1/1/2015
guest More on Solarcity valuation:
GTM Research: Distributed Energy Resources Will Soon Receive Locational Valuation | Greentech Media�
1/1/2015
guest I looked at SCTY and peer companies like SPWR. I liked SCTY's focus on rooftop deployment and power purchase agreements, because I believe that distributed generation and a more decentralized grid is the way the electricity industry is going. SPWR and others still have a lot of resources devoted to utility-scale solar farms. Finally, SolarCity has a good relationship with Tesla (for obvious reasons -- Elon is the chairman of SolarCity's board), and I'm guessing that this will give SolarCity an advantage with integrating storage solutions like PowerPack and PowerWall.
The one thing that gives me pause about SCTY is the financial side of it. I spent a lot of time trying to understand the different and sometimes convoluted ways that SolarCity formed tax partnerships with financial institutions. This was much more complicated than understanding Tesla or most any other company I've looked at.
In the end, it's a leap of faith. I started investing in TSLA before the first Model S rolled off the production line, and the outlook was so uncertain that the company could have cratered at any time before May of 2013 (1st quarterly profit announced). I had no idea if Tesla would make it. SolarCity seems to be past the "survival" phase, but I'm thinking it may be 5-10 years before we see how well its unorthodox business model shakes out.�
1/1/2015
guest US Supreme Court Rules in Favor of Demand Response | Greentech Media
This is also good info. Note that things like the virtual power plant using Powerpacks in hotels was possible in SoCal was possible because California has it's own non-interstate ISO. Now FERC Order 745 opens this sort of thing up nationally.
This change really is a big deal. The Electrical Power Supply Association fought Order 745 because they knew it would open up a level of competion that would eat into their profits. I have long maintained that power generation is an industry headed for a glut of capacity in which no one makes enough money to survive. Blocking Order 745 was key to protecting this industry.
So what happens as generation becomes an unprofitable business to be in? Well utilities need to get out of power generation or suffer capital destruction. Utilities need to move toward an network and service model. The better job they can do of helping prosumers trade surplus power, capacity, storage, etc. to one another the more valuable the network becomes to participants.
It's going to take some of these yokels longer to figure this out. For example, NV Energy's plan to build a $900M gas peaker is monumentally dumb in light of the recent SCOTUS ruling. For example, DR programs in other neighboring states can start to undermine the value of a peaker in Nevada. This is an interstate issue, not a Nevada issue. So the Nevada PUC cannot protect them from out of state competition.
Try to grasp what this means. Suppose the wholesale price spikes up to $6/kWh in a multistage market. Utilities in one state may have set up really effective aggregation programs with their customers and as an aggregator they are entitled to some portion of the proceed. So thsee pro-DER utilities call up power from their customers that then sells this into all the surrounding states. So these utilities get to share $6/kWh mostly exporting into the other states. Meanwhile all the other utilities are paying through the nose for power at $6/kWh selling it to their ratepayers for $0.15/kWh. And guess what a state like Nevada has folks with solar and batteries that are not interconnected. So these folk are just charging their own batteries while NV Energy is losing almost $6 on every kWh they sell. These kinds of events happen a couple of times per year.
The implication here is that utilities that do a good job of cultivating and aggregating DERs among their own customers have resources that they can export into interstate wholesale power markets. The utilities that figure this out first will have an edge over the rest.�
1/1/2015
guest Got to just mention Solarcity has seemed to have raised $450mln in past month or so to little or no fanfare by the market.
Also, now the casinos are starting to sue the Nevada PUC because of mystifying reason for exorbitant exit fees. If the casinos are against you in Nevada, PUC/NV Energy are looking to good with the people of Nevada. Bet that solar referendum hits 55k in the next 1-2months now.�
1/1/2015
guest Germany says solar and wind have won technology race : Renew Economy�
1/1/2015
guest Wynn Las Vegas files lawsuit over fee to leave NV Energy - Las Vegas Sun News
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1/1/2015
guest 1.2-million sq. ft. solar panel 'Gigafactory' in Buffalo almost ready
Had not realized the buffalo plant could be bumped to 5GW. Sick.�
1/1/2015
guest Buffalo Niagara has lowest December jobless rate in 9 years - Business - The Buffalo News
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1/1/2015
guest German energy minister states (basically): "Game over - wind and solar wins":
Germany says solar and wind have won technology race : Renew Economy�
1/1/2015
guest Solar and Wind Could Be the Dominant Source of Power in the US by 2030
Here is an interesting study that shows how extreme use of HVDC power lines could integrate 78% wind and solar into the US power grid by 2030 without use of batteries. It's an interesting technical scenario, but it seems to take for granted the cost of so much transmission. We see Europe moving in this sort of direction where heavy use of long distance power lines balances out the grid so that high levels of renewables can be integrated without much use of batteries. But there is a fundamental problem here. The cost of transmission lines is not likely to decline that much over time, while batteries are declining some 7% over time. So if you work out a levelized cost of transmission for say a 1000 km line and compare that to the levelize cost of storage to obviate bidirectional transmission eventually batteries are cheaper than trading power regional. So by the time this proposed scenario could be built out it could already be economically obsolete.
Does anyone have estimates on the cost of HVDC power lines, maintenance, and energy losses. I'd like to do a little modeling.�
1/1/2015
guest Of course the Germans aren't interested in caps at peak, they're going to be 200% solar at peak before you know it. All those deals they pushed through to link the European grids are going to pay huge dividends when German utilities are selling their neighbors all their peak supply at a huge premium with no fuel cost!
The next phase of solar in Germany will almost be more interesting than the initial rooftop rollout. How does their open electricity marketplace end up functioning? How much economic advantage does Germany reap by being first to market with massive excess wholesale solar at peak?�
1/1/2015
guest jhm and others here eloquently laid out the case for the impeding generation glut and how NG (and other) peaker plants will soon be stranded assets. Well guess what, the Germans did these calculations years ago and acted accordingly politically and policy wise. This even as they are not and optimal country for solar (too far north, too much clouds). 5-10 years ago all other countries in Europe were laughing at Germany's "ridiculously expensive" investments in solar and wind. We'll see who gets the last laugh...�
1/1/2015
guest Agreed, and this is very much like my point about pro-DER utilities in a FERC Order 745 market. Proactive utilities have an opportunity to build up distributed solar on a low capital basis and export it to the wholesale market capturing value well beyond their service area.
So Germany is already doing this. Last year they had EUR 2 B net export of electricity to the rest of Europe. Critics have tried to dismiss this energy trade saying that Germany is effectively using the rest of Europe to balance their grid. This is the claim that you need alot of fossil generation capacity to balance intermittent renewables. But this is ridiculous from the economic view point. German is exporting higher value power than it is importing. The next export in euros proves that they are actually doing more to relieve their neighbors of the cost of balancing their grids than the other way around.
Thinking more about Order 745, I think this dies have implications for NEM. Consider that a utility wants to argue that solar feed-in rates should only be compensated at wholesale prices and moves to dismantle NEM in their state. Very well, they are opening the door to FERC regulation of the inter-state wholesale market. Could one argue that all solar power that solar customers generate, not just the surplus exported to the grid, is in fact demand response, and under Order 745 must be compensated at the real time wholesale price? So at anytime the solar customer is generating solar power or discharging stored energy for self-consumption while wholesale prices, the customer is entitled to the excess of wholesale to retail, and when exporting surplus is entitled to the wholesale price. I think such an arrangement could create pretty substantial value for customers with solar and batteries, perhaps higher compensation than under NEM. FERC has set a basic standard to assure that DR is not undercompensated below the wholesale price. So it is incumbent on utilities to demonstrate that they are cheating their customers who participate in DR. NEM probably avoids this scrutiny because it is a transaction of local energy that does not impact wholesale prices. But once the utility tries to offer something else that is supposedly based on wholesale prices, it seems they have just opened the door to FERC oversight.�
1/1/2015
guest Is there absolutely no way for the DoE to weigh in on FiT's and net metering? Can they force the hand of state regulators by setting some kind of variable minimum of net metering as a percentage of some other price/cost?�
1/1/2015
guest Whats Coming Net Metering 2.0 Decision | Greentech Media
California timeline for Solarcity mass market solar+storage is now becoming more apparent.
retail net metering will be retained through 2019. At the same time, Over the same 3 year period California will establish distributed resources(solar+storage,etc) first priority on any grid infrastructure investments given equal or more benefit with fossil fuels. They will also establish the value of distributed resources(solar+storage) to the grid.
by 2020, this new system will be codified and Solarcity will operate within the interoperability standards across the industry mandated by California utility commission. The same interopersbility standards of which Solarcity itself is establishing right now in 2016. Having 1/3 of entire distributed solar market has it distinct advantages in proliferating this standard across a wide array of assets in an effiecent timeframe.
so, as such, I expect the stock to jump Each time more pricing of services becomes available. Then we investors and interested investors can apply these revenue streams across the gigawatts of installed capacity and determine a somewhat clearer outlook post 2020.
As I've stated before, I expect it to demonstrate solarcity's significantly undervalued stock price. However by the time this becomes this clearly obvious, the stock price will not be where it is today.�
1/1/2015
guest I'm not sure. The Supreme Court's dissenting opinion, written by justice Scalia I believe, spelled out the arguments against Federal incursion on the states' abilities to be the arbiters of such regulation. So once you veer away from the effects that clearly are interstate ones, you fairly quickly get back to states' rights issues, and the questions you raise sound to me at first glance too specific to be considered national in nature. Happy to be shown wrong.
On edit: I probably should have written "...not only the dissenters...but the majority opinion as well took into consideration..." etc.�
1/1/2015
guest FERC explicitly stated NEM is retail and not under its jurisdiction.
Wholesale markets are explicitly under its jurisdiction and confirmed as such by Supreme Court decision.
States jurisdiction is retail. Feds jurisdiction is wholesale.
How this relates to Solarcity is that they will begin offering wholesale market services from consumer solar which traditionally falls under NEM, retail markets. Solarcity is able to now migrate into the Fed jurisdiction confirmed by Supreme Court, which makes ever more difficult for utilities to block/slowdown Solarcity,etc...
consider the implications of the value of Solarcity grid services now... Solarcity now can potentially march into any wholesale market across the country and there is nothing the utilties can do about it. If Solarcity successfully migrated from state NEM to federal wholesale business model, they have essentially kicked open the entire 50 state Union for business and there is nothing outside overturning a Supreme Court decision anyone can do about it. Talk about mitigating regulatory risk... This obliterates it...�
1/1/2015
guest Two questions:
That was my understanding of net metering, defined literally as compensation at the retail level(rate). So how the hell is the NV PUC allowed to create a net metering rate that does not exist on the retail side? Perhaps that's the essence of the legal issue. I always just assumed the new 3 cent rate was simply ridiculous, but still legal.
I made this comment on another board, is it accurate? (LOL.....perhaps I should be checking accuracy before spouting off)�
1/1/2015
guest I think since the Nevada PUC decision is still relatively recent, a lot of legal questions are being examined by all parties just as we discuss this ourselves right now. We haven't heard the end of what violations/problems the PUC decision has manifested, so it's just a matter of seeing responses unfold now.
ive said this before, Solarcity is already working on a business model beyond net metering and seems to be setting up and working with a policy framework it has intimate knowledge of. In essence, they are not adjusting to the system, the system is adjusting to them... they are reengineering a new game of which they'll be playing within. To understand this, only further supports the undervalued nature of its stock right now. Again, when this becomes explicitly obvious, you will never see stock prices we're seeing right now again...�
1/1/2015
guest This is why I focus on install cost, particularly customer acquisition cost, and don't get concerned when people point to all that heavy cost out on the edge. They're into some crazy stuff that takes a lot of money to develop, but the payback is simply astronomical if this is executed properly. Another reason I was fine with a post-ITC shakeout and subsequent marketshare lead increase, I think it would have helped SCTY consolidate their frontrunner position in solar.
Finding the point where the wider investing public is convinced of this model is going to be more complex that I thought, but the roadblocks are being removed almost daily. I'll just stick with "soon" as my official time horizon.�
1/1/2015
guest Right. NEM is safe for the utility that wants to avoid FERC scrutiny on feed-in tariff, but when they step out of that safe place, watch out. Solar and battery owners can take their case to FERC if they believe their utility not giving them full wholesale compensation.
Additionally, when SolarCity is selling grid services in the wholesale market, it becomes a power producers among the rest. Other IPPs operate solar and storage assets, so I see no room for distinction. The distinction between centralized and distributed energy assets would seem immaterial. It's the ability to put MWs of power into the grid at will that matters. I am speaking at a practical and market impact level. The legal distinctions will be thoroughly challenged. But from a practical viewpoint, if you've got your hand on the lever for charging or discharging 100 MW of batteries, you can seriously impact wholesale markets. It matters not how spread out your fleet is.�
1/1/2015
guest The single biggest concern with Solarcity is regulatory risk. That's it. The fundamental premise of solar and energy storage developing into a superior technology to fossil fuel is undeniable. In a market with 1% penetration, Solarcity is explicitly in a position to grow significantly over many years to come. The only thing that is slowing this process unnaturally is regulatory risk. Eliminate much of the reflgulatory risk and the stock goes bat****.
What Solarcity is doing right now in California, Hawaii, and New York is specifically aimed at reducing that risk associated with NEM and much of the traditional state energy politics. Like orange is the new black, wholesale is the new net metering business model.
Also aquisitiion costs dramatically drop with less regulatory risk. Less risk leads to greater capital investment. Capital investment leads to greater scale. Scale leads to more referrals, etc.. Also, changing the permitting and inspection process also is a massive boon for referrals. Solarcity said if the permitting/inspection process was streamlined (like Germany),they could meet a customer, design the system, install the system, and have it turned on within a day. Imagine what would things would like when this is the case? California is already moving in that direction with regard to permitting...�
1/1/2015
guest So if NV Energy pays you 3c/kWh while it sells power into the wholesale market at 9c/kWh, they are effectively selling your energy in the wholesale market but are not providing fair compensation. This is not fair to you, and it is not fair to all other power producers who are being undercut in the wholesale market. Clearly, FERC needs to safeguard against such exploitation. This may go beyond the details of Order 745, but it is in keeping with the Court's view of FERC's authority to regulate the wholesale market. When utilities exploit retail customers to undercut the wholesale market, this is a problem.�
1/1/2015
guest You must be new around here.�
1/1/2015
guest I'm in touch with my excellent local installer on a weekly basis just shooting the **** and they consider SCTY the enemy. The potential benefit solar has for nonsolar utility customers and the benefit SCTY's efforts will have for local installer nationwide needs to be articulated better. We're all on the same team here and there's enough marketshare for to last everyone for decades before we move on to storage or the next thing. What we need to do is get out message straight.
