July 7 (Reuters) - With its $1.5 billion acquisition of smaller rival Vivint Solar Inc, Sunrun is creating a residential solar behemoth that it hopes will bring down the cost of going solar, accelerate adoption of home batteries and expand the technology to more U.S. homes, analysts said on Tuesday.
The deal, announced late on Monday, combines two of the five biggest U.S. residential solar companies at a time when the industry is struggling with sharply weaker demand due to the coronavirus pandemic.
Sunrun investors cheered the news, sending shares up $4.83, or 22.6%, to $26.17 at market close. The new company will control a quarter of the U.S. residential market, according to JMP Securities Analyst Joe Osha.
Despite the sector's rapid growth over the last decade, fewer than 4% of U.S. households have solar panels. That poses a huge opportunity -- and challenge -- for installers to make going solar cheaper and more attractive.
Installers have struggled for years to bring down the cost of marketing to and winning new customers. Sunrun said acquiring Vivint's huge door-to-door salesforce will save the company $90 million a year in overhead, sales and other costs while enabling it to expand offerings like battery storage to the company's half a million customers, most of which have 20-year contracts for solar.
In the residential solar market, according to Barclays Analyst Moses Sutton, "there is a demonstrable benefit to scale" that comes from consolidating sales offices, research and development, debt fees and more. He added it will take time for those benefits to be realized, however.
Cutting the cost of going solar is critical to expanding in states like Texas, which has sunny weather but does not subsidize residential solar, Osha said.
It is also increasingly important as a 30% federal tax credit for solar energy systems phases out by 2022. (Reporting by Nichola Groom; Editing by Aurora Ellis)