What happened
Shares of Sunrun Inc. (RUN +2.59%), which bills itself as "America's leading residential solar, storage, and energy services company," closed 6.3% higher on Tuesday. The catalyst for this jump appears to have been a Sunrun press release earlier in the day, in which management promised, over the next decade in California, to "develop a minimum of 100 megawatts of solar on affordable multi-family housing, where 80% of tenants fall below 60% of the area median income."
The prospects for solar power in California just got a little brighter. Image source: Getty Images.
So what
Over the weekend, The Wall Street Journal published an editorial criticizing California Democrats who recently passed legislation requiring that by 2045, all electric power used in the state must come from renewable resources such as solar and wind power.
Among other critiques of the plan, the WSJ argued that "California's low-income residents will suffer the most [from higher electricity rates caused by the renewable mandate] since they spend more of their income on energy and live in hotter inland areas where more electricity is required for cooling."
But Sunrun said that its initiative promises to "directly benefit at least 50,000 moderate and low-income households" by selling solar panels to building owners "at no cost to the tenants, creating significant economic benefits and reducing cost for renters. This initiative will also improve local air quality, decrease reliance on fossil fuels and offer freedom from climbing electric utility bills."
Now what
Thus, Sunrun's move appears aimed at creating more sales of solar systems for the company, while blunting criticism of California's new 100% renewable mandate. That might increase the likelihood that Gov. Jerry Brown will sign his Legislature's bill into law -- thus securing growth prospects for Sunrun and its peers for decades to come.
Even with its price up 72% over the past year, Sunrun stock still only costs less than 11 times earnings. If today's news increases the chances that Sunrun can keep on growing for decades to come, investors who bought the stock on the news would appear to be making the right decision.