I'm really excited to see how Pennsylvania can drift down the path that NY has taken now that we have such an amazing governor. Out state legislature is a hot mess, but there's plenty of things he can do to tip the scales. It will only take a handful of larger states setting up a decent regulatory climate for SCTY to take off and solar momentum to reach unstoppable. So hard to tell when that will be.
NY, CA, PA, MA, OR, WA, TX, NC, NJ, MD, Florida(?), VA(?) Once there's stability in a handful of those states it's game over. Now that TSLA and SCTY have had this experience in Nevada, they're more prepared with a list of legislative "must haves" when picking sites for the next gigafactories.�
1/1/2015
guest The thing is with Solarcity leading taking on all these battles, the local installer also wins. A rising tide lifts all ships. Ask a competitor to Tiger woods(in his prime) if they liked competing against him they would say no. But they would say they love him under their breath because that second place paycheck was massive, and thst in addition to the benefits from 20 million people that saw him win second place. Before tiger woods, golfing as a profession made a fraction of what it does after. This is no different here.
So, installers competing with Solarcity may not enjoy losing to Solarcity in marketshare, but never, ever have they had so much business because of them at the same time. The industry before Solarcity was but a fraction of what is today and what will be every day after.�
1/1/2015
guest California public utilities commission decision tomorrow now published:
http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M158/K060/158060623.pdf
looks like vote will happen tomorrow, no utiltiy alternative accepted.�
1/1/2015
guest Could I kindly ask for an ELI5?�
1/1/2015
guest Revised Proposed Decision on NEM 2.0 Just Released
looks like solar won and utilties lost. California appears good to go for rooftop solar growth.�
1/1/2015
guest SolarCity Promotes Radford Small to Executive Vice President, Global Capital Markets
did solarcity securitize my solar loans for $185mln or $200mln as this announcement claims?
if so, must have had high demand/oversubscribed again.
also, California will grandfather for 20 years, so looking good for future securitizations coming down the pike soon.�
1/1/2015
guest Love Radford Small being in charge of financing. He needs to be the investor relations face of the company too, but that's a separate complaint.....
California utilities seem pissed, that is a good sign.
California solar advocacy group says "This proposed decision rejects utilities' bad math on solar and stands with consumers.". That may very well be true, but does not highlight the benefits of solar to nonsolar rate payers. That continues to be a big hindrance to wider acceptance of reality. Get off the back foot and express solar's true value to everyone. Not doing so reinforces the "solar vs nonsolar" resentment that the utils are trying to cultivate.
Good day.
- - - Updated - - -
Have not read yet, but wanted to post that Bloomberg is starting to dig deeper. I mean....they spent the time and effort to make this nice gif, that's a good sign.
Who Owns the Sun?
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1/1/2015
guest Live webcast of today's meeting in California: Admin Monitor - California - California Public Utilities Commission�
1/1/2015
guest Passed 3-2.
better then expected decision. This stands until 2019.
stock should rise�
1/1/2015
guest yay!�
1/1/2015
guest Laugh out loud I logged in just in time for the vote it passed 3 to 2, was it basically the prosolar plan that I submitted yesterday�
1/1/2015
guest Yes, it is. The testimonies were good and all pro solar.�
1/1/2015
guest Summary of California's decision by Vote Solar:
Today saw a major victory for solar choice in San Francisco. After many months of deliberation, the California Public Utilities Commission (CPUC) voted to adopt new rules that uphold net metering for future solar customers of the state�s large investor-owned utilities (IOUs). The decision, put forward by CPUC President Michael Picker and approved by the Commission in a 3-2 vote, represents a balanced path forward that will support consumer savings, local jobs, healthier communities and climate progress.
As any of you regular Vote Solar blog readers will know by now, understanding how solar�s benefits and costs fit into our changing electricity system is complex and groundbreaking stuff. Today�s decision was the result of a thorough Commission-led stakeholder process from the state that knows solar best, our nation�s largest rooftop solar market by a long shot, and we hope other states will take note.
Here are some key elements of the decision:
The decision doesn�t keep everything as it was under California�s current net metering program. Instead, it makes a few compromise changes that will apply to customers under the new IOU net metering program:
- Rejects demand charges, fixed charges and standby charges proposed by the utilities and the Office of Ratepayer Advocates that would apply only to solar customers, and finds that none are reasonable or cost-justified.
- Upholds net metering for customers who go solar in 2016 and beyond. That means future solar customers who send excess clean energy back to the grid to be sold to their neighbors will continue to receive a kWh-for-kWh credit for that energy (though they will also pay some new charges on those exports too� see below for info on new non-bypassable charges).
- Ensures that customers who go solar under the new net metering tariff can stay on that tariff for 20 years from the date their solar array is interconnected � which is key for reducing customer uncertainty around future policy changes. The Commission will review the net metering rules again in 2019, but any changes would not apply to customers who have already gone solar before that date.
- For the first time, extends eligibility for the new net metering tariff to customer-sited facilities larger than one megawatt in size, so long as the customer pays all interconnection and distribution system upgrade fees.
- Removes a utility-imposed roadblock to virtual net metering in multi-tenant buildings, requiring that the utilities� virtual net metering tariffs must allow one solar array to serve multiple service delivery points in multi-tenant buildings.
- Establishes a Phase 2 of the proceeding to develop new policies to expand solar access for residential customers in disadvantaged communities.
There are ways we think this decision could have been even stronger, but all in all the CPUC has provided a solid foundation for keeping rooftop solar growing in California. In doing so, the CPUC has stood strong against intense pressure from the state�s three powerful utilities � PG&E, SCE and SDG&E � which have attacked net metering for years and in the last few weeks even mounted a last-ditch, inside-outside campaign to weaken the Commission�s strong proposed decision. The CPUC also chose a markedly different path from Nevada�s Public Utilities Commission, whose recent decision to weaken Nevada�s net metering program has resulted in the loss of hundreds of local jobs and significant new costs for residents and small businesses that go solar.
- Requires solar customers to pay non-bypassable charges on all the energy they consume from the grid, regardless of how much clean energy they export back to the grid. We consider it reasonable that solar customers contribute in this way to public purpose programs, like energy efficiency rebates and rate subsidies for low-income residential customers. These new charges are expected to add approximately 2-3 cents per kilowatt hour for energy exported back to the grid, equivalent to about $6-8/month for an average residential solar customer. (The Commission removed two categories of charges from the list included in the December proposed decision, following clean energy advocates� argument that rooftop solar reduces the need for new transmission and new large-scale power plants.)
- Puts a small interconnection fee in place to ensure that customers cover the costs to the utility of plugging into the grid, another reasonable compromise. The amount of the fee may only include the following Commission-approved utility costs: Net Metering Processing and Administrative Costs, Distribution Engineering Costs, and Metering Installation/Inspection and Commissioning Costs.
- Requires all residential customers who go solar under the new net metering tariff to take service on a time-of-use (TOU) rate schedule, meaning rooftop solar generation will be credited more during times of peak electricity system need. (Note: current NEM customers will be able to stay on their rate design plans) We commend the Commission for moving towards TOU rates, which if properly designed empower customers to respond to price signals, and which demand charges or other fixed charges largely fail to do. Vote Solar will work with the Commission to help shape future TOU rates that are fair for solar customers, and we will strongly advocate for programs that begin to shift load, with the help of demand response, storage and other innovations, to the hours when solar produces most energy.
Instead, the Commission stood with hundreds of social justice, faith, environmental, business, labor and health groups, schools and local elected leaders, as well as with California ratepayers from all across the state, who late last year delivered more than 150,000 petitions in favor of protecting net metering and expanding solar access � by far the most public input the CPUC has ever received on any issue. In recent months, major newspapers including the LA Times, San Francisco Chronicle and the San Jose Mercury News have all editorialized in favor of upholding net metering and continuing the state�s push on solar progress. Last weekend, rock legends Bob Weir, Sammy Hagar and Michael Franti joined the campaign, hosting a pop-up performance celebrating California sunshine that ended with a march to the CPUC steps in support of net metering.
So the list of those to thank for today�s historic solar victory is inspiringly long. It starts with forward-thinking Commissioners and staff at the CPUC as well as Governor Brown, whose vision of leading the world in clean energy and climate progress this decision helps achieve. It includes all the clean energy and public interest advocates who worked tirelessly in the Commission proceeding to build the case for keeping rooftop solar affordable and expanding access to more Californians, and the many more community leaders for whom this was the first time they�d participated in a CPUC proceeding. But we couldn�t have achieved this victory without the hundreds of thousands of ordinary Californians that heard what was happening and spoke up for solar. Today�s vote really was a win for all of us � our communities, our state and our planet. Thank you!
Comment by me, Gene: California would have been a better environment than Nevada for Tesla's Gigafactory
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1/1/2015
guest Can someone suggest good, broad solar ETFs?
I have absolutely no doubt whatsoever in my mind that solar will come to dominate world energy and do so more quickly than many people expect. However, I don't know exactly how the solar landscape will look in 15 or 20 years and would like to rely on my understanding of the physics and engineering advantage of solar in general rather than my limited understanding of the business advantages of individual solar companies over each other.�
1/1/2015
guest The one I know is TAN. Holdings here: Fund Details - Exchange Traded Funds | Guggenheim Investments - Investment Management for Financial Professionals
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1/1/2015
guest I don't know exactly how ETFs are managed and manipulated day to day, but it's hard to simply bet on an industry since many individual players will go busto even as a handful of others go on to rule the world. Think of picking out Chevrolet from the thousands of US car companies at the turn of the century, not an easy task.
I have heard that SCTY has a major position in most solar ETFs. I think the biggest one has SCTY at 5-10% or something like that.�
1/1/2015
guest Yes, I've just been looking. SCTY is 9% of KWT. I understand your point, but with an ETF you can cope with a few of the companies going to 0 as others will pick up the slack as long as the overall pie keep growing. And as new entrants enter the market the ETF is likely to include them in its portfolio. It saves me having to pay attention to each entrant and make the decision of whether I want to invest or not, I just average out. As long as the pie keeps growing, the ETF should keep growing.
Of course you'll never get the returns that you'd get if you picked out the winner that has a 40% market share 15 years from now, but that's not what I'm after.�
1/1/2015
guest Wouldn't you want to shift to a time-of-use rate platform if you have a decent solar array? You'd be kicking out the most juice at peak hours and would be compensated more, no?�
1/1/2015
guest I have solar and I have TOU. It works for me as I charge my car at night. The only cases I can think of where TOU is a bad choice is where someone needs to run A/C or a pool filter during the daytime.�
1/1/2015
guest BREAKING: California regulators preserve retail rate net metering in 3-2 vote | Utility Dive
"The new solar net metering program will begin in 2017, or as soon as net metering caps are reached in each utility service territory."
This is a key point we must all take explicit notice.
caps will be met over the next 2-3 quarters, and probably will accelerate sooner because of the selling point of getting the net metering rates before the switch.
with that being said, expect stronger then already strong demand as a result.
again, I'm not sure if Solarcity will change its 40% compounded growth target, but I'm sure they will increase install projections now over the next few quarters. It's safe to say they will have strong q2/q3 booking/install numbers at least in my opinion.
Overall, I expect strong guidance at the q4 conference call on FEB 8th. It's pretty much a no brainier with this news out of California. There are still GW+ of installs to go under current caps. Lots of room for eager consumers to get in under old NEM for Solarcity.
20 year grandfathering a massive incentive alone.
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1/1/2015
guest In related news, I wouldn't be surprised if SEC got wind of insider trading by Jim Chanos on Solarcity. He clearly had prior knowledge in the lead up to the NV PUC decision. His comments on subprime and customers defaulting just 2 months prior(during which the case was in the PUCs hands for decision) would be clear enough start for investigation alone.
He also stated he wished he could short more just before the decision came out as well.
where there is smoke there is fire as they say... It would be very interesting a massive case like that on chanos would do to his hedge fund fortune...�
1/1/2015
guest Why would you say it's clear he had insider knowledge? Is there some specific circumstances, statements or such that suggests that? Couldn't it just be he was betting on the Nevada vote going the other way, based on his knowledge of the politics and people involved?�
1/1/2015
guest I have solar, and use PG&E EV time of use plan. It's the best choice even with my pool pump and heavy A/C use (fresno). The only thing I actually schedule around TOU is car charging, which I do overnight.�
1/1/2015
guest No, because non-grandfathering was not even a part of the discussion between rooftop and NV Energy. It was purely a PUC decision that came as a big surprise to rooftop solar industry when it was announced on December 22nd.
The only way people would default on their leases is if keeping the solar system would cost them more then if it wasn't on their roof. That is the case in Nevada right now, so it is essentially made Solarcity a sub prime lender.
These are the exact reasons chanos made a big short bet. The only market where this timing was possible was in Nevada. His short was perfectly placed right when the NV PUC was making its decision early September and was then set to give a decision by the end of December, by which they did. That time period where he established his short position.
he was tipped off in my opinion and I also think others(involved in the proceedings)made a lot of money with him(or attempted to make a lot of money).�
1/1/2015
guest There's nothing stopping you from running your pool pump overnight, especially in winter. Even in the summertime, when I'm using my pool solar heater, I'll only run 2-3 hours during the day and the rest overnight. Easy to schedule, and it's about 1/4 the cost.. something to think about.�
1/1/2015
guest SolarCity Statement on California Net Metering Decision -- SAN MATEO, Calif., Jan. 28, 2016 /PRNewswire/ --
solarcity stating its time to install as fast as they can in this new "paradigm shift."
Does this mean greater then 40% compounded growth is back on?
"Paradigm shift" s definately a statement solar+storage and aggregation is happening in a big way. No looking back.
It is definately going to be an interesting q4 conference call.�
1/1/2015
guest From a cost perspective that would be smart. If you talk to pool people they will tell you that filtering the water in the dark isn't very productive--biologically there's much more need for filtering during sunlight hours.�
1/1/2015
guest The Tesla Powerwall is finally rolling out. First stop: Australia
first powerwall up and running in Australia. Reported as having Massive massive demand for it there as well.
