Harvard Case - Sunrun in 2017: Net Metering in Nevada (A)
"Sunrun in 2017: Net Metering in Nevada (A)" Harvard business case study is written by Steven Callander. It deals with the challenges in the field of Business & Government Relations. The case study is 11 page(s) long and it was first published on : Jan 8, 2018
At Fern Fort University, we recommend that Sunrun aggressively pursue a multi-pronged strategy to navigate the evolving regulatory landscape in Nevada. This strategy should encompass active engagement with policymakers, strategic partnerships with local stakeholders, and innovative business model adaptations to ensure continued growth and profitability in the face of net metering policy changes.
2. Background
The case study focuses on Sunrun, a leading residential solar provider, facing the challenge of a proposed change to Nevada's net metering policy in 2017. This policy change would significantly reduce the value of solar energy credits for homeowners, potentially impacting Sunrun's business model and profitability. The case highlights the complex interplay between government policy and regulation, business strategy, and the evolving solar energy market.
The main protagonists are:
- Sunrun: A company navigating the complex regulatory landscape and seeking to maintain its market position.
- Nevada Public Utilities Commission (PUC): The regulatory body responsible for setting net metering policies.
- Nevada Legislature: The body responsible for enacting legislation impacting the energy sector.
- Nevada Governor: The executive branch responsible for approving or vetoing legislation.
- Solar industry stakeholders: Other solar companies, advocacy groups, and consumers who are impacted by the net metering policy.
3. Analysis of the Case Study
This case study can be analyzed through the lens of competitive strategy, government relations, and business model innovation.
Competitive Strategy:
- Porter's Five Forces: The case highlights the competitive forces at play in the solar energy market, including the threat of new entrants, the bargaining power of buyers and suppliers, and the intensity of rivalry among existing players.
- Competitive Advantage: Sunrun's competitive advantage lies in its established brand, strong customer base, and operational efficiency. However, the proposed policy change could erode this advantage by making solar less attractive to consumers.
- Strategic Positioning: Sunrun needs to adapt its strategic positioning to address the changing regulatory landscape. This may involve focusing on niche markets, developing new business models, or expanding into other states with favorable policies.
Government Relations:
- Lobbying Strategies: Sunrun must engage in effective lobbying efforts to influence policymakers and advocate for its interests. This includes building relationships with key legislators, participating in public hearings, and mobilizing its customer base.
- Corporate Political Activity: Sunrun needs to develop a comprehensive strategy for corporate political activity, including engaging in campaign finance, supporting political candidates, and advocating for policy changes.
- Public-Private Partnerships: Sunrun can explore opportunities for public-private partnerships with the government to promote solar energy adoption and address the concerns of utility companies.
Business Model Innovation:
- Value Proposition: Sunrun needs to re-evaluate its value proposition to customers in light of the proposed policy change. This may involve offering new financing options, bundled services, or enhanced customer support.
- Revenue Model: Sunrun may need to explore alternative revenue models to compensate for the reduced value of net metering credits. This could include selling solar energy directly to utilities, providing energy storage solutions, or developing new business lines.
- Operating Model: Sunrun may need to adapt its operating model to optimize efficiency and profitability in a changing regulatory environment. This could involve streamlining processes, reducing costs, or expanding into new markets.
4. Recommendations
Sunrun should implement the following recommendations to navigate the evolving regulatory landscape in Nevada:
- Engage in Proactive Lobbying and Advocacy: Sunrun should invest in a robust lobbying strategy to influence the Nevada PUC and Legislature. This includes building strong relationships with key policymakers, participating in public hearings, and mobilizing its customer base to advocate for favorable net metering policies.
- Form Strategic Partnerships: Sunrun should seek strategic partnerships with local stakeholders, such as utility companies, community groups, and environmental organizations. These partnerships can help build support for solar energy adoption and address the concerns of policymakers.
- Develop Innovative Business Models: Sunrun should explore innovative business models to adapt to the changing regulatory landscape. This could include offering bundled services, such as energy storage or home automation, or developing new revenue streams, such as selling solar energy directly to utilities.
- Focus on Customer Value: Sunrun should continue to prioritize customer value by offering competitive pricing, reliable service, and innovative solutions. This includes providing clear and transparent information about the impacts of the net metering policy change on customers.
- Diversify Geographic Footprint: Sunrun should consider expanding its operations into other states with favorable policies for solar energy adoption. This diversification strategy can mitigate the risks associated with regulatory changes in a single state.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: Sunrun's core competencies lie in its expertise in solar technology, project development, and customer service. These recommendations align with Sunrun's mission to provide clean and affordable energy to homeowners.
- External Customers and Internal Clients: The recommendations address the needs of both external customers, who want affordable and reliable solar energy, and internal clients, who want to maintain profitability and growth.
- Competitors: The recommendations consider the competitive landscape in the solar energy market and aim to maintain Sunrun's competitive advantage.
- Attractiveness: The recommendations are expected to be attractive in terms of financial returns, considering the potential for increased market share, new revenue streams, and reduced regulatory risk.
6. Conclusion
Sunrun faces a significant challenge in navigating the evolving regulatory landscape in Nevada. However, by proactively engaging with policymakers, forming strategic partnerships, and adapting its business model, Sunrun can maintain its market position and continue to grow in the face of these challenges. The company's ability to effectively manage these complexities will determine its long-term success in the solar energy market.
7. Discussion
Alternatives not selected:
- Aggressive price cuts: While this could temporarily increase sales, it would likely erode profitability and be unsustainable in the long term.
- Complete withdrawal from Nevada: This would abandon a significant market and potentially damage Sunrun's reputation.
Risks and key assumptions:
- Policy uncertainty: The regulatory landscape could change further, creating additional challenges for Sunrun.
- Customer acceptance: Customers may not be receptive to new business models or price increases.
- Competition: Other solar companies may adopt similar strategies, intensifying competition.
8. Next Steps
Sunrun should implement the following steps to execute its strategy:
- Within 3 months: Establish a dedicated team to manage government relations and lobbying efforts.
- Within 6 months: Develop a comprehensive plan for strategic partnerships and identify potential partners.
- Within 12 months: Launch pilot programs for new business models and gather customer feedback.
- Ongoing: Continuously monitor the regulatory landscape, adjust strategies as needed, and communicate transparently with customers.
By taking these steps, Sunrun can effectively navigate the changing regulatory environment in Nevada and position itself for long-term success in the solar energy market.
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Case Description
In 2015, the Nevada Public Utility Commission (PUC) passed a ruling that essentially eliminated net metering, dramatically reducing the compensation rate for home solar owners selling excess electricity back to the utility company. As a result, solar companies, including Sunrun, were forced to close down operations, severing 3,000 industry jobs. This case profiles the PUC's decision, and Sunrun's strategy in dealing with out-of-market forces in order to retain a sales presence in the state of Nevada.
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