What changed in this filing

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Item 1. Business

2023-02-22 compared with 2022-02-17 · 56 added, 40 removed, 159 unchanged (38% of the section changed)

Sunrun’s (the “Company”) mission is to provide our customers with clean, affordable solar energy and storage, and a best-in-class customer experience.

Sunrun’s (the “Company,” “our,” “we”) mission is to provide our customers with clean, affordable solar energy and storage, and a best-in-class customer experience.

In 2007, we pioneered the residential solar service model, creating a low-cost solution for customers seeking to lower their energy bills.

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to create a planet run by the sun.

On October 8, 2020, we completed the acquisition of Vivint Solar, Inc.

("Vivint Solar") a leading full-service residential solar provider in the United States, at an estimated purchase price of $5.0 billion, pursuant to an Agreement and Plan of Merger, dated as of July 6, 2020, by and among Sunrun, Vivint Solar and Viking Merger Sub, Inc., a Delaware corporation and direct wholly owned subsidiary of the Company (“Merger Sub”).

Further information about the acquisition of Vivint Solar can be found in Note 3, Acquisitions to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

We are engaged in the design, development, installation, sale, ownership and maintenance of residential solar energy systems (“Projects”) in the United States.

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As of December 31, 2022, we operated the largest fleet of residential solar energy systems in the United States.

We have a Networked Solar Energy Capacity of 4,677 Megawatts as of December 31, 2021, which represents the aggregate megawatt production capacity of our solar energy systems that have been recognized as deployments, from the company’s inception through the measurement date.

We have a Networked Solar Energy Capacity of 5,667 megawatts as of December 31, 2022, which represents the aggregate megawatt production capacity of our solar energy systems that have been recognized as deployments, from our inception through the measurement date.

Our Gross Earning Assets as of December 31, 2022 were approximately $12.4 billion.

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After the initial term of the Customer Agreement, customers have the option to renew their contracts for the remaining life of the solar energy system, typically at a 10% discount to then-prevailing power prices, to purchase the system from us at its fair market value, or have us remove the system.

Regardless of the type of Customer Agreement our customers choose, we operate the system and agree to monitor and maintain it in good condition at no cost to the customer.

Regardless of the type of Customer Agreement our customers choose, we operate the system and agree to monitor it at no cost to the customer.

System maintenance is included in our power purchase agreement (“PPA”) or lease.

We offer an industry-leading performance guarantee to ensure that our customers are receiving the energy they expect at the price they expect.

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As discussed in Item 1A.

Risk Factors " We have historically benefited from declining costs in our industry, and our business and financial results may be harmed not only as a result of any increases in costs associated with our solar service offerings but also any failure of these costs to continue to decline as we currently expect.

Risk Factors " We have historically benefited from declining costs in our industry, and our business and financial results may be harmed as a result of recent and any continued increases in costs associated with our solar service offerings and any failure of these costs to continue declining as we currently expect.

If we do not reduce our cost structure in the future, our ability to continue to be profitable may be impaired.

” Section 201 tariffs on solar modules were imposed beginning in 2018 and were extended through 2026.

While these tariffs have not had a material negative impact on our business, we believe the tariffs were a contributing factor to smaller decreases to equipment costs than we would have otherwise experienced in 2021.

In addition, federal agencies and Congress are increasing enforcement against the importation of products suspected of being manufactured with forced labor.

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We believe that our primary competitors are the traditional utilities that supply electricity to our potential customers.

We compete with these traditional utilities primarily based on price (cents per kilowatt hour), predictability of future prices (by providing pre-determined annual price escalations), the backup power capabilities of our Brightbox TM battery storage solution and the ease by which customers can switch to electricity generated by our solar energy systems.

We also compete with companies that are not regulated like traditional utilities but that have access to the traditional utility electricity transmission and distribution infrastructure pursuant to state and local pro-competitive and consumer choice policies and with solar companies with business models that are similar to ours.

We compete with these traditional utilities primarily based on price (cents per kilowatt hour), predictability of future prices (by providing pre-determined annual price escalations), the backup power capabilities of our battery storage solution and the ease by which customers can switch to electricity generated by our solar energy systems.