I expect the same is happening here is the US and that signals Solarcity is looking to have incredible demand as well.
The signals are clear in my opinion. Solar+powerwall has commenced ramp up.
This may also indicate we should start getting solar+storage updates from Solarcity. Will be looking for this at q4 conference call. Again, I feel guidance is going to be the star of the call for this and many other reasons.�
1/1/2015
guest That's a good point. I haven't had chlorination issues (even with my salt generator), but I also have my pool covered when not in use. When it's in use, the pump's always on. But if for some reason you don't have a pool cover, you'd at least need to supplement during the day.
Still, in winter there's little excuse for daytime pumps. Depending on where you live, if it ever freezes your freeze guard comes on. That's extra pump time. So if you already run your pump overnight, you're cutting that extra energy usage as well.
Thanks for the clarity either way. I'd forgotten about "naked" pools, and that's an important distinction. Um.. SolarCity. (just trying to stay on topic)�
1/1/2015
guest I have to think Nevada backing off de-grandfathering and headed toward a full voter ballot smackdown plus this California net metering decision would be enough to send this stock to the stratosphere. Is no one doing the math? Is it not clear enough that these grandfathered PPA contracts have inherent value and will have almost no defaults? SCTY needs a net retained value clock somewhere on it's investor relations page.�
1/1/2015
guest Garnaut – time to write down value of power grids : Renew Economy
Wow, I feel like I stepped into an alternate universe reading this. If utilities don't write down their grid asset, they push the economy into even greater inefficiencies. I love the blunt economic framing here.
California and Nevada is the tale of two states. CPUC has chosen a path that will support the entire economy of the state, while NPUC has chosen a path that adds friction to economic advancement. Is it too much to expect that a PUC consider the total impact of policies on the state economy. Industrial firms like Tesla and Switch could flourish in Nevada, especially as they are allowed to make full use of the solar, wind and geothermal resources of the state, but NPUC is willing to compromise that by seeking to protect the profits of utilities in the state. California, on the other hand, is willing to harness the economic potential of renewable energy, which will be a boost to every business that has chosen to operate in the state.�
1/1/2015
guest At this point I'm thinking $50 was the short squeeze we were expecting (those shorts covered and new ones entered the game). So one way to look at it is the market was valuing SCTY at mid 20's before ITC extension, and mid-30's after. Another way to look at it is market was valuing SCTY at $50 after ITC but China, oil and Nevada knocked it down to 30's. There's also interest rates rise somewhere in there, which seems important. Now we have very favorable California and federal demand response decisions that barely moved the stock. So that would mean market doesn't think the last round of positives is of much value compared to last round of negatives. Eventually SCTY will show the money or at least show the path and force price action, but if we're assuming market got some modicum of rationality in it it's all said and done for now.�
1/1/2015
guest /disagree, the market has to be spoon feed and solar city has been radio silent on all of this�
1/1/2015
guest The market will only trend up on scty. But, I think cautious until solar+storage value is understood. The instant those numbers are understood, investors will flood in.
key points in this valuation:
sunspec aggregation/interoperability pilot preliminary results this year at some point, most likely late 2016.
APS solar+storage pilot preliminary results by the end of 2016
New York value of solar determination late 2016
Kuai utiltiy solar+storage system turned on by approximately q3.
Sales of solar+ storage officially apart of quarterly reports.�
1/1/2015
guest I'm starting to think it's still solar in general that is the problem. Well educated progressive friends of mine still regurgitate the disinformation of "unfair cost shifts" when I mention Nevada. They read one article on the topic and assume the worst. This is why I feel let down my the SCTY PR team.
It'll pass though. By the end of this summer everyone will know. One would think.�
1/1/2015
guest Great article, thanks!
Question:
So in this article, Garnaut says:
So is he saying they need to discontinue the rate increases that happen every year due to this technology shift? If so, what happens to the people who have a PPA and in year 12 their rate is higher than the utilities due to the esculator? That wouldn't be good......
I love this:
�
1/1/2015
guest Most other solars are up today. Might SCTY be struggling simply because of the efforts of the shorts?�
1/1/2015
guest Cramer said sell scty, buy fslr at some point in the past 24 hours.
on another note, California decision yesterday has set up a big solar+storage market. The time of use rates scream powerwall purchase. As will any states that develop time of use.
This time of use rate plan will effect all rate payers down the line, so all the more incentive to get solar+storage for non solar rate payers.
The early adopters this year understand buying Solarcity solar with powerwall has far more value then currently available. They understand it will be an over the air upgrade for when the wholesale market opens up. At that point, not only can they use the battery to mitigate time of use rates, they also share 50/50 with Solarcity in a demand response contract with the utiltiy. The savings from both could really drive down that $/kWh much great then solar alone (or being a non solar rate payer in general). In addition, greater reliability occurs because if the grid in general goes down you can island and run off storage.
Also, services may increase as more value is monetized as Solarcity develops more functionality over time. Again, nothing more than an over the air update.
The moment people experience this, it will create a convert/advocate for life. And that's a massive tailwind for reducing acquisition costs as referrals will be through the roof(and referrals are damn good already).�
1/1/2015
guest As I understand his argument, he is saying that the transmission network was over built for current level of utilization. Shareholder and perhaps the government need to bear the cost of this over spending on unneeded capacity. BAU is the recover the cost of this bad investment from ratepayers. Even though this can be done legally, the economic problem is that ratepayers have alternatives in solar and batteries. The attempt to collect on the is bad investment is inducing customers to get solar and even go off grid. These investments that customers are making further impair the value of network investments. So if network operators persist with BAU the future write downs will be even more severe. They are actively destroying value with their current rate plans.
The alternative is to write down the bad investments now. Set new rates that accurately reflect the marginal cost of supplying power in real time. This would both lower power bills and make customers more sensitive to consumption behaviors that truly drive the cost of infrastructure. That is, peak consumption is what drives the capacity requirements for the network. So when customers pay more for using the network at times of peak consumption, they are in fact paying for the capacity requirement they are imposing. So how this helps is that it avoid an artificial inducement for customers to use solar and batteries just to avoid paying retail rates that are well above market value so as to recover costs on bad investments. With better rates solar may still be induced because it offsets peak demands on the network, but customers with batteries will not be induced to charge their batteries at peak demand times just to avoid buy power at times of low demand. And no one is induced to leave the grid. All of this leads to making economically optimal use of the network, which supports the long term value of the network and minimizes the need for further write downs.
Suppose Wal-Mart accidentally spent way too much building out a new store. Maybe the contractor screwed up or something. So Wal-Mart decides it will simply add an extra $2 to every shoppers purchase to recover the cost of the overage in building costs. Would that work? Hell, no. All it would do is drive away customer and make the building nearly worthless. Wal-Mart would never do this. They would write down their loss on the building (and capture a tax break doing so) and sell their goods at their everyday low prices. This way they maximize net income at this store even though the had to take a capital loss.
This sort of thing is so fundamental to any business that operates in a competitive market place. And economics explains why this is so Utilities are a gross exception. They act as if basic economic theory need not apply to them. So they are actually destroying economic value, but as long as they are propped up by a political system investors are happy. Eventually, however, the political support will unravel and investors will lose big time. So the challenge is for management to have the integrity and will to do the right thing to preserve the longterm value of the business. Yet management is caught in a classic over valuation trap, which induces them to perpetuate value destroying practices.
I'm not worried about PPAs on solar systems. Things will get much worse for ratepayers before utilities are even able to match PPA rates, much less beat them. Consider in Australia an utility that charges 25c/kWh and makes only 10% profit. So their bloated cost structure is at 22.5c/kWh. How are they going to cut that cost structure in half? Write-downs help, but it is a very slow process of cutting all the fat. Additionally, in Australia most solar is owned not leased. In either case pay back is very fast when the utility is charging 25c/kWh. Even under a PPA, one would easily get full payback long before the utilities can offer a fair price.�
1/1/2015
guest cost plus system incentivizes high costs. 10% return on high cost is much better then 10% on low costs.
thsts why Solarcity is advocating for utilities to get paid on procuring other people's infrastructure(like solarcity's network of rooftop solar+storage).
on that line, Solarcity is going to start making two separate revenue streams from each install they do. They will collect a monthly payment from the customer AND a monthly payment from the utility demand response contract. So, each solarcity install maybe worth multiple times what they are worth today.
I think if you just think about that for a few minutes, one might really understand the magnitude of how undervalued solarcity(and tesla) really are right now...�
1/1/2015
guest I see. Thanks for the explanation.�
1/1/2015
guest Just look at Germany. They are doing everything they can to protect all ratepayers at retail(far more than US regulators will), and their retail rates continue to drift upward even as wholesale costs absolutely plummet because of renewables. It takes a looooong time to "work off" these short sighted investments such as the totally unnecessary new $1B NV Energy peaker plant. It is physically impossible for retail grid prices to do anything better than drift upward for the next 10-15 years, unless there's a gov't bailout or something moronic like that. I guess we shouldn't discount that possibility in this country.�
1/1/2015
guest Short interest is way down as of Jan 15th, but we can hope I guess.�
1/1/2015
guest That's right, cost plus 10% profit motivates unnecessary cost.
How about this? Simply fix the profit per kWh sold. For example, 2c/kWh for renewable energy and 1c/kWh for nonrenewable energy. This allows the utility to maximize profit by switching to 100% renewable energy while reducing costs to motivate higher consumption. Regarding distributed solar and batteries, solar feed-in power adds a cent profit for practically no incremental cost, and tapping aggregated batteries to offset fossil peakers also improves profitability. Generally the utility is motivated to minimize prices to increase volume, this can only be done by improving the utilization of network assets. Demand response mechanisms are properly encouraged because they smooth out utilization from peek to valley.
So right now utilities make about 1.5c/kWh profit. So under my plan they would need to move to 50% renewable to get back to that. This could be phased, say the nonrenewable profit rate starts at 1.4 and shrinks down to 1.0 over 20 years. This would push utilities to 50% renewable by 2035 just to maintain their profit, but in actuality I think utilities would move much more quickly than that. I think we could get to 90% re enables by 2035 under this plant. What about inflation? Have a provision that the 2c for renewables can be indexed to inflation once, 90% renewables have been achieved. So again this would reinforce moving quickly to renewables.�
1/1/2015
guest Isn't the current pattern the definition of a pennant? Brushing up against the upper bound preparing for a breakout?�
1/1/2015
guest This is pretty much what my statement was, they'll either have to show the money or tell a story that'll make investors change their mind about the valuation vs. current. I hope they'll have enough time before ER to crunch the numbers given the new California and Fed decision news and update the guidance based on that.
- - - Updated - - -
this I'm looking forward to, seems might happen earlier than expected in CA that moved well beyond basic net metering. We'll get to see if SCTY really has a superior integrated solution including the control software/cloud computing part, and will be able to establish/influence the standards. They also seem to be quite willing to go into various partnerships so I'm exited to see if/how quickly can this become a driver for wide adoption of true home automation. Before it was just a matter of cool factor/convenience, now folks will see an actual monetary value (via power bill) of having their fridge and AC unit being connected to an intelligent control system.�
1/1/2015
guest Who owns the sun? - Moneyweb
Here is a fascinating article about Nevada situation with amazing new info given out from Lyndon Rive.
Sandavol was completely emotionally involved and paranoid the rooftop solar was out to smear him from the start of 2015 when the whole legislative process happened. He also had his two long time friends, both nv energy lobbyist in his ear constantly like lady Macbeth. Obviously, he was not neutral like he says he is... add more lies to the evidence now.
Also interesting to note that the legislation originally planned to be voted on proposed lifting the cap to 10%, but then was taken out and new anti net metering language put in. What changed this movement early in 2015 process? From there it just went down hill.
also Solarcity came to Nevada before buffet boought nv energy a few months after.
Lots of interesting stuff in here...
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Solarcity is the one to provide the data by which all else will be judged/monetized industry wide. many of these hedge funds don't get that fact. When Solarcity says it's experiencing 99.9% transfers of all leases to new owners, it's based on actual real world data, not hypothesis as they work from. When Solarcity says they receive 99.4% of all payments on time since 2006, that's hard fact from actual business transactions, not theories they conjure from academic studies.
and it's no different with powerwall energy storage integration and grid services. Solarcity has firsthand knowledge (and only at this depth and scale) of how this really works in the real world. If they are hinting that this his a massive advantage and adds another revenue stream to the company, then everyone ought to listen. It's the same for tesla as well.
its boggling to me that so much credence is being given to fund managers thst have no idea whatsoever is actually happening in the real world of distributed solar. But in the end, which I feel will start this year and become painfully apparent over the next two years, everyone of them will lose a lot of money or get out of short position before they do. Ultimately, they love money so in order to make any of it they will take a long position at some point in there.�
1/1/2015
guest http://www.solarcity.com/sites/default/files/SolarCity%20White%20Paper%20-%20Integrated%20Distribution%20Planning_final.pdf
Now with California net metering set, here is the current phase of what the net metering decision sets up. Solarcity is, at this very moment proving out this next phase(outlined above). My feeling is California will sign off on as soon as some supporting data comes out soon. That will be a monumental moment to say the least, because all of the number crunching will happen and the capital markets will go nuts wanting to be apart of its development. Abs, tax equity, facilities, bonds, etc...
Energy Storage QA with New COO Chris Beitel - SimpliPhi PowerSimpliPhi Power
Great insight into energy storage market in this interview... another interesting development is silevo's Chris beitel has taken a COO job with an energy storage start-up. Elon has stated he's always on the look out for new tech and getting into business with those that meet tesla criteria. He said currently a couple are a 3 out of 5 on his scale, which means tesla should be in preliminary talks.
Im wondering if Chris beitel' start up is on that list if preliminary talks? Since beitel is an insider to Solarcity/silevo, does he see a big opportunity to sell to tesla(maybe Solarcity) just as he did with his silevo start up? Could this potentially be a pre selected acquisition target if all works as planned?
listening to the interview, Chris sure sounds exactly like Elon and the Rive bros when describing a scalable technology(as well as the important aspects of a commercially viable energy storage product). Exactly how he approached silevo and we all know how that turned out....�
1/1/2015
guest Minor point on spelling: ISTM that is Sil-Evo, not silveo. Makes more sense that way?�
1/1/2015
guest Love/hate relationship with iPhone autocorrect...�
1/1/2015
guest
Did you mean: Autocorrupt? ;-)�
1/1/2015
guest Swarms of workers turning SolarCity into complex panel factory - Strictly Business
�
1/1/2015
guest An Op-Ed in the NYT about the Nevada bait-and-switch.�
1/1/2015
guest Best piece to date and was almost enough to get me to actually pay for NYT's online content. I'd still like to see someone clearly and with actual figures illustrate how these real dollars are being shifted from the citizens of Nevada to Berkshire shareholders. I mean, it's got to be in billions from 2014 through 2016.
