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Additionally, there have been significant changes in the residential solar policy and pricing framework in California, which is one of our key markets and represents over 45% of our customer base.
−Removed: Newly adopted changes to California’s net metering policy in December 2022 present a significant change to the financial benefits California customers could receive from our solar systems and may negatively impact the financial attractiveness of our offerings in this market.
−Removed: Further if support diminishes materially for solar policy related to rebates, tax credits and other incentives, our ability to obtain external financing on acceptable terms, or at all, could be materially adversely affected.
+Added: Changes to California’s net metering policy adopted in December 2022 present a significant change to the financial benefits California customers receive from our solar systems and may limit the financial attractiveness of our offerings in this market, particularly for solar-only systems.
+Added: Originations in California are below levels prior to the Net Billing Tariff (“NBT”) transition, and without further increases in originations, our new installations in California may continue to decline compared to prior periods, which could have a material adverse effect on our business operations and financial performance.
+Added: Further, if support diminishes materially for solar policy related to rebates, tax credits, bill crediting, or other incentives, our ability to obtain external financing on acceptable terms, or at all, could be materially adversely affected.
These types of funding limitations could lead to inadequate financing support for the anticipated growth in our business.
Furthermore, growth in residential solar energy depends in part on macroeconomic conditions, retail prices of electricity and customer preferences, each of which can change quickly.
−Removed: Declining macroeconomic conditions, including in the job markets and residential real estate markets, could contribute to instability and uncertainty among customers and impact their financial wherewithal, credit scores or interest in entering into long-term contracts, even if such contracts would generate immediate and long-term savings.
+Added: Declining macroeconomic conditions, including in job markets and residential real estate markets, could contribute to instability and uncertainty among customers and impact their financial wherewithal, credit scores or interest in entering into long-term contracts, even if such contracts would generate immediate and long-term savings.
Furthermore, market prices of retail electricity generated by utilities or other energy sources could decline for a variety of reasons, as discussed further below.
−Removed: Any such declines in macroeconomic conditions, changes in retail prices of electricity or changes in customer preferences would adversely impact our business.
+Added: Any declines in macroeconomic conditions, changes in retail prices of electricity or changes in customer preferences would adversely impact our business.
Achieving net zero emissions by 2050 will require an unprecedented transformation of American energy systems and the adoption of a wide variety of clean energy, storage, and home electrification solutions.
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Our failure to adapt to changing market conditions, to compete successfully with existing or new competitors, and to adopt new or enhanced offerings could limit our growth and have a material adverse effect on our business and prospects.
−Removed: 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.
+Added: 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
+Added: 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.
Declining costs related to raw materials, manufacturing and the sale and installation of our solar service offerings have been a key driver in the pricing of our solar service offerings and, more broadly, customer adoption of solar energy.
−Removed: While historically the prices of solar panels and raw materials have declined, the cost of solar panels and raw materials have at times increased and may increase in the future, and such products’ availability could decrease, due to a variety of factors, including restrictions stemming from the COVID-19 pandemic, supply chain disruptions, inflation, tariffs and trade barriers, export regulations, geopolitical conflicts, regulatory or contractual limitations, industry market requirements, and changes in technology and industry standards.
−Removed: For example, we and our solar partners purchase a significant portion of the solar panels used in our solar service offerings from overseas manufacturers.
−Removed: In January 2018, in response to a petition filed under Section 201 of the Trade Act of 1974, the United States imposed four-year tariffs on imported solar modules and imported solar cells not assembled into other products (the “Section 201 Module Tariffs”) that apply to all imports above a 2.5 gigawatts (GW) annual threshold.
−Removed: The Section 201 Module Tariffs were 30% in 2018 and stepped down by 5% each year.
−Removed: While the tariffs were scheduled to expire in February 2022, U.S.
−Removed: International Trade Commission recommended that the Biden Administration extend the tariffs for another four years.
−Removed: On February 4, 2022, the Biden Administration announced a four-year extension of the Section 201 tariffs starting at 14.75%, with a modest reduction to the tariff rate each year.
+Added: While historically the prices of solar panels and raw materials have declined, the cost of solar panels and raw materials have at times increased and may increase in the future, and such products’ availability could decrease, due to a variety of factors, including supply chain disruptions, inflation, tariffs and trade barriers, export regulations, geopolitical conflicts, regulatory or contractual limitations, industry market requirements, and changes in technology and industry standards.
+Added: For example, on February 4, 2022, the Biden Administration announced a four-year extension of the 2018 tariffs imposed in response to a petition filed under Section 201 of the Trade Act of 1974 (the “Section 201 Tariffs”).
+Added: The Biden Administration set the Section 201 Tariffs at 14.75%, with a modest rate reduction each year.
The decision exempted bifacial modules from the tariffs as well as 5 GW of imported solar cells each year.
−Removed: The United States also has, from time to time, considered tariffs on goods imported from other countries.
−Removed: For example, in August 2021, an anonymous group of U.S.
+Added: Separately, in August 2021, an anonymous group of U.S.
solar manufacturers filed petitions with the U.S.
−Removed: Department of Commerce alleging that Chinese companies were evading antidumping and countervailing duty (AD/CVD) orders on crystalline silicon photovoltaic cells and modules, which are used in the production of solar panels.
+Added: Department of Commerce (the “DOC”) alleging that Chinese companies were evading antidumping and countervailing duty (AD/CVD) orders on crystalline silicon photovoltaic cells and modules, which are used in the production of solar panels.
The petitioners requested a federal investigation into Chinese firms allegedly circumventing tariffs by manufacturing in Malaysia, Vietnam and Thailand, and sought to apply the existing tariffs on China to companies in these three countries.
−Removed: Ultimately, the Department of Commerce objected to the anonymous nature of the petition, and it expired.
−Removed: Subsequently, on February 8, 2022, Auxin Solar, a U.S.-based solar panel manufacturer, submitted a petition to the U.S.
−Removed: Department of Commerce to request country-wide circumvention inquiries pursuant to Section 781(b) of the Tariff Act of 1930 concerning crystalline silicon photovoltaic cells and modules assembled in Malaysia, Thailand, Vietnam and Cambodia using Chinese inputs.
−Removed: On April 1, 2022, the Department initiated the inquiries, and, after conducting an investigation, issued a preliminary decision on December 2, 2022, recommending that the Biden Administration impose tariffs on certain solar panel imports from the Southeast Asian countries.
−Removed: Prior to the Department of Commerce issuing its preliminary decision, the Biden Administration issued an order in June 2022 that paused the collection of any new anti-dumping or countervailing duty of certain solar cells and modules exported from Cambodia, Malaysia, Thailand, and Vietnam for two years, until June 2024.
−Removed: The White House initiated this “bridge” action in advance of the Department of Commerce’s preliminary decision, in effect guaranteeing no new solar tariffs for 24 months.
−Removed: Nonetheless, the Department’s investigation had the effect of increasing module prices and affected supply.
−Removed: If imposed in June 2024, the related duties could further increase module prices and affect supply, which would negatively impact our supply chain and operations.
−Removed: In addition, the withhold release order issued by the U.S.
−Removed: Customs and Border Protection (CBP) on June 24, 2021 applicable to certain silica-based products manufactured in the Xinjiang Uyghur Autonomous Region of China, and any other allegations regarding forced labor in China and U.S.
−Removed: trade regulations to prohibit the importation of any goods derived from forced labor, could also disrupt our business operations and supply chain.
−Removed: In particular, the Uyghur Forced Labor Prevention Act that President Biden signed into law on December 23, 2021 could affect our supply chain and operations.
+Added: Ultimately, the DOC objected to the anonymous nature of the petition, and it expired.
+Added: Subsequently, on February 8, 2022, Auxin Solar, a U.S.-based solar panel manufacturer, submitted a petition to the DOC to request country-wide circumvention inquiries pursuant to Section 781(b) of the Tariff Act of 1930 concerning crystalline silicon photovoltaic cells and modules assembled in Malaysia, Thailand, Vietnam and Cambodia using Chinese inputs.
+Added: On April 1, 2022, the DOC initiated the inquiries, and, after conducting an investigation, issued a preliminary decision on December 2, 2022, recommending that the Biden Administration impose tariffs on certain solar panel imports from the Southeast Asian countries.
+Added: Prior to the DOC issuing its preliminary decision, the Biden Administration in June 2022 issued Presidential Proclamation 10414, which paused the collection of any new anti-dumping or countervailing duty of certain solar cells and modules imported from Cambodia, Malaysia, Thailand, and Vietnam for two years, until June 2024.
+Added: The White House initiated this “bridge” action in advance of the DOC’s preliminary decision, in effect deferring any new solar tariffs for 24 months.
+Added: Even though the White House effectively deferred any new tariffs from taking effect until June 2024, the DOC’s investigation and subsequent preliminary decision had the effect of increasing module prices and affecting module supply.
+Added: In August 2023, the DOC published a final determination in the affirmative, consistent with the preliminary determination.
+Added: In addition, Congress passed legislation (H.J.
+Added: 39) in 2023 via procedures of the CRA that would have rescinded Presidential Proclamation 10414 and retroactively imposed tariffs on certain imported modules, but President Biden vetoed the legislation on May 16, 2023, and Congress failed to override his veto on May 24, 2023.
+Added: In December 2023, Auxin Solar, a U.S.-based solar panel manufacturer filed a suit seeking to overturn the regulations implementing Presidential Proclamation 10414 and overturn the Biden Administration's moratorium on additional duties and tariffs on certain solar cells and modules imported from Cambodia, Malaysia, Thailand, or Vietnam.
+Added: In addition, as Presidential Proclamation 10414 expires in June 2024, panel prices may increase.
+Added: In addition, U.S.
+Added: laws and regulations intended to prevent the importation of goods manufactured with forced labor has and could continue to affect our business operation and supply chain, including the Uyghur Forced Labor Prevention Act and the withhold release order (“WRO”) that U.S.
+Added: Customs and Border Protection ("CBP") issued on June 24, 2021 applicable to certain silica-based products manufactured in the Xinjiang Uyghur Autonomous Region of China.
Intensive examinations, withhold release orders, and related governmental procedures have resulted in supply chain and operational delays throughout the industry, and we have implemented policies and procedures to maintain compliance and minimize delays.
−Removed: These and other similar trade restrictions that may be imposed in the future could cause delivery and installation delays, and restrict the global supply of polysilicon and solar products.
+Added: These and similar trade restrictions that may be imposed in the future could cause delivery and installation delays, and restrict the global supply of polysilicon and solar products.
This could result in near-term demand for available solar energy systems despite higher costs, increased costs of polysilicon and the overall cost of solar energy systems, and equipment shortages, potentially reducing overall demand for and limiting the supply of our products and services.
−Removed: We cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and other countries, what products may be subject to such actions, or what actions may be taken by the other countries in retaliation.
+Added: We cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and other countries, what products may be subject to such actions, or what actions may be taken by other countries in retaliation.
The tariffs described above, the adoption and expansion of trade restrictions, the
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We cannot predict whether and to what extent U.S.
−Removed: trade policies will change under the Biden Administration and cannot ensure that additional tariffs or other restrictive measures will not continue or increase.
+Added: trade policies will change in the future and cannot ensure that additional tariffs or other restrictive measures will not continue or increase.
Other factors may also impact costs, such as our choice to make significant investments to drive growth in the future.
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While few utilities to date have received regulatory permission to rate-base residential solar or storage, our competitiveness would be significantly harmed should more utilities receive such permission because we do not receive guaranteed profits for our solar service offerings.
−Removed: We face competition from other residential solar service providers, and we also may face competition from new entrants into the market as a result of the passage of the IRA and its anticipated impacts and benefits to the solar industry.
+Added: We face competition from other residential solar service providers, and we also may face competition from new entrants into the market as a result of the passage of the IRA and its impacts and benefits to the solar industry.
Some of these competitors may have a higher degree of brand name recognition, differing business and pricing strategies, lower barriers to entry into the solar market, and greater capital resources than we have, as well as extensive knowledge of our target markets.
−Removed: If we are unable to establish or maintain a consumer brand that resonates with customers, maintain high customer satisfaction, or compete with the pricing offered by our competitors, our sales and market share position may be adversely affected, as our growth is dependent on originating new customers.
+Added: If we are unable to establish or maintain a consumer brand that resonates with customers, maintain high customer satisfaction, or compete with the pricing offered by our competitors, our sales and market share position may be adversely affected, as our growth is primarily dependent on originating new customers.
We also face competitive pressure from companies that may offer lower-priced consumer offerings than we do.
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Some of these competitors may provide energy at lower costs than we do.
−Removed: Finally, as declining prices for solar panels and related equipment has resulted in an increase in consumers purchasing instead of leasing solar energy systems, we face competition from companies that offer consumer loans for these solar panel purchases.
+Added: Finally, as declining prices for solar panels and related equipment has resulted in an increase in consumers
+Added: purchasing instead of leasing solar energy systems, we face competition from companies that offer consumer loans for these solar panel purchases.
