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What changed in Sunrun Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Sunrun Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+427 added−392 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-22)

Top changes in Sunrun Inc.'s 2023 10-K

427 paragraphs added · 392 removed · 286 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeCustomer Agreements Since we were founded in 2007, we have been providing solar energy to residential customers at prices typically below utility rates through a variety of offerings, most commonly through our leases and power purchase agreements which we refer to as our “Customer Agreements.” Under our Customer Agreements, customers have the right to use and consume all electricity produced by the solar energy system on a continuous basis.
Biggest changeCustomer Agreements Since we were founded in 2007, we have been providing solar energy to residential customers at prices typically below utility rates through a variety of offerings, most commonly through our leases and power purchase agreements which we refer to as our Customer Agreements.
With our solar service offerings, we install solar energy systems on our customers’ homes and provide them the solar power produced by those systems for typically a 20- or 25-year initial term. In addition, we monitor, maintain and insure the system during the term of the contract.
With our solar service offerings, we install solar energy systems on our customers’ homes and provide them with the solar power produced by those systems for typically a 20- or 25-year initial term. In addition, we monitor, maintain and insure the system during the term of the contract.
Risk Factors " We have historically benefited from declining costs in our industry, and our business and financial results may be harmed as a result of recent and any continued increases in costs associated with our solar service offerings and any failure of these costs to continue declining as we currently expect.
Risk Factors “ We have historically benefited from declining costs in our industry, and our business and financial results may be harmed as a result of recent and any continued increases in costs associated with our solar service offerings and any failure of these costs to continue declining as we currently expect.
The Sunrun design logo, “Sunrun” and our other registered or common law trademarks, service marks or trade names appearing in this Annual Report on Form 10-K are the property of Sunrun Inc. Other trademarks and trade names referred to in this Annual Report on Form 10-K are the property of their respective owners. 12
The Sunrun design logo, “Sunrun” and our other registered or common law trademarks, service marks or trade names appearing in this Annual Report on Form 10-K are the property of Sunrun Inc. Other trademarks and trade names referred to in this Annual Report on Form 10-K are the property of their respective owners.
We also face competition from purely finance-driven organizations that acquire customers and then subcontract out the installation of solar energy systems, from installation businesses that seek financing from external parties, from large construction companies and utilities and from sophisticated electrical and roofing companies.
We also face competition from purely finance-driven organizations that acquire customers and then subcontract out the installation of solar energy systems, from installation businesses that seek financing from external parties, to large construction companies and utilities and sophisticated electrical and roofing companies.
Together, this multi-channel strategy supported by our open platform allows us to reach more customers with our leading solar service without compromising our ability to provide exceptional customer service.
Together, this multi-channel strategy supported by our open platform allows us to reach more customers with our leading solar service offerings without compromising our ability to provide exceptional customer service.
Risk Factors " Compliance with occupational safety and health requirements and best practices can be costly, and noncompliance with such requirements may result in potentially significant penalties, operational delays and adverse publicity. ” These incidents have not had a material impact on our business or our relations with our employees .
Risk Factors “Compliance with occupational safety and health requirements and best practices can be costly, and noncompliance with such requirements may result in potentially significant penalties, operational delays and adverse publicity.” These incidents have not had a material impact on our business or our relations with our employees .
At Sunrun, the foundation of all our talent programs and initiatives is fostering a culture of inclusive, connected and innovative teams. In 2022, we focused on aligning our human capital strategy to support a high performance, customer-focused culture where our employees can thrive and meet our customer needs.
At Sunrun, the foundation of all our talent programs and initiatives is fostering a culture of inclusive, connected and innovative teams. In 2023, we focused on aligning our human capital strategy to support a high performance, customer-focused culture where our employees can thrive and meet our customer needs.
Our core solar service offerings are provided through our lease and power purchase agreements, which we refer to as our “Customer Agreements” and which provide customers with simple, predictable pricing for solar energy that is insulated from rising retail electricity prices.
Our core solar service offerings are provided through our lease and power purchase agreements, which we refer to as our “Customer Agreements,” and which provide customers with simple, predictable pricing for solar energy that is insulated from rising retail electricity prices.
We have completed thousands of service transfers and, from inception through December 31, 2022, the aggregate expected net present value of the Customer Agreements once assigned represented approximately 100% of what it was prior to assignment.
We have completed thousands of service transfers and, from inception through December 31, 2023, the aggregate expected net present value of the Customer Agreements once assigned represented approximately 100% of what it was prior to assignment.
Intellectual Property As of December 31, 2022, we had 53 issued patents and 16 filed patent applications in the United States relating to a variety of aspects of our solar solutions. Our issued U.S. patents will expire 20 years from their respective filing dates, with the earliest expiring in 2029.
Intellectual Property As of December 31, 2023, we had 54 issued patents and 16 filed patent applications in the United States relating to a variety of aspects of our solar solutions. Our issued U.S. patents will expire 20 years from their respective filing dates, with the earliest expiring in 2029.
Federal agencies may also issue tax guidance or regulations that could negatively impact our business, by, for example, narrowing the applicability of ITC adders or preventing certain businesses from participating.
Federal agencies may also issue tax guidance or regulations that could negatively impact our business, by, for example, narrowing the applicability of ITC bonus credits or preventing certain businesses from participating.
To help us continue to progress toward our goals, in 2022 we implemented requirements that a diverse slate of qualified candidates must be presented to hiring managers for all new management-level roles and above. Additionally, we require that our interview panels of all new management-level roles and above include a diverse panel of interviewers.
To help us continue to progress toward our goals, we continue to require that a diverse slate of qualified candidates must be presented to hiring managers for all new management-level roles and above. Additionally, we require that our interview panels of all new management-level roles and above include a diverse panel of interviewers.
The Inflation Reduction Act of 2022 (the “IRA”) was signed into law by President Biden on August 16, 2022, and some of its notable provisions include: • the eligibility of solar facilities placed in service in 2022 (regardless of when construction began) and prior to January 1, 2025 for a 30% investment tax credit (“Commercial ITC”) under Section 48(a) of the Internal Revenue Code of 1986 (the “Code”) (assuming apprenticeship and prevailing wage requirements are met; these requirements are deemed met for projects less than 1 MW), with standalone storage beginning in 2023; • in the absence of meeting apprenticeship and prevailing wage requirements, the “base” amount of the Commercial ITC is 6% for facilities beginning construction prior to January 1, 2025 and 2% thereafter (however, as indicated above, the majority of our business qualifies for 30% base credits upon which “adders” could increase this amount up to 70% under certain circumstances); • the eligibility of solar and storage facilities placed in service after 2024 and through at least 2032 for a 30% technology-neutral ITC under Section 48E of the Code (the “48E Credit”); and • several new ITC adders under both the Commercial ITC and the 48E Credit, which apply to certain facilities placed in service beginning in 2023, including those meeting certain domestic content requirements, those located in “Energy Communities,” and those located in or that benefit low-income communities and tribal communities.
The Inflation Reduction Act of 2022 (the “IRA”) was signed into law by President Biden on August 16, 2022, and some of its notable provisions include: • the eligibility of solar facilities placed in service in 2022 (regardless of when construction began) and prior to January 1, 2025 for a 30% Commercial ITC under Section 48(a) of the Code (assuming apprenticeship and prevailing wage requirements are met; these requirements are deemed met for projects less than 1 MW), with standalone storage beginning in 2023; • in the absence of meeting apprenticeship and prevailing wage requirements, the “base” amount of the Commercial ITC is 6% for facilities beginning construction prior to January 1, 2025 and 2% thereafter (however, as indicated above, the majority of our business qualifies for 30% credits upon which “bonus credits” could increase the total credit amount up to 70% in certain circumstances); • the eligibility of solar and storage facilities placed in service after 2024 and through at least 2032 for a 30% technology-neutral ITC under Section 48E of the Code (the “48E Credit”); and • several new ITC bonus credits under both the Commercial ITC and the 48E Credit, which apply to certain facilities placed in service beginning in 2023, including those meeting certain domestic content requirements, those located in “Energy Communities,” and those located in or that benefit low-income communities and tribal communities.
Our Gross Earning Assets as of December 31, 2022 were approximately $12.4 billion. Please see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Operating Metrics” for more details on how we calculate Networked Solar Energy Capacity and Gross Earning Assets.
Our Gross Earning Assets as of December 31, 2023 were approximately $14.2 billion. Please see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Operating Metrics” for more details on how we calculate Networked Solar Energy Capacity and Gross Earning Assets.
As of December 31, 2022, we operated the largest fleet of residential solar energy systems in the United States. We have a Networked Solar Energy Capacity of 5,667 megawatts as of December 31, 2022, which represents the aggregate megawatt production capacity of our solar energy systems that have been recognized as deployments, from our inception through the measurement date.
As of December 31, 2023, we operated the largest fleet of residential solar energy systems in the United States. We have a Networked Solar Energy Capacity of 6,689 megawatts as of December 31, 2023, which represents the aggregate megawatt production capacity of our solar energy systems that have been recognized as deployments, from our inception through the measurement date.
For example, in the future, Congress could revise or eliminate certain provisions in the Inflation Reduction Act that could negatively impact our business, such as reducing the percentage or duration of the ITC.
For example, in the future, Congress could revise or eliminate certain provisions in the IRA that could negatively impact our business, such as reducing the percentage or duration of the ITC.
Annually, as part of our larger impact report on environment, sustainability and governance, we share details on our strategies, focus areas, outcomes achieved and workforce demographics. Human Capital. As of December 31, 2022, we had approximately 12,408 full-time employees, inclusive of our active direct-to-home salesforce. Our front-line sales and installation teams are 83% of our total workforce.
Annually, as part of our impact report on environment, sustainability and governance, we share details on our strategies, focus areas, outcomes achieved and workforce demographics. Human Capital. As of December 31, 2023, we had approximately 10,833 full-time employees, inclusive of our active direct-to-home salesforce. Our front-line sales and installation teams are 80% of our total workforce.
