Electric utilities should replace fear with cooperation, CEO of Sunrun says

Transitioning to a more cost-effective, more resilient and cleaner U.S. electricity system requires regulated utilities to become more supportive of residential solar power, Sunrun CEO Lynn Jurich said Tuesday as the keynote speaker of Stanford Energy Week.

“The DNA – the core concept – of the utility is fear-based, it’s entrenched, it’s lobbyist,” said Stanford alumna Jurich (BS '02, MBA '07).

“The energy system that we operate in the U.S. is so inefficient, underutilized, and hasn’t really innovated for 100 years,” said the head of the largest U.S. residential solar energy provider.

Some would argue that electric utilities are right to fear residential solar providers, who have grown in large part due to government subsidies. In some states, solar customers can use utilities as a free battery and do not pay them for standing by in case their rooftop systems fail.

In traditional electricity service, utilities generate power from a centralized facility and transmit it to consumers. Transporting energy over long distances—from fuel source to power plant, and then from power plant to homes and businesses—can be very inefficient, Jurich said.

Regulated utility companies tend to resist advances in the residential solar electricity market, said Jurich, highlighting examples from Hawaii and Arizona. In the regulated utility business model, profits are based on capital investments, so they have an incentive to build more power plants and transmission lines, then pass the costs on to consumers.

“What’s disruptive about solar is that it’s micro. It can be installed locally and consumed locally,” she said.

The benefits of solar

Solar power reduces demands on utilities in the afternoons, traditionally a peak demand time when utilities call upon expensive supplies. This, said Jurich, also shrinks the need for transmission, which further reduces cost for consumers.

Solar providers’ business model is at odds with that of utilities. Sunrun purchases solar panels from a handful of manufacturers, hires local installers and offers homeowners several financing options. Sunrun offers leases—contracts with fixed monthly payments—and “power purchase agreements,” in which the customer pays per kilowatt-hour of electricity generated. In either case, the customer can pay little or nothing upfront, while Sunrun owns and maintains the solar installations. Alternatively, one can pay the entire lease upfront or purchase the equipment outright. In all cases, Sunrun assures homeowners that they will lower their electricity costs.

Solar power has societal benefits as well, said Jurich. Solar panels do not emit greenhouse gases, though GHG is emitted during manufacture. Also, California’s recent wildfires show how energized power lines can pose a threat to human safety, she said. So, by decreasing the amount of energy running through the lines, solar electricity also helps contribute to public welfare.

The key to relieving the tension between utilities and solar providers, in Jurich’s eyes, is cooperation. She cited California’s recent mandates on utilities to focus more on distributed technologies like solar as an example of how collaboration is beginning to take place.

But much of today’s tensions could become long-term problems if collaboration is not continued, in part because of the competing infrastructures. Jurich said that as a society we must resolve the many challenges traditional utilities face and foster more innovation.

“We can actually cooperate and build a much more nimble, much more cost-effective, and much more carbon-neutral system,” Jurich said.

Jurich co-founded Sunrun in 2007 with classmate Ed Fenster (MBA '07)and Nat Kreamer. The company went public in 2015 and based on its stock price is worth $1.37 billion.