As the solar industry grows and evolves, we will continue to face existing competitors as well as new competitors who are not currently in the market (including those resulting from the consolidation of existing competitors) that achieve significant developments in alternative technologies or new products such as storage solutions, EV chargers, loan products, or other programs related to third-party ownership.
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Weather patterns could change, making it harder to predict the average annual amount of sunlight striking each location where our solar energy systems are installed.
−Removed: This could make our solar service offerings less
−Removed: economical overall or make individual systems less economical.
+Added: This could make our solar service offerings less economical overall or make individual systems less economical.
Any of these events or conditions could harm our business, financial condition, and results of operations.
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Warming temperatures throughout the United States, and in California, our biggest market, in particular, have contributed to extreme weather, intense drought, and increased wildfire risks.
−Removed: These events have the potential to disrupt our business, our third-party suppliers, and our customers, and may cause us to incur additional operational costs.
−Removed: For instance, natural disasters and extreme weather events associated with climate change can impact our operations by delaying the installation of our systems, leading to increased expenses and decreased revenue and cash flows in the period.
+Added: These extreme weather events have the potential to disrupt our business, our third-party suppliers, and our customers, and may cause us to incur additional operational costs.
They can also cause a decrease in the output from our systems due to smoke or haze.
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This could make our solar service offerings less economical overall or make individual systems less economical.
−Removed: Our corporate mission is to create a planet run by the sun, and we seek to mitigate these climate-related risks not only through our core business model and sustainability initiatives, but also by working with organizations who are also focused on mitigating their own climate-related risks.
+Added: Natural disasters and extreme weather events associated with climate change have impacted our operations by delaying the installation of our systems, leading to increased expenses and decreased revenue and cash flows.
+Added: For instance, the series of twelve atmospheric river weather events that deluged the western United States in 2023, resulted in prolonged, intense downpour of rain and high wind gusts, and put home roofs under acute stress.
+Added: As a result, we have seen a larger than usual number of damage claims in 2023, which have resulted in higher associated costs.
+Added: Continued increases in similar types of extreme weather events may harm our business, financial condition, and results of operations.
+Added: Our corporate mission is to connect people to the cleanest energy on earth, and we seek to mitigate these climate-related risks not only through our core business model and sustainability initiatives, but also by working with organizations who are also focused on mitigating their own climate-related risks.
Risks Related to Our Operating Structure and Financing Activities
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Volatility in current economic conditions could adversely impact our business, including our ability to raise financing.
−Removed: Our future success depends on our ability to raise capital from third parties to grow our business.
+Added: Our future success depends on our ability to raise capital at acceptable terms from third parties to grow our business.
To date, we have funded our business principally through low-cost tax equity investment funds.
If we are unable to establish new investment funds when needed, or upon desirable terms, the growth of our solar service business would be impaired.
−Removed: Changes in tax law could also affect our ability to establish such tax equity investment funds, impact the terms of existing or future funds, or reduce the pool of capital available for us to grow our business.
+Added: Changes in tax law or changes in the interpretation of existing tax law could also affect our ability to establish such tax equity investment funds, impact the terms of existing or future funds, or reduce the pool of capital available for us to grow our business.
+Added: The passage of the IRA, which extended subsidies for various renewable energy technologies, is expected to lead to additional demands for tax equity.
+Added: As a result, availability of tax equity may present constraints to our growth and harm our financial performance.
+Added: In addition, terms for tax equity funds, including the realization of tax credit value through potential structures that utilize transferability of the ITC, may not be at terms we view as favorable.
The contract terms in certain of our existing investment fund documents contain various conditions with respect to our ability to draw on financing commitments from the fund investors, including conditions that restrict our ability to draw on such commitments if an event occurs that could reasonably be expected to have a material adverse effect on the fund or, in some instances, us.
If we are not able to satisfy such conditions due to events related to our business, a specific investment fund, developments in our industry, including tax or regulatory changes, or otherwise, and as a result, we are unable to draw on existing funding commitments, we could experience a material adverse effect on our business, liquidity, financial condition, results of operations and prospects.
−Removed: If any of the investors that currently invest in our investment funds decide not to invest in future investment funds to finance our solar service offerings due to general market conditions, concerns about our business or prospects or any other reason, or materially change the terms under which they are willing to provide future financing, we would need to identify new investors to invest in our investment funds and our cost of capital may increase.
+Added: If any of the investors that currently invest in our investment funds decide not to invest in future investment funds to finance our solar service offerings due to general market conditions, concerns about our business or prospects, decreased appetite for tax benefits or any other reason, or materially change the terms under which they are willing to provide future financing, we would need to identify new investors to invest in our investment funds and our cost of capital may increase.
In addition, our business and results of operations are materially affected by conditions in the global capital markets and the economy.
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Volatility and increases in interest rates raise our cost of capital and may adversely impact our business.
−Removed: While interest rates have been at long-term historic lows in recent years, they have recently increased, and may continue increasing in the near future.
−Removed: Rising interest rates, including recent historic increases starting in 2021 and continuing throughout 2022, have and may continue to result in a decrease in our advance rates, reducing the proceeds we receive from certain investment funds.
−Removed: Because our financing structure is sensitive to volatility in interest rates, higher rates increase our cost of capital and may decrease the amount of capital available to us to finance the deployment of new solar energy systems.
+Added: While interest rates had been at long-term historic lows during large parts of our operating history, they have increased in recent years, and may continue to increase.
+Added: Rising interest rates, including recent historic increases starting in 2021, have resulted and may continue to result in a decrease in our advance rates, reducing the proceeds we receive from certain investment funds.
+Added: Because our financing structure is sensitive to volatility in interest rates, higher rates increase our cost of capital and decrease the amount of capital available to us to finance the deployment of new solar energy systems.
+Added: Additionally, we have selectively increased pricing in many markets over the last year in response to higher interest rates, and may continue to do so in the future, which may impact the overall attractiveness of our offerings to potential new customers.
Our future success depends on our ability to raise capital from fund investors and obtain secured lending to help finance the deployment of our solar service offerings.
−Removed: Part of our business strategy is to seek to reduce our cost of capital through these arrangements to improve our margins, offset reductions in government incentives and maintain the price competitiveness of our solar service offerings.
−Removed: Rising base interest rates or credit spreads, which have, and may continue to be worsened by inflation, an economic recession, or other variables, may have an adverse impact on our ability to offer attractive pricing on our solar service offerings to customers, which could negatively impact sales of our solar energy offerings, and our cash flows.
−Removed: Because we typically enter into interest rate swaps shortly after the installation of a system, we are subject to higher interest rate risk between customer pricing through installation, which may cause volatility to our cash flows.
+Added: Part of our business strategy is to seek to reduce our cost of capital through such financing arrangements to improve our margins, offset reductions in government incentives and maintain the price competitiveness of our solar service offerings.
+Added: Rising base interest rates or credit spreads, which have been, and may continue to be, worsened by inflation, an economic recession, or other variables, may have an adverse impact on our ability to offer attractive pricing on our solar service offerings to customers, which could negatively impact sales of our solar energy offerings and our cash flows.
+Added: Because we typically enter into interest rate swaps shortly after the installation of a system, we are subject to higher interest rate risk between customer pricing through system installation, which may cause volatility to our cash flows.
The majority of our cash flows to date have been from solar service offerings under Customer Agreements that have been monetized under various investment fund structures.
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Our investors in our tax equity investment funds typically advance capital to us based on, among other things, production capacity estimates.
−Removed: The models we use to calculate prepayments in connection with certain of our tax equity investment funds are updated at a fixed date occurring after placement in service of all applicable
−Removed: solar energy systems or an agreed upon date (typically within the first year of the applicable term) to reflect certain specified conditions, as they exist at such date including the ultimate system size of the equipment that was sold or leased to the tax equity investment fund, the cost thereof, and the date the equipment went into service.
+Added: The models we use to calculate prepayments in connection with certain of our tax equity investment funds are updated at a fixed date occurring after placement in service of all applicable solar energy systems or an agreed upon date (typically within the first year of the applicable term) to reflect certain specified conditions, as they exist at such date including the ultimate system size of the equipment that was sold or leased to the tax equity investment fund, the cost thereof, and the date the equipment went into service.
In some cases, these true-up models also incorporate any changes in law, which would include any reduction in rates (and thus any reduction in the benefits of depreciation).
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Our financial model is impacted by the volume of customers who choose our solar service offerings, and an increase in the number of customers who choose to purchase solar energy systems (whether for cash or through third-party financing) may harm our business and financial results.
−Removed: Additionally, as discussed above, reductions in the Commercial ITC as scheduled may impact the attractiveness of solar energy to certain customers and could potentially harm our business.
−Removed: Reductions in, eliminations of, or expirations of, governmental incentives such as the Residential Energy Efficient Property Credit could reduce the number of customers who choose to purchase our solar energy systems.
Servicing our debt requires a significant amount of cash to comply with certain covenants and satisfy payment obligations, and we may not have sufficient cash flow from our business to pay our substantial debt and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
−Removed: We have substantial amounts of debt, including our Notes, our $600.0 million credit facility and the non-recourse debt facilities entered into by our subsidiaries, as discussed in more detail in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, in each case, included in this periodic report.
+Added: We have substantial amounts of debt, including our convertible senior notes (“Notes”), our credit facility and the non-recourse debt facilities entered into by our subsidiaries, as discussed in more detail in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, in each case, included in this periodic report.
Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.
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We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations and negatively impact our financial condition and prospects.
−Removed: Indebtedness under certain of our Senior and Subordinated Debt Facilities bear interest at variable interest rates based on LIBOR, while our credit facility and certain other Senior and Subordinated Debt Facilities accrue interest at variable interest rates based on the Secured Overnight Financing Rate (or other benchmark rates based thereof, collectively, “SOFR”).
−Removed: The potential replacement of LIBOR with SOFR or an alternative reference rate in the applicable debt facilities where interest and interest rate swap payments are
−Removed: based on LIBOR may adversely affect interest rates charged with respect to such facilities and may otherwise affect our financial condition and results of operations.
−Removed: Our debt facilities accruing interest based on SOFR may suffer from potential volatility and uncertainty around SOFR as a LIBOR replacement rate and increase our cost to hedge our floating rate exposure which could adversely affect our financial condition and results of operations.
−Removed: In July 2017, the U.K.
−Removed: Financial Conduct Authority, the authority that regulates LIBOR, announced that it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021.
−Removed: In March 2021, the U.K.
−Removed: Financial Conduct Authority announced that all LIBOR tenors will either cease to be provided by any benchmark administrator or will no longer be representative (a) with respect to the 1-week and 2-month U.S.
−Removed: dollar LIBOR tenors, immediately after December 31, 2021 and (b) with respect to all other U.S.
−Removed: dollar LIBOR tenors, immediately after June 30, 2023.
−Removed: As a result, it appears highly likely that LIBOR will be discontinued or significantly modified by June 30, 2023.
−Removed: In July 2021, the Alternative Reference Rates Committee (“ARRC”) in the U.S., a steering committee comprised of large U.S.
−Removed: financial institutions and other market participants organized to ensure a successful transition away from U.S.
−Removed: dollar LIBOR, has identified SOFR as its preferred alternative rate to LIBOR for use in derivatives and other financial contracts that are currently indexed to LIBOR.
−Removed: ARRC has proposed a paced market transition plan to SOFR from U.S.
−Removed: dollar LIBOR and organizations are currently working on industry-wide and company-specific transition plans as relating to derivatives and cash markets exposed to U.S.
−Removed: dollar LIBOR.
−Removed: We have certain financial contracts, including many of our Senior and Subordinated Debt Facilities, that remain indexed to U.S.
−Removed: dollar LIBOR.
−Removed: Furthermore, changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect interest rates on our current or future indebtedness.
−Removed: Any transition process may involve, among other things, increased volatility or illiquidity in markets for instruments that rely on LIBOR or SOFR, reductions in the value of certain instruments or the effectiveness of related transactions such as hedges, increased borrowing costs, uncertainty under applicable documentation, or difficult and costly consent or amendment processes.
−Removed: We are monitoring this activity and evaluating the related risks, and any such effects of the transition away from LIBOR may result in increased borrowing costs and reduced borrowing capacity, may impair our ability to refinance our indebtedness or hedge our exposure to floating rate instruments, or may result in difficulties, complications or delays in connection with future financing efforts, any of which could adversely affect our financial condition and results of operations.
−Removed: In addition, certain of our debt facilities accrue interest based on SOFR.
−Removed: Since the initial publication of SOFR, daily changes in the rate have, on occasion, been more volatile than daily changes in comparable benchmark or market rates, and SOFR over time may bear little or no relation to the historical actual or historical indicative data.
−Removed: Additionally, some of our credit facilities based on SOFR include a credit adjustment on SOFR due to LIBOR representing an unsecured lending rate while SOFR represents a secured lending rate.
+Added: Indebtedness under certain of our Senior and Subordinated Debt Facilities and our other credit facilities accrue interest at variable interest rates based on the Secured Overnight Financing Rate (or other benchmark rates based thereof, collectively, “SOFR”).