Any excess solar energy, including amounts in excess of battery storage, that is not immediately used by our customers is exported to the utility grid using a bi-directional utility net meter, and the customer generally receives a credit for this excess power from their utility to offset future usage of utility-generated energy.
Any excess solar energy that is not immediately used by our customers or stored in batteries is exported to the utility grid using a bi-directional utility net meter, and in states with net metering, customers generally receive a credit for this excess power from their utility to offset future usage of utility-generated energy.
We are engaged in the design, development, installation, sale, ownership and maintenance of residential solar energy systems (“Projects”) in the United States. We provide clean, solar energy typically at savings compared to traditional utility energy. Our primary customers are residential homeowners.
Sunrun also manages energy services that benefit communities, utilities, and the electric grid while enhancing customer value. We are engaged in the design, development, installation, sale, ownership and maintenance of residential solar energy systems (“Projects”) in the United States. We provide clean, solar energy typically at savings compared to traditional utility energy. Our primary customers are residential homeowners.
In structuring tax equity partnerships and determining ITC eligibility, we have relied upon applicable tax law and published IRS guidance. On February 13, 2023, the U.S. Treasury issued initial guidance on an ITC “adder” for low-income communities and is expected to issue additional guidance on this and other ITC adders, as well as other newly enacted IRA provisions.
In structuring tax equity partnerships and determining ITC eligibility, we have relied upon applicable tax law and published IRS guidance. The U.S. Treasury issued a final rule on the ITC bonus credit for low-income communities in 2023 and is expected to issue final rules on the other ITC bonus credits in 2024.
We created a sourcing and communities team to focus on attracting candidates from underrepresented populations and enhance our community partnerships, implemented a new learning management system, and continued to provide learning and development opportunities aimed at promoting engagement and retention. Inclusion and Diversity .
We built additional community partnerships focused on attracting candidates from underrepresented populations and continued to provide learning and development opportunities aimed at promoting engagement and retention. Inclusion and Diversity .
We established Employee Resource Groups (“ERGs”) to promote connection and communication among our employees, foster inclusivity, assist in the development and facilitation of programming that supports personal and professional development while also supporting our objectives.
We have grown our Sunrun Employee Resource Groups (“ERGs”) to promote connection and communication among our employees, foster inclusivity, and assist in the development and facilitation of programming to support personal and professional development. Our eight ERGs have grown to a membership of over 1,000 employees as of December 31, 2023.
We develop valuable customer relationships that can extend beyond this initial contract term and provide us an opportunity to offer additional services in the future, such as our home battery storage service.
We develop valuable customer relationships that can extend beyond this initial contract term and provide us an opportunity over time to integrate additional solar, battery storage, electrification and distributed power plant offerings into a smart solution for each home and community.
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Item 1. Business. Overview Sunrun’s (the “Company,” “our,” “we”) mission is to provide our customers with clean, affordable solar energy and storage, and a best-in-class customer experience. In 2007, we pioneered the residential solar service model, creating a low-cost solution for customers seeking to lower their energy bills.
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Item 1. Business. Overview Sunrun's (the “Company,” “our,” “we”) mission is to connect people to the cleanest energy on earth. Sunrun transformed the solar industry in 2007 by removing financial barriers and democratizing access to locally-generated, renewable energy.
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By removing the high initial cost and complexity of cash system sales that used to define the residential solar industry, we have fostered the industry’s rapid growth and exposed an enormous market opportunity. Our relentless drive to increase the accessibility of solar energy is fueled by our enduring vision: to create a planet run by the sun.
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Today, Sunrun is the nation’s leading provider of clean energy as a subscription service, offering residential solar and storage with no upfront costs. Sunrun’s innovative products and solutions can connect homes to the cleanest energy on earth, providing them with energy security, predictability, and peace of mind.
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We believe we will accomplish our goals by having a diverse team that reflects the diversity of our customers and who can connect with the unique experiences and backgrounds of our customers.
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They also provide customers who opt for storage offerings the benefit of increased resiliency from backup energy and enhanced energy management capabilities.
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In 2022 we launched the Disability + ERG focused on supporting the needs and recognizing the contributions of our employees with both seen and unseen disabilities. Our seven ERGs have grown to a membership of over 1,605 employees as of December 31, 2022.
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Under our Customer Agreements, customers have the right to use and consume all electricity produced by the solar energy system on a continuous basis or, for customers who also opted for our battery storage offerings, stored in batteries which can be discharged as needed.
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Some of these final rules may be subject to Congressional Review Act (“CRA”) challenges in 2025, based on legal outcomes determining whether certain final rules are subject to the CRA, and on the date the U.S. Treasury finalizes and publishes the final rules.
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We also have minimum requirements for the length in time that many roles are posted to promote consideration of internal candidates and a broader range of external candidates. In 2023, we fostered deeper talent attraction partnerships with local organizations such as Illinois Solar For All (ILSFA) and military partnerships such as Skillbridge for hiring retiring military service members.
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To progress our diversity efforts (achieving female director parity and parity in Black, Indigenous, People of Color (BIPOC) managers), we are investing in internal career progression programming and a career progression platform we plan to launch in early 2024.
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We encourage investors, the media and others interested in Sunrun to review the information we make public in these locations, as such information could be deemed to be material information, including any information posted to our investor relations page on our website, which has been designated a Regulation FD compliant method of disclosure.
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Data Privacy and Security In the ordinary course of our business, we may process personal or sensitive data. Accordingly, we are, or may become, subject to numerous data privacy and security obligations, including federal, state, local, and foreign laws, regulations, guidance, and industry standards related to data privacy, security, and protection.
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Such obligations may include, without limitation, the European Union’s General Data Protection Regulation 2016/679 (“EU GDPR”), the EU GDPR as it forms part of United Kingdom (“UK”) law by virtue of section 3 of the European Union (Withdrawal) Act 2018 (“UK GDPR”), the ePrivacy Directive, and the Payment Card Industry Data Security Standard (“PCI DSS”).
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Several states within the United States have enacted or proposed data privacy laws. For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act.
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Additionally, we are, or may become, subject to various U.S. federal and state consumer protection laws which require us to publish statements that accurately and fairly describe how we handle personal data and choices individuals may have about the way we handle their personal data.
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The California Consumer Privacy Act (“CCPA”) is an example of the increasingly stringent and evolving regulatory frameworks related to personal data processing that may increase our compliance obligations and exposure for any noncompliance.
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For example, the CCPA imposes obligations on covered businesses to provide specific disclosures related to a business’s collecting, using, and disclosing personal data and to respond to certain requests from California residents related to their personal data (for example, requests to know of the business’s personal data processing activities, to delete the individual’s personal data, and to opt out of certain personal data disclosures).
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Also, the CCPA provides for civil penalties and a private right of action for data breaches which may include an award of statutory damages.
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In addition, the California Privacy Rights Act of 2020 (“CPRA”) expanded the CCPA by giving California residents the ability to limit use of certain sensitive personal data, establishing restrictions on personal data retention, expanding the types of data breaches that are subject to the CCPA’s private right of action, and establishing a new California Privacy Protection Agency to implement and enforce the new law.
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See the section titled “Risks Related to Our Business Operations” for additional information about the laws and regulations to which we may become subject and about the risks to our business associated with such laws and regulations. 12

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, per the terms of our Customer Agreements, a customer maintains the ability to cancel before commencement of installation, subject to certain conditions. Any delay or 29 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.
Biggest changeAny 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. 28 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 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.
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.
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.
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.
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. Utilities in additional states may follow suit.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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. Our amended and restated certificate of incorporation provides that our stockholders may not take action by written consent.
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. Our restated certificate of incorporation provides that our stockholders may not take action by written consent.
These provisions may delay the ability of our stockholders to force consideration of a stockholder proposal, including a proposal to remove directors. 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.
These provisions may delay the ability of our stockholders to force consideration of a stockholder proposal, including a proposal to remove directors. 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. In addition, our amended and restated certificate of incorporation provides that stockholders may remove directors only for cause.
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. In addition, our restated certificate of incorporation provides that stockholders may remove directors only for cause.
These risks include the following, among others: • failure to satisfy the required conditions and otherwise complete a planned acquisition, joint venture or other strategic transaction on a timely basis or at all; • legal or regulatory proceedings, if any, relating to a planned acquisition, joint venture or other strategic transaction and the outcome of such legal proceedings; • difficulty in assimilating the operations, systems, and personnel of the acquired company, especially given our unique culture; • difficulty in effectively integrating the acquired technologies or products with our current products and technologies; 30 • difficulty in maintaining controls, procedures and policies during the transition and integration; • disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges due to integration issues; • difficulty integrating the acquired company’s accounting, management information and other administrative systems; • inability to retain key technical and managerial personnel of the acquired business; • inability to retain key customers, vendors and other business partners of the acquired business; • inability to achieve the financial and strategic goals for the acquired and combined businesses; • incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our results of operations; • significant post-acquisition investments which may lower the actual benefits realized through the acquisition; • potential failure of the due diligence processes to identify significant issues with product quality, legal, and financial liabilities, among other things; • moderating and anticipating the impacts of inherent or emerging seasonality in acquired customer agreements; • potential inability to assert that internal controls over financial reporting are effective; and • potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which could delay or prevent such acquisitions.
These risks include the following, among others: • failure to satisfy the required conditions and otherwise complete a planned acquisition, joint venture or other strategic transaction on a timely basis or at all; • legal or regulatory proceedings, if any, relating to a planned acquisition, joint venture or other strategic transaction and the outcome of such legal proceedings; • difficulty in assimilating the operations, systems, and personnel of the acquired company, especially given our unique culture; • difficulty in effectively integrating the acquired technologies or products with our current products and technologies; • difficulty in maintaining controls, procedures and policies during the transition and integration; 29 • disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges due to integration issues; • difficulty integrating the acquired company’s accounting, management information and other administrative systems; • inability to retain key technical and managerial personnel of the acquired business; • inability to retain key customers, vendors and other business partners of the acquired business; • inability to achieve the financial and strategic goals for the acquired and combined businesses; • incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our results of operations; • significant post-acquisition investments which may lower the actual benefits realized through the acquisition; • potential failure of the due diligence processes to identify significant issues with product quality, legal, and financial liabilities, among other things; • moderating and anticipating the impacts of inherent or emerging seasonality in acquired customer agreements; • potential inability to assert that internal controls over financial reporting are effective; and • potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which could delay or prevent such acquisitions.