These nonsense rules will be overturned within the calendar year no doubt, but what about the economic impact to Nevada? Not to mention the ~$2-3B profit swing for Berkshire.�
1/1/2015
guest From discussion in another thread, filed under potential causes for concern......
It's one thing to say Warren Buffett bought NV Energy at the wrong time in 2013, Dominion is willing to do the very same thing today in Utah. Obviously consolidation while valuations are low is going to happen regardless of outlook, I just find this moderately insane.
The minute residential solar gets any foothold in these states companies like NV Energy and Questar become worthless, so what's the logic? Do they really think solar is some kind of fad that can be beaten back?�
1/1/2015
guest Yeah, just like Internet, donchaknow. The Swedish minister for communications became infamous mid-90's when she declared Internet to be just such a fad that wouldn't last very long. Pretty shrewd lady otherwise ...�
1/1/2015
guest This sounds like the over valuation trap. Pretty much all utilities are over valued in the present situation. Management will try to preserve the illusion that their company is worth its valuation. One way to do that is to buy up weaker competitiors. This creates the illusions of dominance and growth. Shareholders are lead to believe that their dividends are secured on a stronger base of business. All this deflects from the fact that utilizes are stuck with a cost structure that requires rates higher than distributed solar. There can be no security in any business model that is so deeply undercut by competing technologies. I suspect that the smart utilities are the ones selling out to the likes of Dominion and NG Energy. They may look weak, but they will walk away with capital that can be reinvested in other areas. Just look a coal. The smart money divested a long time ago. Dumb money will stick around to hire the bankruptcy lawyers.�
1/1/2015
guest Tuck this Elon quote away for Jul/Aug. When Tesla announces powerwall v2, they'll likely announce some trial results. Could be an ah-ha moment for SCTY investors.
�
1/1/2015
guest NV Energy files ideas to soften solar rate hike
looks like NV energy is backtracking a little on their big announcement about grandfathering in existing users�
1/1/2015
guest De-Grandfathering was never going to fly and they knew it. You need to put something batshit crazy out there so you can "compromise" by paying consumers 2.6 cents for wholesale juice at the same time you pay yourself 10 cents.
Bernie and Hillary should be pivoting to Nevada soon, let's hope they make this a major issue.�
1/1/2015
guest http://www.streetinsider.com/dr/news.php?id=11270039
This is a surprising forecast. US solar up 67% in 2016 to 15 GW. 10 GW to utilities, but 5 GW distributed. If SolarCity takes 1/3 of distributed. That would be about 1.67 GW.
I do expect that SolarCity will do quite well in the commercial segment. Killing demand charges with Powerpacks and solar is a winning play for SolarCity. I think commercial can be the surprise segment fir solar as the gap between utility scale and commercial installation costs narrow.�
1/1/2015
guest IIRC the commercial portion of the bar chart was much fatter in the 3Q presentation than in quarters past. Certainly helping drive that $1.92 install cost and should only accelerate. Corporations are waking up to the savings faster than the huddled masses.
I'm not too bullish on 2016 considering most folks were likely ramping down to cut costs then you add in that the pressure is now off to complete projects before the ITC expires. I think both will have a decent muting effect on installs across the board. From there on out it's a rocket to the moon as soft costs trim to grid parity everywhere.
2017 $70's and $80's will still be in the money, but starting to think it's my 2018 $90's that will be the big home run. Hoping 2018's drop before Friday so I can load up again.�
1/1/2015
guest Silver Lining For Natural Gas As EIA Forecasts Price Hike | OilPrice.com
So this is interesting, the US EIA is starting to model forecast that in coming years natural gas and coal will decline in power generation due to advances of renewable energy. This is the sort of fossil offset that I've been talking about. The EIA seems to think that as gas is squeezed out of power generation, it will find higher prices in other markets. This strikes me as magical thinking. Apparently, they are not quite recognizing price competition in the power markets is what is driving down the price of gas. In any case the price may moderate, because currently levels may not be enough to sustain growth in production.�
1/1/2015
guest Options strategy for potential rosy guidance on the earnings call next week? Are we all a bit gun-shy at the moment? Could we get a big pop? Or a big drop like last quarter?�
1/1/2015
guest I have no clue what is happening lately. It seems to me we're just caught in the oil collapse undertow...which seems to me the glut will only get worse with renewables displacing fossil fuels.
I saw this interview which I think makes sense, but I don't know how this effects SCTY. Maybe a strangle?
http://www.cnbc.com/2016/02/02/gartman-pickens-is-wrong-on-oil-heres-why.html�
1/1/2015
guest Anyone with a short interest update?�
1/1/2015
guest Well the Dec 2016 oil future is trading at $40/b. So if you really believe Pickens prognostication of $52/b by year end, you ought to load up on these futures with 30% upside. Serious, Pickens is uttering nonsense. The world is adding oil storage capacity everywhere to buy up this glut. Over 3 billion barrels in inventory. By the end of the year, inventory could easily exceed 3.3 billion even if the market balances. That storage is ready to reverse flow at any price above the futures curve. Storage is currently putting a floor at about $30 and also implies as $40 cap over the next year or so. This is why Gartman can be pretty confident in a $27 to $47 trading range.
Remember storage is now the swing producer for oil.�
1/1/2015
guest I liked the detail that Russia simply can't stop pumping because their Siberian pipelines will freeze up the minute flow stops. There is simply no end in sight for this glut, talk about a global stimulus(for developed non-petro countries).
Back on topic.....no one wants to take a stab at how this quarterly call will be received? SCTY has to have learned their lesson from last quarter and is carefully crafting their language. They are in the enviable position of being able to give very aggressive(and realistic) guidance relative to the tone of last quarter's call. Will they pull the trigger or just keep it bland?
CA net metering is now locked in, ITC is now locked in, grandfathering is all but locked in. I think they go a bit past neutral to the aggressive side spouting positive guidance out toward 2017/18 and we see a nice jump. The idea that this company is fairly valued at $3B is asinine at this point. Give the investment world a glimpse of what 80% growth looks like in 2018.�
1/1/2015
guest Will SCTY recant it's pledge from last earnings call to be cash positive by the end of 2016? That plan was in response to the potential ITC expiration which is now generously extended. If they feel compelled to announce this return to more rapid(expensive) growth will it be taken as a negative on Tuesday's call?
Will the increased revenue projections that go along with that aggressive expansion lift sentiment more than potential continued high sales cost weighs it down?�
1/1/2015
guest All good questions. I hope they give some details on Silevo and where they are at. I feel like this gets way too little coverage from any analyst for something that will be so substantial to the company. Paying 250 million to get a state of the art 1 billion dollar factory is crazy and it got so little coverage. We are actually getting pretty close now to when Solar City starts installing the equipment to make the solar panels. I think Spring of this year is the timeframe with full production (10,000 panels a day) spring of 2017.
I am also very excited to hear more about the Powerwall v2. I hope Elon talks about it in the Tesla Earnings call and does not hold the details quiet until the product launch.�
1/1/2015
guest Ralston Live | Vegas PBS Shows | Vegas PBS
man, Bryan Miller once again represents on this PBS interview show. Says we'll hear soon on lawsuit on gov Sandavol and gave warning of another lawsuit on the PUC if they don't toss out current rate decision after reconsideration next week.
Wow, There are so many other legal and legislative actions in motion now I can't see how nv energy and the Nevada PUC will survive if they go solarcity's way:
-- A state referendum on overturning the PUC recent net metering decision is gathering signatures and looking for a state wide vote in November 2016.
-- A Nevada constitutional amendment to open electricity market and dismantle monopoly structure just filed today.
-- A class action lawsuit(anti-trust)bait and switch on nv energy by two Nevadans now in motion.
-- Also, the current federal energy bill has a supported amendment to prohibit non grandfathering of net metering customers under agreement terms at time of signing up, and also to ensure commissions assess all benefits before changing retail net metering (senator reid&King).
This is a clear battle ground now. I feel nv energy not only burned solar industry but they have also messed with the casino/gaming industry. Change will happen and nv energy will not like it at all.
I feel there is such a large movement, such a momentum now that we ought to take this as a sign Solarcity and rooftop solar is going to have a winning result after all is said and done over this next year.
I read on more and more Solarcity employees social media that the new mantra is to grow "as fast" as they can. With that, I feel guidance is going to emphasized at the conference call. This guidance ought to give an indication of a longer term outlook, maybe a new look at 2018 goals again. Like the million customer goal affirmation as well as growth rate expectations (40% sustained or increases).
I hope we can start to get solar+storage projections. How many sales they are going to aim for for 2016. This will really be important for breaking through in stock price because we all know this is the "holy grail" for expanding the business into a post NEM centric compensation model, such as grid services. an update on their California aggregation could be helpful here as well.
The tesla powerwall 2.0 is interesting. I'm hopeful Lyndon could give more color by addressing solar+storage sales over the 2016 year. I feel he can be general enough not to look in specific number expectations, but can be explicit enough to assure ramping product offers in applicable markets. I really really think this would impact investors in a positive way to start including energy storage goals in guidance outlooks.�
1/1/2015
guest About the Powerwall 2, I had heard from a long time SolarCity employee that it would be bigger (capacity wise) and cheaper. We'll hopefully find out soon enough. If so, I'll order one.�
1/1/2015
guest If management gives out lofty storage guidance, without provide any detail on the expected ROIs and such, I will throw up on the keyboard.
Storage is cost.
If argument is that grid services will pay for (battery cost + transportation cost + installation costs + profits), that's a load of baloney. Why won't grid get it's own batteries from Musk or wherever else?
As a shareholder, you want storage to be postponed as far away as possible.
With full net-metering, you literally get infinite battery with zero losses (100% 'round trip efficiency' in battery language) for FREE.
Why would you want to ever add costs to the system, when you have this for free??
Jeez, you are the very same people fighting for net-metering, aren't you??
Any mention of storage (other than in the context of HI) in today's world will doom the stock. Expect another 20 to 30% slide on that. Because it means that management is not confident in continuing net metering (free battery).
PS: For clarity, every time a powerwall is sold, Tesla makes money. Guaranteed. Both revenues and profits. It's not some iffy proposition based on some esoteric money falling off sky.
PPS: Did I say this already? As a SC shareholder, you want storage to be postponed away to as far as possible.�
1/1/2015
guest I hear what you are saying Steve. It makes sense. I'd still buy one just because I need a new toy!�
1/1/2015
guest
You are So wrong here! You seem to think that solarcity will install all of this storage for free to the consumer. I think there will make money on every storage system installed before the added on grid Services. So just so we're clear if you're a solarcity shareholder the sooner solar systems are installed with storage the better. Imo anyway.
In unrelated news one of the new public utility commisioners in Arizona will not be voting on any cases that involve solarcity because his son works for solarcity. I'm not sure if this is good or bad it sucks that the one person throw Solar is not going to be voting on anything that has to do with solarcity
Newly appointed Arizona utility regulator to recuse himself from SolarCity cases | Utility Dive�
1/1/2015
guest I'm sure jhm will provide a better analysis but in short, look at the rate plan that California adopted. Even residential solar installation with a battery now is able to arbitrage due to variable rates. It is better than net metering. Even without the battery but with intelligent use of resources one could lower the power bill even further. The trick is it's not that easy to implement and that's where SolarCity has a chance to shine. This is where one needs sophisticated software that predicts spot rates, knows how much sun there is on that day (including the weather forecast), and based on that decides when to charge, when to discharge, and when to run the freezer.�
1/1/2015
guest SolarCity releases report on saving billions in electricity costs - LA Times
Breaking:
Solarcity publishes plan(solar+storage)to potentially save $1.4 billion annually to the California grid
Plan link within just released blog post:
SolarCity Blog�
1/1/2015
guest That would be a valid argument if maintaining status quo for the grid were an American priority. We are more interested in life, liberty and the pursuit of various other fun things. Why does "the grid" have to exist as an entity with feelings rather than just a utility can be morphed into any form suits us best?
I kind of agree here. Going to the "early option" on storage smells like desperation. I'm fine with painting the picture for NV Energy as a threat, but don't start talking implementation until we're at 50-70% of peak demand in these sunny locales.
Relax. The faster we can get to a truly open energy market, the faster solar/wind/storage takes over. As an investor we should probably want a few years of insane solar ramp up with just net metering, but the real revenue comes when the services are needed in the next phase. These guys are just impatient.
This blog post has me very bullish on the Tues call. They're learning PR lessons and taking the right steps. Fingers crossed.�
1/1/2015
guest Any rational reason for this tanking? Good lord I hope the shorts are piling on.
The 2018 options are getting delicious.�
1/1/2015
guest Back to pre-ITC extension levels huh. Damn tempting to convert some stock into LEAPs.�
1/1/2015
guest $80 Jul15 calls $.25? Oh the temptation! Get thee behind me Satan!�
1/1/2015
guest Senate Democrats Block Energy Bill After Republicans Dont Agree To Aid For Flint | Politicus USA
energy bill (federal net metering measures) stalled right now due to flint funding issues with republicans.
solarcity is currently selling storage as back up which is a massive market in itself. However, this is a penetration strategy for future grid services as policies are put in place to open the market, which I posted today's development above.
solarcity solar+storage will offer 13 services to all 3 primary stakeholders on the grid. That's 13 services that have monitary value and Solarcity is helping to price those services in their plan outlined in their blog post pdf.
Commissione picker is willing and ready to move forward on viable data and Solarcity is right there offering it. That is a significant indicator forward progress is happening on grid service pricing for all of us to model.
In the meantime, Solarcity is selling solar+storage as back up. We all know that this is just 1 of 13 services to be priced in. I say again, back up is just 1 of 13. Let's not forget this as these values become integrated into cost structure of adding energy storage to their product offering. It is painfully clear, specifically in California, thst when Solarcity sells these products as back up, that is not the end goal when those systems are in operation. It's like I've said before, the opportunity for "upgrades" are a significant selling point for early adopters of back up. The systems will be set up for software updates to integrate these other 12 services as policies are developed. And as Solarcity has already stated, they have 50/50 revenue share of these added grid services with customers written into their contracts already.