+Added: In certain of our debt facilities accruing interest based on SOFR, daily changes in the rate have, on occasion, been more volatile than daily changes in comparable benchmark or market rates, and SOFR over time may bear little or no relation to the historical actual or historical indicative data.
+Added: Additionally, some of our credit facilities based on SOFR include a credit spread adjustment on SOFR due to LIBOR representing an unsecured lending rate while SOFR represents a secured lending rate.
In addition, ARRC has imposed certain curbs on interdealer trading in SOFR derivatives, which reduce market liquidity and may raise hedging costs for us as end-users.
−Removed: The possible volatility of, and uncertainty around, SOFR as a LIBOR replacement rate, the applicable credit adjustment, and illiquidity in SOFR derivative markets could result in higher borrowing costs for us, which would adversely affect our financial condition, and results of operations.
−Removed: We may not have the ability to raise the funds necessary to settle conversions of the Convertible Senior Notes in cash or to repurchase the Convertible Senior Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Convertible Senior Notes.
−Removed: Holders of the Convertible Senior Notes (the “Notes”) will have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change under the indenture, which includes certain events such as a change of control, before the maturity date at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any.
+Added: The possible volatility of, and uncertainty around, SOFR as the LIBOR replacement rate, the addition of credit spread adjustment in certain of our facilities, and potential illiquidity in SOFR derivative markets could result in higher borrowing costs for us, which would adversely affect our financial condition, and results of operations.
+Added: We may not have the ability to raise the funds necessary to settle conversions of the Notes in cash or to repurchase the Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Notes.
+Added: The Notes will have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change under the indenture, which includes certain events such as a change of control, before the maturity date at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any.
In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted.
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Our failure to repurchase Notes at a time when the repurchase is required by the indenture governing such Notes or to pay any cash payable on future conversions of the Notes as required by the indenture would constitute a default.
−Removed: A default under the indenture or the fundamental change itself could also lead to a default under
−Removed: agreements governing our existing or future indebtedness.
+Added: A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our existing or future indebtedness.
If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or make cash payments upon conversions thereof.
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Risks Related to Regulation and Policy
−Removed: We rely on certain utility rate structures, such as net metering, to offer competitive pricing to customers in all of our current markets, and changes to those policies, such as those recently decided by the California Public Utilities Commission, may significantly reduce demand for electricity from our solar service offerings.
−Removed: As of December 31, 2022, a substantial majority of states have adopted net metering policies.
−Removed: Net metering policies allow homeowners to serve their own energy load using on-site generation while avoiding the full retail volumetric charge for electricity.
−Removed: Electricity that is generated by a solar energy system and consumed on-site avoids a retail energy purchase from the applicable utility, and excess electricity that is exported back to the electric grid generates a retail credit within a homeowner’s monthly billing period.
−Removed: At the end of the monthly billing period, if the homeowner has generated excess electricity within that month, the homeowner typically carries forward a credit for any excess electricity to be offset against future utility energy purchases.
−Removed: At the end of an annual billing period or calendar year, utilities either continue to carry forward a credit, or reconcile the homeowner’s final annual or calendar year bill using different rates (including zero credit) for the exported electricity.
−Removed: Utilities, their trade associations, and fossil fuel interests in the country are currently challenging net metering policies, and seeking to eliminate them, cap them, reduce the value of the credit provided to homeowners for excess generation, or impose charges on homeowners that have net metering.
−Removed: A few states have moved away from traditional full retail net metering and instead values excess generation by customers’ solar systems in various ways.
−Removed: For example, in 2017, Nevada enacted legislation, to restore net metering at a reduced credit and guarantee new customers the net metering rate in effect at the time they applied for interconnection for 20 years.
−Removed: In 2016, the Arizona Corporation Commission (“ACC”) replaced retail net metering with a net-feed in tariff (a fixed export rate).
−Removed: Some states set limits on the total percentage of a utility’s customers that can adopt net metering or set a timeline to evaluate net metering successor tariffs.
−Removed: For example, South Carolina passed legislation in 2019 that required review of net metering after two years.
−Removed: In 2021, the South Carolina Public Service Commission approved a portion of Duke Energy’s proposal that maintains the net metering framework with time-of-use rates and rejected a proposal from Dominion Energy to eliminate net metering altogether.
−Removed: In 2021 legislation, Illinois changed its net metering threshold from a percentage of customers to full retail net metering offered to a date certain (December 31, 2024) with a directed successor tariff that includes values that distributed resources provide to the distribution grid.
−Removed: New Jersey currently has no net metering cap;
−Removed: however, it has a threshold that triggers commission review of its net metering policy.
−Removed: These policies could be subject to change in the future, and other states we serve now or in the future may adopt net metering caps.
−Removed: If the net metering caps in these jurisdictions are reached without an
−Removed: extension of net metering policies, homeowners in those jurisdictions will not have access to the economic value proposition net metering provides.
−Removed: Our ability to sell our solar service offerings may be adversely impacted by the failure to extend existing limits to net metering or the elimination of currently existing net metering policies.
−Removed: The failure to adopt a net metering policy where it currently is not in place would pose a barrier to entry in those states.
−Removed: Most recently, on April 26, 2022, Florida Governor DeSantis vetoed legislation that would have established a threshold date and percentage trigger when retail net metering would have faced declines in the immediate export rate.
−Removed: Additionally, the imposition of charges that only or disproportionately impact homeowners that have solar energy systems, or the introduction of rate designs mentioned above, would adversely impact our business.
−Removed: Because fixed charges cannot easily be avoided with the installation of an on-site battery, which can mitigate or eliminate the negative impacts of net metering changes, these fixed charges have the potential to cause a more significant adverse impact.
−Removed: In June of 2021, two of four commissioners of the Federal Energy Regulatory Commission (“FERC”), including its chairperson, issued a letter stating there was a “strong case” such fixed charges in Alabama “may be violating the Commission’s PURPA regulations, undermining the statute’s purpose of encouraging Qualifying Facilities,” which is the Commission’s term for on-site generation.
−Removed: Litigation regarding the legality of these charges is ongoing in federal court.
−Removed: Most recently, on April 26, 2022, Florida Governor DeSantis vetoed legislation that would have allowed investor-owned utilities to petition the Public Service Commission for the ability to add fixed charges on solar customers.
−Removed: As part of the California Public Utilities Commission (“CPUC”) final decision on December 15, 2022, the CPUC rejected a solar specific fix charge on solar customers.
−Removed: The California Public Utilities Commission issued a final decision on December 15, 2022, that revised its net metering policy, bringing finality to a proceeding that began in the third quarter of 2020.
−Removed: Over two years ago, the California investor-owned utilities, along with other parties, sought to significantly reduce the level of compensation for customer-owned generation and to impose large fixed fees on solar customers.
−Removed: The CPUC released a Proposed Decision on the matter in December 2020.
−Removed: On February 3, 2021, the CPUC paused the proceeding “until further notice” to “consider revisions to the proposed decision.” After California Governor Gavin Newsom said at a press conference there is “work to do” on the proposal, in May 2022, the CPUC requested additional feedback from parties on rate design options.
−Removed: The final decision creates no new fixed charges - no non-bypassable charges, minimum bills, or grid participation charges for solar and solar plus storage customers.
−Removed: Determination of whether to create fixed charges on all residential customers has been deferred to a new docket, and the CPUC will be considering income graduated fixed chargers.
−Removed: In mid-April 2023, customers will be transitioned to the new net metering tariff, now called a “net billing tariff,” or “NBT”, and exports will be credited at an avoided cost calculator rate.
−Removed: Additionally, the final decision made no retroactive changes to legacy net metering customers.
−Removed: The final CPUC decision presents a significant change to the financial benefits California customers could receive from our solar systems and may negatively impact the financial attractiveness of our solar and solar plus storage offerings in this market, which may adversely impact our financial performance and the costs of our operations.
−Removed: This new framework may result in increased demand for our solar plus storage offerings, thereby increasing the importance of procuring a variety of battery storage products and potentially accentuating supply chain risks related to battery storage systems.
−Removed: The new NBT pricing framework may also result in the introduction of new product offerings and pricing structures at Sunrun and throughout the solar and utilities industries.
−Removed: This may result in increased competition and uncertainty regarding the demand for such new products and offerings.
−Removed: Similarly, certain California municipal utilities, which are not regulated by the CPUC and would not be governed by the CPUC's net metering policy, have also reviewed their net metering policies.
−Removed: In September 2021, the Sacramento Municipal Utility District (SMUD) ordered a change in its solar tariff, reducing the compensation of solar energy exported to the grid for new solar customers effective March 1, 2022.
−Removed: Such reviews have been taking place at California municipal utilities since 2015.
−Removed: More of our revenue is generated in California than any other state, and these potential changes in policies could result in a significant reduction in our revenue.
+Added: The customer value proposition for distributed solar, storage, and home electrification products is influenced by a number of factors, including, but not limited to, the retail price of electricity, the valuation of electricity not consumed on site and exported to the grid, the rate design mechanisms of customers’ utility bills, various policies related to the permitting and interconnection costs of our products to homes and the grid, the availability of incentives for solar, batteries, and other electrification products, and other policies which allow aggregations of our systems to provide the grid value.
+Added: Significant changes to any of these factors may impact the competitiveness of our service offerings to customers.
+Added: The value proposition of our solar and storage offering, as well as our other related home electrification offerings, such as the electric vehicle charging station, is impacted by several factors outside of our control including, but are not limited to, the retail price of electricity, the valuation of electricity not consumed on site but exported to the grid, the rate design mechanisms of customers’ utility bills, various policies related to the permitting and interconnection costs of our products to homes and the grid, the availability of incentives for solar, batteries, and other electrification products, and other policies which allow aggregations of our systems to provide the grid value.
+Added: For over two decades across the United States, utilities, their trade associations, fossil fuel interests, and some other stakeholders not aligned with a decentralized grid have been challenging many legislative and regulatory policies that enhance the customer value proposition of residential solar and storage.
+Added: In connection with the value attributed to exported electricity, net metering (“NEM”) has traditionally been the main policy mechanism to measure and value exported electricity sent back to the grid in the markets within which we do business.
+Added: That value has always varied depending on the retail price of power in a certain market, substantial differences in rate design per market, and NEM market specific differences, including detail around how to carry over NEM credits, whether or not to cap the amount of net metered solar in a specific market, or how a market values the exported electricity.
+Added: A substantial majority of the markets in which we operate have implemented NEM policies, allowing end customers to receive credits for the electricity not consumed on site and exported to the grid.
+Added: Some states, including our largest market of California, have moved away from the traditional retail NEM credit structure of paying the full retail rate for exported electricity, and instead, such states have chosen to value excess generation by customers’ solar systems in different ways.
+Added: In 2016, the Arizona Corporation Commission (“ACC”) replaced retail NEM with a declining fixed export rate.
+Added: In 2017, Nevada implemented a reduced credit step down to NEM credits over time.
+Added: Hawaii, a state with extremely high distributed solar penetration, effectively ended NEM in 2016 and has since become a solar plus battery market, with programs that utilize additional values from aggregated distributed resources, including rooftop solar paired with batteries, to support grid needs.
+Added: Many states across the United States have traditionally set limits on the amount of rooftop solar that can be exported for retail credit and there is a long legislative and regulatory history of those limitations being extended in various states, including California, New Jersey, Illinois, North Carolina, and South Carolina.
+Added: Our ability to sell our solar service offerings may be adversely impacted by the failure to extend existing limits or “caps” to retail NEM or the elimination of other existing policies that value exported electricity to the grid.
+Added: On April 26, 2022, Florida Governor DeSantis vetoed legislation that would have established a threshold date and percentage trigger when retail NEM could have faced declines in the immediate export rate in Florida.
+Added: New Jersey currently has no NEM cap but reached a threshold that triggers regulatory review of its NEM policy, which will proceed over the next two years.
+Added: Most notably, as a result of the finalization of the NEM proceeding on December 15, 2022 by the California Public Utilities Commission (“CPUC”), California has moved to a NBT structure in which exported electricity is no longer valued at the retail rate and is instead valued by that state’s “avoided cost” annual calculations, which substantially decreased the credit allocated to an exported electron during the day.
+Added: The final California NEM decision rejected a very controversial solar specific fixed charge and rejected the creation of new non-bypassable charges, minimum bills, and grid participation charges for solar and solar plus storage customers.
+Added: Additionally, the final California NEM decision made no retroactive changes to legacy NEM 1.0 or 2.0 California customers.
+Added: In mid-April 2023, new California solar customers located in areas serviced by investor-owned utilities (“IOU”) began applying for service under the new NBT.
+Added: The final California NEM decision presents a significant change to the residential solar market in California.
+Added: Under this new framework, storage paired with solar will have a heightened value proposition to customers, and we may see increased demand for our solar plus storage offerings, thereby increasing the importance of procuring a variety of battery storage products and potentially accentuating supply chain risks related to battery storage systems.