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 18 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.
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.
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. 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.
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.
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. This could make our solar service offerings less 16 economical overall or make individual systems less economical. Any of these events or conditions could harm our business, financial condition, and results of operations.
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. 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.
If we are required to pay higher compensation than we anticipate, these greater expenses may also adversely impact our financial results and the growth of our business. 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.
If we are required to pay higher compensation than we anticipate, these greater expenses may also adversely impact our financial results and the growth of our business. 35 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.
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”). However, the Solar Exclusion is not a 43 permanent exclusion from the assessment of property tax.
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”). However, the Solar Exclusion is not a permanent exclusion from the assessment of property tax.
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.
If a court were to find the choice of forum provisions contained in our amended and restated bylaws to be 48 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 we do not reduce our cost structure in the future, our ability to continue to be profitable may be impaired. 13 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.
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.
In addition, product liability claims, injuries, defects or other problems experienced by other companies in the residential solar industry could lead to unfavorable market 28 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.
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.
The capped call transactions are expected generally to reduce the potential dilution to our common 49 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 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.
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.
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.
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.
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.
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. As such, our past quarterly results of operations may not be good indicators of likely future performance.
However, 38 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.
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.
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 41 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.
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.
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.
Additionally, the benefits of the Commercial ITC have historically enhanced our ability to provide 41 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.
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.
If we fail to comply with applicable OSHA regulations, 37 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.
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.
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.
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.
Furthermore, market prices of retail electricity generated by utilities or other energy sources could decline for a variety of reasons, as discussed further below. Any such declines in macroeconomic conditions, changes in retail prices of electricity or changes in customer preferences would adversely impact our business.
Furthermore, market prices of retail electricity generated by utilities or other energy sources could decline for a variety of reasons, as discussed further below. Any declines in macroeconomic conditions, changes in retail prices of electricity or changes in customer preferences would adversely impact our business.
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.
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 13 offerings and any failure of these costs to continue declining as we currently expect.
Governments, often acting through state utility or public 22 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.
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.
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 24 systems at higher costs or after delays.
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.
Other companies in our industry may be affected differently by the adoption of new accounting standards, including timing of the adoption of new accounting standards, adversely affecting the comparability of financial statements. 44 Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
Other companies in our industry may be affected differently by the adoption of new accounting standards, including timing of the adoption of new accounting standards, adversely affecting the comparability of financial statements. Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
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.
In the event that our 30 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.
Product failures or operational deficiencies also would reduce our revenue from power purchase or lease agreements because they are dependent on system production. Any 32 widespread product failures or operating deficiencies may damage our market reputation and adversely impact our financial results.
Product failures or operational deficiencies also would reduce our revenue from power purchase or lease agreements because they are dependent on system production. Any widespread product failures or operating deficiencies may damage our market reputation and adversely impact our financial results.
Some markets, such as New Jersey and Maryland, currently utilize SRECs. SRECs can be volatile and their value could decrease over time as the supply of SREC-producing solar energy systems installed in a particular 42 market increases.
Some markets, such as New Jersey and Maryland, currently utilize SRECs. 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.
Our actual financial results may differ materially from any guidance we may publish from time to time. 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.
Our actual financial results may differ materially from any guidance we may publish from time to time. 39 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.
We have relied on, and will continue to rely on, tax equity investment funds, which are financing 40 structures that monetize a substantial portion of those benefits, in order to finance our solar service offerings.
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.
Adverse regulatory treatment of third- 23 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.
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.
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.
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.
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.
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.
Climate change may have long-term impacts on our business, our industry, and the global economy. Climate change poses a systemic threat to the global economy and will continue to do so until our society transitions to renewable energy and decarbonizes.
Climate change may have long-term impacts on our business, our industry, and the global economy. 16 Climate change poses a systemic threat to the global economy and will continue to do so until our society transitions to renewable energy and decarbonizes.
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.
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.
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.
Customers may cancel their Customer Agreement, subject to certain conditions, during this process until commencement of installation, 25 and we have experienced increased customer cancellations in certain geographic markets during certain periods in our operating history.
Damage to our brand and reputation or failure to expand our brand would harm our business and results of operations. We depend significantly on our brand and reputation for high-quality solar service offerings, engineering and customer service to attract customers and grow our business.
Damage to our brand and reputation or failure to expand our brand would harm our business and results of operations. 34 We depend significantly on our brand and reputation for high-quality solar service offerings, engineering and customer service to attract customers and grow our business.
Risks Related to Our Business Operations Our growth depends in part on the success of our relationships with third parties, including our solar partners. A key component of our growth strategy is to develop or expand our relationships with third parties.
Risks Related to Our Business Operations 23 Our growth depends in part on the success of our relationships with third parties, including our solar partners. A key component of our growth strategy is to develop or expand our relationships with third parties.
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.
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.
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.
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.
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.
Our 26 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.
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.
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.
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.
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.
As of December 31, 2022, the average FICO score of our customers under a Customer Agreement with a monthly payment schedule remained at or above 740, which is generally categorized as a “Very Good” credit profile by the Fair Isaac Corporation. However, this may decline to the extent FICO score requirements under future investment funds are relaxed.
As of December 31, 2023, the average FICO score of our customers under a Customer Agreement with a monthly payment schedule remained at or above 740, which is generally categorized as a “Very Good” credit profile by the Fair Isaac Corporation. However, this may decline to the extent FICO score requirements under future investment funds are relaxed.
This activity could also cause or avoid an increase or a decrease in the market price of our common stock. 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. Item 1B. Unresolved Staff Comments. Not applicable. 50
This activity could also cause or avoid an increase or a decrease in the market price of our common stock. 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. Item 1B. Unresolved Staff Comments. 49 Not applicable.
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. 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.
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.
A default under the indenture or the fundamental change itself could also lead to a default under 20 agreements governing our existing or future indebtedness.
A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our existing or future indebtedness.
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.
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.
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.
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.
Subsequently, on February 8, 2022, Auxin Solar, a U.S.-based solar panel manufacturer, submitted a petition to the U.S. 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.
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.
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.
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.
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.
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.
Factors that could cause fluctuations in the market price of our common stock include the following: • price and volume fluctuations in the overall stock market from time to time; 45 • volatility in the market prices and trading volumes of companies in our industry or companies that investors consider comparable; • changes in operating performance and stock market valuations of other companies generally, or those in our industry in particular; • sales of shares of our common stock by us or our stockholders; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow us, or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; • announcements by us or our competitors of new products or services; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our results of operations; • 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; • actual or perceived privacy or data security incidents; • our ability to protect our intellectual property and other proprietary rights; • changes in the regulatory environment and utility policies and pricing, including those that could reduce any savings we are able to offer to customers; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • major catastrophic events or civil unrest; 46 • 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; and • general economic conditions and slow or negative growth of our markets.
Factors that could cause fluctuations in the market price of our common stock include the following: • price and volume fluctuations in the overall stock market from time to time; 45 • volatility in the market prices and trading volumes of companies in our industry or companies that investors consider comparable; • changes in operating performance and stock market valuations of other companies generally, or those in our industry in particular; • sales of shares of our common stock by us or our stockholders; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow us, or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; • announcements by us or our competitors of new products or services; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our results of operations; • changes in tax and other incentives that we rely upon in order to raise tax equity investment funds; • actual or perceived data privacy or security incidents; • our ability to protect our intellectual property and other proprietary rights; • changes in the regulatory environment and utility policies and pricing, including those that could reduce any savings we are able to offer to customers; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • 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; 46 • any significant change in our management; and • general economic conditions including instability in financial markets and bank failures, and slow or negative growth of our markets.
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. These types of funding limitations could lead to inadequate financing support for the anticipated growth in our business.
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.
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 40% of our customer base.
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.
U.S. federal, state and local governmental bodies provide incentives to owners, distributors, installers and manufacturers of solar energy systems to promote solar energy. 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.
U.S. federal, state and local governmental bodies provide incentives to owners, distributors, installers and manufacturers of solar energy systems to promote solar energy. 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.
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. Ultimately, the Department of Commerce objected to the anonymous nature of the petition, and it expired.
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. Ultimately, the DOC objected to the anonymous nature of the petition, and it expired.
In addition, our business is affected by general economic conditions and related uncertainties affecting markets in which we operate. Volatility in current economic conditions could adversely impact our business, including our ability to raise financing. Our future success depends on our ability to raise capital from third parties to grow our business.
In addition, our business is affected by general economic conditions and related uncertainties affecting markets in which we operate. Volatility in current economic conditions could adversely impact our business, including our ability to raise financing. Our future success depends on our ability to raise capital at acceptable terms from third parties to grow our business.
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.
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.
If our solar energy systems, more than 40% of which were located in California as of December 31, 2022, are damaged as the result of a natural disaster beyond our control, losses could exceed or be excluded from, our insurance policy limits, and we could incur unforeseen costs that could harm our business and financial condition.
If our solar energy systems, more than 45% of which were located in California as of December 31, 2023, are damaged as the result of a natural disaster beyond our control, losses could exceed or be excluded from, our insurance policy limits, and we could incur unforeseen costs that could harm our business and financial condition.
Any such cost increases or decreases in availability could slow our growth and cause our financial results and operational metrics to suffer. We cannot predict whether and to what extent U.S. trade policies will change under the Biden Administration and cannot ensure that additional tariffs or other restrictive measures will not continue or increase.
