Sunnova Ends 2019 With Growth but Overall Losses, Heralds ‘Year of the Battery’

Residential solar company Sunnova experienced a surge in customers buying energy storage in the fourth quarter of 2019, CEO John Berger said on an earnings call Tuesday.

The share of customers opting for batteries alongside solar, referred to as the "attachment rate," jumped from 15 percent in Q3 to 24 percent in Q4. The continued growth prospects inspired Berger to deem 2020 the “year of the battery.”

“Batteries continue to add to Sunnova’s profitability and recurring cash flow,” Berger said. “The instability of regional power grids is becoming increasingly intolerable for consumers. As a result, demand for our product offerings continues to increase.”

The potential to add batteries to solar systems will be a “significant catalyst” for future growth, said Berger, as Sunnova wrapped up a quarter that brought in more than 6,000 new residential solar customers, an 84 percent increase over the same period in 2018. The company now offers energy storage in 16 of its more than 20 markets, but penetration among its overall customer base remains in the low single-digit percentages. That could make existing customers a receptive audience for battery retrofits, even as Sunnova pushes to increase the attachment rate on new deals.

Despite projecting confidence, Sunnova logged another quarter of losses — a trend that’s held in all quarters since the company’s IPO in July 2019. For the full year 2019, Sunnova reported losses at $133.4 million, compared to $68.4 million in the prior year. The company attributed the higher losses to IPO-related costs, an increase in customers and losses on interest-rate swaps. But Sunnova did reduce its Q4 losses compared to the same period in 2018, and the stock price responded by drifting up nearly $2 before mellowing to close at pre-results prices.   

Heading into 2020, Berger said Sunnova will continue growing storage deployments in expected states like California as well as in areas where the economics are a harder sell, such as Texas. The CEO attributed much of the spike in interest to resiliency concerns related to wildfires and significant storms.

“Anywhere you see that, you’re going to see some storage pickup,” said Berger.

As earthquakes continue to roil Puerto Rico, for instance, Berger said Sunnova has kept the power on for 2,500 customers.  

The demand is giving the company a boost even as policy changes threaten to eat into its market. A recent decision from California regulators to allow a community solar program designed by the Sacramento Municipal Utility District (SMUD) to supplement installations on new homes may mean more utilities propose similar programs, possibly eroding the surge that residential providers expect from a state requirement for solar on all new homes.

When asked about that approval, Berger appeared unfazed, saying that Sunnova wants consumers to have a choice. Plus, he said, residential solar-plus-storage, when compared to SMUD’s program, is “a better energy service at a better price.”

In the lead-up to the implementation of California’s mandate, Sunnova and competitors such as SunPower and Sunrun rolled out new partnerships with homebuilders and roofers. Those competitors are also prioritizing storage; SunPower has forecasted residential storage attachment rates above 20 percent by the end of 2020.

This month Sunnova also announced a partnership with Generac, a generator company that recently entered the solar and storage businesses. Sunnova will be the exclusive lease and power-purchase agreement provider for Generac’s energy storage system.

Sunnova, which installs via independent dealers, announced that its dealer network had grown to 155 dealers and sub-dealers in Q4, up from 136 in Q3. That model is relatively unique in the solar-plus-storage space, with competitors like Tesla and No. 1 installer Sunrun relying on in-house installation crews. That makes Sunnova’s market share of installations harder to measure, but its dealer Trinity Solar Power accounted for about 3 percent of the market in 2019, according to Wood Mackenzie Power & Renewables, compared to the 9.5 percent claimed by leader Sunrun.

Buoyed by higher-than-expected growth in 2019, Sunnova upped its guidance for the coming year. The company expects to add between 28,000 and 30,000 customers in 2020, up from its previous guidance of 27,500. The company also increased its expected operating cash flow to between $10 million and $20 million from between $5 million and $15 million.