+Added: The new NBT pricing framework may also result in the introduction of new product offerings and pricing structures by our competitors throughout the solar and utilities industries, and has led to our introduction of Sunrun Shift™, our home solar subscription offering that maximizes the value of solar energy under California's NBT by increasing self-consumption during peak hours when rates are highest and reducing low-value exports back to the grid through the use of a new storage configuration.
+Added: This may also result in increased competition and uncertainty regarding the demand for such new products and offerings, which may adversely impact our business and results of operations.
+Added: In 2022, before the final California NEM decision, California passed legislation (AB 205) which provided the CPUC with the ability to implement three tiers of income-graduated fixed charges on all California customers above the previous $10 per month maximum.
+Added: In mid-April 2023, new California solar customers located in areas serviced by IOUs began applying for service under the new NBT.
+Added: Subsequently, in early April 2023, the California IOUs filed an initial proposal that would represent the highest fixed charges in the United States for all residential customers subject to IOU electricity service in California.
+Added: In a June 2023 ruling, the CPUC indicated that it will approve by July 2024 guidelines for future development and implementation of income-graduated fixed charges, but that implementation of the first iteration of these charges is not expected to occur until late 2026.
+Added: Legislation (AB 1999) has recently been introduced seeking to repeal the 2022 legislation that authorized income-graduated fixed charges.
+Added: Depending on the outcome of the legislation and the CPUC proceeding, which is currently considering the size of the fixed charges, how the income categories are determined, and rate design for future solar plus storage customers, the value proposition for our customers would be impacted.
+Added: The pending determination may also result in uncertainty regarding demand for such new products and offerings, which may adversely impact our business and results of operations.
+Added: Additionally, the imposition of charges may disproportionately impact or specifically single out homeowners who have installed solar energy systems, including our customers, which could adversely impact our business.
Electric utility statutes and regulations and changes to such statutes or regulations may present technical, regulatory and economic barriers to the purchase and use of our solar service offerings that may significantly reduce demand for such offerings.
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These statutes and regulations are constantly evolving.
−Removed: Governments, often acting through state utility or public
−Removed: service commissions, change and adopt different rates for residential customers on a regular basis and these changes can have a negative impact on our ability to deliver savings, or energy bill management, to customers.
−Removed: In addition, many utilities, their trade associations, and fossil fuel interests in the country, which have significantly greater economic, technical, operational, and political resources than the residential solar industry, are currently challenging solar-related policies to reduce the competitiveness of residential solar energy.
+Added: Governments, often acting through state utility or public service commissions, change and adopt different rates for residential customers on a regular basis and these changes can have a negative impact on our ability to deliver savings, or energy bill management, to customers.
+Added: In addition, many utilities, their trade associations, and fossil fuel interests in the country, which have significantly greater economic, technical, operational, and political resources than the residential solar industry, are currently challenging solar-related policies, which may have the effect of reducing the competitiveness of residential solar energy.
Any adverse changes in solar-related policies could have a negative impact on our business and prospects.
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These regulations and policies could deter potential customers from purchasing our solar service offerings.
−Removed: For example, some utilities in states such as Arizona and Utah have sought and secured rate design changes that reduce credit for residential solar exports to below the retail rate and impose new charges for rooftop solar customers.
+Added: For example, some utilities in states such as Arizona and Utah have sought and secured rate design changes that reduce the credit for residential solar exports to below the retail rate and impose new charges for rooftop solar customers.
Utilities in additional states may follow suit.
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These proposals could continue or be replicated in other states.
−Removed: In addition to changes in general rates charged to all residential customers, utilities are increasingly seeking solar-specific charges (which may be fixed charges, capacity-based charges, or other rate charges).
+Added: In addition to changes in general rates charged to all residential customers, utilities sometimes have proposed solar-specific charges (which may be fixed charges, capacity-based charges, or other rate charges).
Any of these changes could materially reduce the demand for our offerings and could limit the number of markets in which our offerings are competitive with electricity provided by the utilities.
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As a result, we are not subject to the various regulatory requirements applicable to U.S.
−Removed: However, any federal, state, local or other applicable regulations could place significant restrictions on our ability to operate our business and execute our business plan by prohibiting or otherwise restricting our sale of electricity.
+Added: However, federal, state, local or other applicable regulations could place significant restrictions on our ability to operate our business and execute our business plan by prohibiting or otherwise restricting our sale of electricity.
These regulatory requirements could include restricting our sale of electricity, as well as regulating the price of our solar service offerings.
−Removed: For example, the New York Public Service Commission and the Illinois Power Agency have issued orders regulating distributed energy providers in certain ways as if they were energy service companies, which increases the regulatory compliance burden for us in such states.
−Removed: If we become subject to the same regulatory authorities as utilities in other states or if new regulatory bodies are established to oversee our business, our operating costs could materially increase.
+Added: For example, the New York Public Service Commission and the Illinois Power Agency have issued orders requiring registration of distributed energy providers in certain ways similar to energy service companies, which increases the regulatory compliance burden for us in such states.
+Added: If we become subject to the same regulatory authorities as utilities in other states or if new regulatory bodies are established to oversee our business, our operating costs could materially increase and we may not be able to execute on our business plans.
Our business depends in part on the regulatory treatment of third-party-owned solar energy systems.
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Sales of electricity by third parties face regulatory challenges in some states and jurisdictions.
−Removed: These challenges pertain to issues such as whether third-party-owned systems qualify for the same rebates, tax exemptions or other non-tax incentives available for homeowner-owned solar energy systems, whether third-party-owned systems are eligible at all for these incentives, whether our customer agreements are properly characterized as leases or power purchase agreements, and whether third-party-owned systems are eligible for net metering and the associated significant cost savings.
+Added: These challenges pertain to issues such as whether third-party-owned systems qualify for the same rebates, tax exemptions or other non-tax incentives available for homeowner-owned solar energy systems, whether third-party-owned systems are eligible at all for these incentives, whether our Customer Agreements are properly characterized as leases or PPAs, and whether third-party-owned systems are eligible for net metering and the associated significant cost savings.
In 2021, South Carolina enacted legislation providing a solar property tax exemption.
Texas and Connecticut clarified through legislation that third-party-owned residential solar systems would be treated the same as customer-owned systems, and would qualify for the existing residential solar property tax exemption.
−Removed: Adverse regulatory treatment of third-
−Removed: party ownership arrangements could reduce demand for our solar service offerings, adversely impact our access to capital and cause us to increase the price we charge customers for energy.
+Added: Adverse regulatory treatment of third-party ownership arrangements could reduce demand for our solar service offerings, adversely impact our access to capital and cause us to increase the price we charge customers for energy.
Interconnection limits or circuit-level caps imposed by regulators may significantly reduce our ability to sell electricity from our solar service offerings in certain markets or slow interconnections, harming our growth rate and customer satisfaction scores.
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Utilities throughout the country have different rules and regulations regarding interconnection and some utilities cap or limit the amount of solar energy that can be interconnected to the grid.
−Removed: Our systems do not provide power to customers until they are interconnected to the grid.
+Added: Our systems do not provide power to customers until they are interconnected to the grid, and some relevant laws and regulations in certain markets may considerably slow the timing of interconnection, which may in turn impact the system production and our business and sales results.
Interconnection regulations are based on claims from utilities regarding the amount of solar energy that can be connected to the grid without causing grid reliability issues or requiring significant grid upgrades.
Although recent rulings from the Hawaii Utilities Commission have helped resolve some problems, historically, interconnection limits or circuit-level caps have slowed the pace of our installations in Hawaii.
−Removed: Similar interconnection limits could slow our future installations in Hawaii or other markets, harming our growth rate and customer satisfaction scores.
−Removed: Similarly, the California and Hawaii Public Utilities Commissions require the activation of some advanced inverter functionality to head off presumed grid reliability issues, which may require more expensive equipment and more oversight of the operation of the solar energy systems over time.
−Removed: As a result, these regulations may hamper our ability to sell our offerings in certain markets and increase our costs, adversely affecting our business, operating results, financial condition, and prospects.
+Added: Similar interconnection limits could slow our future installations in Hawaii, Puerto Rico, Colorado, New Jersey, or other markets, harming our growth rate and customer satisfaction scores.
+Added: Similarly, the California, Illinois, and Hawaii Public Utilities Commissions require the activation of some advanced inverter functionality to head off presumed grid reliability issues, which may require more oversight of the operation of the solar energy systems over time, but may also help ensure circuits remain open or interconnection costs remain low.
+Added: Interconnection constraints and limits may hamper our ability to sell our offerings in certain markets and increase our costs, adversely affecting our business, operating results, financial condition, and prospects.
We expect utility requirements to incorporate these advanced functions provided by the IEEE 1547-2018/UL-1741 SB inverters and that they will become more commonplace.
Additional states are expected to adopt the usage of advanced inverters to align with California's anticipated requirement that all new systems use inverters certified to the new UL 1741 SB standard.
−Removed: This requirement could become effective in California during the second quarter of 2023.
+Added: This requirement became effective in March 2023.
+Added: All of our vendors are certified to this standard.
Risks Related to Our Business Operations
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We and our solar partners purchase solar panels, inverters, batteries, and other system components from a limited number of suppliers, making us susceptible to quality issues, shortages, bottlenecks, and price changes.
−Removed: If we or our solar partners fail to develop, maintain and expand our relationships with these or other suppliers, we may be unable to adequately meet anticipated demand for our solar service offerings, or we may only be able to offer our
−Removed: systems at higher costs or after delays.
+Added: If we or our solar partners fail to develop, maintain and expand our relationships with these or other suppliers, we may be unable to adequately meet anticipated demand for our solar service offerings, or we may only be able to offer our systems at higher costs or after delays.
If one or more of the suppliers that we or our solar partners rely upon to meet anticipated demand ceases or reduces production, we may be unable to quickly identify alternate suppliers or to qualify alternative products on commercially reasonable terms, and we may be unable to satisfy this demand.
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Once we design a system for use with a particular battery, if that type of battery is not readily available from our supplier, we may incur delays and additional expenses to install the system or be forced to redesign the system.
−Removed: Global demand has increased for lithium-ion battery cells, which may cause challenges for our battery suppliers, including delays or price volatility.
+Added: Cost and mass production of battery cells depends in part upon the prices and availability of raw materials such as lithium, nickel, cobalt and/or other metals.
+Added: The prices for these materials fluctuate and their available supply may be unstable, depending on market conditions and global demand for these materials.
+Added: For example, as a result of increased global production of electric vehicles and energy storage products, global demand has increased for lithium-ion battery cells, which may cause challenges for our battery suppliers, including delays or price volatility.
Any such delays or reduced availability of battery cells (or other component materials) may impact our sales and operating results.
Further, these risks may increase as market demand for our solar and battery offering grows.
+Added: Any reduced availability of these batteries may impact our growth, and any increases in their prices may reduce our profitability if we cannot recoup such costs through increased prices.
+Added: Our inability to meet demand and any product price increases may harm our brand, growth, prospects and operating results.
There have also been periods of industry-wide shortage of key components, including solar panels, batteries and inverters, in times of rapid industry growth or regulatory change.
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government response to them could also disrupt our supply chain and operations.
−Removed: In particular, the withhold release order issued by U.S.
−Removed: Customs and Border Protection (CBP) on June 24, 2021 applicable to certain silica-based products manufactured in the Xinjiang Uyghur Autonomous Region of China, and any other allegations regarding forced labor in China and U.S.
+Added: In particular, the WRO issued by the CBP on June 24, 2021 applicable to certain silica-based products manufactured in the Xinjiang Uyghur Autonomous Region of China, and any other allegations regarding forced labor in China and U.S.
trade regulations to prohibit the importation of any goods derived from forced labor, could affect our operations.
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These and other similar trade restrictions that may be imposed in the future could cause delivery and installation delays, and restrict the global supply of polysilicon and solar products.
−Removed: This, coupled with the passage of the Inflation Reduction Act, could result in near-term demand for available solar energy systems despite higher costs, as well as increased costs of polysilicon and the overall cost of solar energy systems, potentially reducing overall demand for our products and services.
−Removed: In addition, our supply chain and operations (or those of our partners) could be subject to events beyond our control, such as earthquakes, wildfires, flooding, hurricanes, tsunamis, typhoons, volcanic eruptions, droughts, tornadoes, the effects of climate change and related extreme weather, public health issues and pandemics, war, terrorism, government restrictions or limitations on trade, and geo-political unrest and uncertainties.
−Removed: On February 24, 2022, Russia invaded Ukraine and the duration of the conflict and extensiveness of the impact are still evolving and indeterminable at this time.
−Removed: We currently do not, and do not plan to in the future, source any products,
−Removed: materials, components, parts, or services directly from Russian or Ukrainian providers.
−Removed: As a result, we do not anticipate any material impacts to our supply chain directly arising from the invasion at this time.