Current stock price is completely divergent to this reality which is extremely interesting for those that like to time entry points in accumulation strategies.�
1/1/2015
guest Observation : SolarCity's white paper has received very little attention and has only been retweeted 15 times. There are currently only 7 people viewing this thread.
We need a few celebrity re-tweets/vocal support to raise awareness and to force politicians to ACT soon. Maybe a comment from Elon?
Investors are waiting for politicians to do the right thing. Many have been spooked or scared out of the market by the recent volatility. Meanwhile Fisher and Musk have been accumulating shares.
Release the Hulk!�
1/1/2015
guest I get bonuses in September, so I hope this thing stays "undiscovered" until then�
1/1/2015
guest Keep in mind that customers want this. So certainly some cost will be borne by the customer. However, for those customers who prefer not to have a battery, I am sure SolarCity will offer solar only systems too. So this is an issue of customer choice. There is no need to project our personal values on all customers. This in fact is the fundamental mistake that opponents of PPAs make. They are personally convinced that solar ownership is so superior to leasing that they fail to see the very simple point that most solar customers actual chose to lease. So let customers chose to add batteries to their system. Many of them will, whether you or I see the value in doing so.
In no way does offering batteries reduce SolarCity's opportunity to sell solar systems. If anything, I expect that offering Powerwalls will increase public interest in solar. So this reduces marketing costs. Second, offering batteries is an up sell opportunity, so revenue per sale will increase.�
1/1/2015
guest Great target I think. Hopefully the spread will be reasonable. I've been thinking next week will be good timing to get ahead of the ER. I guess the market is pricing cheap fuel prices as slowing SCTY growth and some new guidance would be welcome.�
1/1/2015
guest I really enjoy hanging out with and listening to people much smarter than myself, but sometimes feel like a farm boy at an astrophysics convention. I'm wondering if anyone would be willing to spend 5 minutes creating a primer of sorts for those of us with zero investing experience? I found this forum when looking for SolarCity news and it is absolutely one of the best sources on the internet for such news. But I'd love to know more about the investing side, which would probably make following this thread even more interesting than it already is.
What is an option? What's the difference between a 2017 option and a 2018 option?
I have a general idea what stock is, but what are LEAPs? What happens when you convert a stock into a LEAP? What's the upside? What's the downside?
What's a 25� call for $80 on July 15? I'm guessing that the $80 is stock price, but what's the 25� for? And does spending that quarter get you good things if the stock is above $80? What happens if it's not above $80?
For assorted reasons I follow solar in general and SolarCity in particular. I understand the business side of things, but not the investing side of things. I'm also real tempted to buy some of the Solar Bonds available on their website - small return but for a good cause.
If anyone's interested in chiming in and using small words to explain a complex concept, it would be appreciated.�
1/1/2015
guest Moderator Note:
A call to all to follow Forum rules and TOS: Posts in the TMC are your words, which express your thoughts. You are permitted and encouraged to augment them with links to other sites, but a bare link - one with no member input - like the one just excised, are considered rude and an evidence of laziness.�
1/1/2015
guest Whoops, my bad! Was trying to make it easier.
Here's the normal link to khan academy american call options video.�
1/1/2015
guest Californias distributed resources proposal could benefit grid, solar and utilities | PV-Tech
More indication solarcity's solar+storage grid services is moving along and will be entering the wholesale market soon. For those following along, this is fantastic(and exciting) news. Again, there are 13 different services identified from what Solarcity offers with it's products.
Here's a quote from cal ISO (one of the three stakeholders for those services):
�As distributed resources continue to grow on the grid, it�s critical to leverage them in managing the bulk power system rather than unnecessarily duplicating resources,� Berberish wrote.
�The ISO seeks to provide a platform for distributed resources to offer their services in the wholesale market while working closely with regulators and the utilities to better define how the transmission/distribution interface will work.�
again, the required stars are starting to line up quickly for Solarcity now.�
1/1/2015
guest I think we'll see SCTY wiggle into many more wholesale and commercial silos as the quarters move on. 3Q showed a fairly large uptick in commercial that was likely a big reason their install costs per watt came down so much. That's the biggest positive I'm expecting from the call Tues, accelerating commercial sales.
This gigafactory can't open soon enough. Getting this one running and moving on to the next one(or two!) would be a huge boost to the stock price. The value prop and differentiation will be obvious at that point.�
1/1/2015
guest Couldn't resist. Executed my orders and placing my bets for earnings and an increase in guidance. If it drops I'll be in it for the long haul. Betting it'll pop though.�
1/1/2015
guest The key is getting those grid services priced and in the market. Aggregating thousands of rooftop solar systems is the moneymaker. The wholesale market is controlled under FERC, not the utilties/PUC (through net metering). This will essentially limit/prevent the Kochs/buffets from interfering with Solarcity business. The key piece to why the stock is down is regulatory uncertainty. That's it. All stats on solar consumers shows they are the highest credit rated group on the planet right now. No payment group out there on planet earth has held a 99.4% on time payments made rate for 9+ years in a row. Please, anyone out there prove me wrong. I welcome it. The real world numbers support a massive massive stable market not even remotely close to being saturated, so this has nothing what so ever about solar as a product. It's all about the ability of the utiltiies to disrupt that market, which boils down to how they can influence state politics and regulations on rates and net metering.The wholesale markets take away that influence. Solarcity under the wholesale markets have a stronger policy/regulatory footing to hold there own and compete in a equalized manner. The current policy risk weighing the stock(especially after the shenanigans in Nevada) would be lifted significantly.Solarcity is deep in this process already and positive indicators are coming more frequent showing they are getting this new regulatory framework put in place to operate in the wholesale market effectively.It's eye brow raising when someone comes to the state of California offering a method of saving $1.4billion a year while improving the grid at the same time. If what they suggest is validated, then no matter what level of influence monopoly utilities have on the regulators around the country, states will start to demand the same opportunities and the domino effect kicks into gear. It will happen that rapidly once the ball starts rolling in early states like Califonia and New York.�
1/1/2015
guest I feel there is a little uncertainty due to what happened in Nevada. We have to see what short term effects that will have on bookings and installs since Solarcity is 60% of all rooftop installs in Nevada and a massive number of installs/bookings happened there at the end of the year right when the PUC decision happened.
i wouldn't be surprised if they don't share bookings next week because of it. Maybe q1 guidance will be lower then expected as well. so this might give short players some ammo to pump the stock down.
However, I feel there will a majority of investors out there looking for what Solarcity has to say about longer term guidance, like annual guidance and beyond. With the ITC extension and the developments in California(and New York) how does this change the outlook? if this outlook looks better then expected, I feel this might overcome some of the short pressure post earnings.
like I've said before any guidance and update on solar+storage will aslo get investors thinking in a positive direction with this business model as well. The more goals expressed on solar+storage the better.
the silevo factory is still a year out so I don't think this will move the needle at all, imo.
Bottomline, if they really make the conference call about strong longer term guidance as well as set us all up for the impact of solar+storage in that strong long term guidance, it will turn on investors, and subdue the short momentum.�
1/1/2015
guest Power grid of tomorrow may include batteries - Houston Chronicle
This is informative. I did not know that SolarCity had move into Dallas-Fort Worth.�
1/1/2015
guest And here's the after story.
Despite Bold Predictions, T. Boone Pickens Sells All Oil Holdings | OilPrice.com
Pickens had so much confidence in his $52/b prediction that he sold all his oil holdings a few days later.�
1/1/2015
guest Yep, they have an agreement with one of the power producers to offer full net metering. A very good friend recently had solarcity installed on his house with a PPA in dfw�
1/1/2015
guest
Its actually "thermal runaway" (sort of speak) on oil/gas production. The lower oil prices go, the more oil producers around the world pump to make up lost revenue. Make it up on volume is the mantra, which creates more downward pricing pressure and so on...
i also think we see historic levels of inventory because the thought is to stock up at this at these low prices for when it does go up. It's far cheaper to stock pile then not, which gives us sometimes a sense of a false bottom, creating a price range as bigger orders are placed at a specific price causing a spike up but then retreats as demand drops again. However, producers keep pumping out supply to make it up on volume, etc...
solarcity's business only becomes stronger as fuel become cheaper. Literally zero effect on utility pricing because as we know retail electricity rates are heavily priced on infrastructure and other costs outside of fuel costs.�
1/1/2015
guest Wow up $1 on no news with Dow/Nasdaq down and oil not doing anything. I assume it's due to earnings CC in a few days. According to ShortAnalytics short interest is at 46% (at least at end of day yesterday) so they're not exactly backing off. I'm REALLY hoping for some good news this time to set off another mini squeeze.�
1/1/2015
guest Tsla traders moving over to scty...�
1/1/2015
guest I can't tell if you're joking or not, but I've suspected that was a thing for a while now. I've seen the 2 stocks go in opposite directions numerous times. I've thought about using TSLA upcoming events as a contraindicator for SCTY.�
1/1/2015
guest Actually, good idea, thanks. I just moved $15k worth from Tsla to Scty. We'll see, might be fun!? I still have 2,400 shares of TSLA, I am still in the green as I bought these way back.�
1/1/2015
guest I don't know of you've followed my posts on oil storage. If you store oil and sell a future, you can lock in well hedged ROI. So storage does create a floor by arbitrage. The problem with Pickens position is that it was likely unhedged so as oil goes down and stays down he loses money. So oil speculators like that need to get out and let wall street hedge funds seize the opportunity. In terms of where the spot price goes, under arbitrage free pricing, that totally depends on the futures curve, yeild curve and cost of storage. So basically as the long end of the futures curve remains above $50, there should be a floor on the short end around $25 to $30. So it really should not get much lower unless the futures curve collapses.
But just as hedged storage puts a lower bound on oil it also puts an upper bound. It could be that Pickens had folks who finally connected the dots. He was stuck sitting on oil he paid too much for, but the yeild going back up the futures curve was not sufficient to cover his cost of capital. See, he could have sold futures contracts to exit this position, but a high cost of capital would have made that undesirable. So he cut bait.
Oil traders have been accustomed to OPEC playing a swing producer role. So traders could just trade around what they though OPEC might do in a given situation. But OPEC has failed this role. Now the futures market and hedge storage traders must play this role, and they play it by trading against the futures curve. If a cowboy, thinks they are smarter than the futures curve, he will get burnt. Or more specifically he will get arbed. This is a structural change in the oil market brought on by the loss of OPEC as swing producer.�
1/1/2015
guest I agree. Maybe producers(Russia and others)got caught naked at low tide with the historic drop and have to do whatever it takes to stay in business in the hopes everything will rise again some day. Pumping out of survival is not a good futures look.�
1/1/2015
guest Here are a few thoughts on upcoming ER
Positives
- Q4 weather was good (relatively). So more installs than expected possible.
- Commercial might be improving. Adding in some concrete numbers.
- Reporting progress in HI can be positive
Negatives
- Growth: A few different times, Lyndon said they will grow as fast as cash flow will allow. We know they are locked out from markets. So to me this effectively means re-instating 40% growth (if at all). I think market will react negatively to this.
- RV reset: In Q3 ER they said $33/week. At analyst day they said something like $17/share. I am not sure that really sunk into the market. When the new slidedeck shows say $18 or $19/share, I wonder if the market will freak out (or is this reset priced in?).
- Storage: No specifics on ROI but guidance on big installs will be bad (terrible actually). Only way to sell storage to investors is to draw up the numbers and show healthy margins. I don't expect much talk on storage exclusively except the vugue talk of - we are working with utilities, pucs, blah blah.
Need to watch - Sales-Cost/Watt trend.
Not just out of concern for profitability but to know if the market is saturating for the PPA model. Given that PPAs are NOT economically compelling, we really don't know what the addressable market is. Selling PPAs will work, until it doesn't.
You might argue that the addressible market is 50% (or whatever) based on installs done over last year. But that's not the right way to look at it. It's very much possible PPA guys made 100 sales touches for 1 install, while local installers made 10 sales touches for 1 install. So we really never know what the proportion is interms of addressible market.
Summary
I am not too optimistic in post-ER price action.
Stock generally falls big post-ER. Here is the list of 1-day price actions for each of the past ERs. Latest first.
-22.12%
2.64%
1.43%
-5.76%
-5.33%
-7.26%
12.35%
-5.71%
-16.70%
-10.80%
-12.37%
-14.43%
This ER has particular risks with growth and RV reset. One could argue these factors are already priced in. But going with my own model they are not.
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On a separate note
Remember Credit Suisse, the sole underwriter for the latest ABS issue. They have a price target of $124.
* chuckles *�
1/1/2015
guest Guest Editorial: Should state regulatory ratemaking decisions impacting customer-resource investments be based on analysis and a record? | Editorials
great article on net metering amendment in the new bipartisan energy bill. Looks like it's staying in for the senate vote this weekend. Would require PUCs to give full benefit/cost analysis before changing retail net metering. Also, would assure grandfathering. this could be really big for scty on the regulatory risk side if it passed into law soon. Keep an eye on this one this month.
California ISO approves proposals to bolster storage and demand response | Utility Dive
Again, Solarcity clearing the path for entry into the wholesale market, aggregated solar+storage capturing 13 separate value streams. And the cal Iso has signed off on it.�
1/1/2015
guest Buffetts Nevada power play >> Nevada Policy Research Institute
ha, an intriguing story of buffets purchase of NVE energy and governor "neutral" Sandavol's involvement. Curious how things come to bite you in the end...�
1/1/2015
guest This is excellent background information. You can totally see how messed up this business model is and why it is so easily threatened by real competition.
Apparently solar customers were not paying their "fair share" of shuttered coal plants. Solar advocates really ought to throw up this sort of hypocrisy whenever the utility speak of fairness and cost shifts.
I've become so disillusion with the idea of switching from coal to natural gas. While coal is truly horrendous, the better move is simply to replace coal with renewables. Switching to natural gas as an intermediate step just delays achieving 100% renewable energy and wastes capital doing so. This totally sets the utilities up for being priced above distributed solar. From an economic viewpoint, part of why NV Energy has been faced with such strong uptake of solar is because of this sort of rate making that is based on recouping cost on under used assets.