Any such cost increases or decreases in availability could slow our growth and cause our financial results and operational metrics to suffer. We cannot predict whether and to what extent U.S. trade policies will change in the future and cannot ensure that additional tariffs or other restrictive measures will not continue or increase.
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.
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. The U.S.
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.
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.
The Commercial ITC was extended and expanded upon by the IRA, which was signed into law by President Biden on August 16, 2022. The IRA also created several ITC “adders” to further incentivize various types of solar and storage facilities.
The Commercial ITC was extended and expanded upon by the IRA, which was signed into law by President Biden on August 16, 2022. The IRA also created several ITC “bonus credits” to further incentivize various types of solar and storage facilities.
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).
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).
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.
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.
In addition to the other risks described in this “Risk Factors” section, as well as the factors discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, the following factors, among others, could cause our results of operations and key performance indicators to fluctuate: • the expiration, reduction or initiation of any governmental tax rebates, tax exemptions, or incentives; • significant fluctuations in customer demand for our solar service offerings or fluctuations in the geographic concentration of installations of solar energy systems; • changes in financial markets, which could restrict our ability to access available and cost-effective financing sources; • seasonal, environmental or weather conditions that impact sales, energy production, and system installations; • the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure; • announcements by us or our competitors of new products or services, significant acquisitions, strategic partnerships, joint ventures, or capital-raising activities or commitments; • changes in our pricing policies or terms or those of our competitors, including utilities; • changes in regulatory policy related to solar energy generation; • the loss of one or more key partners or the failure of key partners to perform as anticipated; • 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; • 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; and • changes to our cancellation rate. 39 In the past, we have experienced seasonal fluctuations in sales and installations, particularly in the fourth quarter.
In addition to the other risks described in this “Risk Factors” section, as well as the factors discussed in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, the following factors, among others, could cause our results of operations and key performance indicators to fluctuate: • the expiration, reduction or initiation of any governmental tax rebates, tax exemptions, or incentives; • significant fluctuations in customer demand for our solar service offerings or fluctuations in the geographic concentration of installations of solar energy systems; • changes in financial markets, which could restrict our ability to access available and cost-effective financing sources; • seasonal, environmental or weather conditions that impact sales, energy production, and system installations; • the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure; • announcements by us or our competitors of new products or services, significant acquisitions, strategic partnerships, joint ventures, or capital-raising activities or commitments; • changes in our pricing policies or terms or those of our competitors, including utilities; • changes in regulatory policy related to solar energy generation; • the loss of one or more key partners or the failure of key partners to perform as anticipated; • actual or anticipated developments in our competitors’ businesses or the competitive landscape; • actual or anticipated changes in our growth rate; • 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; and • changes to our cancellation rate.
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.
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.
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.
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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. Our corporate headquarters and executive offices are located in San Francisco, California, where we lease approximately 44,000 square feet of office space. We also maintain 104 other locations, consisting primarily of branch offices, warehouses, sales offices and design centers in 19 states. We lease all of our facilities and we do not own any real property.
Biggest changeItem 2. Properties. Our corporate headquarters and executive offices are located in San Francisco, California, where we lease approximately 44,000 square feet of office space. We also maintain 101 other locations, consisting primarily of branch offices, warehouses, sales offices and design centers in 19 states. We lease all of our facilities and we do not own any real property.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 51 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 52 Item 6. [Reserved] 53 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 54 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 71 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 52 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 53 Item 6. [Reserved] 54 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 55 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 74 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe figures represented below assume an investment of $100 in our common stock at the closing price of $5.90 on December 29, 2017 and in the Nasdaq Composite Index and the Invesco Solar ETF on December 31, 2017 including the reinvestment of dividends into shares of common stock.
Biggest changeThe figures represented below assume an investment of $100 in our common stock at the closing price of $10.89 on December 31, 2018 and in the Nasdaq Composite Index and the Invesco Solar ETF on December 31, 2018 including the reinvestment of dividends into shares of common stock.
This graph shall not be deemed “soliciting material” or be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. 52
This graph shall not be deemed “soliciting material” or be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. 53
The shares underlying the warrants will vest upon certain time- and performance-based criteria as set forth in the warrants. The exercise price of the warrants is $0.01 per share, and 346,269 and 69,309 warrants were exercised during the years ended December 31, 2022 and 2021, respectively.
The shares underlying the warrants will vest upon certain time- and performance-based criteria as set forth in the warrants. The exercise price of the warrants is $0.01 per share, and 63,742, 346,269 and 69,309 warrants were exercised during the years ended December 31, 2023, 2022 and 2021, respectively.
Stock Price Performance Graph The following stock performance graph compares our total stock return with the total return for (i) the Nasdaq Composite Index and the (ii) the Invesco Solar ETF, which represents a peer group of solar companies, for the period from December 31, 2017 through December 31, 2022.
Stock Price Performance Graph The following stock performance graph compares our total stock return with the total return for (i) the Nasdaq Composite Index and the (ii) the Invesco Solar ETF, which represents a peer group of solar companies, for the period from December 31, 2018 through December 31, 2023.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock began trading on the Nasdaq Global Select Market under the symbol “RUN” on August 5, 2015. Holders of Record As of February 17, 2023, there were approximately 293 holders of record of common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock began trading on the Nasdaq Global Select Market under the symbol “RUN” on August 5, 2015. Holders of Record As of February 16, 2024, there were approximately 429 holders of record of common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOur Annual Report on Form 10-K for the year ended December 31, 2021 includes a discussion and analysis of our financial condition and results of operations for the year ended December 31, 2020 in Item 7 of Part II, “Management's Discussion and Analysis of Financial Condition and Results of Operations.” 64 Year Ended December 31, 2022 2021 (in thousands, except per share amounts) Revenue: Customer agreements and incentives $ 983,047 $ 826,564 Solar energy systems and product sales 1,338,375 783,390 Total revenue 2,321,422 1,609,954 Operating expenses: Cost of customer agreements and incentives 844,162 699,102 Cost of solar energy systems and product sales 1,178,548 666,370 Sales and marketing 745,386 622,961 Research and development 20,907 23,165 General and administrative 189,247 259,173 Amortization of intangible assets 5,364 5,370 Total operating expenses 2,983,614 2,276,141 Loss from operations (662,192) (666,187) Interest expense, net (445,819) (327,700) Other income, net 260,657 22,628 Loss before income taxes (847,354) (971,259) Income tax expense 2,291 9,271 Net loss (849,645) (980,530) Net loss attributable to noncontrolling interests and redeemable noncontrolling interests (1,023,022) (901,107) Net income (loss) attributable to common stockholders $ 173,377 $ (79,423) Net income (loss) per share attributable to common stockholders Basic $ 0.82 $ (0.39) Diluted $ 0.80 $ (0.39) Weighted average shares used to compute net income (loss) per share attributable to common stockholders Basic 211,347 205,132 Diluted 219,157 205,132 Comparison of the Years Ended December 31, 2022 and 2021 Revenue Year Ended December 31, Change 2022 2021 $ % (in thousands) Customer agreements $ 872,298 $ 725,220 $ 147,078 20 % Incentives 110,749 101,344 9,405 9 % Customer agreements and incentives 983,047 826,564 156,483 19 % Solar energy systems 913,904 471,283 442,621 94 % Products 424,471 312,107 112,364 36 % Solar energy systems and product sales 1,338,375 783,390 554,985 71 % Total revenue $ 2,321,422 $ 1,609,954 $ 711,468 44 % 65 Customer Agreements and Incentives .
Biggest changeOur Annual Report on Form 10-K for the year ended December 31, 2022 includes a discussion and analysis of our financial condition and results of operations for the year ended December 31, 2021 in Item 7 of Part II, “Management's Discussion and Analysis of Financial Condition and Results of Operations.” 66 Year Ended December 31, 2023 2022 (in thousands, except per share amounts) Revenue: Customer agreements and incentives $ 1,186,706 $ 983,047 Solar energy systems and product sales 1,073,107 1,338,375 Total revenue 2,259,813 2,321,422 Operating expenses: Cost of customer agreements and incentives 1,077,114 844,162 Cost of solar energy systems and product sales 1,019,638 1,178,548 Sales and marketing 740,821 745,386 Research and development 21,816 20,907 General and administrative 221,067 194,611 Goodwill impairment 1,158,000 — Total operating expenses 4,238,456 2,983,614 Loss from operations (1,978,643) (662,192) Interest expense, net (652,989) (445,819) Other (expense) income, net (63,900) 260,657 Loss before income taxes (2,695,532) (847,354) Income tax (benefit) expense (12,691) 2,291 Net loss (2,682,841) (849,645) Net loss attributable to noncontrolling interests and redeemable noncontrolling interests (1,078,344) (1,023,022) Net (loss) income attributable to common stockholders $ (1,604,497) $ 173,377 Net (loss) income per share attributable to common stockholders Basic $ (7.41) $ 0.82 Diluted $ (7.41) $ 0.80 Weighted average shares used to compute net (loss) income per share attributable to common stockholders Basic 216,642 211,347 Diluted 216,642 219,157 Comparison of the Years Ended December 31, 2023 and 2022 Revenue Year Ended December 31, Change 2023 2022 $ % (in thousands) Customer agreements $ 1,077,099 $ 872,298 $ 204,801 23 % Incentives 109,607 110,749 (1,142) (1) % Customer agreements and incentives 1,186,706 983,047 203,659 21 % Solar energy systems 656,408 913,904 (257,496) (28) % Products 416,699 424,471 (7,772) (2) % Solar energy systems and product sales 1,073,107 1,338,375 (265,268) (20) % Total revenue $ 2,259,813 $ 2,321,422 $ (61,609) (3) % 67 Customer Agreements and Incentives .
We recognize the effect of tax rate and law changes on deferred taxes in the reporting period in which the legislation is enacted. We sell solar energy systems to the investment funds. As the investment funds are consolidated by us, the gain on the sale of the solar energy systems is not recognized in the consolidated financial statements.