+Added: This, coupled with the passage of the IRA, could result in near-term demand for available solar energy systems despite higher costs, as well as increased costs of polysilicon and the overall cost of solar energy systems, potentially reducing overall demand for our products and services.
+Added: In addition, our supply chain and operations (or those of our partners) could be subject to events beyond our control, such as earthquakes, wildfires, flooding, hurricanes, tsunamis, typhoons, volcanic eruptions, droughts, tornadoes, the effects of climate change and related extreme weather, public health issues and pandemics, war, terrorism, government restrictions or limitations on trade, and geo-political unrest and uncertainties, such as Russia’s invasion of Ukraine and the current armed conflict in Israel and the Gaza Strip.
+Added: We currently do not, and do not plan to in the future, source any products, materials, components, parts, or services directly from providers in these regions.
+Added: As a result, we do not anticipate any material impacts to our supply chain directly arising from these conflicts at this time.
As the primary entity that contracts with customers, we are subject to risks associated with construction, cost overruns, delays, customer cancellations, regulatory compliance, and other contingencies, any of which could have a material adverse effect on our business and results of operations.
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In addition, because the solar energy systems we or our solar partners deploy are high voltage energy systems, we may incur liability for any failure to comply with electrical standards and manufacturer recommendations.
−Removed: For example, on December 2, 2020, the California Contractors State License Board (the “CSLB”) filed an administrative proceeding against Sunrun and certain of its officers related to an accident that occurred during an installation by one of our channel partners, Horizon Solar Power, which held its own license with the CSLB.
+Added: For example, on December 2, 2020, the California Contractors State License Board (the “CSLB”) filed an administrative proceeding against us and certain of our officers related to an accident that occurred during an installation by one of our affiliate channel partners, Horizon Solar Power, which held its own license with the CSLB.
On November 8, 2021, the parties entered into a stipulated settlement imposing citations and withdrawing the administrative proceeding with additional conditions.
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Completing the sale and installation of a solar energy system requires many different steps including a site audit, completion of designs, permitting, installation, electrical sign-off and interconnection.
−Removed: Customers may cancel their Customer Agreement, subject to certain conditions, during this process until commencement of installation, and we have experienced increased customer cancellations in certain geographic markets during certain periods in our operating history.
+Added: Customers may cancel their Customer Agreement, subject to certain conditions, during this process until commencement of installation,
+Added: and we have experienced increased customer cancellations in certain geographic markets during certain periods in our operating history.
We or our solar partners may face customer cancellations, delays or cost overruns which may adversely affect our or our solar partners’ ability to ramp up the volume of sales or installations in accordance with our plans.
−Removed: These cancellations, delays or overruns may be the result of a variety of factors, such as labor shortages or other labor issues, defects in materials and workmanship, adverse weather conditions, transportation constraints, construction change orders, site changes or roof conditions, geographic factors and other unforeseen difficulties, any of which could lead to increased cancellation rates, reputational harm and other adverse effects.
+Added: These cancellations, delays or overruns may be the result of a variety of factors, such as labor shortages or other labor issues, defects in materials and workmanship, adverse weather conditions, transportation constraints, construction change orders, site changes or roof conditions, geographic factors, extended permitting and inspection times and other unforeseen difficulties or any other factors that may extend the timing to install, any of which could lead to increased cancellation rates, reputational harm and other adverse effects.
For example, some customer orders are canceled after a site visit if we determine that a customer needs to make repairs to or install a new roof, or that there is excessive shading on their property.
+Added: Additionally, as the demand for solar plus storage offerings grows, we anticipate facing additional operational challenges associated with the complexity of deploying storage solutions that tend to have longer cycle times due to factors such as lengthened permitting and inspection times and potential need of a main panel upgrade.
+Added: Any such factors that extend the timeframes from customer signature to installation or increased project complexity may result in increased operational challenges and correspondingly lower realization rates.
If we continue to experience increased customer cancellations, our financial results may be materially and adversely affected.
+Added: In addition, the current macroeconomic environment, including rising interest rates, instability in financial markets and bank failures, may impact our ability to engage with new customers and expand our relationships with existing customers.
+Added: If our customers are materially negatively impacted by these factors, our business could be negatively impacted.
Policy can impact solar installation completion timelines.
For example, in fall 2022, California passed SB 379, which imposes a required timeline for cities and counties to implement an online, automated solar permitting platform like SolarAPP+.
−Removed: Cities with populations over 50,000 and counties with populations over 150,000 will need to have instant, online, automated residential solar and storage permitting by September 30, 2023, which may increase the rate at which we install solar systems.
+Added: Cities with populations over 50,000 and counties with populations over 150,000 will need to have instant, online, automated residential solar and storage permitting as of September 30, 2023, which may increase the rate at which we install solar systems.
In addition, the installation of solar energy systems and other energy-related products requiring building modifications are subject to oversight and regulation in accordance with national, state and local laws and ordinances relating to building, fire and electrical codes, safety, environmental protection, utility interconnection and metering, and related matters.
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Any new government regulations or utility policies pertaining to our systems may result in significant additional expenses to us and our customers and, as a result, could cause a significant reduction in demand for our solar service offerings.
−Removed: As the demand for solar plus storage offerings grows, we anticipate facing additional operational challenges associated with the complexity of deploying storage solutions.
−Removed: For example, solar plus storage offerings tend to have longer cycle times due to factors such as lengthened permitting and inspection times and potential need of a main panel upgrade.
We have a variety of stringent quality standards that we apply in the selection, supervision, and oversight of our third-party suppliers and solar partners.
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In particular, we have been in the past, and may in the future, be required to expand, train and manage our growing employee base and solar partners.
−Removed: Our management will also be required to maintain and expand our relationships with customers, suppliers, and other third parties and attract new customers and suppliers, as well as to manage multiple geographic locations.
−Removed: During 2021, we experienced our highest customer growth in the past five years, and this trend of increased customer demand and sales productivity has increased our backlog of installation projects.
−Removed: Although installation capacity has grown significantly, it has been and may continue to be, outpaced by the growth of our backlog.
−Removed: An increase in backlog creates higher costs incurred in the period relative to completed installations.
−Removed: If we fail to appropriately manage our backlog in relation to the rate at which we install, it could adversely affect our financial performance and hinder our ability to compete effectively.
+Added: management will also be required to maintain and expand our relationships with customers, suppliers, and other third parties and attract new customers and suppliers, as well as to manage multiple geographic locations.
In addition, our current and planned operations, personnel, systems and procedures might be inadequate to support our future growth and may require us to make additional unanticipated investment in our infrastructure, including additional costs for the expansion of our employee base and our solar partners as well as marketing and branding costs.
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Any failure to effectively manage growth could adversely impact our business, operating results, financial condition, and reputation.
−Removed: The COVID-19 pandemic, including its variants, has had and could continue to have an adverse impact on our business, operations, and the markets and communities in which we operate.
−Removed: Our business and financial condition have been, and could continue to be, affected by the COVID-19 pandemic.
−Removed: The COVID-19 pandemic has had an unprecedented impact on the U.S.
−Removed: economy and has impacted our business.
−Removed: The effects of COVID-19, such as the widespread growth in infections, travel restrictions, quarantines, return-to-work restrictions, government regulations, supply chain disruptions, workforce shortages, and site closures have impacted and may continue to impact our ability to staff sales and operations centers and install and maintain solar energy systems in the field, as well as direct-to-home sales activities.
−Removed: The rise and resurgence of increasingly
−Removed: infectious variants, despite efforts to combat the virus with vaccinations, has presented additional challenges and unpredictability that have, and may continue to have, resulted in workforce constraints, delays, and additional costs, particularly in regions experiencing significant outbreaks.
−Removed: The COVID-19 pandemic has also led to significant volatility in global financial markets, which could negatively affect our cost of and access to capital and could have an adverse impact on customer demand and the financial health and credit risk associated with our customers.
−Removed: Future disruptions or instability in capital markets could also negatively impact our ability to raise capital from third parties, such as tax equity partners, to grow our business.
−Removed: In addition, significant inflation, a recession, or a market correction resulting from the impacts of the COVID-19 pandemic has and could continue to adversely affect our business and the value of our common stock.
−Removed: The full economic impact of the pandemic is still not known.
−Removed: COVID-19 has caused disruptions to the supply chain across the global economy, including within the solar industry.
−Removed: Certain suppliers have experienced, and may continue to experience, delays related to a variety of factors, including logistical delays, and component shortages from upstream vendors.
−Removed: We continue to monitor the situation and are working closely with our solar partners and suppliers to develop contingency plans for potential operations and supply chain interruptions.
−Removed: The ultimate impact of the pandemic is highly uncertain, beyond our control, dependent on future developments that cannot be accurately predicted, and subject to change.
−Removed: We will continue to monitor developments affecting our workforce, our customers, and our business operations generally and will take additional actions that we determine are necessary in order to mitigate the impacts, however, any steps we take may be inadequate and, as a result, our business may be harmed.
We typically bear the risk of loss and the cost of maintenance, repair and removal on solar energy systems that are owned or leased by our investment funds.
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The successful assertion of product liability claims against us could result in potentially significant monetary damages that could require us to make significant payments, as well as subject us to adverse publicity, damage our reputation and competitive position and adversely affect sales of our systems and other products.
−Removed: In addition, product liability claims, injuries, defects or other problems experienced by other companies in the residential solar industry could lead to unfavorable market
−Removed: conditions to the industry as a whole, and may have an adverse effect on our ability to attract customers, thus affecting our growth and financial performance.
+Added: In addition, product liability claims, injuries, defects or other problems experienced by other companies in the residential solar industry could lead to unfavorable market conditions to the industry as a whole, and may have an adverse effect on our ability to attract customers, thus affecting our growth and financial performance.
Our business is concentrated in certain markets, putting us at risk of region-specific disruptions.
−Removed: As of December 31, 2022, more than 40% of our customers were in California.
+Added: As of December 31, 2023, California represented over 45% of our customer base.
This concentration of our customer base and operational infrastructure could lead to our business and results of operations being particularly susceptible to adverse economic, regulatory, political, weather and other conditions in this market and in other markets that may become similarly concentrated, in particular the east coast, where we have seen significant growth recently.
−Removed: Recent changes to net metering policy and the tariff structure in California in December 2022 create additional uncertainty and challenges, given the size of our customer base in California.
+Added: Recent changes to net metering policy and the tariff structure in California in December 2022 have created additional uncertainty and challenges, given the size of our customer base in California.
+Added: Originations in California continue to be below levels prior to the NBT transition, and without further increases in originations, our
+Added: new installations in California may continue to decline compared to prior periods, which could have a material adverse effect on our business operations and financial performance.
Our corporate and sales headquarters are located in San Francisco, California, an area that has a heightened risk of earthquakes and nearby wildfires.
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If we fail to compete effectively through our direct-selling efforts, our financial condition, results of operations and growth prospects could be adversely affected.
−Removed: Expansion into new sales channels could be costly and time-consuming.
−Removed: As we enter new channels, we could be at a disadvantage relative to other companies who have more history in these spaces.
−Removed: As we continue to expand into new sales channels, such as direct-to-home, homebuilder, retail, and e-commerce channels and adapt to a remote selling model, we have incurred and may continue to incur significant costs.
+Added: Expanding and maintaining new sales channels and affiliate channel partner networks could be costly and time-consuming.
+Added: As we enter new channels and establish new partnerships, we could be at a disadvantage relative to other companies who have more history in these spaces.
+Added: As we continue to grow and expand our sales channels and affiliate channel partner networks, we may encounter challenges and additional costs.
+Added: With respect to developing our sales channels, such as direct-to-home, homebuilder, retail, and e-commerce channels and adapting to a remote selling model, we have incurred and may continue to incur significant costs.
In addition, we may not initially or ever be successful in utilizing these new channels.
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If we are unable to successfully compete in new channels, our operating results and growth prospects could be adversely affected.
+Added: If we fail to maintain or expand our affiliate channel partner relationships, we may be unable to adequately meet anticipated demand for our solar service offerings, or we may only be able to offer our systems at higher costs or after delays.
+Added: Further, if the terms, including geographic scope, exclusivity, pricing, duration, or other key terms of our agreements with our solar partners are substantially altered, it may impact our operational results and financial performance.
Obtaining a sales contract with a potential customer does not guarantee that the potential customer will not decide to cancel or that we will not need to cancel due to a failed inspection, which could cause us to generate no revenue despite incurring costs and adversely affect our results of operations.
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In addition, per the terms of our Customer Agreements, a customer maintains the ability to cancel before commencement of installation, subject to certain conditions.
−Removed: cancellation of an anticipated sale could materially and adversely affect our financial results, as we may have incurred sales-related, design-related, and other expenses and generated no revenue.
−Removed: The value of our solar energy systems at the end of the associated term of the lease or power purchase agreement may be lower than projected, which may adversely affect our financial performance and valuation.
+Added: Any delay or cancellation of an anticipated sale could materially and adversely affect our financial results, as we may have incurred sales-related, design-related, and other expenses and generated no revenue.
