Sunrun is a big commercial entity globally and the largest in its national market sector. Surprisingly, their approach to capital budgeting decision-making is evident and straightforward. Sunrun financiers adhere to two principles when looking for, choosing investors and investing in projects, enterprises, and market actors. These risk-based rules are avoidance or minimization of “interest rate exposure” and non-involvement “into any derivative instruments for trading or speculative purposes” (Annual Report 2020, 2020, p. 9). These two exceptions make determining the most effective direction of an investment strategy more explicit for Sunrun. The need to avoid complex and volatile financial investments makes this company focus its investments on such tangible objects as household solar projects and additional production plants.
Systematic and Unsystematic Risks Associated with Sunrun
As with any other industry, especially if it is novel and highly high-tech, the commercial field of renewable energy contains some systematic risks. One of them is the delays in planning and installation of solar technology caused by the urban infrastructure and landscape in the places where customers want to place the purchased products (Teja, 2021). The weather is also a risk-generating factor, as “the weather conditions sometimes become unpredictable and uncertain” (Teja, 2021, para. 8). Another big systematic one that people and companies in the renewable energy industry have to face is the uncertainty in finding capital investments and large investors (Teja, 2021). Specific monetary risks for Sunrun are rising interest rates and significant shifts in their floating debt (Annual Report 2020, 2020). These are caused by the fact that Sunrun has to maintain its extensive corporate network of high-tech and costly facilities, services, and subsidiaries to remain a top market player.
Market Characteristics of Sunrun
Sunrun is a big business organization and a leading entity in its industry, renewable energy technologies. More specifically, Sunrun’s field of activity is solar panels and rechargeable batteries designed and specialized for homes in residential areas (Impact report 2020, 2020). Sunrun achieved a top position in a new technological and market niche by relying on its unique strengths and characteristics. Among them is the pricing policy of affordability when “the household simply pays a low, locked-in rate for the power that’s produced” (Impact report 2020, 2020, p. 9). Another hallmark of Sanrun is its commitment to providing customers with highly customized products. As the company’s representatives note, Sunrun employees consider “roof and home specifications” when installing their systems for customers (Impact report 2020, 2020, p. 9). Rich and comprehensive service is also a marketing advantage of this private entity. A rich and comprehensive service that covers things from repairs to financing is also a marketing advantage of this private entity (Impact report 2020, 2020). Leadership, affordability, extensive customization, and advanced service are Sunrun’s characteristics.
Sunrun and Its Capital Projects
One might say that Sunrun Inc.’s investment strategy for capital projects is simple, rudimentary, and straightforward. They either directly invest in solar projects mainly related to residential infrastructure or buy other companies to expand their network and service using newly acquired capacities and technologies. A prime example of the latter is “its acquisition of Vivint Solar,” which happened relatively recently in 2020 (Sunrun Inc., 2020, para. 1). As a flagship and top actor in the renewable energy industry, which nature is an oligopoly, Sunrun can invest in very costly projects and enterprises.
References
Annual Report 2020. Sunrun. Web.
Impact report 2020. Sunrun. Web.
Sunrun Inc. (2020). Sunrun completes acquisition of Vivint Solar to accelerate clean energy adoption and enhance customer value. Sunrun. Web.
Teja, S. (2021). Critical risks in renewable energy. IRM India Affiliate. Web.