We recognize the effect of tax rate and law changes on deferred taxes in the reporting period in which the legislation is enacted. We sell solar energy systems to investment funds. As the investment funds are consolidated by us, the gain on the sale of the solar energy systems is not recognized in the consolidated financial statements.
Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include those identified below and those discussed in the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K. We provide clean, solar energy to customers at a significant savings compared to traditional utility energy.
Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include those identified below and those discussed in the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K. We provide clean, solar energy and energy storage to customers at a significant savings compared to traditional utility energy.
We believe it is useful for investors to evaluate the future expected cash flows from all customers that have been deployed through the respective measurement date, less estimated costs to maintain such systems and estimated distributions to tax equity partners in consolidated joint venture partnership flip structures, and distributions to project equity investors.
We believe it is useful for investors to evaluate the future expected cash flows from all customers that have been deployed through the respective measurement date, less estimated costs to maintain such systems and estimated distributions to tax equity partners in consolidated joint venture partnership flip 60 structures, and distributions to project equity investors.
Under our partnership flip structures, we have determined that we control the partnership entity which is a variable interest entity (“VIE”), and accordingly we consolidate the entity and record the investor’s interest as either noncontrolling interests or redeemable noncontrolling interests in our consolidated balance sheets. 57 Inverted Leases .
Under our partnership flip structures, we have determined that we control the partnership entity which is a variable interest entity (“VIE”), and accordingly we consolidate the entity and record the investor’s interest as either noncontrolling interests or redeemable noncontrolling interests in our consolidated balance sheets. Inverted Leases .
It is calculated as the present value of cash flows (discounted at 5%) we expect to receive from Subscribers in future periods, after deducting expected operating and maintenance costs based on the service agreements underlying each fund, equipment replacements costs, distributions to tax equity partners in consolidated joint venture partnership flip structures, and distributions to project equity investors.
It is calculated as the present value of cash flows (discounted at 6%) we expect to receive from Subscribers in future periods, after deducting expected operating and maintenance costs based on the service agreements underlying each fund, equipment replacements costs, distributions to tax equity partners in consolidated joint venture partnership flip structures, and distributions to project equity investors.
The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to the solar energy systems acquired as part of our acquisition of Vivint Solar. Significant estimates in valuing certain tangible and intangible assets include but are not limited to discount rates.
The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to the solar energy systems acquired as part of our acquisition of Vivint Solar in 2020. Significant estimates in valuing certain tangible assets include but are not limited to discount rates.
Customer lead revenue is recognized at the time the lead is delivered. Goodwill Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed. Goodwill is reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount may be impaired.
Customer lead revenue is recognized at the time the lead is delivered. 63 Goodwill Goodwill represents the excess of the purchase price over the fair value of assets acquired and liabilities assumed. Goodwill is reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may be impaired.
We believe it is helpful to investors to evaluate networked solar energy capacity added during the period in order to measure the growth of our business as a whole, whether sold directly to customers or subject to executed Customer Agreements. • Gross Earning Assets is calculated as Gross Earning Assets Contracted Period plus Gross Earning Assets Renewal Period. 58 ◦ Gross Earning Assets Contracted Period represents the present value of the remaining net cash flows (discounted at 5%) during the initial term of our Customer Agreements as of the measurement date.
We believe it is helpful to investors to evaluate networked solar energy capacity added during the period in order to measure the growth of our business as a whole, whether sold directly to customers or subject to executed Customer Agreements. • Gross Earning Assets is calculated as Gross Earning Assets Contracted Period plus Gross Earning Assets Renewal Period. ◦ Gross Earning Assets Contracted Period represents the present value of the remaining net cash flows (discounted at 6%) during the initial term of our Customer Agreements as of the measurement date.
Furthermore, other companies may calculate these metrics differently than we do now or in the future, which would reduce their usefulness as a comparative measure. • Networked Solar Energy Capacity represents the aggregate megawatt production capacity of our solar energy systems, whether sold directly to customers or subject to executed Customer Agreements (i) for which we have confirmation that the systems are installed on the roof, subject to final inspection; (ii) in the case of certain system installations by our partners, for which we have accrued at least 80% of the expected project cost (inclusive of acquisitions of installed systems), or (iii) for multi-family and any other systems that have reached NTP, measured on the percentage of the project that has been completed based on expected project cost.
Furthermore, other companies may calculate these metrics differently than we do now or in the future, which would reduce their usefulness as a comparative measure. 59 • Networked Solar Energy Capacity represents the aggregate megawatt production capacity of our solar energy systems, whether sold directly to customers or subject to executed Customer Agreements (i) for which we have confirmation that the systems are installed on the roof, subject to final inspection; (ii) in the case of certain system installations by our partners, for which we have accrued at least 80% of the expected project cost (inclusive of acquisitions of installed systems), or (iii) for multi-family and any other systems that have reached Notice to Proceed (“NTP”), measured on the percentage of the project that has been completed based on expected project cost.
In addition, fund investors can receive attractive after-tax returns from our investment funds due to their ability to utilize 55 Commercial ITCs, accelerated depreciation and certain government or utility incentives associated with the funds’ ownership of solar energy systems. As of December 31, 2022, we had 64 active investment funds, which are described below.
In addition, fund investors can receive attractive after-tax returns from our investment funds due to their ability to utilize Commercial ITCs, accelerated depreciation and certain government or utility incentives associated with the funds’ ownership of solar energy systems. As of December 31, 2023, we had 64 active investment funds, which are described below.
During the years ended December 31, 2022, 2021 and 2020, there were no indicators of impairment and therefore no cash flow analysis was performed. Provision for Income Taxes We account for income taxes under an asset and liability approach.
During the years ended December 31, 2023, 2022 and 2021, there were no indicators of impairment and therefore no cash flow analysis was performed. Provision for Income Taxes We account for income taxes under an asset and liability approach.
Various assumptions are made when calculating these metrics. Gross Earning Assets utilize a 5% unlevered discount rate (weighted average cost of capital or “WACC”) to discount future cash flows to the present period.
Various assumptions are made when calculating these metrics. Gross Earning Assets utilize a 6% unlevered discount rate (weighted average cost of capital or “WACC”) to discount future cash flows to the present period.
Given our net operating loss carryforwards as of December 31, 2022, we do not expect to pay income tax, including in connection with our 2022 income tax provision, until our net operating losses are fully utilized.
Given our net operating loss carryforwards as of December 31, 2023, we do not expect to pay income tax, including in connection with our 2023 income tax provision, until our net operating losses are fully utilized.
Recoverability of these assets is measured by comparison of the carrying amount of each asset group to the future undiscounted cash flows the asset is expected to generate over its remaining life.
Recoverability of these assets is measured by comparison of the carrying value of each asset group to the future undiscounted cash flows the asset is expected to generate over its remaining life.
Sunrun’s next goal and chapter of growth is to be the go-to company for clean 54 energy and storage solutions, and reliable home electrification, providing our customers with affordable renewable energy throughout their homes and our communities with a cleaner, more resilient grid.
Sunrun’s next goal and chapter of growth is to be the go-to company for clean and reliable home electrification, providing our customers with affordable renewable energy throughout their homes and our communities with a cleaner, more resilient grid.
Under our pass-through financing obligation structure, in accordance with the provisions of FASB, Accounting Standards Codification Topic 810 (“ASC 810”) Consolidation , we have determined that we are the primary beneficiary of the owner entity, and accordingly, we consolidate that entity.
Under our pass-through financing obligation structure, in accordance with the provisions of FASB, Accounting Standards Codification (“ASC”) Topic 810, Consolidation , we have determined that we are the primary beneficiary of the owner entity, and accordingly, we consolidate that entity.
This was primarily driven by $1.2 billion in net proceeds from fund investors, $1.9 billion in net proceeds from debt, $32.9 million in net proceeds from stock-based awards activity, offset by $42.6 million in acquisition of noncontrolling interests and $14.1 million in repayments under finance lease obligations. During 2021, we generated $2.6 billion from financing activities.
During 2022, we generated $3.0 billion from financing activities. This was primarily driven by $1.2 billion in net proceeds from fund investors, $1.9 billion in net proceeds from debt, $32.9 million in net proceeds from stock-based awards activity, offset by $42.6 million in acquisition of noncontrolling interests and $14.1 million in repayments under finance lease obligations.
", Note 13, Pass-Through Financing Obligations , Note 14, VIE Arrangements and Note 15, Redeemable Noncontrolling Interests to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. 56 Pass-through Financing Obligations Pass-Through Financing Obligations.
", Note 12, Pass-Through Financing Obligations , Note 13, VIE Arrangements and Note 14, Redeemable Noncontrolling Interests to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. Pass-through Financing Obligations Pass-Through Financing Obligations.
As of December 31, 2022, we provided our solar services to customers and sold solar energy panels and other products to resellers throughout the United States. More than 40% of our cumulative systems deployed are in California. We compete mainly with traditional utilities.
As of December 31, 2023, we provided our solar services to customers and sold solar energy panels and other products to resellers throughout the United States. More than 45% of our cumulative systems deployed are in California. We compete mainly with traditional utilities.
We account for investment tax credits as a reduction of income tax expense in the year in which the credits arise. We determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.
We account for investment tax credits as a reduction of income tax expense in the year in which the credits arise ( i.e. the flow-through method). We determine whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.
We intend to establish new investment funds in the future, and we may also use debt, equity or other financing strategies to finance our business. 69 Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statement included elsewhere in this Annual Report on Form 10-K. 70
We intend to establish new investment funds in the future, and we may also use debt, equity or other financing strategies to finance our business. 72 Recent Accounting Pronouncements See Note 2, Summary of Significant Accounting Policies, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 73
Our principal uses of cash are funding our business, including the costs of acquisition and installation of solar energy systems, satisfaction of our obligations under our debt instruments and other working capital requirements. As of December 31, 2022, we had outstanding borrowings of $505.2 million on our $600.0 million credit facility maturing in January 2025.