+Added: The value of our solar energy systems at the end of the associated term of the lease or PPA may be lower than projected, which may adversely affect our financial performance and valuation.
We depreciate the costs of our solar energy systems over their estimated useful life of 35 years.
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In addition, we rely, and expect to continue to rely, on licensing agreements with certain third parties for aerial images that allow us to efficiently and effectively analyze a customer’s rooftop for solar energy system specifications.
−Removed: In the event that our current or future products require features that we have not developed or licensed, or we lose the benefit of an existing license, we will be required to develop or obtain such technology through purchase, license or other arrangements.
+Added: In the event that our
+Added: current or future products require features that we have not developed or licensed, or we lose the benefit of an existing license, we will be required to develop or obtain such technology through purchase, license or other arrangements.
If the required technology is not available on commercially reasonable terms, or at all, we may incur additional expenses in an effort to internally develop the required technology.
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Product failures or operational deficiencies also would reduce our revenue from power purchase or lease agreements because they are dependent on system production.
−Removed: widespread product failures or operating deficiencies may damage our market reputation and adversely impact our financial results.
+Added: Any widespread product failures or operating deficiencies may damage our market reputation and adversely impact our financial results.
Our business may be harmed if we fail to properly protect our intellectual property, and we may also be required to defend against claims or indemnify others against claims that our intellectual property infringes on the intellectual property rights of third parties.
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In addition, any future litigation required to enforce our patents, to protect our trade secrets or know-how or to defend us or indemnify others against claimed infringement of the rights of third parties could harm our business, financial condition, and results of operations.
−Removed: We use “open source” software in our solutions, which may require that we release the source code of certain software subject to open source licenses or subject us to possible litigation or other actions that could adversely affect our business.
+Added: We use “open source” software in our solutions, which may require that we release the source code of certain software subject to open source licenses or introduce vulnerabilities into our software that could become exploitable and expose sensitive data, either of which could subject us to possible litigation or other actions that could adversely affect our business.
We utilize software that is licensed under so-called “open source,” “free” or other similar licenses.
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However, our use of open source software may entail greater risks than use of third-party commercial software.
−Removed: Open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code.
+Added: Open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code, which could introduce vulnerabilities that could be exploited and lead to the loss of sensitive or protected data.
In addition, if we combine our proprietary software with open source software in a certain manner, we could, under certain open source licenses, be required to release the source code of our proprietary software to the public.
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Any security breach, unauthorized access or disclosure, or theft of data, including personal information, we, our third-party service providers, and suppliers gather, store, transmit, and use, or other hacking, cyber-attack, phishing attack, and unauthorized intrusions into or through our systems or those of our third party service providers, could harm our reputation, subject us to claims, litigation, financial harm, and have an adverse impact on our business.
−Removed: In the ordinary course of business, we, our third party providers upon which we rely, and our suppliers receive, store, transmit, and use data, including the personal information of customers, such as names, addresses, email addresses, credit information and other housing and energy use information, as well as the personal
−Removed: information of our employees.
−Removed: Unauthorized disclosure of such personal information, whether through a breach of our or those of our third party service providers and suppliers systems by an unauthorized party, including, but not limited to hackers, threat actors, sophisticated nation-states, nation-state-supported actors, personnel theft or misuse of information, or otherwise, could harm our business.
−Removed: In addition, we, our third party service providers upon which we rely, and our suppliers may be subject to a variety of evolving threats, such as computer malware (including as a result of advanced persistent threat intrusions), ransomware, malicious code (such as viruses or worms), social engineering (including spear phishing and smishing attacks), telecommunications failures, natural disasters and extreme weather events, general hacking and other similar threats.
−Removed: Cybersecurity incidents have become more prevalent, have occurred on our systems in the past, and could occur on our systems and those of our third parties in the future.
+Added: In the ordinary course of business, we, our third-party providers upon which we rely, and our suppliers collect, receive, store, transmit, process, and use proprietary, confidential, and sensitive data, including the personal information of customers, such as names, addresses, email addresses, credit information and other housing and energy use information, as well as the personal information of our employees.
+Added: Unauthorized disclosure of such proprietary, confidential, or sensitive data, including personal information, whether through a breach of our or those of our third-party service providers and suppliers systems by an unauthorized party, including, but not limited to hackers, threat actors, sophisticated nation-states, nation-state-supported actors, personnel theft or misuse of information, or otherwise, could harm our business.
+Added: Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.
+Added: During times of war and other major conflicts, we, the third parties upon which we rely, and our customers may be vulnerable to a heightened risk of these attacks, including retaliatory
+Added: cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.
+Added: In addition, we, our third-party service providers upon which we rely, and our suppliers may be subject to a variety of evolving threats, such as computer malware (including as a result of advanced persistent threat intrusions), ransomware, malicious code (such as viruses or worms), social engineering (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), telecommunications failures, natural disasters and extreme weather events, general hacking, and other similar threats.
+Added: Cybersecurity incidents have become more prevalent, and could occur on our systems and those of our third parties in the future.
Our team members who work remotely pose increased risks to our information technology systems and data, because many of them utilize less secure network connections outside our premises.
+Added: Applicable data privacy and security obligations may require us to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents.
+Added: Such disclosures are costly, and the disclosure or the failure to comply with such requirements could lead to adverse consequences.
Inadvertent disclosure of confidential data, such as personal information, or if a third party were to gain unauthorized access to this type of data in our possession, has resulted in, and could result in future claims or litigation arising from damages suffered by those affected, government enforcement actions (for example, investigations, fines, penalties, audits, and inspections), additional reporting requirements and/or oversight, indemnification obligations, reputational harm, interruptions in our operations, financial loss, and other similar harms.
In addition, we could incur significant costs in complying with the multitude of federal, state and local laws, and applicable independent security control frameworks, regarding the unauthorized disclosure of personal information.
−Removed: Although we have not experienced a material information security breach in the last three years, and have developed systems and processes to prevent or detect security breaches and protect the confidential information we receive, store, transmit, and use, we cannot assure you that such measures will provide absolute security.
+Added: While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.
Finally, any perceived or actual unauthorized disclosure of such information, unauthorized intrusion, or other cyberthreat could harm our reputation, substantially impair our ability to attract and retain customers, interrupt our operations, and have an adverse impact on our business.
+Added: We rely on third-party service providers and technologies to operate critical business systems to process sensitive information in a variety of contexts, including, without limitation, cloud-based infrastructure, encryption and authentication technology, employee email, and other functions.
+Added: Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place.
+Added: If our third-party service providers experience a security incident or other interruption, we could experience adverse consequences.
+Added: While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.
While we currently maintain cybersecurity insurance, such insurance may not be sufficient to cover us against claims, and we cannot be certain that cyber insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
−Removed: Our business is subject to complex and evolving laws and regulations regarding privacy and data protection (“data protection laws”).
+Added: We are, and may become, subject to stringent and evolving U.S.
+Added: and foreign laws, regulations, and rules, contractual obligations, industry standards, policies and other obligations related to data privacy and security.
Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, increased cost of operations, or otherwise harm our business.
−Removed: The regulatory environment surrounding data privacy and protection is constantly evolving and can be subject to significant change.
−Removed: New data protection laws, including California legislation and regulation which affords California consumers an array of new rights, such as the right to be informed about what kinds of personal data companies have collected and why it was collected, pose increasingly complex compliance challenges and potentially elevate our costs.
−Removed: Complying with varying jurisdictional requirements could increase the costs and complexity of compliance, and violations of applicable data protection laws could result in significant penalties.
−Removed: Any failure, or perceived failure, by us to comply with applicable data protection laws could result in proceedings or actions brought against us by governmental entities or others, subject us to significant fines, penalties, judgments and negative publicity, require us to change our business practices, increase the costs and complexity of compliance, and adversely affect our business.
+Added: In the ordinary course of business, we process personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, and sensitive third-party data.
+Added: Our data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and security.
+Added: Obligations related to data privacy and security (and consumers’ data privacy expectations) are quickly changing, becoming increasingly stringent, and creating uncertainty.
+Added: Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions.
+Added: Preparing for and complying with these obligations requires us to devote significant resources, which may necessitate changes to our services, information technologies, systems, and practices, and to those of any third parties that process personal data on our behalf.
+Added: In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws, and other similar laws.
+Added: For example, the Telephone Consumer Protection Act of 1991 (“TCPA”) imposes various consumer consent requirements and other restrictions on certain telemarketing activity and other communications with
+Added: consumers by phone, fax, or text message, and violations of the TCPA violations can result in significant financial penalties, including penalties or criminal fines imposed by the Federal Communications Commission.
+Added: In the past few years, numerous U.S.
+Added: states—including California, Colorado, and Connecticut —have enacted comprehensive data privacy and security laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data.
+Added: As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making.
+Added: The exercise of these rights may impact our business and ability to provide our products and services.
+Added: Certain states also impose stricter requirements for processing certain personal data, including sensitive information.
+Added: These state laws allow for statutory fines for noncompliance.
+Added: For example, the CCPA applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights.
+Added: The CCPA provides for fines of up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages.
+Added: These developments further complicate compliance efforts, and increase legal risk and compliance costs for us, the third parties upon whom we rely, and our customers.
+Added: We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations.
+Added: Moreover, despite our efforts, our personnel or third parties on whom we rely may fail to comply with such obligations, which could negatively impact our business operations.
+Added: If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to:
+Added: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections), litigation (including class-action claims), additional reporting requirements and/or oversight, bans on processing personal data, and orders to destroy or not use personal data.
+Added: Information technology systems are a critical component of our long-term competitive strategy, and if we fail to timely and responsibly implement, adopt, and innovate in response to rapidly evolving technological developments, including the use of artificial intelligence, our ability to compete, financial condition, and operating results could be adversely impacted.
+Added: Our ability to compete effectively requires our continued investment in technology to ensure we provide ongoing value to our current and potential customers and operate efficiently.
+Added: However, there are many uncertainties in newly emerging technologies and if we are unable to integrate and introduce new technologies, products, and services effectively, our ability to compete may be adversely affected and our business could be materially harmed.
+Added: Whether we compete effectively may also be impacted by our ability to accurately anticipate and effectively respond to the risks and opportunities presented by the disruptions and developments of emerging and newly available technologies, including artificial intelligence ("AI").
+Added: We may not be successful in anticipating or responding to these developments on a timely and cost-effective basis, and if the rate at which we adopt and the ways in which we apply new technologies lags or differs negatively in meaningful ways from our competitors, our business could be adversely affected.
+Added: In particular, generative AI and other new and emerging technologies present a number of inherent risks and incorporating them into our information technology infrastructure, products, and services responsibly is crucial to maintaining and strengthening our competitive position in the market.
+Added: For example, AI technologies may create unintended biases, accuracy issues, and discriminatory outcomes that could lead to errors in our decision-making, product development or other business activities, which could have a negative impact on our business, operating results and financial condition.
+Added: Further, the unauthorized use of AI technologies by our employees, third-party providers, or our suppliers pose additional risks relating to data privacy and security, including the potential exposure of our confidential information to unauthorized recipients.
+Added: Use of AI tools could result in future claims or litigation related to unauthorized access to or use of confidential information and failure to comply with open source software requirements.
Damage to our brand and reputation or failure to expand our brand would harm our business and results of operations.
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Shortages of skilled labor could significantly delay a project or otherwise increase our costs.
−Removed: Because our profit on a particular installation is based in part on assumptions as to the cost of such project, cost overruns, delays or other execution issues may cause us to not achieve our expected margins or cover our costs for that project.
+Added: Because our profit on a particular installation is based in part on assumptions as to the cost of such a project, cost overruns, delays or other execution issues may cause us to not achieve our expected margins or cover our costs for that project.
In addition, because we are headquartered in the San Francisco Bay Area, we compete for a limited pool of technical and engineering resources that requires us to pay wages that are competitive with relatively high regional standards for employees in these fields.
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Regulators may limit the type of electricians qualified to install and service our solar and battery systems in California, which may result in workforce shortages, operational delays, and increased costs.
−Removed: On July 27, 2021, the CSLB decided that only electricians with a certain license (C-10) would be eligible to install energy storage systems in California (the “July CSLB Decision”).
−Removed: On November 29, 2021, the CSLB voted to postpone initiating a formal rulemaking process thereby commencing a stakeholder process to develop an
−Removed: alternative regulatory proposal to be brought back to its Board in March 2022 and committing to adhere to a full rulemaking process in accordance with the California Administrative Procedure Act.
−Removed: In June 2022, the CSLB voted to commence the official rulemaking process on the required licensing to install storage systems in California, including notice and comment, in accordance with the CA Administrative Procedures Act.
−Removed: In the proposal, CSLB recommends that C46 license holders can install battery energy storage systems that do not exceed 80 kWh.
−Removed: For battery energy storage systems that exceed 80 kWh, a C10 license is proposed to be required.
−Removed: While our workforce includes workers operating under both C-10 and C-46 licenses in California, there are a limited number of C-10 certified electricians in the state, which may result in workforce shortages, operational delays, and increased costs if the CSLB Decision stands.