We also compete with companies that are not regulated like traditional utilities but that have access to the traditional utility electricity transmission and distribution infrastructure pursuant to state and local pro-competitive and consumer choice policies, solar companies with business models that are similar to ours, and other renewable energy companies.

Some customers might choose to subscribe to a community solar project or renewable subscriber program with these companies or their utilities, instead of installing a solar energy system on their home, which could affect our sales.

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Intellectual Property

As of December 31, 2021, we had 36 issued patents and 12 filed patent applications in the United States and foreign jurisdictions relating to a variety of aspects of our solar solutions.

As of December 31, 2022, we had 53 issued patents and 16 filed patent applications in the United States relating to a variety of aspects of our solar solutions.

Our issued U.S.

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” These incidents have not had a material impact on our business or our relations with our employees .

In Puerto Rico, we are subject to regulation as an electric power company by the Puerto Rico Energy Bureau and are required to comply with certain filing, certification, reporting and annual fee requirements.

Regulation by the Puerto Rico Energy Bureau as an electric power company does not currently subject us to centralized utility-like regulation and currently we do not need the Puerto Rico Energy Bureau's approval of charges to customers.

Government Incentives

Federal, state and local government bodies provide incentives to owners, distributors, system integrators and manufacturers of solar energy systems to promote solar energy in the form of rebates, tax credits, payments for renewable energy credits associated with renewable energy generation and exclusion of solar energy systems from property tax assessments.

These incentives enable us to lower the price we charge customers for energy from, and to lease, our solar energy systems, helping to catalyze customer acceptance of solar energy as an alternative to utility-provided power.

These incentives enable us to lower the price we charge customers for energy from, and to lease, our solar energy systems, helping to catalyze customer adoption of solar energy as an alternative to utility-provided power.

In addition, for some investors, the acceleration of depreciation creates a valuable tax benefit that reduces the overall cost of the solar energy system and increases the return on investment.

The federal government currently offers an investment tax credit (“Commercial ITC”) under Section 48(a) of the Internal Revenue Code of 1986, as amended (the “Code”), for the installation of certain solar power facilities owned for business purposes.

If construction on the facility began before January 1, 2020, the amount of the Commercial ITC available is 30%, if construction began during 2020, 2021, or 2022 the amount of the Commercial ITC available is 26%, and if construction begins during 2023 the amount of the Commercial ITC available is 22%.

The Commercial ITC steps down to 10% if construction of the facility begins after December 31, 2023 or if the facility is not placed in service before January 1, 2026.

The depreciable basis of a solar facility is also reduced by 50% of the amount of any Commercial ITC claimed.

The Internal Revenue Service (the “IRS”) provided taxpayers guidance in Notice 2018-59 for determining when construction has begun on a solar facility.

This guidance is relevant for any facilities which we seek to deploy in future years but take advantage of a higher tax credit rate available for an earlier year.

For example, we have sought to avail ourselves of the methods set forth in the guidance to retain the 30% Commercial ITC that was available prior to January 1, 2020 by incurring certain costs and taking title to equipment in 2019 or early 2020 and/or by performing physical work on components that will be installed in solar facilities.

From and after 2023, we may seek to avail ourselves of the 26% credit rate by using these methods to establish the beginning of construction in 2020, 2021, or 2022 and we may plan to similarly further utilize the program in future years if the Commercial ITC step down continues.

Congress may extend or otherwise alter the Commercial ITC, as well as the depreciation benefits for solar, via legislation in 2022.

More than half of the states, and many local jurisdictions, have established property tax incentives for renewable energy systems that include exemptions, exclusions, abatements and credits.

Many states also have adopted procurement requirements for renewable energy, and in 2018 the California Energy Commission and California Building Standards Commission approved a standard for newly constructed single-family and multifamily residences up to three stories tall to be solar-powered beginning in 2020.

The federal government also currently offers an investment tax credit (“Commercial ITC”) under Section 48(a) of the Internal Revenue Code of 1986, as amended (the “Code”), for the installation of certain energy properties, including solar power facilities owned for business purposes.