Our principal uses of cash are funding our business, including the costs of acquisition and installation of solar energy systems, satisfaction of our obligations under our debt instruments and other working capital requirements. As of December 31, 2023, we had outstanding borrowings of $539.5 million on our $600.0 million credit facility maturing in January 2025.
Our ability to offer Customer Agreements depends in part on our ability to finance the purchase and installation of the solar energy systems by monetizing the resulting customer cash flows and related commercial investment tax credits (“Commercial ITCs”), accelerated tax depreciation and other incentives from governments and local utilities.
Our ability to offer Customer Agreements depends in part on our ability to finance the purchase and installation of the solar energy systems by monetizing the resulting customer cash flows and related Commercial ITCs, accelerated tax depreciation and other incentives from governments and local utilities.
If our estimate of the future production shortfall amount for Customer Agreements with a performance guarantee was 10% higher, the additional reduction to revenue in the twelve months ended December 31, 2022 would have been less than $2.4 million.
If our estimate of the future production shortfall amount for Customer Agreements with a performance guarantee was 10% higher, the additional reduction to revenue in the twelve months ended December 31, 2023 would have been less than $3.3 million.
Investment funds generally allocate more loss to the noncontrolling interest in the first several years after fund formation. Liquidity and Capital Resources As of December 31, 2022, we had cash of $740.5 million, which consisted of cash held in checking and savings accounts with financial institutions.
Investment funds generally allocate more loss to the noncontrolling interest in the first several years after fund formation. Liquidity and Capital Resources As of December 31, 2023, we had cash of $678.8 million, which consisted of cash held in checking and savings accounts with financial institutions.
Revenue from incentives, which primarily consisted of the sale of SRECs, increased by $9.4 million when compared to the prior year related to the timing and volume of SREC sales which were responsive to market conditions. Solar Energy Systems and Product Sales .
Revenue from incentives, which primarily consisted of the sale of SRECs, decreased by $1.1 million when compared to the prior year related to the timing and volume of SREC sales which were responsive to market conditions. Solar Energy Systems and Product Sales .
As of December 31, 2022, we had net operating loss carryforwards for federal and state income tax purposes of approximately $720.7 million and $2.5 billion, respectively, which will begin to expire in 2028 for federal purposes and in 2024 for state purposes.
As of December 31, 2023, we had net operating loss carryforwards for federal and state income tax purposes of approximately $720.7 million and $3.3 billion, respectively, which will begin to expire in 2028 for federal purposes and in 2024 for state purposes.
The $145.1 million increase in Cost of customer agreements and incentives was primarily due to the new systems placed in service in 2022, plus a full year of costs recognized in 2022 for systems placed in service in 2021 versus only a partial amount of such expenses related to the period in which the assets were in service in 2021.
The $233.0 million increase in Cost of customer agreements and incentives was primarily due to the new systems placed in service in 2023, plus a full year of costs recognized in 2023 for systems placed in service in 2022 versus only a partial amount of such expenses related to the period in which the assets were in service in 2022.
The $147.1 million increase in Revenue from Customer Agreements was primarily due to new systems placed in service in 2022 and a full year of revenue recognized in 2022 for systems placed in service in 2021 versus only a partial amount of such revenue related to the period in which the assets were in service in 2021.
The $204.8 million increase in Revenue from Customer Agreements was primarily due to new systems placed in service in 2023 and a full year of revenue recognized in 2023 for systems placed in service in 2022 versus only a partial amount of such revenue related to the period in which the assets were in service in 2022.
We also continue to pursue the development of our grid services business, creating virtual power plants that lead to a cleaner, more resilient grid. In collaboration with grid managers, we can deploy our battery systems where they will add the most value for utilities, the grid, and customers.
We intend to pursue these opportunities on a variety of fronts, and we continue to pursue the development of our grid services business, creating virtual power plants that lead to a cleaner, more resilient grid. In collaboration with grid managers, we can deploy our battery systems where they will add the most value for utilities, the grid, and customers.
We have historically estimated an immaterial amount of liquidated damages pursuant to SREC contracts, and actual damages have not been materially different from estimates, nor material in amount during the years ended December 31, 2022, 2021 and 2020. Solar Energy Systems and Product Sales.
We have historically estimated an immaterial amount of liquidated damages pursuant to SREC contracts, and actual damages have not been materially different from estimates, nor material in amount during the years ended December 31, 2023, 2022 and 2021. Solar Energy Systems and Product Sales. Solar energy systems sales are revenue from the sale of solar energy systems directly to customers.
Changes in working capital resulted in a net cash outflow of $485.1 million. Investing Activities During 2022, we used $2.1 billion in cash in investing activities. The majority was used to design, acquire and install solar energy systems and components under our long-term Customer Agreements.
Changes in working capital resulted in a net cash outflow of $410.8 million. Investing Activities During 2023, we used $2.6 billion in cash in investing activities. The majority was used to design, acquire and install solar energy systems and components under our long-term Customer Agreements.
The increase in Interest expense, net of $118.1 million is primarily related to additional non-recourse debt entered into in 2022. Included in net interest expense is $28.3 million and $26.3 million of non-cash interest recognized under Customer Agreements that have a significant financing component for 2022 and 2021, respectively. Other income, net.
The increase in Interest expense, net of $207.2 million is primarily related to additional non-recourse debt entered into in 2023. Included in net interest expense is $31.2 million and $28.3 million of non-cash interest recognized under Customer Agreements that have a significant financing component for 2023 and 2022, respectively. Other (expense) income, net.
In 2022, we received $1.2 billion of new commitments on secured credit facilities arrangements with syndicates of banks and $1.2 billion of commitments from secured, long-term non-recourse loan arrangements.
In 2023, we received $1.0 billion of new commitments on secured credit facilities arrangements with syndicates of banks and $0.8 billion of commitments from secured, long-term non-recourse loan arrangements.
If redemption is at our option or the consolidated joint ventures are not redeemable, we record the investor’s interest as a noncontrolling interest and account for the interest using the hypothetical liquidation at book value (“HLBV”) method.
If redemption is at our option or the consolidated joint ventures are not redeemable, we record the investor’s interest as a noncontrolling interest and account for the interest using the HLBV method.
If the assumptions used for each of these were 10% higher, the impact to the aggregate redeemable noncontrolling interest balance as of December 31, 2022 would be a reduction of $13.3 million.
If the assumptions used for each of these were 10% higher, the impact to the aggregate redeemable noncontrolling interest balance as of December 31, 2023 would be a reduction of $20.6 million.
In this investment fund structure, we and the fund investor each utilize separate entities to facilitate the pass-through of the Commercial ITC or U.S. Treasury grants to the fund investors.
In this investment fund structure, we and the fund investor each utilize separate entities to facilitate the pass-through of the Commercial ITC to the fund investors.
There was a $512.2 million increase in Cost of solar energy systems and product sales which was primarily due to the corresponding net increase in the solar energy systems and product sales discussed above.
There was a $158.9 million decrease in Cost of solar energy systems and product sales, which was primarily due to the corresponding net decrease in the solar energy systems and product sales discussed above.
These market dynamics, which we expect will continue into the foreseeable future, have and may continue to impact our business and financial results, including costs and revenues.
These market dynamics, some of which we expect will continue into the foreseeable future, have impacted and may continue to impact our business and financial results.
Our estimated production shortfall reduced revenue during the twelve months ended December 31, 2022 by less than $6.2 million more than the prior year's period.
Our estimated production shortfall reduced revenue during the twelve months ended December 31, 2023 by less than $8.3 million more than the prior year's period.
The table below provides an overview of our current investment funds (dollars in millions): Consolidated Joint Ventures Pass-Through Financing Obligations Partnership Flip JV Inverted Lease Consolidation Owner entity consolidated, tenant entity not consolidated Single entity, consolidated Owner and tenant entities consolidated Balance sheet classification Pass-through financing obligation Redeemable noncontrolling interests and noncontrolling interests Redeemable noncontrolling interests Revenue from Commercial ITCs Recognized on the PTO date None None Method of calculating investor interest Effective interest rate method Greater of HLBV or redemption value Greater of HLBV or redemption value Liability balance as of December 31, 2022 $ 305.6 N/A N/A Noncontrolling interest balance (redeemable or otherwise) as of December 31, 2022 N/A $ 1,453.2 $ 5.5 For further information regarding our investment funds, including the associated risks, see Item 1A.
If the investor has the option to put their interest to us, we record the investor’s interest as a redeemable noncontrolling interest at the greater of the HLBV and the redemption value. 57 The table below provides an overview of our current investment funds (dollars in millions): Consolidated Joint Ventures Pass-Through Financing Obligations Partnership Flip JV Inverted Lease Consolidation Owner entity consolidated, tenant entity not consolidated Single entity, consolidated Owner and tenant entities consolidated Balance sheet classification Pass-through financing obligation Redeemable noncontrolling interests and noncontrolling interests Redeemable noncontrolling interests Revenue from Commercial ITCs Recognized on the permission to operate date None None Method of calculating investor interest Effective interest rate method Greater of HLBV or redemption value Greater of HLBV or redemption value Liability balance as of December 31, 2023 $ 294.6 N/A N/A Noncontrolling interest balance (redeemable or otherwise) as of December 31, 2023 N/A $ 1,678.5 $ 5.3 For further information regarding our investment funds, including the associated risks, see Item 1A.
Income Tax Expense Year Ended December 31, Change 2022 2021 $ % (in thousands) Income tax expense $ 2,291 $ 9,271 $ (6,980) (75) % The decrease in Income tax expense of $7.0 million primarily relates to a decrease in valuation allowance on certain federal and state tax credits and net operating losses, which was offset by a decrease in tax benefit related to a higher pre-tax loss and an increase in noncontrolling interest and redeemable noncontrolling interests.