+Added: In June 2023, the CSLB initiated a formal rule proposal to allow solar installers (C-46 license holders) to continue to install energy storage systems less than 80 kWh when “incidental and supplemental” to the installation of a PV system, but would require the use of a C-10 license holder for repair and retrofit work.
+Added: The proposed rule is subject to notice and comment procedures and is still pending.
+Added: The energy storage systems that we install in the residential market typically do not exceed 80 kWh.
+Added: While our workforce includes workers operating under both C-10 and C-46 licenses in California, there are a limited number of C-10 certified electricians in the state, which may result in workforce shortages, operational delays, and increased costs.
Obtaining a C-10 license can be an extended process, and the timing and cost of having a large number of our C-46 licensed electricians seek such additional qualification is unclear.
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We cannot predict how the courts will rule in any potential lawsuit against us.
−Removed: Decisions in favor of parties that bring
−Removed: lawsuits against us could subject us to significant liability for damages, adversely affect our results of operations and harm our reputation.
+Added: Decisions in favor of parties that bring lawsuits against us could subject us to significant liability for damages, adversely affect our results of operations and harm our reputation.
A failure to comply with laws and regulations relating to our interactions with current or prospective residential customers could result in negative publicity, claims, investigations, and litigation, and adversely affect our financial performance.
Our business involves transactions with customers.
−Removed: We and our solar partners must comply with numerous federal, state and local laws and regulations that govern matters relating to our interactions with customers, including those pertaining to privacy and data security, consumer financial and credit transactions, home improvement contracts, warranties and direct-to-home solicitation, along with certain rules and regulations specific to the marketing and sale of residential solar products and services.
+Added: We and our solar partners must comply with numerous federal, state and local laws and regulations that govern matters relating to our interactions with customers, including those pertaining to data privacy and security, consumer financial and credit transactions, home improvement contracts, warranties and direct-to-home solicitation, along with certain rules and regulations specific to the marketing and sale of residential solar products and services.
These laws and regulations are dynamic and subject to potentially differing interpretations, and various federal, state and local legislative and regulatory bodies may expand current laws or regulations, or enact new laws and regulations, regarding these matters.
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There is substantial risk of serious illness, injury, or death if proper safety procedures are not followed.
−Removed: Our operations are subject to regulation under the U.S.
−Removed: Occupational Safety and Health Act ("OSHA") and equivalent state laws.
+Added: Our operations are subject to regulation under OSHA and equivalent state laws.
Changes to OSHA requirements, or stricter interpretation or enforcement of existing laws or regulations, could result in increased costs.
−Removed: If we fail to comply with applicable OSHA regulations,
−Removed: even if no work-related serious illness, injury, or death occurs, we may be subject to civil or criminal enforcement and be required to pay substantial penalties, incur significant capital expenditures, or suspend or limit operations.
+Added: If we fail to comply with applicable OSHA regulations, even if no work-related serious illness, injury, or death occurs, we may be subject to civil or criminal enforcement and be required to pay substantial penalties, incur significant capital expenditures, or suspend or limit operations.
Any accidents, citations, violations, illnesses, injuries or failure to comply with industry best practices may subject us to adverse publicity, damage our reputation and competitive position and adversely affect our business.
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• reducing the cost of components for our solar service offerings;
−Removed: • growing and maintaining our channel partner network;
+Added: • growing and maintaining our affiliate channel partner network;
• maintaining high levels of product quality, performance, and customer satisfaction;
−Removed: • mitigating the impact of the COVID-19 pandemic on our business;
• growing our direct-to-consumer business to scale.
3 unchanged sentences
We have experienced seasonal and quarterly fluctuations in the past and expect these fluctuations to continue.
−Removed: However, given that we are operating in a rapidly changing industry, those fluctuations may be masked by our recent growth rates and thus may not be readily apparent from our historical results of operations.
+Added: given that we are operating in a rapidly changing industry, those fluctuations may be masked by our recent growth rates and thus may not be readily apparent from our historical results of operations.
As such, our past quarterly results of operations may not be good indicators of likely future performance.
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• the loss of one or more key partners or the failure of key partners to perform as anticipated;
−Removed: • our failure to successfully integrate the Vivint Solar business;
• actual or anticipated developments in our competitors’ businesses or the competitive landscape;
• actual or anticipated changes in our growth rate;
−Removed: • general economic, industry and market conditions beyond our control, such as the ongoing COVID-19 pandemic, inflationary pressures, other macroeconomic factors, and associated economic downturn;
+Added: • general economic, industry and market conditions beyond our control, such as bank failures, the COVID-19 pandemic, inflationary pressures, other macroeconomic factors, and associated economic downturn;
• changes to our cancellation rate.
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We have in the past provided, and may from time to time provide, guidance regarding our future performance that represents our management’s estimates as of the date such guidance is provided.
−Removed: Any such guidance is based upon a number of assumptions with respect to future business decisions (some of which may change) and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies (many of which are beyond our control, including those related to the ongoing COVID-19 pandemic, inflationary pressures, other macroeconomic factors, and associated economic downturn).
+Added: Any such guidance is based upon a number of assumptions with respect to future business decisions (some of which may change) and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies (many of which are beyond our control, including those related to the COVID-19 pandemic, inflationary pressures, geopolitical conflict, bank failures, other macroeconomic factors, and associated economic downturn).
Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions that inform such guidance will not materialize or will vary significantly from actual results.
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Treasury grants, and other tax benefits.
−Removed: We have relied on, and will continue to rely on, tax equity investment funds, which are financing
−Removed: structures that monetize a substantial portion of those benefits, in order to finance our solar service offerings.
+Added: We have relied on, and will continue to rely on, tax equity investment funds, which are financing structures that monetize a substantial portion of those benefits, in order to finance our solar service offerings.
If, for any reason, we are unable to continue to monetize those benefits through these arrangements, we may be unable to provide and maintain our solar service offerings for customers on an economically viable basis.
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• changes in the legal or tax risks associated with these financings;
−Removed: • legislative or regulatory changes or decreases to these incentives.
−Removed: 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 energy properties, including solar power and storage facilities owned for business purposes.
+Added: • legislative or regulatory changes or decreases to these incentives, including forthcoming final regulations from the U.S.
+Added: Treasury regarding the Section 48 investment tax credit and the “tech-neutral” Section 48E Clean Electricity Investment Tax Credit.
+Added: The federal government currently offers a Commercial ITC under Section 48(a) of the Code, for the installation of certain energy properties, including solar power and storage facilities owned for business purposes.
The Commercial ITC was extended and expanded upon by the IRA, which was signed into law by President Biden on August 16, 2022.
−Removed: The IRA also created several ITC “adders” to further incentivize various types of solar and storage facilities.
−Removed: Our inability to operationalize these tax credits, avail ourselves of IRA benefits in a timely fashion, or ensure the facilities we intend to qualify under the ITC adders satisfy the applicable requirements, could impact our ability to compete, and compromise or eliminate opportunities to financially benefit from these tax credits, which would adversely impact our business.
−Removed: Additional guidance regarding the ITC adders is expected from the U.S.
−Removed: Department of the Treasury ("U.S.
−Removed: This guidance will be necessary in determining whether and to what extent we may benefit from the various ITC adders, and our ability to incorporate it into our business operations, which will be further impacted by the timing of any additional guidance provided by the U.S.
−Removed: On February 13, 2023, the U.S.
−Removed: Treasury issued initial guidance regarding the Low-Income Communities Bonus Credit, which stated that the U.S.
−Removed: Treasury and the IRS will not accept applications to use this adder until the third quarter of 2023, or thereafter.
−Removed: Treasury also stated that further guidance is forthcoming and will address application procedures, additional criteria, applicable definitions, and other information necessary to submit an application.
−Removed: Without additional clarifying guidance, or changes to the program construct, we are likely to face challenges efficiently monetizing the Low-Income Communities Bonus Credit based on the initial program guidance.
−Removed: The federal government also currently 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.
+Added: The IRA also created several ITC “bonus credits” to further incentivize various types of solar and storage facilities.
+Added: Our inability to operationalize these tax credits, avail ourselves of IRA benefits in a timely fashion, or ensure the facilities we intend to qualify under the ITC bonus credits satisfy the applicable requirements could impact our ability to compete, and compromise or eliminate opportunities to financially benefit from these tax credits, which would adversely impact our business.
+Added: Department of the Treasury is in various stages of issuing guidance on the ITC bonus credits.
+Added: On August 10, 2023, the Treasury issued a final rule for the Low-Income Communities Bonus Credit Program under Section 48(e) of the Internal Revenue Code, and it is currently reviewing applications for it, along with the U.S.
+Added: Department of Energy.
+Added: In addition, the U.S.
+Added: Treasury issued initial guidance on the Energy Community Bonus Credit (Notice 2023-29) on April 4, 2023, followed by additional guidance on June 15, 2023 (Notice 2023-47).
+Added: Finally, the U.S.
+Added: Treasury issued guidance on the Domestic Content Bonus Credit (Notice 2023-38) on May 12, 2023.
+Added: Our ability to use this bonus credit will depend in part on the extent to which our equipment suppliers and financing partners have confidence in the potentially burdensome, complicated regulations.
+Added: Forthcoming further regulations and guidance on the ITC bonus credits and allocation process will be necessary to determine whether, to what extent, and when we may benefit from the bonus credits, and our ability to incorporate them into our business operations, which will be further impacted by when the U.S.
+Added: Treasury promulgates additional guidance and the official regulations.
+Added: Treasury is expected to issue final rules on the Energy Communities Bonus Credit and the Domestic Content Bonus Credit in 2024 or early 2025.
+Added: The federal government also currently offers a 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.
We and our tax equity partners have claimed and expect to continue to claim ITCs with respect to qualifying solar energy projects.
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Treasury may modify existing guidance, possibly with retroactive effect.
+Added: For example, on November 17, 2023 the U.S.
+Added: Treasury published a Notice of Proposed Rulemaking (“NPRM”) titled “Definition of Energy Property and Rules Applicable to the Energy Credit,” which will update the rules and regulations of the Section 48 ITC.
Any of the foregoing items could reduce the amount of ITCs available to us and our tax equity partners.
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Obtaining tax equity funding (and tax equity funding on advantageous terms) also may become more challenging.
−Removed: Additionally, the benefits of the Commercial ITC have historically enhanced our ability to provide
−Removed: competitive pricing for customers.
+Added: Additionally, the benefits of the Commercial ITC have historically enhanced our ability to provide competitive pricing for customers.
Reductions in, eliminations of or expirations of governmental incentives such as the Residential Clean Energy Credit could reduce the number of customers who choose to purchase our solar energy systems.
−Removed: Additionally, potential investors must remain satisfied that the structures that we offer make the tax benefits associated with solar energy systems available to these investors, which depends on the investors’ assessment of the tax law, the absence of any unfavorable interpretations of that law and the continued application of existing tax law and interpretations to our funding structures.
+Added: Additionally, potential investors must remain satisfied that the structures that we offer make the tax benefits associated with solar energy systems available to these investors, which depends on the investors’ assessment of
+Added: the tax law, the absence of any unfavorable interpretations of that law and the continued application of existing tax law and interpretations to our funding structures.
Changes in existing law or interpretations of existing law by the IRS and/or the courts could reduce the willingness of investors to invest in funds associated with these solar energy systems.
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New investment fund structures or other financing mechanisms may become available, but if we are unable to take advantage of these fund structures and financing mechanisms, we may be at a competitive disadvantage.
−Removed: If, for any reason, we are unable to finance our solar service offerings through tax-advantaged structures or if we are unable to realize or monetize Commercial ITCs or other tax benefits, we may no longer be able to provide our solar service offerings to new customers on an economically viable basis, which would have a material adverse effect on our business, financial condition, and results of operations.
−Removed: If the IRS makes determinations that the fair market value of our solar energy systems is materially lower than what we have claimed, we may have to pay significant amounts to our fund investors, and our business, financial condition, and prospects may be materially and adversely affected.
−Removed: We and our fund investors claim the Commercial ITC in amounts based on the fair market value of our solar energy systems.
−Removed: We have obtained independent appraisals to determine the fair market values we report for claiming Commercial ITCs.
−Removed: With respect to Commercial ITCs, the IRS may review the fair market value on audit and determine that the tax credits previously claimed must be reduced.
−Removed: If the fair market value is determined in these circumstances to be less than what we or our tax equity investment funds reported, we may owe our fund investors an amount equal to this difference (including any interest and penalties), plus any costs and expenses associated with a challenge to that valuation.
+Added: If, for any reason, we are unable to finance our solar service offerings through tax-advantaged structures or if we are unable to realize or monetize Commercial ITCs or other tax benefits, we may no longer be able to provide our solar service offerings to new customers on an economically viable basis, which would have a material adverse effect on our business, financial condition, and operations.