Additionally this report shows that Buffet is intimately involved in the politics of NV Energy. Some posters here have tried to portray Buffet as a hands off investor. In reality he is a political entrepreneur.�
1/1/2015
guest read the comments of the article, it gets even better. Let's just say they were very good at bait and switch from the very start.
looks like the push for skipping nat gas altogether is building. This just came out today:
If you thought solar was going to hurt utilities, get a load of solar+storage - Vox�
1/1/2015
guest There's always a possibility of the stock going down, but given the renewal of solar incentives, the Paris alternative energy agreement and oil spiraling down, I'm betting on solar. It's likely that Nevada is already baked in as we dropped from $50 plus..
And no I didn't come from Tesla. I had extra funds and decided to go scty as I have too mucho TSLA. It'll be fun with both.�
1/1/2015
guest More evidence the regulatory stars are lining up for Solarcity aggregation business model:
State legislators call for drastic overhaul of Californias utility regulator - LA Times
California legislature looking to bypass the governor and redesign the entire public utiltiy commission function/system. In addition to advancing solar+storage deployments, This type of legislative momentum is exactly needed to shake up the utility business model in California and Solarcity is right there with a plan to implement the new one. I can't stress enough how significant this is for what Solarcity is doing. Again, California is 50% of all solar installs nationwide and now Solarcity is prepping California for the next evolution of its business model. It is becoming more clear reversing this trend will be near impossible now. To say the least, California transformation will be exciting to watch over the course of 2016.�
1/1/2015
guest Hopefully, this can be a warning to other PUC regulators in other states. These regulators really do need to act on the public's best interest. When they are too cozy with the utilities, the public will lose confidence in the process, and responsible legislators will step in to make changes.�
1/1/2015
guest 3 Reasons NextEra Energy Stock Could Fall -- The Motley Fool
It can be enlightening to read up how investors like your competitors. This author is pretty clear about the threat that the likes of SolarCity poses for his favorite Florida utility, NextEra Energy. So NextEra has been at the forefront of blocking rooftop solar through political means, and supposedly could work the same magic in Hawaii. The author views this political skill as a good thing. Moreover, the author would view that acquisition of HECO, the distressed Hawaiian utility, as a growth opportunity. He believe investors want such growth. But in this case the HECO deal was thwarted by Hawaiian politics. So the author is concerned that rooftop solar can deprive utilities of growth, which in his world view seems to be meted out by political processes. Even so, he'd like to have NextEra in his portfolio because electricity consumption is growing in Florida.
I am not impressed. The author puts great weight on utilities continuing to earn above market returns on the basis of political favor. Where is the fallback plan? Suppose the citizens of Florida succeed in opening up the state to third-party rooftop ownership. How will NextEra compete? Are they in a position to offer rooftop solar directly? Can they cut rates and become rate competitive? There does not appear to be any business strategy. So the proposition for shareholders is to hold shares now, and sell them when political winds change. I must also take exception to the idea that consolidation in the utility space constitutes growth. Growth by acquisition in an industry that is facing structural decline should hardly count as growth. It is simply rearranging deck chairs on a sinking ship. Most mergers and acquisitions actually destroy shareholder value. If this author likes NextEra because it is in a favorable state, why in the world would he want NextEra to be exposed to the intractable mess known as HECO. That utility basically runs diesel gensets and has poles and wire. Such assets are in no way competitive to rooftop solar plus batteries even at last year's prices. About 20% of residents already have rooftop solar and many are already offgrid. In fact, realtors will feature homes that are already offgrid. So I am astounded that this analysts would view buying a basket of gensets, poles, and wire as a growth opprtunity. In any case, the author seems woefully naive regarding the capabilities of rooftop solar. The idea that rooftop solar is only a political threat misses the point that its a technology that posses an existential threat to utilities. Politics operates at the margins. As solar and batteries advance becoming ever more economical, the politics shift. The voting public is waking up to utility cronyism. But for now political favors are to be found here and there, and I guess that is enough for utility investors to bet on. Yeah, I'm not impressed.�
1/1/2015
guest New Reid: Solar Customers Must Be Protected Against Abusive Rate Hikes
Foghat, I think you'll find this interesting. Do you know what bill this amendment is to be attached to? May be worth following.�
1/1/2015
guest My experience is that when you see investing advice posted on SA and Motley idiot the exact opposite moves will pay off handsomely. The only redeeming quality those sites have is when they recommend buying something in a bull market when everything not going bankrupt is rising. Which ultimately means they are worthless and for entertainment purposes only... which when pressed they would agree. After all, they are not REALLY giving out investment advice, are they?
BTW, I never liked Warren Buffett and his supposed everyman folksy ways. He was born a privileged elite insider but the media meme on him is such that one gets the feeling he grew up some dirt poor farm boy and made good along the way. However the latest dirt you have dished on him in this thread has certainly solidified my dislike. Why is he betting so hard on fossils? Because he can twist arms to get his way. Must have learned that growing up in the Nebraska cornfields...�
1/1/2015
guest LG to invest $US435m to triple solar cell production by 2020 : Renew Economy
So LG Chem is growing it's solar panel capacity from 1 GW now to 1.8 GW in 2018 and 3 GW in 2020. So this move anticipates 32% annualized growth in solar at least for LG Chem. Of course, LG Chem is also big in batteries both stationary and automotive. So obviously LG Chem is bullish about the growth of solar and batteries. It's good to see that they are not deterred by the low prices of fossil fuels.�
1/1/2015
guest Yeah, it's probably a mistake to dignify an article like this with any sort of thoughtful review. For my part, I'm mostly interested in how utility investors are framing their investment.
OilPrice.com is a good source on how oil investors see the world. Oil majors are in a position of operating at a loss and borrowing to pay dividends. Should oil majors should cut dividends? Well, if they do, they send a powerful signal to investors that oil cannot be counted upon to fund one's retirement. But to borrow money to pay dividends while in a glut with no reliable end in sight puts massive capital at risk. Investors could in fact lose their retirements if they are not paying attention to how the world is changing. So dividends are pretty important for framing the investment decision. The preference seems to be to keep paying dividends to perpetuate the illusion of BAU.
- - - Updated - - -
One more thing, oil and gas represents about 10% of the stock market and have lost about 50% of their market cap. So this glut alone takes the market down 5%. So how much of this threat of a bear market is just spill over from the collapse of oil?�
1/1/2015
guest Oil collapse creates a vicious cycle in certain economic cycles. Much of the consumption in oil nations (and oil economies like ND) is based on imports. The exporters into these markets suffer, like European luxury goods selling into Saudi Arabia for example. That in turn creates a negative cycle in the consumable exporter economies. So the impact is certainly more than 5%.
There is a bigger issue with collapsing oil prices - pushing the consumable exporter economies into Deflation. It is a scenario already getting reflected in many advanced economies with near zero, and negative yields on the benchmark bonds.
Death, Depression, Deflation - interesting coincidence, they all start with D and they are inter-related (Death as in Economic Death eg: Japan).
If we want to celebrate collapsing oil prices as a win for renewables, I consider the current situation to be way too premature. I would much rather have much higher oil prices right now.
- - - Updated - - -
Not that I have any say in it�
1/1/2015
guest Well, the problem is oversupply. According to the IEA, global consumption increased 1.7 mb/d in 2015. So this rules out some sort of falling demand problem in the general economy. However, production increased 2.6 mb/d in 2015, and remember that the price of oil began to collapse in the middle of 2014. Moverover, production was up 2.4 mb/d over the year before. So this is clearly a problem of overproduction. It is an industrywide self-inflicted wound. So the price has dropped to about $30. Does that mean that producers are ready to shut in production? Nope, not yet.
So while oil producers try to figure out who blinks first, the cost of goods for practically everything gets mare affordable.
So what role do renewables play in this? Did oil producers really expect oil consumption to grow by 2.6 mb/d? That's a bad assumption, and it only gets worse as renewables advance. Producers really need to get a grip.�
1/1/2015
guest You are right on the money there and many players (dare I say Algos?) are simply interpreting oil glut as falling demand and recession indicator. Problem is that the central banks have built such a house of cards that this can definitely be a self-fulfilling prophecy. The leveraged debt that is choking the life out of oil producers is not restricted to that industry. It is everywhere, sovereign and private. When there is leveraged debt the collapsing asset price, whether it is equity or commodity, is lethal. SUNE is a good example. China may be an even better one soon, though I sincerely hope not. It is hard to deny that they have poured trillions down the rabbit hole though. Anyone want to move into an empty city?�
1/1/2015
guest Sure, there are contagion effects to watch for. One is that sovereign oil wealth funds like the Saudi sovereign wealth have been liquidating stocks and other assets to keep their governments afloat. The Saudis are also issuing debt and only have about five years of solvency left. So as they liquidate massive assets that does draw down the value of those assets. So I do think that this is part of what is dragging the stock market down. However, it is important for investors to read the situation properly. There is a multi-trillion transfer of wealth from oil producers to oil consumers going on. This actually creates huge buying opportunities in equities. One needs to be mindful of which side of the wealth transfer each stock sits on. For example, retailers like Home Depot can benefit. Distressed oil wealth may be cashing out of theses stocks depressing values, but lower cost of shipping and goods as a consequence of low oil and other commodity prices are a boon for such a retailer. On the flip side, Chevron is clearly on the wrong side of this wealth transfer. So it is not at all helpful for stock investors simply to marinate in negative sentiment and exit from the whole market. This is dumb contagion. What is needed are sharp investors who make the distinction between stocks that are on the winning side of the oil wealth reversal and those that are on the wrong side. So what happens is that dumb money succumbs to fear and anxiety while smart money picks the winners. So the general market decline for a while and then surges back as winners take the lead.�
1/1/2015
guest Thought this was interesting, small town in NY planning to go off grid using renewables, including solar. (Hopefully from SolarCity).
http://www.usnews.com/news/business/articles/2016-02-07/driven-by-power-outages-and-savings-towns-look-to-microgrid�
1/1/2015
guest Ah! So once again, Paxson leads the way. I keep telling everybody, we ARE at the center of the universe!
Slightly more seriously, I see that the NY town, Nassau, is not completely doing what the headline says. Rather, its municipal buildings are going to be on their own microgrid. So residents will remain vulnerable to a utility's insufficient infrastructure. But it's an important start, as is the other town the article mentions, Fairfield CT (with our without GE's presence....)�
1/1/2015
guest Outside of the oil and gas sector we are MUCH less leveraged than we were in the run-up to 2008. Banking regulations have been put in place and cash buildup has long since started. Mark Carney and the FSB have quietly chipped away at global systemic risk while US "regulators" twiddle their thumbs.
That's the only reason I'm not too worried about this downturn, it's contained in the oil&gas world should be stimulative to everybody else in "consumer" nations. How that balances out in the end......who knows. But we should be able to treat this as just a major reset/correction.
China's a hot mess, but that's not really a big deal for us.
Back to solar/SCTY......Yes, it might be better for solar if oil were still super high. But I have to think at least half the reason for this commodities rout is because renewables are being targeted either consciously or subconsciously by the legacy energy world. [What used to be called]OPEC can't just let oil get to $160 on a whim.....solar/wind/batteries are getting waaaaay to cheap and logical for that to net out to positive returns. The battle is on! [and kind of already over]
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Most legit analysts seems to be putting a positive spin on things heading into the earnings call and have targets double today's price, but Deutschebank put out a sentence that concerns me (even though their target is $64).
3Q earnings included an announcement that shocked most, but really should have been a positive. Lyndon aiming to get cash flow positive by the end of the year was important as the ITC was set to perhaps expire, now I would imagine they're not going to trim costs as aggressively. Will analysts lose their minds if Lyndon is perceived to be flip-flopping on being cash-flow positive in 2016? I would hope not.
No clue how to play this earnings call options-wise. Literally anything could happen. Good times!�
1/1/2015
guest I see low oil and commodity prices as beneficial to solar. This reduces the transportation costs and material costs of solar. I don't think SolarCity would be looking at a $1.96/W installation cost is oil were still above $80/b. It still takes a lot of dirty energy to manufacture and install solar.
Would demand for solar be substantially higher is oil were expensive? It's unclear why that would be the case. Solar just keeps growing at about 30% per year globally. Specifically, as it relates to SolarCity, this is even more remote. Only in Hawaii is the grid power significantly sourced from oil, and as we have discussed at length fuel cost everywhere else is a very small component of residential retail rates. So if the price of oil were to jump to $100 tomorrow, I don't see how that would enable SolarCity to install more solar this year.
So I am quite happy for SolarCity to keep growing at a lower cost of installation thanks to cheap oil. I am also happy for customers to save a little at the pump so they have more discretionary income. This makes it a little easier for a homeowner to upgrade their roof in anticipation of installing solar.�
1/1/2015
guest Just reading around on broad economic topics today. It seems that low liquidity due to potential energy sector defaults combined with generally increased reserve requirements at banks under new TLAC rules is causing the tightness. Doesn't help that there's no more Saudi(and similar) hoards of cash floating around the world looking for a home.
Then I see SCTY puttering along with another securitization today, this round is 5,600 bundled PPAs mostly from the West coast. Now I understand that return on these is around 5%, but I guess that total line of expense ends up being fairly high since it's "paid for" in one shot by SCTY. SBenson points to an ever-increasing cost of securitization, but I'm not really seeing it illustrated anywhere.
What is the real cost of these rounds vs. what a guy would pay to 100% finance his own rooftop array? And how long is it going to take for people to realize they're about the safest big bond out there? And what does that realization do to the cost of securitization? Won't the default of half the fracking interests in the US point investors naturally toward these solar bonds? Won't they become very popular and therefore "cheap"?�
1/1/2015
guest I think it will be hard for some investors to transition from fossils to renewables. However, I think that general income investors could warm up to renewables. With the fall of fossil fuel a lot of income investment opportunities will be lost or severely compromised. So income investors will have to look further, and some will find their way to renewables.