Income Tax (Benefit) Expense Year Ended December 31, Change 2023 2022 $ % (in thousands) Income tax (benefit) expense $ (12,691) $ 2,291 $ (14,982) (654) % The decrease in Income tax (benefit) expense of $15.0 million primarily relates to an increase in tax benefit related to a higher pre-tax loss, which was offset by goodwill impairment, an increase in valuation allowance on certain federal and state tax credits and net operating losses, and an increase in noncontrolling interest and redeemable noncontrolling interests.
Through these electrification, storage, and grid services opportunities, we aim to be the consumer brand synonymous with repowering our customers’ homes with renewable energy and providing a pathway to a cleaner, healthier future. Macroeconomic Environment Our business and financial performance also depend on worldwide economic conditions.
Through these electrification opportunities and our grid services business, we aim to be the consumer brand synonymous with repowering our customers’ homes with renewable energy and providing a pathway to a cleaner, healthier future.
During 2021, we used $817.2 million in net cash from operating activities. The driver of our operating cash outflow consists of the costs of our revenue, as well as sales, marketing and general and administrative costs. During 2021, our operating cash outflows were $332.2 million from our net loss excluding non-cash and non-operating items.
During 2022, we used $848.8 million in net cash from operating activities. The driver of our operating cash outflow consisted of the cost of our revenue, as well as sales, marketing and general and administrative costs. During 2022, our operating cash outflows were $438.1 million from our net loss excluding non-cash and non-operating items.
The driver of our operating cash outflow consists of the costs of our revenue, as well as sales, marketing and general and administrative costs. During 2022, our operating cash outflows were $438.1 million from our net loss excluding non-cash and non-operating items. Changes in working capital resulted in a net cash outflow of $410.8 million.
The driver of our operating cash outflow consisted of the cost of our revenue, as well as sales, marketing and general and administrative costs. During 2023, our operating cash outflows were $625.5 million from our net loss excluding non-cash and non-operating items. Changes in working capital resulted in a net cash outflow of $195.3 million.
To corroborate this conclusion, we compared the carrying value of our one reporting unit to our market capitalization and concluded that there was no goodwill impairment during the years ended December 31, 2022, 2021 and 2020. 62 Impairment of Long-Lived Assets The carrying amounts of our long-lived assets, including solar energy systems and definite-lived intangible assets, are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated.
To corroborate this conclusion, we compared the carrying value of our one reporting unit to our enterprise market capitalization after consideration of a reasonable control premium and concluded that there was no goodwill impairment during the fourth quarter of 2023. 64 Impairment of Long-Lived Assets The carrying values of our long-lived assets, including solar energy systems, are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated.
We begin to recognize revenue from a Customer Agreement when PTO for the applicable solar energy system is given by the local utility company or on the date daily operation commences if utility approval is not required.
Customer agreements and incentives revenue is primarily comprised of revenue from our Customer Agreements and sales of Commercial ITCs and SRECs to third parties. 62 We begin to recognize revenue from a Customer Agreement when PTO for the applicable solar energy system is given by the local utility company or on the date daily operation commences if utility approval is not required.
This was primarily driven by $1.0 billion in net proceeds from fund investors, $1.6 billion in net proceeds from debt, $36.1 million in net proceeds from stock-based awards activity, offset by $42.0 million in acquisition of noncontrolling interests and $12.4 million in repayments under finance lease obligations.
This was primarily driven by $1.4 billion in net proceeds from fund investors, $2.2 billion in net proceeds from debt, $22.6 million in net proceeds from stock-based awards activity, offset by $1.5 million in repurchase of convertible senior notes, $46.3 million in acquisition of noncontrolling interests and $23.3 million in repayments under finance lease obligations.
After the fund investor receives its contractual rate of return or after the specified time period, we receive substantially all of the value attributable to the remaining customer payments and SREC sales. Included within the Partnership Flips is the project equity financing we entered into in December 2016.
After the fund investor receives its contractual rate of return or after the specified time period, we receive substantially all of the value attributable to the remaining customer payments and SREC sales.
We account for these investment funds in our consolidated financial statements as if we have not assigned the Customer Agreement to the investor, and we record on our consolidated financial statements activities arising from the Customer Agreements and any related Commercial ITCs monetized as part of the upfront payments received from the investor and SREC sales.
In addition, funds paid for the Commercial ITC value upfront are initially recorded as a refund liability and recognized as revenue as the associated solar system reaches permission to operate ("PTO"). 58 We account for these investment funds in our consolidated financial statements as if we have not assigned the Customer Agreement to the investor, and we record on our consolidated financial statements activities arising from the Customer Agreements and any related Commercial ITCs monetized as part of the upfront payments received from the investor and SREC sales.
The additional revenue is included in the total transaction price to be recorded over the term of the agreement and is recognized based on the timing of the delivery.
The additional revenue is included in the total transaction price to be recorded over the term of the agreement and is recognized based on the timing of the delivery. The interest expense is recognized based upon an amortization schedule which typically decreases throughout the term of the related agreement.
While there can be no assurances, we anticipate raising additional required capital from new and existing investors. We believe our cash, investment fund commitments and available borrowings as further described below will be sufficient to meet our anticipated cash needs for at least the next 12 months.
We believe our cash, investment fund commitments and available borrowings as further described below will be sufficient to meet our anticipated cash needs for at least the next 12 months.
The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2022 2021 (in thousands) Consolidated cash flow data: Net cash used in operating activities $ (848,793) $ (817,186) Net cash used in investing activities (2,086,066) (1,686,185) Net cash provided by financing activities 3,037,451 2,645,594 Net increase in cash $ 102,592 $ 142,223 Operating Activities During 2022, we used $848.8 million in net cash from operating activities.
The following table summarizes our cash flows for the periods indicated: 70 Year Ended December 31, 2023 2022 (in thousands) Consolidated cash flow data: Net cash used in operating activities $ (820,740) $ (848,793) Net cash used in investing activities (2,613,143) (2,086,066) Net cash provided by financing activities 3,468,698 3,037,451 Net increase in cash $ 34,815 $ 102,592 Operating Activities During 2023, we used $820.7 million in net cash from operating activities.
The interest expense is recognized based upon an amortization schedule which typically decreases throughout the term of the related agreement. 61 For pass-through financing obligation funds, the value attributable to the Commercial ITCs is recognized in the period a solar system is granted PTO, at which point we have met our obligation to the investor.
For pass-through financing obligation funds, the value attributable to the Commercial ITCs is recognized in the period a solar system is granted PTO, at which point we have met our obligation to the investor.
We face global macroeconomic challenges, particularly in light of increases and volatility in interest rates, uncertainty in markets, inflationary trends, navigating complex and evolving regulatory and tax frameworks, and the dynamics of the global trade environment. Throughout fiscal 2022, we observed market uncertainty, increasing inflationary pressures, supply constraints and the ongoing and rippling effects from the COVID-19 pandemic.
We face global macroeconomic challenges, particularly in light of increases and volatility in interest rates, uncertainty in markets, inflationary trends, navigating complex and evolving regulatory and tax frameworks, and the dynamics of the global trade environment.
We believe the electrification of U.S. households with renewable energy, and the accompanying development of an inter-connected, smart grid will provide a number of market opportunities beyond our traditional solar and battery storage offerings, including EV chargers, battery retrofits, re-powered or expanding systems, home energy management services, and other home electrification products.
We are actively delivering demand response and capacity services to meet operational needs in multiple geographies, and partnering with grid managers to build a more resilient electricity system that integrates the new energy technologies customers want. 56 We believe the electrification of U.S. households with renewable energy, and the accompanying development of an inter-connected, smart grid will provide a number of market opportunities beyond our traditional solar and battery storage offerings, including EV chargers, battery retrofits, re-powered or expanding systems, home energy management services, and other home electrification products.
Included in sales and marketing expense were $38.7 million and $23.3 million of amortization of costs to obtain Customer Agreements for 2022 and 2021, respectively. Research and Development Expense . The $2.3 million decrease in Research and development expense was primarily attributable to a decrease in headcount driving lower employee compensation costs. General and Administrative Expense .
The $4.6 million decrease in Sales and marketing expense was primarily attributable to decreases in headcount driving lower employee compensation and costs to acquire customers through our sales lead generating partners. Included in sales and marketing expense were $56.3 million and $38.7 million of amortization of costs to obtain Customer Agreements for 2023 and 2022, respectively.
However, in order to grow, we will continue to be dependent on financing from outside parties. If financing is not available to us on acceptable terms if and when needed, we may be required to reduce planned spending, which could have a material adverse effect on our operations.
If financing is not available to us on acceptable terms if and when needed, we may be required to reduce planned spending, which could have a material adverse effect on our operations. While there can be no assurances, we anticipate raising additional required capital from new and existing investors.
See Note 3, Acquisition to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 63 Noncontrolling Interests and Redeemable Noncontrolling Interests Our noncontrolling interests and redeemable noncontrolling interests represent fund investors’ interests in the net assets of certain investment funds, which we consolidate, that we have entered into in order to finance the costs of solar energy facilities under Customer Agreements.
These estimates are inherently uncertain and unpredictable. 65 Noncontrolling Interests and Redeemable Noncontrolling Interests Our noncontrolling interests and redeemable noncontrolling interests represent fund investors’ interests in the net assets of certain investment funds, which we consolidate, that we have entered into in order to finance the costs of solar energy facilities under Customer Agreements.
Debt, Equity, and Financing Fund Commitments Debt Instruments For a discussion of the terms and conditions of debt instruments and changes thereof in the period, refer to Note 11, Indebtedness, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Debt, Equity, and Financing Fund Commitments Debt Instruments For a discussion of the terms and conditions of debt instruments and changes thereof in the period, refer to Note 10, Indebtedness, to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 71 Investment Fund Commitments As of December 31, 2023, we had committed and available capital of approximately $386.9 million that may only be used to purchase and install solar energy systems.
Our business model requires substantial outside financing arrangements to grow the business and facilitate the deployment of additional solar energy systems. The solar energy systems that are operational are expected to generate a positive return rate over the term of the Customer Agreement, typically 20 or 25 years.