+Added: If the IRS makes determinations that the creditable basis of our solar energy systems is materially lower than what we have claimed, we may have to pay significant amounts to our fund investors, and our business, financial condition, and prospects may be materially and adversely affected.
+Added: We and our fund investors claim the Commercial ITC in amounts based on the purchase price paid by our funds for our solar energy systems ( i.e.
+Added: , the funds’ basis in the solar energy systems, or creditable basis).
+Added: Such purchase prices are based on the fair market value of our systems as determined pursuant to independent appraisals obtained by us.
+Added: With respect to Commercial ITCs, the IRS may on audit determine that the creditable basis for our solar energy systems is lower than the amount determined by the appraisal and accordingly argue that the tax credits previously claimed must be reduced.
+Added: If the creditable basis is determined in these circumstances to be less than what we or our tax equity investment funds reported, we may owe our fund investors an amount equal to the amount by which the ITCs are reduced (including any interest and penalties), plus any costs and expenses associated with a challenge to that valuation.
We could also be subject to tax liabilities, including interest and penalties.
−Removed: If the IRS further disagrees now or in the future with the amounts we or our tax equity investment funds reported regarding the fair market value of our solar energy systems, it could have a material adverse effect on our business, financial condition, and prospects.
−Removed: We have purchased insurance policies insuring us and related parties for additional taxes owed in respect of lost Commercial ITCs, gross-up costs and expenses incurred in defending the types of claims described above.
+Added: If the IRS further disagrees now or in the future with the amounts we or our tax equity investment funds reported regarding the creditable or depreciable basis of our solar energy systems, it could have a material adverse effect on our business, financial condition, and prospects.
+Added: We have purchased insurance policies insuring us and related parties for additional taxes owed in respect of lost Commercial ITCs, depreciation, gross-up costs and expenses incurred in defending the types of claims described above.
However, these policies only cover certain investment funds and have negotiated exclusions from, and limitations to, coverage and therefore may not cover us for all such lost Commercial ITCs, taxes, costs and expenses.
−Removed: The IRS is auditing one of our investment funds covered by our 2018 insurance policy in an audit involving a review of the fair market value determination of our solar energy systems.
+Added: The IRS is auditing one of our investors in an audit involving a review of the fair market value determination of our solar energy systems in the investment fund, which is covered by our 2018 insurance policy.
If this audit results in an adverse final determination, we may be subject to an indemnity obligation to our investor, which may result in certain limited out-of-pocket costs and potential increased insurance premiums in the future.
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federal, state and local governmental bodies provide incentives to owners, distributors, installers and manufacturers of solar energy systems to promote solar energy.
−Removed: These incentives include Commercial ITCs and Residential Energy Efficient Property Credit, as discussed above, as well as other tax credits, rebates and solar renewable energy credits (“SRECs”) associated with solar energy generation.
+Added: These incentives include Commercial ITCs and Residential Energy Efficient Property Credit, as discussed above, as well as other tax credits, rebates and SRECs associated with solar energy generation.
Some markets, such as New Jersey and Maryland, currently utilize SRECs.
−Removed: SRECs can be volatile and their value could decrease over time as the supply of SREC-producing solar energy systems installed in a particular
−Removed: market increases.
−Removed: For example, in New Jersey, because of the substantial supply of solar energy systems installed, the state was on the cusp of reaching the solar carve-out under the state’s Renewable Portfolio Standard.
−Removed: In May 2018, legislation was enacted to expand New Jersey’s solar carve-out to 5.1% of kilowatt hours of electricity sold in the state.
−Removed: In December 2019, the state regulators adopted a transition program to follow the current SREC program that will be based on a fixed price SREC model and which is anticipated to be available to replace the current SREC program.
+Added: SRECs can be volatile and their value could decrease over time as the supply of SREC-producing solar energy systems installed in a particular market increases.
We rely on these incentives to lower our cost of capital and to attract investors, all of which enable us to lower the price we charge customers for our solar service offerings.
−Removed: These incentives have had a significant impact on the development of solar energy but they could change at any time, especially in light of the recent change in administration, as further described below.
+Added: These incentives have had a significant impact on the development of solar energy but they could change at any time, especially after changes in the Administration or Congress.
These incentives may also expire on a particular date, end when the allocated funding is exhausted, or be reduced, terminated or repealed without notice.
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Congress is constantly considering changes to the tax code.
+Added: For example, on June 13, 2023, the House Ways & Means Committee passed legislation (H.R.
+Added: 3938) that, if it became law, would eliminate the IRA’s Section 48E Clean Electricity Investment Credit, which is scheduled to take effect on January 1, 2025.
Further limitations on, or elimination of, the tax benefits that support the financing of solar energy under current U.S.
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The State of California provides an exclusion (the “Solar Exclusion”) from the assessment of California property taxes for qualifying “active solar energy systems” installed as fixtures before January 1, 2027, provided such systems are locally rather than centrally assessed (“Eligible Property”).
−Removed: However, the Solar Exclusion is not a
−Removed: permanent exclusion from the assessment of property tax.
+Added: However, the Solar Exclusion is not a permanent exclusion from the assessment of property tax.
Once a change in ownership of the Eligible Property occurs, the Eligible Property may be subject to reassessment and California property taxes may become due.
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The risk of errors is increased in light of the complexity of our business and investment funds.
−Removed: For example, we must deal with significant complexity in accounting for our fund structures and the resulting allocation of net income (loss) between our stockholders and noncontrolling interests under the hypothetical liquidation at book value (“HLBV”) method as well as the income tax consequences of these fund structures.
+Added: For example, we must deal with significant complexity in accounting for our fund structures and the resulting allocation of net (loss) income between our stockholders and noncontrolling interests under the hypothetical liquidation at book value (“HLBV”) method as well as the income tax consequences of these fund structures.
As we enter into additional investment funds, which may have contractual provisions different from those of our existing funds, the analysis as to whether we consolidate these funds, the calculation under the HLBV method, and the analysis of the tax impact could become increasingly complicated.
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Additionally, states may impose other limitations on the use of NOLs and tax credit carryforwards.
−Removed: For example, California has recently imposed other limitations on the use of NOLs and limited the use of certain tax credits for taxable years beginning in 2020 through 2022.
Any such limitations on our ability to use our NOLs and other tax assets could adversely impact our business, financial condition, and results of operations.
−Removed: We have performed an analysis to determine whether an ownership change under Section 382 of the Code had occurred and determined no ownership changes were identified as of December 31, 2022.
−Removed: Vivint Solar, Inc.
−Removed: underwent an ownership change as of October 8, 2020.
+Added: We have performed an analysis
+Added: to determine whether an ownership change under Section 382 of the Code had occurred and determined no ownership changes were identified as of December 31, 2023.
We may be required to record an impairment expense on our goodwill or intangible assets.
−Removed: We are required under generally accepted accounting principles to test goodwill for impairment at least annually or when events or changes in circumstances indicate that the carrying amount may be impaired, and to review our intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
+Added: We are required under generally accepted accounting principles to test goodwill for impairment at least annually or when events or changes in circumstances indicate that the carrying value may be impaired, and to review our intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
Factors that can lead to impairment of goodwill and intangible assets include significant adverse changes in the business climate and actual or projected operating results, declines in the financial condition of our business and sustained decrease in our stock price.
−Removed: Since our annual impairment test of goodwill for the fiscal year ended December 31, 2022, we have not identified any qualitative factors that would require a quantitative goodwill impairment analysis.
−Removed: However, if we identify any factors that could indicate an impairment, including a sustained decrease in our stock price, we may be required to record charges to earnings if our goodwill becomes impaired.
+Added: During the third quarter of fiscal 2023, we performed an interim quantitative assessment as of September 30, 2023 related to the recoverability of our goodwill for our one reporting unit as a result of a material sustained decline in our stock price.
+Added: We concluded that the fair value of our one reporting unit did not exceed its carrying value as of September 30, 2023 and recorded an impairment of $1.2 billion in our consolidated statements of operations.
+Added: As of October 1, 2023, we conducted our annual goodwill impairment test.
+Added: The test concluded that no additional impairment had occurred during the fourth quarter of 2023.
+Added: It is possible that we could recognize further goodwill impairment losses in the future if, among other factors:
+Added: • there are further sustained declines in our stock price
+Added: • valuations for comparable companies or comparable acquisitions valuations deteriorate
+Added: the cost of equity or debt capital increases;
+Added: • the outlook for future cash flows for our reporting unit deteriorate including but not limited to, increased competition, changes to discount rate, downward forecast revisions, restricting plans or changes in state and federal regulations affecting our business.
+Added: For further information regarding the assessment please see Note 2, Summary of Significant Accounting Policies, in this Annual Report on Form 10-K.
Risks Related to Ownership of Our Common Stock
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• actual or anticipated changes in our results of operations;
−Removed: • the continued adverse impact of the COVID-19 pandemic;
• changes in tax and other incentives that we rely upon in order to raise tax equity investment funds;
−Removed: • actual or perceived privacy or data security incidents;
+Added: • actual or perceived data privacy or security incidents;
• our ability to protect our intellectual property and other proprietary rights;
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• changes in accounting standards, policies, guidelines, interpretations or principles;
−Removed: • major catastrophic events or civil unrest;
+Added: • major catastrophic events, global armed conflicts or civil unrest;
• negative publicity, including accurate or inaccurate commentary or reports regarding us, our products, our sales professionals or other personnel, or other third parties affiliated with us, on social media platforms, blogs, and other websites;
• any significant change in our management;
−Removed: • general economic conditions and slow or negative growth of our markets.
+Added: • general economic conditions including instability in financial markets and bank failures, and slow or negative growth of our markets.
Further, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies.
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These sales also could cause the market price of our common stock to decline and make it more difficult for you to sell shares of our common stock.
−Removed: Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
−Removed: Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors and therefore depress the trading price of our common stock.
−Removed: Among other things, our amended and restated certificate of incorporation and amended and restated bylaws include provisions:
−Removed: • creating a classified board of directors whose members serve staggered three-year terms;
+Added: Anti-takeover provisions contained in our restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
+Added: Our restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors and therefore depress the trading price of our common stock.
+Added: Among other things, our restated certificate of incorporation and amended and restated bylaws include provisions:
• authorizing “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our common stock;
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As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation law, which prevents certain stockholders holding more than 15% of our outstanding capital stock from engaging in certain business combinations without approval of the holders of at least two-thirds of our outstanding capital stock not held by such stockholder.
−Removed: Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock.
−Removed: Provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws limit the ability of our stockholders to call special meetings and prohibit stockholder action by written consent.
−Removed: Our amended and restated certificate of incorporation provides that our stockholders may not take action by written consent.
+Added: Any provision of our restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock.
+Added: Provisions contained in our restated certificate of incorporation and amended and restated bylaws limit the ability of our stockholders to call special meetings and prohibit stockholder action by written consent.
+Added: Our restated certificate of incorporation provides that our stockholders may not take action by written consent.
Instead, any such actions must be taken at an annual or special meeting of our stockholders.
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These provisions may delay the ability of our stockholders to force consideration of a stockholder proposal, including a proposal to remove directors.
−Removed: Provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws could preclude our stockholders from bringing matters before meetings of stockholders and delay changes in our board of directors.
+Added: Provisions contained in our restated certificate of incorporation and amended and restated bylaws could preclude our stockholders from bringing matters before meetings of stockholders and delay changes in our board of directors.
Our amended and restated bylaws provide advance notice procedures for stockholders seeking to bring business before, or nominate candidates for election as directors at, our annual or special meetings of stockholders.
−Removed: In addition, our amended and restated certificate of incorporation provides that stockholders may remove directors only for cause.
−Removed: Any amendment of these provisions in our amended and restated bylaws or amended and restated certificate of incorporation would require approval by holders of at least 66 2/3% of our then outstanding capital stock.
+Added: In addition, our restated certificate of incorporation provides that stockholders may remove directors only for cause.
+Added: Any amendment of these provisions in our amended and restated bylaws or restated certificate of incorporation would require approval by holders of a majority of our then outstanding capital stock.
These provisions could preclude our stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors.
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In addition, our amended and restated bylaws also provide that, unless we consent to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
−Removed: If a court were to find the choice of forum provisions contained in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.
+Added: If a court were to find the choice of forum provisions contained in our amended and restated bylaws to be
+Added: inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.
If securities or industry analysts cease publishing research or reports about us, our business, our market or our competitors, or if they adversely change their recommendations regarding our common stock, the market price of our common stock and trading volume could decline.
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In connection with the issuance of the Notes, we entered into the Capped Call transactions with the option counterparties.
−Removed: The capped call transactions are expected generally to reduce the potential dilution to our common
−Removed: stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap.
+Added: The Capped Call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap.
The option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the Notes (and are likely to do so during the observation period for conversions of Notes following November 1, 2025 or following any repurchase of Notes by us).
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The potential effect, if any, of these transactions and activities on the market price of our common stock will depend in part on market conditions and cannot be ascertained at this time.
−Removed: Unresolved Staff Comments.
−Removed: Not applicable.
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.