From a global perspective, the total investment in renewables in 2015 was $329B. I think that was enough to rival investment in oil for the same year. Regardless, that is quite a volume and it will likely increase in coming years.�
1/1/2015
guest Wow, update from Nevada PUC hearings going on today:
Marie Anne Cuneo said her computer couldn't calculate the impact of NV Energy's new rates on customer. They basically took NV Energy for their word on the impact. Again, she was on PBS show, making a public record, saying she and her staff thoroughly vetted numbers... But now she said her computers couldn't calculate the impact... This whole PUC will get annihilated in court now, it's a complete embarrassment.
secondly, NV Energy gave out letters saying solar customers would continue to get current net metering rate after PUC decides new rates. They gave this letter out all the way up to December 15, literally one week before the PUC decision. This absolutely blows away the charge by the PUC saying solar companies mislead people by saying they were going to be grandfathering. It also showed that nv energy itself was reassuring people of grandfathering. Also of note, the video that demonstrates net metering as a calculation in determining long term payback on their solar investment. All, indicators the PUC was completely out of bounds in changing the terms under which were promoted and agreed to by nv energy, solar providers, and consumers.
Add just these two points(PUC did not calculate impact of rates and nv energy promoting net metering grandfathering up to a week before the PUC decision) and the complete rate decision implodes under basic legal scrutiny.
To me, there is no turning back here, Nevada is in serious trouble, major changes will happen... wsit till all the democratic candidates start moving in Wednesday after New Hampshire primaries, followed by the republicans after that.... National spotlight will come at the worst time for them there.�
1/1/2015
guest I've been in SCTY since the IPO. As well as I can remember ((and I forget a lot), every ER results in the stock going down. Fingers on both hands now crossed for a green day tomorrow!�
1/1/2015
guest There's a very clear Democratic Socialism angle that I expect to be highlighted in Nevada by an older gentleman starting tomorrow. Germany went through this exercise 2-3 years ago, but rather than putting the entire burden on solar users their regulatory environment made it so all peak production by legacy utilities worthless. That's the logical, free-market way to let things flow to the best option and it protects regular citizens from the survival tactics of dying business models.
The top three utilities in Germany lost 75% of their value and instantly tried to divest from production. The government said no, forcing them to plan/pay for nuclear step-down and other production divestment. Here we are just a few years later and all these companies have capitulated, invested in models centered around grid operations plus renewables, and values are rapidly on the rise.
Very logical. Wholesale energy prices plummet and savings are passed on to industrial customers while retail prices stay flat while the cost of fossil/nuke wind-down is recouped to a degree.�
1/1/2015
guest http://www.infomine.com/ChartsAndData/GraphEngine.ashx?z=f&gf=110563.USD.lb|110569.USD.lb|110564.USD.lb|110572.USD.lb&df=20150201&dt=20160209
Here is a chart for four metals that are important to Tesla Energy and solar: copper, aluminum, cobalt, nickel. These metals.have fallen 20% to 40% over the last 12 months. Falling oil prices contribute to declines in these and all other commodities. So we largely have an oil glut to thank for driving down the commodity cost of solar and batteries. This very well could accelerate renewable energy price declines over the next few years. So one can see how it is not a simple matter for fossil fuels to undercut renewables. The price concessions required to reduce demand for renewables also reduce the commodity cost of those same renewables. Net result, the globe installs more renewable GW for fewer dollars. Cheap oil begets cheaper solar and cheaper batteries. Utilimately it is technology that delivers the best use of commodities.�
1/1/2015
guest I never really made a big deal out of ABS pricing. Yes, the latest one (MyPower loans) appears to be slightly worse than the ones before. But nothing alarming.
What is alarming is the recourse debt (NON-asset-backed debt). Yields there are going through the roof. Again.
SCTY is in bit of a vicious cycle. Can't raise cash at reasonable terms. So need to get to cash-flow neutral state very quickly. For that they may need to slow down the growth. Hence they are stuck between rock and a hard place.
One can argue that TSLA is in the same situation today. But at least there are meaningful catalysts ahead of it. For SolarCity I can't think of anything big positive.�
1/1/2015
guest Are the non-recourse debt convertible for shares of stock?�
1/1/2015
guest Non-recourse is ABS debt right. No, there is no convertible.
Curious, why you asked. Are you suggesting something?�
1/1/2015
guest Just posted - could someone ELI5?
--
The following is a press release from Standard & Poor's:
OVERVIEW
-- SolarCity LMC Series V LLC's issuance is a solar ABS transaction
backed by a trust estate consisting primarily of all rights, title, and
interest of the issuer in and to a portfolio of solar photovoltaic (PV)
systems; the master lease documents (including the rights to receive rent and
other payments in respect of the PV systems subject to the master lease
agreement); solar asset agreements (related to PV systems that are no longer
subject to the master lease agreement); amounts on deposit in various
transaction accounts; rights from certain insurance policies covering the
solar assets; and cash flow associated with the ownership of such assets.
-- We assigned our preliminary ratings to the class A and B notes.
-- The preliminary ratings reflect our view of the transaction's
structure, credit enhancement in the form of overcollateralization and
subordination, and projected cash flows, among other factors.
CHICAGO (Standard & Poor's) Feb. 9, 2016--Standard & Poor's Ratings Services
today assigned its preliminary ratings to SolarCity LMC Series V LLC's $57.45
million solar lease- and power purchase agreement (PPA)-backed notes series
2016-1 (see list).
The note issuance is solar asset-backed securities transaction backed by a
trust estate consisting primarily of all rights, title, and interest of the
issuer in and to a portfolio of solar PV systems; the master lease documents
(including the rights to receive rent and other payments in respect of the PV
systems subject to the master lease agreement); solar asset agreements
(related to PV systems that are no longer subject to the master lease
agreement); amounts on deposit in various transaction accounts; rights from
certain insurance policies covering the solar assets; and cash flow associated
with the ownership of such assets.
The preliminary ratings are based on information as of Feb. 9, 2016.
Subsequent information may result in the assignment of final ratings that
differ from the preliminary ratings.
The preliminary ratings reflect:
-- The credit enhancement available in the form of overcollateralization
and subordination (for the class A notes);
-- The manager's operational and management abilities;
-- The customer base's initial credit quality underlying the portfolio;
-- The projected cash flows supporting the notes; and
-- The transaction's structure.
RELATED CRITERIA AND RESEARCH
Related Criteria
-- Revised Assumptions For Rating U.S. RMBS Prime, Alternative-A, And
Subprime Loans Incorporated Into LEVELS Version 7.4.3, June 1, 2015
-- Principles For Rating Debt Issues Based On Imputed Promises, Dec. 19,
2014
-- Key Credit Factors For Power Project Financing, Sept. 16, 2014
-- Global Investment Criteria For Temporary Investments in Transaction
Accounts, May 31, 2012
-- Principles Of Credit Ratings, Feb. 16, 2011
-- Understanding Standard & Poor's Rating Definitions, June 3, 2009
-- Legal Criteria For U.S. Structured Finance Transactions:
Special-Purpose Entities, Oct. 1, 2006
Related Research
-- Presale: SolarCity LMC Series V LLC (Series 2016-1), Feb. 9, 2016
-- With Limited Operating History In The Sector, Solar Transactions Will
Remain At The 'BBB' Rating Level -- For Now, July 10, 2015
-- Global Structured Finance Scenario And Sensitivity Analysis:
Understanding The Effects Of Macroeconomic Factors On Credit Quality, July 2,
2014
-- Will Securitization Help Fuel The U.S. Solar Power Industry?, Jan. 23,
2012
In addition to the criteria specific to this type of security (listed above),
the following criteria articles, which are generally applicable to all
ratings, may have affected this rating action: "Post-Default Ratings
Methodology: When Does Standard & Poor's Raise A Rating From 'D' Or 'SD'?,"
March 23, 2015; "Global Framework For Assessing Operational Risk In Structured
Finance Transactions," Oct. 9, 2014; "Methodology: Timeliness of Payments:
Grace Periods, Guarantees, And Use of 'D' And 'SD' Ratings," Oct. 24, 2013;
"Counterparty Risk Framework Methodology And Assumptions," June 25, 2013;
"Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings," Oct. 1,
2012; "Methodology: Credit Stability Criteria," May 3, 2010; and "Use of
CreditWatch And Outlooks," Sept. 14, 2009.
PRELIMINARY RATINGS ASSIGNED
SolarCity LMC Series V LLC
Solar lease- and PPA-backed notes series 2016-1
Class Rating(i) Amount (mil. $)
A BBB (sf) 52.15
B(ii) BB (sf) 5.30
(i)The ratings do not address post-ARD additional note interest. (ii)Interest
on the class B notes is deferrable if certain triggers are breached.
PPA--Power purchase agreement. ARD--Anticipated repayment date. NR--Not rated.
Primary Credit Analyst:
Alexander Dennis, CFA, Chicago (1) 312-233-7069;
[email�protected]
Secondary Contacts:
Jesse Sable, New York (1) 212-438-6719;
[email�protected]
Trevor J D'Olier-Lees, New York (1) 212-438-7985;
[email�protected]
Lead Analytical Manager, U.S. Commercial Credit: Winston W Chang, New York (1) 212-438-8123;
[email�protected]
Legal Contact:
Stuart Stahl, New York (212) 438-5627;
[email�protected]�
1/1/2015
guest Thanks for the clarification. So this is essentially just straight borrowing to fuel growth? Obviously a concern for any investor, but I'm perfectly fine with them pushing that all the way up to a fairly unreasonable rate. That's the price of being out in front of the next thing.
This model after all pays off at the back end.
Maybe I'm reading this comment wrong. You don't see growth in the solar sector or benefit to being the clear leader in the industry?
SCTY and TSLA commentary on CNBC right now.�
1/1/2015
guest I was specifically referring to big upcoming catalysts. What will arrest the price declines is the question. I don't know of any potential catalysts that could do it.
As you bring up, in a longer term perspective:
- Yes, solar will be huge. But nothing indicative that SolarCity business model will thrive (or even survive).
Contrast that with Tesla. EVs are the future. In addition, we can also say that there is no real competition to Tesla. See techmaven's posts to get an idea, especially the ones where he is dueling tftf.
SolarCity has plenty of competition from grid-solar to local-installers. Both of which are utterly cheaper options. SolarCity's service is not that differentiated. Solar is dumb. You throw the panels somewhere, they just work.
- All of SolarCity valuation is based on RV and RV-trajectory, both of which are thoroughly destroyed recently. So nothing to look forward to.�
1/1/2015
guest Meh, that's the same old argument and share has only gone up. Half the people don't want to own their power plant or the hassles that comes with it. As costs go down for everyone and the product gets leaner, it'll only be a more compelling option.
Of course everyone is free to interpret value as they feel.�
1/1/2015
guest Agreed, both arguments are same old. It boils down to what you believe.�
1/1/2015
guest Oops, I meant to ask of the recourse debt is convertible. If it is, then is includes essentially call option on equity. The yield on convertible debt is very sensitive to the stock price.�
1/1/2015
guest Yes. That is is the very fact that makes matters even worse than they appear. If you remove the call option, the yields are even higher!�
1/1/2015
guest Consumers will eventually make the value decision for the market. Sales and revenue at low cost will tell the story!
This drift back upward at the end of the day is disappointing, only got in one buy and then spooked myself enough to hold off on the other. I still think we will see a lower bottom later in the week, but you never know. This whole idea of Lyndon giving any kind of 2018 guidance on installs makes me worry there's a pop coming. Much better chance that confusion still reigns.�
1/1/2015
guest I'm confused. How does removing the call option increase the yield? The final payout is the max of principle and stock value. Without the call option the final payout is just the principle. So whatever the price of the bond today it has a lower yeild if you assume the call option is unexercised. Am I getting this mixed up?�
1/1/2015
guest The bond maturing Nov 2019 has a price of $61 right now (for a face value of $100). It has a coupon of 1 5/8 and thus resulting in a yield of about 16%, based on current price.
The bond has some embedded stock options. If you were to remove the value of it, the price will be even lower and thus yield even higher. In very round numbers I think the price will be about $2 lower and the yield will be about 17%.
A better way to think about this is, what will be the yield that SolarCity will have to pay to raise capital through bonds today. If they were to do non-convertible debt, it will be higher than 16%, more likely around 17%.
Again this is for debt maturing in 3-years. For longer term debt SolarCity will have to pay even higher yields.�
1/1/2015
guest Anyone playing this ER? Just bought 5 $32 calls for next week for $1.6 each. Pure gambling. My only other SCTY positions are '18 leaps.�
1/1/2015
guest Was thinking about buying calls. They are outrageously expensive. You're going to need a 27.5% movement upward to break even on those calls!
Decided to sell premium instead. Bought shares at $26.35 today and sold this weeks' $26.50 calls for $3 each.
Worst case: I acquire shares at a cost basis of $23.35. Otherwise I'll pocket a quick 11% return by selling these calls.�
1/1/2015
guest Bought 18's @ 70 for super cheap�
1/1/2015
guest I posted this yesterday afternoon in TSLA thread.
Turns out that I got this right. For a change...�
1/1/2015
guest And...a miss. SP getting hammered. Holy crap I hate 2016.�
1/1/2015
guest There is a very good chance this goes under $20 this week. Eventually will be taken out private in $10 to $15 price range is my speculation.�
1/1/2015
guest Cash positive...hmmmm.
- - - Updated - - -
Looks like there's some extra cost calculations with this report, should be fun to see some new numbers.
- - - Updated - - -
The analysis from CNBC consisted of a guy saying "it's down 23%, why would I want that?" LOL.....numbers look decent enough considering the Nevada mess. Will load up on 2018 LEAPs down the line, but we are definitely in EXISTENTIAL LAND now!
Thank god I didn't load up at 2:30 today. I'm slowly learning!�
1/1/2015
guest We're down -32% in AH, down to about $18.�
1/1/2015
guest In the cash flow chart on page 10 of the presentation, what is the massive increase in O&M around 2025 and 2035? Inverter replacements?�
1/1/2015
guest At this point, this is game over. They need to start looking for something strategic.�
1/1/2015
guest Commercial installs were up 80-something percent, residential 50-something percent. What fundamental has changed after this earnings announcement?�
1/1/2015
guest Other than the lackluster Q1 guidance, I don't see how this was anything other than expected. What changed?�
1/1/2015
guest I thought it was good that 40% increase in 2016 was reiterated, even though the incentive from expiring ITC has now been removed. How could anybody expect more than that? I guess they weren't explicit about guidance for 2017 and later...maybe that had been expected.�
1/1/2015
guest I was actually expecting the 4Q residential installs to be worse and certainly wasn't expecting them to reiterate cash-flow positive by 4Q16. Will just wait for the detailed jhm review I guess!