The solar energy systems that are operational are expected to generate a positive return rate over the term of the Customer Agreement, typically 20 or 25 years. However, in order to grow, we will continue to be dependent on financing from outside parties.
The Cost of solar energy systems and product sales increased to 88% of solar energy systems and product sales revenue during 2022, when compared with 85% in the prior year period, primarily as a result of increased demand for solar energy related products and services in the marketplace. Sales and Marketing Expense.
The Cost of solar energy systems and product sales increased to 95% of solar energy systems and product sales revenue during 2023, when compared with 88% in the prior year, primarily as a result of sales price increases lagging cost increases, as well as volume pricing granted in our distribution business. Sales and Marketing Expense.
The increase in other income, net of $238.0 million relates primarily to an increase of $168.3 million in gains on derivatives recognized in 2022, as well as a $47.3 million gain on an equity investment, with no such comparable activity in 2021.
The increase in other expense of $324.6 million relates primarily to a $58.7 million loss on an equity investment in Lunar Energy Inc. (“Lunar Energy”) during 2023, compared with a $47.3 million gain on this same equity investment in Lunar Energy during 2022, as well as to gains on derivatives during 2022, with no such comparable activity in 2023.
The majority was used to design, acquire and install solar energy systems and components under our long-term Customer Agreements. Financing Activities During 2022, we generated $3.0 billion from financing activities.
Included within cash used in investing activities during 2023, was a $5.0 million contribution we made as an additional investment in Lunar Energy. During 2022, we used $2.1 billion in cash in investing activities. The majority was used to design, acquire and install solar energy systems and components under our long-term Customer Agreements.
The decarbonization of the American economy will require powering our energy supply, including our homes, appliances and automobiles, with clean energy.
The Opportunity of Home Electrification and a Clean, Resilient Grid The United States is on the precipice of a once-in-a-generation transformation of our energy system. The decarbonization of the American economy will require powering our energy supply, including our homes, appliances and automobiles, with clean energy.
Included within cash used 68 in investing activities during 2022, was a $75.0 million contribution we made as an additional investment in our home electrification venture with SK E&S Co., Ltd. During 2021, we used $1.7 billion in cash in investing activities.
Included within cash used in investing activities during 2022, was a $75.0 million contribution we made as an additional investment in Lunar Energy. Financing Activities During 2023, we generated $3.5 billion from financing activities.
Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests Year Ended December 31, Change 2022 2021 $ % (in thousands) Net loss attributable to noncontrolling interests and redeemable noncontrolling interests $ (1,023,022) $ (901,107) $ (121,915) 14 % Net loss attributable to noncontrolling interests and redeemable noncontrolling interests was primarily the result of an addition of six new investment funds since December 31, 2021, for which the HLBV method was used in 67 determining the amount of net loss attributable to noncontrolling interests.
In addition, federal and certain state net operating loss carryforwards generated in tax years beginning after December 31, 2017 total $2.0 billion and $357.1 million, respectively, and have indefinite carryover periods and do not expire. 69 Net Loss Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests Year Ended December 31, Change 2023 2022 $ % (in thousands) Net loss attributable to noncontrolling interests and redeemable noncontrolling interests $ (1,078,344) $ (1,023,022) $ (55,322) 5 % Net loss attributable to noncontrolling interests and redeemable noncontrolling interests was primarily the result of an addition of six new investment funds since December 31, 2022, for which the HLBV method was used in determining the amount of net loss attributable to noncontrolling interests.
Customers may cancel their Customer Agreements with us, subject to certain conditions, during this process until commencement of installation. Customer cancellation rates can change over time and vary between markets. The Opportunity of Home Electrification and Storage Solutions to Build a Clean, Resilient Grid The United States is on the precipice of a once-in-a-generation transformation of our energy system.
Customers may cancel their Customer Agreements with us, subject to certain conditions, during this process until commencement of installation. Customer cancellation rates can change over time and vary between markets. Market & Macroeconomic Environment 55 Our business and financial performance also depend on worldwide economic conditions.
Additionally, we have purchase commitments, which have the ability to be canceled without significant penalties, with multiple suppliers to purchase $360.1 million of photovoltaic modules, inverters and batteries by the end of 2022. In January 2021, we issued $400.0 million of convertible senior notes with a maturity date of February 1, 2026, for net proceeds of approximately $389.0 million.
For additional details, see the description of "Senior Secured Credit Facility" and "Line of Credit" in Item 9B.Other Information. Additionally, we have purchase commitments, which have the ability to be canceled without significant penalties, with multiple suppliers to purchase $366.4 million of photovoltaic modules, inverters and batteries by the end of the first quarter of 2025.
Additionally, we believe our omni-channel model and geographic reach provides us with the capabilities to execute on these opportunities in a variety of markets. We also believe that energy storage offerings will play an increasingly important role and be a key part of the customer value proposition.
Additionally, we believe our omni-channel model and geographic reach provides us with the capabilities to execute on these opportunities in a variety of markets. To further expand such future upsell and retrofit opportunities, from time to time, we may pursue acquisitions of previously installed solar systems.
As of December 31, 2022 2021 Networked Solar Energy Capacity (megawatts) 5,667 4,677 Customers 797,296 660,311 59 As of December 31, 2022 2021 (in thousands) Gross Earning Assets Contracted Period $ 8,878,718 $ 6,638,838 Gross Earning Assets Renewal Period 3,546,821 3,033,150 Gross Earning Assets $ 12,425,539 $ 9,671,988 The tables below provide a range of Gross Earning Asset amounts if different default, discount and purchase and renewal assumptions were used.
As of December 31, 2023 2022 Networked Solar Energy Capacity (megawatts) 6,689 5,667 Customers 933,275 797,296 As of December 31, 2023 2022 (1) (in thousands) Gross Earning Assets Contracted Period $ 10,802,494 $ 8,878,718 Gross Earning Assets Renewal Period 3,364,026 3,546,821 Gross Earning Assets $ 14,166,520 $ 12,425,539 (1) The Gross Earning Assets as of December 31, 2022 reflect the application of a 5% unlevered discount rate, which is consistent with the discount rate used during that period.
Non-Operating Expenses Year Ended December 31, Change 2022 2021 $ % (in thousands) Interest expense, net $ (445,819) $ (327,700) $ (118,119) 36 % Other income, net 260,657 22,628 238,029 1,052 % Total interest and other income, net $ (185,162) $ (305,072) $ 119,910 (39) % Interest expense, net.
Non-Operating Expenses Year Ended December 31, Change 2023 2022 $ % (in thousands) Interest expense, net $ (652,989) $ (445,819) $ (207,170) 46 % Other (expense) income, net (63,900) 260,657 (324,557) (125) % Total interest and other expense, net $ (716,889) $ (185,162) $ (531,727) 287 % Interest expense, net.
The $69.9 million decrease in General and administrative expenses was primarily attributable to a decrease in stock-based compensation expense.
Research and Development Expense . The $0.9 million increase in Research and development expense was primarily attributable to an increase in support related consulting costs. General and Administrative Expense . The $26.5 million increase in General and administrative expenses was primarily attributable to an increase in headcount driving higher employee compensation costs.
Operating Expenses Year Ended December 31, Change 2022 2021 $ % (in thousands) Cost of customer agreements and incentives $ 844,162 $ 699,102 $ 145,060 21 % Cost of solar energy systems and product sales 1,178,548 666,370 512,178 77 % Sales and marketing 745,386 622,961 122,425 20 % Research and development 20,907 23,165 (2,258) (10) % General and administrative expense 189,247 259,173 (69,926) (27) % Amortization of intangible assets 5,364 5,370 (6) — % Total operating expenses $ 2,983,614 $ 2,276,141 $ 707,473 31 % Cost of Customer Agreements and Incentives .
Operating Expenses Year Ended December 31, Change 2023 2022 $ % (in thousands) Cost of customer agreements and incentives $ 1,077,114 $ 844,162 $ 232,952 28 % Cost of solar energy systems and product sales 1,019,638 1,178,548 (158,910) (13) % Sales and marketing 740,821 745,386 (4,565) (1) % Research and development 21,816 20,907 909 4 % General and administrative expense 221,067 194,611 26,456 14 % Goodwill impairment 1,158,000 — 1,158,000 100 % Total operating expenses $ 4,238,456 $ 2,983,614 $ 1,254,842 42 % Cost of Customer Agreements and Incentives .
Revenue from solar energy systems sales increased by $442.6 million compared to the prior year primarily due to an overall increased demand for solar energy systems in the marketplace, particularly through retail partners. Additionally, the average price of system sales increased 12% from the prior year period.
Revenue from solar energy systems sales decreased by $257.5 million compared to the prior year primarily due to an increase in the proportion of customers choosing to enter into a Customer Agreement versus purchasing a system outright using a loan, likely due to increased interest rates.
Removed
We believe Sunrun will be uniquely positioned as the leading national provider of solar and storage energy subscription offerings, making our clean energy services more accessible to even more communities. We intend to pursue these opportunities on a variety of fronts.
Added
During the twelve months ended December 31, 2023, we observed market uncertainty, increasing inflationary pressures, rising interest rates, the market impacts of proposed or newly enacted regulatory frameworks in markets within which we do business and within our industry, supply constraints, and bank failures.
Removed
For instance, in May 2020, we announced a partnership with Ford Motor Company to be the preferred installer for Ford’s Charge Station Pro and Intelligent Backup Power System, debuting with the all-electric F-150 Lightning.
Added
In particular, 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed3 unchanged
Biggest changeA hypothetical 10% increase in our interest rates on our variable rate debt facilities would have increased our interest expense by $6.0 million and $3.2 million for the year ended December 31, 2022 and 2021, respectively. 71
Biggest changeA hypothetical 10% increase in our interest rates on our variable rate debt facilities would have increased our interest expense by $11.7 million and $6.0 million for the year ended December 31, 2023 and 2022, respectively. 74

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