The Inflation Reduction Act of 2022 (the “IRA”) was signed into law by President Biden on August 16, 2022, and some of its notable provisions include:

• the eligibility of solar facilities placed in service in 2022 (regardless of when construction began) and prior to January 1, 2025 for a 30% investment tax credit (“Commercial ITC”) under Section 48(a) of the Internal Revenue Code of 1986 (the “Code”) (assuming apprenticeship and prevailing wage requirements are met;

these requirements are deemed met for projects less than 1 MW), with standalone storage beginning in 2023;

• in the absence of meeting apprenticeship and prevailing wage requirements, the “base” amount of the Commercial ITC is 6% for facilities beginning construction prior to January 1, 2025 and 2% thereafter (however, as indicated above, the majority of our business qualifies for 30% base credits upon which “adders” could increase this amount up to 70% under certain circumstances);

• the eligibility of solar and storage facilities placed in service after 2024 and through at least 2032 for a 30% technology-neutral ITC under Section 48E of the Code (the “48E Credit”);

• several new ITC adders under both the Commercial ITC and the 48E Credit, which apply to certain facilities placed in service beginning in 2023, including those meeting certain domestic content requirements, those located in “Energy Communities,” and those located in or that benefit low-income communities and tribal communities.

The federal government also offers a personal income tax credit under Section 25D of the Code (“Residential Clean Energy Credit”), for the installation of certain solar power facilities owned by residential taxpayers, which is applicable to customers who purchase a solar energy system outright as opposed to entering into a Customer Agreement.

The Residential Clean Energy Credit was 26% if the facility was placed in service during 2020 or 2021;

30% for facilities placed in service from January 1, 2022 through December 31, 2032;

26% for facilities placed in service during 2033;

and 22% for facilities placed in service during 2034.

The Residential Clean Energy Credit is not available for property placed in service after December 31, 2034.

We and our tax equity partners have claimed and expect to continue to claim investment tax credits (“ITCs”) with respect to qualifying solar energy projects.

In structuring tax equity partnerships and determining ITC eligibility, we have relied upon applicable tax law and published IRS guidance.

On February 13, 2023, the U.S.

Treasury issued initial guidance on an ITC “adder” for low-income communities and is expected to issue additional guidance on this and other ITC adders, as well as other newly enacted IRA provisions.

More than half of the states in the U.S., and many local jurisdictions, have established property tax incentives for renewable energy systems that include exemptions, exclusions, abatements and credits.

Many states also have adopted procurement requirements for renewable energy.

Approximately thirty states and the District of Columbia have adopted a renewable portfolio standard (and approximately eight other states have some voluntary goal) that requires regulated utilities to procure a specified percentage of total electricity delivered in the state from eligible renewable energy sources, such as solar energy systems, by a specified date.

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Solar energy system owners such as our investment funds often are able to sell SRECs to utilities directly or in SREC markets.

While there are numerous federal, state and local government incentives that benefit our business, some adverse interpretations or determinations of new and existing laws can have a negative impact on our business.

While there are numerous federal, state and local government incentives that benefit our business, some adverse actions, interpretations or determinations of new or existing laws or regulations could have a negative impact on our business.

For example, in the future, Congress could revise or eliminate certain provisions in the Inflation Reduction Act that could negatively impact our business, such as reducing the percentage or duration of the ITC.

Federal agencies may also issue tax guidance or regulations that could negatively impact our business, by, for example, narrowing the applicability of ITC adders or preventing certain businesses from participating.

Human Capital Management

At Sunrun, we are obsessed with our customers and our mission to work together to electrify homes, powered by a planet run by the sun.

That is only made possible by focusing on and investing in our people.

At Sunrun, we love people and believe that focusing on and investing in our people is critical to our mission to work together to electrify homes and give all people the joy of clean, abundant energy from the sun.

At Sunrun, the foundation of all our talent programs and initiatives is fostering a culture of inclusive, connected and innovative teams.

In 2021, we focused on talent attraction and acquisition, talent upskilling and bringing out the best in our employees to prepare us for accelerated growth and to meet our customer needs.

