the merger of the two, the market share will reach 23%, making it the largest household photovoltaic installer in the United States.

The top three American residential photovoltaic installers in 2019 are Sunrun, VivintSolar and Tesla, Inc. / SolarCity.Sunrun installed 78MW in 2020Q2, year-on-year-24%, cumulative installation of nearly 2.2 GWX Vivint in 2020Q1, + 21.7% year-on-year; Tesla, Inc. / SolarCity2020Q1 installation is 35MW, year-on-year-26%.

Household photovoltaic space in the United States reaches trillions

In the United States, photovoltaic is growing steadily, and the growth trend of household photovoltaic is obvious.According to SEIA data, the new installed 13.3GW of photovoltaic in the United States in 2019 was + 25.5% compared with the same period last year, of which the newly installed 2.8GW for household photovoltaic was + 16.7% compared with the same period last year. Household photovoltaic is an important component of photovoltaic installation in the United States, accounting for 21.05% of the new installed capacity in the whole year. The economy and support policy brought about by the decline in the cost of photovoltaic system is an important factor in the development of household photovoltaic in the United States.

The household photovoltaic market in the United States has reached hundreds of billions of levels, and the blue ocean market with broad incremental space.It is estimated that at the end of 2018, the stock of 138 million residential units in the US market, according to the proportion of single-family accounted for 65%, with a value of US $28400 per unit (10KW), the US household photovoltaic market space is as high as US $2.55 trillion. According to the calculation of 10% permeability, corresponding to the photovoltaic market of 254.7 billion US dollars, there will be broad room for increment in the future as the permeability increases further.

Reasons for the vigorous development of household photovoltaic installation in the United States

① increases awareness of clean energy in the United States, and the cost of photovoltaic power is lower than that of natural gas and thermal power.

According to BNEF, photovoltaic plants with tracking systems in the United States cost less than natural gas to generate electricity, making it the cheapest energy on the market along with onshore wind power. According to data released by the US Energy Information Administration, the proportion of photovoltaic installations in the US power generation installation market in 2019 was as high as 40 per cent, followed by 31 per cent of natural gas installations. It is expected that by 2050, with the increasing awareness of environmental protection and the expansion of the advantage of photovoltaic power cost, the installed proportion of photovoltaic will increase steadily.

② American civil electricity price is high, providing natural soil for the rapid development of local household photovoltaic.

Industrial power consumption has a large-scale effect, and the price is only half of the civil electricity price. According to the data of the US Energy Information Administration, the average household electricity price in the United States in April 2020 was 13.28 cents per kilowatt-hour. Due to the economies of scale and lower cost of industrial electricity, the price of industrial electricity in the United States is about half of that of civilian electricity. Only 6.41 cents per kilowatt-hour. Therefore, from the point of view of cost-side consideration of energy substitution, the high civil electricity price provides natural soil for the rapid development of household photovoltaic in the United States.

③ policy support

ITC is a major driving force for the development of the solar energy industry in the United States. Photovoltaic ITC refers to the tax credit of the federal government for investment in residential and commercial solar projects in the United States. During the 10 years from 2006 to 2016 when the ITC policy existed, the installed capacity of solar photovoltaic in the United States increased from 15MW to 16.5GW, achieving a thousand-fold exponential growth.

Sunrun American household photovoltaic installer leader

Founded in 2007, Sunrun is the largest developer of photovoltaic, battery storage and energy services in the United States, dedicated to providing customers with cheap and reliable photovoltaic energy, energy storage and other integrated clean energy services.

As of 2020Q2, the cumulative installation of Sunrun reaches 2.2GW.The installation of 2020Q2 was 78MW, down 24% from the same period last year, of which the installation for rental was about 66.7MW, accounting for 85.5%.The rest of the 11.3MW is sold directly to customers. As of 2020Q2, the cumulative installation of Sunrun is close to 2.2GW.

In 2013-2019, revenue CAGR reached 58.2%, with the leasing business model accounting for 85.5%. There are two main Sunrun business models:One is to install the photovoltaic system on the customer's roof and sell it directly to the owner, either directly or through a photovoltaic partner; the other is to sell the energy generated by the system to the owner under a lease or electricity purchase agreement ("PPA") without paying the upfront cost or very low upfront cost.

Although the share price of Sunrun continues to soar, photovoltaic operators belong to the heavy asset industry, the gross margin is not very high, and the financing pressure is huge.

It is worth mentioning that, unlikeSunrun'sLease is the main mode, while Tesla, Inc. 's SolarCity adopts the direct operation mode.

Tesla, Inc. bought SolarCity, a US household photovoltaic operator, for $2.6 billion in August 2016. For users, the scheme of using SolarCity is 25% cheaper than the ordinary power grid, and because this model is also environmentally friendly, it is favored by low-carbon life enthusiasts.

In May 2019, Tesla, Inc. released Powerwall, which can store the electricity of solar power generation devices to achieve the purpose of power supply for a long time. It can be installed on the wall anywhere in the home and can store up to 10 kilowatts of electricity, allowing the average family to work for 10 hours, while the Powerwall can also recharge Tesla, Inc. 's car.

The data show that more and more customers are choosing to buy their own solar systems instead of renting them, benefiting SolarCity.