We expanded our conscious leadership training strategy to encompass all management levels and launched an Everyday Leadership framework for all employees.

We also introduced PowerU, an internal learning marketplace offering employees the ability to improve their skills and advance their careers by pursuing degrees and certifications fully funded by Sunrun.

In 2022, we focused on aligning our human capital strategy to support a high performance, customer-focused culture where our employees can thrive and meet our customer needs.

We created a sourcing and communities team to focus on attracting candidates from underrepresented populations and enhance our community partnerships, implemented a new learning management system, and continued to provide learning and development opportunities aimed at promoting engagement and retention.

Inclusion and Diversity .

We believe we will accomplish our goals by having a diverse team that reflects the diversity of our customers and who can connect with the unique experiences and backgrounds of our customers.

Our six Employee Resource Groups (ERGs) have grown to a membership of over 1,200 employees as of December 31, 2021.

These ERGs promote connection and communication among our employees, assist in the development and facilitation of programming that supports personal and professional development while also supporting the company’s objectives.

To help us continue to progress toward our goals, in 2022 we implemented requirements that a diverse slate of qualified candidates must be presented to hiring managers for all new management-level roles and above.

Additionally, we require that our interview panels of all new management-level roles and above include a diverse panel of interviewers.

We established Employee Resource Groups (“ERGs”) to promote connection and communication among our employees, foster inclusivity, assist in the development and facilitation of programming that supports personal and professional development while also supporting our objectives.

In 2022 we launched the Disability + ERG focused on supporting the needs and recognizing the contributions of our employees with both seen and unseen disabilities.

Our seven ERGs have grown to a membership of over 1,605 employees as of December 31, 2022.

Annually, as part of our larger impact report on environment, sustainability and governance, we share details on our strategies, focus areas, outcomes achieved and workforce demographics.

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We have not experienced any work stoppages.

Supporting Our Employees through COVID-19 .

We stay committed to keeping our customers and employees safe and healthy.

In response to COVID-19, our cross functional task force continues to monitor safety standards and implement additional policies and protocols for employees.

Corporate Information

Health and Safety.

At Sunrun, we start with safety.

We prioritize the safety, health, and welfare of our team members as part of our people-centric culture.

Our safety strategy consists of four pillars:

visible leadership, technical qualification and knowledge, operational discipline, and formal safety communications.

To reinforce our safety culture of excellence, we have implemented many initiatives, including an expanded fall protection policy;

the implementation of a zero-tolerance policy for violations;

a required recurring competent persons and human factors training;

onsite safety visits from the executive leadership team with each front-line manager;

the adoption of a formal rewards and recognition program;

and the incorporation of proactive safety targets within bonus structures.

Available Information

Our principal executive offices are located at 225 Bush Street, Suite 1400, San Francisco, California 94104, and our telephone number is (415) 580-6900.

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Information contained on, or that can be accessed through, our website does not constitute part of this Annual Report on Form 10-K and inclusions of our website address in this Annual Report on Form 10-K are inactive textual references only.

We were formed in 2007 as a California limited liability company, and converted in 2008 into a Delaware corporation.

The Sunrun design logo, “Sunrun”, "Brightbox" and our other registered or common law trademarks, service marks or trade names appearing in this Annual Report on Form 10-K are the property of Sunrun Inc.

Other trademarks and trade names referred to in this Annual Report on Form 10-K are the property of their respective owners.

Available Information

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act.

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Important information, including press releases, analyst presentations and financial information regarding us, as well as corporate governance information, is routinely posted and accessible on the investor relations page on our website.

Information on or that can be accessed through our website is not part of this Annual Report on Form 10-K, and the inclusion of our website address is an inactive textual reference only.

Information on or that can be accessed through our website is not part of this Annual Report on Form 10-K, any other report or document we file with the SEC, and the inclusion of our website address is an inactive textual reference only.

The Sunrun design logo, “Sunrun” and our other registered or common law trademarks, service marks or trade names appearing in this Annual Report on Form 10-K are the property of Sunrun Inc.

Other trademarks and trade names referred to in this Annual Report on Form 10-K are the property of their respective owners.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business