Gonna be real tough buying LEAPs at this level, but I guess we'll see where they're prices next week.�
1/1/2015
guest The one and only one thing that supports SolarCity valuation is RV and trajectory of RV.
You can't possibly base it on earnings as they are deeply negative. You can't use cash-flow because that too is negative. If you use revenues it is ridiculously overvalued, and it's not even fair to do that. Hence you are only left with RV and it's trajectory.
It's very easy to build RV trajectory actually. The necessary ingredients are
- Current RV/share
- Install MW guidance
- RV/MW
- MW growth to project further future
- Share dilution
- Discount factor
- Discount away renewal portion (in proportion you like)
If you apply the latest metrics, you see that SCTY is very overvalued. Just for fun, run the same model with prior set of metrics (33/share and 80% growth rate). You will see day and night difference in valuation.
The trouble is it's bonds are trading in a correlated manner to it's stock. So it's cost of capital will continue to go through the roof, with these valuation resets. They can only operate in a cash flow neutral environment.
To boot, the cash position worsened by about $130mil or something like that over last quarter (include the silverlake $113mil btw).
Even that 40% growth will be reeled in.
Simply put, SolarCity's way of doing business is simply unsustainable.
They are in a vicious cycle.
All this stuff is all known to everyone. What's new?
Market got confirmation (on base RV, projected growth rate and cash flow) today.�
1/1/2015
guest The main thing that affected the guidance was the net metering ruling in Nevada. Going through the letter, this is what I read as the main issue.
I don't see anything wrong with the way they are calculating the NPV of the PowerCo.
While originally the cash spend was a little alarming, the progress of the Solarpanel factory is quite impressive and explains it. It's not publicized enough. It's not a straight forward business model for the average investor to understand. Obviously, at the current rate I'll agree with you it isn't sustainable. We're running into a similar issue of Tesla where things aren't going to go at the current rate. They are investing and spending to set up for longer term growth. This long term orientation is actually what is killing the Musk ETF at the moment. With that said, this drop does suck but I accounted for this and stuck SCTY into my IRA.�
1/1/2015
guest Meh, I see nothing to change either the trajectory of cost on residential solar or the perceived value of the SCTY product at premium.
Excited however to dig through the cost data tomorrow.�
1/1/2015
guest This works out well for me, since I'm still accumulating, painfully slowly since I too have very limited "free cash flow" each month. The longer the SP stays below $30 the better as far as I'm concerned. My investment time horizon is 3-5 years or maybe longer, so I'm perfectly willing to wait for the street's perception of SCTY to turn around. I'm thinking about taking out a loan from my 401k to take advantage of lower prices and get me closer to my target number of shares sooner rather than later.�
1/1/2015
guest Nobody buying at 17?�
1/1/2015
guest $17.60......Yikes!
I mean....guess you just buy shares at this point. So much for needing leverage! Will do so in the morrow after a premarket sentiment check.
Someone wake me up when the jhm review is published.�
1/1/2015
guest I'm going to stick to shares for new scty purchases anyway. I think I'm going to be burned on 2017 leaps. 2018s might be OK.�
1/1/2015
guest I just love listening to the earnings call when they explain what a horrible value they are for their customers.
They did seem to say that their panel factory is delayed.�
1/1/2015
guest Bwhahaha my meager holdings in SCTY have lost 50% of their market value in the last month :love: Good thing my time horizon is 2025+�
1/1/2015
guest This is pure manipulation! Blame congress for this BS! All republicans who vote against clean energy should be jailed for crimes against humanity.�
1/1/2015
guest So, is there any good reason I should buy SCTY when I can buy SEDG which is apparently down 6% in AH in sympathy? They have actually made money on a GAAP and non-GAAP basis and the forward PE is like 11 and the current PE is less than 20. It goes to show you the market may not be looking for anything in particular here except an excuse to sell solar companies. In any event SEDG has made me all the money I've lost on SCTY now so I'm picking up more of that if it is below $23 tomorrow and should never have really bought SCTY in the first place. Still I'll keep my 2018 LEAPS just in case.�
1/1/2015
guest Could someone please answer this? And please explain further as if i'm a two year old.
in addition, on the same slide what exactly is the levered project cash flow?
The cash flow generated by existing projects minus operation and maintenance costs minus taxes minus debt payments?
Thus if solar city would stop all work except maintenance guys and a few financial people, would this be the profit that it would make? If so is this 2 billion not a good proxy for the absolute minimum value of the company?�
1/1/2015
guest Ouch.�
1/1/2015
guest +70,000, as in minus $70,000!�
1/1/2015
guest ^^^Should be added to your signiture.�
1/1/2015
guest Terrible AH action. I'm truly in disbelief. I'm glad I have this in my IRA so I don't have to look at it for a long time.�
1/1/2015
guest Ouch is right. But, again, you either buy when you can or you stay on the sideline. I accumulate when I can. Have been doing as such since IPO.
For all of us investors here with long term holdings, nothing has changed. The reason they didn't hit their expectations had nothing to do with demand. It was all about waiting for electrical upgrades by the utilities on commercial sites. A little hard to get a timeline estimate right when you are waiting on someone else with a clear conflict of interest to do their side of the work. That 15MWs that were not installed would have been at the high end of expectations.
Secondly, the Nevada debacle has had a direct impact on q4 (and future q1) numbers. That has nothing to do with demand for the product, and everything to do with an unprecedented hostile utility environment. As I've been posting here, Nevada is a mess and will lose mightily. There is not only a legal case, but a public groundswell to change the entire system in a constitutional referendum for vote this november(this is addition other lawsuits and petitions).
Third, you have tremendous market pressure by hedge funds to see this stock drop. Just look at the volume levels and you can see how easy it is to use negative media sentiment in conjunction with trading manipulation techniques known to every hedge fund player to push this down.
Now, the investor relations messaging with analysts and hedge fund critics is a source of weakness. The quarterly briefings keep changing as it should as solarcity is developing the financial metrics as this new business/new distributed energy industry grows and develops at scale, but the walk through of explaining the changes is rough around the edges as a result. This is catnip for spin doctors on CNBC since lack of immediate comprehension is a premium for high frequency traders.
Lastly, the bottomline is clear to me. Solarcity's future is massive. If you have been following the developments on solar+storage and grid services, you understand where the puck will be in relatively short order. Net metering will evolve naturally into grid services. Solarcity will have 13 separate service streams for solar+storage products. It's not a question mark, this is now in the stage of setting a price for the combination of those 13 services for consumers and the grid. It's not a question of if, its a question of when, which looks to be in full swing(by default with every customer) by 2019-2020. Solarcity will continue to install under net metering, but net metering is not the end state since it doesn't reflect the full value of distributed energy. It undervalues it. And at 1% penetration, there is an extremely massive market demand opening up as costs come down as they are. If you are an actual investor in solarcity, you understand this is the investment thesis, not Jim Chanos' trading opportunity.�
1/1/2015
guest Quote this. I'm leaving the USA forever, if Republican's don't get with reality and start acting like adults, or if the Republican party doesn't cease to exist. The Republican party as it exists today is a perfect example of a flawed democracy.�
1/1/2015
guest I really don't get it. I bought in around the IPO and now it's almost the same price!?! The company has only grown, become the number #1 installer in the nation, first solar company to secure bonds.....do the analysts not read up on where the energy industry is going? Son of a bit.....but I'm not going anywhere because I understand the end game. Might buy more now.�
1/1/2015
guest Arent most of the analyst price target for SCTY is in the $60 range?�
1/1/2015
guest I'm really tired of the whole "local installers is cheaper" excuse. Here in TX, no they are not! They don't have half the advantages as Solarcity in this state.
I've called around a lot (which became exhausting when having to go through the same "roof setup process" for every company estimation) and none of them have financing. I'm not taking out another loan for panels. SolarCity's model can and does work.
So maybe that works in very small areas, but obviously they are the #1 installer for a reason.�
1/1/2015
guest For those who want to throw up.
I'm going to leave this right here.
Swarms of workers turning SolarCity into complex panel factory - Strictly Business�
1/1/2015
guest I couldn't resist. I bought some SCTY stock at in the mid $17's.�
1/1/2015
guest As I see it, it's the macro. Mostly every growt stock has taken big hits, even when ER was good. Banks are tanking, and I think the possibility to finance furter growt is a big consern.�
1/1/2015
guest It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, and comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows the great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who know neither victory nor defeat.
Every time I read this I think of Elon Musk, risking his entire wealth on Tesla.
Tomorrow, I'm buying SCTY.�
1/1/2015
guest The Court of history may well deem to be Supremely on the wrong side
http://www.cnbc.com/2016/02/09/us-supreme-court-blocks-obama-carbon-emissions-plan.html�
1/1/2015
guest Nobody should vote against climate change plans since the 5 part article on ExxonMobil came out. Zero. You don't want to vote against the profit making machine? Then come up with a plan to move those jobs over to the clean energy side.
Profits. Blinded by profits. People live for what, 70-80 years? The people working right now will retire in the age of cheap renewables. No other generation will be going into the coal or gas industry. Freaking ridiculous.
Why can't we be proactive as a nation!?!
/rant�
1/1/2015
guest Well, I wanted to take the time to read the materials and listen to the call before reading and replying to posts.
No question Q4 was a tough quarter with so much drama and lost jobs in Nevada. Hitting 272 MW instead of 280 MW is not something I'd worry about. In general, SolarCity is working hard to be much more buttoned down. So 180 MW guidance is totally justified sandbagging considering the BS the manipulative traders have put the stock through. So 1.25GW is quite doable, especially with ITC extended. Driving to becoming cash positive in 2016Q4 is the right sort of way to moderate growth. I think SolarCity will be able to hold their market share, while pitching that to solid financial gains.
So I think this is realistic and sober minded strategy. For me, I am content to pass on the hypergrowth. If SolarCity is able to keep growing at 40% into 2017 and beyond on a cash flow positive basis, that will be a tremendous transformation. I believe the market will respond to this in time. 2016 can be a year of transition. As an election year for a political stock, 2016 is a wash from the outset. So I think the way to look at this year is how SolarCity will emerge in 2017.
There is little doubt in my mind that solar will be a solid growth story so long as fossil fuels are used for power generation. So the question is whether SolarCity will emerge a prime investment vehicle to deliver that growth. They are off to an amazing start with 1/3 market share and the infrastructure to deliver the lowest cost of installation. It is the Amazon of the retail power market.
On a minor note, I did the math on the current parameters for new contracts, 1347 hours/year, 12 c/kWh, only 2% escalator. This works out to a customer price of just $2.77/W or if you back out 30% ITC, $3.95/W. This is a reduction from the prior quarter where comparable calculations lead to $3.14/W net of ITC and $4.49/W. So this looks like SolarCity is bringing more competitive prices to the market, but with a higher mix of commercial it may not be quite so pronounced. In any case, even with a higher skew toward commercial, SolarCity is moving toward delivering lower priced solar.
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Wonderful. Thanks.�
1/1/2015
guest 401k loan applied for. I'm going all in.�
1/1/2015
guest This thing will trade like crap for at least another year. So I'd recommend you feather in your investment over time, just buying a little bit at a time. I think their will be plentry of buying ops along the way.
All the best.�
1/1/2015
guest Moderator Note:
There are many fine forums in which political discussions, and political sentiments, are permitted, and even encouraged.
This forum is not one of them.
But you knew that.�
1/1/2015
guest Almost forgot there was some great irony to the CNBC coverage of the SCTY earnings report today. As I mentioned before, Kevin O'Leary from Shark Tank was on the show commenting on the day's oil/bank volatility and made a big prediction. Said he's betting on a decoupling of the stock market from oil in very short order and that betting on stocks that will benefit from low energy costs will be the obvious smart move that pays off as oil shoot back up. SCTY's AH action is announced and he proceeds to say that no one should ever invest in a stock that can lose 25% of it's value in ten minutes. Asked if he would think of investing in the company.....he had no answer. Clearly had no idea what SCTY does.
I was worried that jhm would throw something at his TV when they mentioned oil decoupling and SCTY as if they were unrelated.�
1/1/2015
guest Ok, I see what you are doing. In the first case you are assuming that the option is worthless at expiry, so that leads to an underestimate of expected yeild. In the second case you are subtracting out the value of the option at the front end which does not have the same bias as the first case. So it is an apples to oranges comparison. But to your basic conclusion, the yeild seems high however you estimate it.
It does take special pricing models to properly value a bond with embedded options. It is a non trivial exercise.
Could it be that these are too illiquid to be given a fair price? The prices offer may not actually represent a solid credit analysis and may just use the stock price as a proxy. Indeed there is a whole bond valuation methodology based just that. It views debt as a put option on the value of the enterprise and stock as a call option on the same underlying value of the enterprise. Once you have an estimate of enterprise volatility assued to be the same as for the stock, you can work backwards to derive a value of the bond frome the value of the stock. Now in the case of SolarCity you have a very complex capital structure with tax equity partners and ABSs so the simple KVM approach is probably way off base. So if there is not proper analysis going into these bond prices, you could just be looking at the stock price and its volatility through fun house mirrors. This debt could be just as mispriced in the bond market as the stock is in the stock market because that's essentially what it is based on.
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Let me see if I get this right. This guy says oil will decouple from stocks. So if you investing in stocks that benefit from cheap energy, they will do well when oil goes back up. That last part is where I get confused. I would think the point of investing in these cheap oil beneficiaries is that they will go up as oil remains low priced.
This decoupling will not take place as long as idiots think oil will shoot back up. It won't, and yet most companies will do just fine in a low oil world. The play is to dump the losers that only do well when oil goes up because as I said it won't.
So where's my shoe to throw?
BTW, IEA expects oil consumption to grow 1.2 mb/d this year, and OPEC production to grow 1.7mb/d. See the problem. The only way for oil supply and demand to balance this year, is for non-OPEC producers to give up market share. It's not going to happen. The glut will persist into 2017 and so will low prices. We can't let these oil producers locked into a pissing match with each other ruin every other investment on the planet.�
1/1/2015
guest Understood. I'm embarrassed to say how little I actually have in my 401k. It's not like it's a significant amount, just that it's enough to borrow half and bump me up to my target number of shares for my mid range plans. Nobody knows what any stock will do tomorrow or short term, but my faith in any Elon Musk adventure is absolute, and I'm willing to throw it all onto the table. I am not worried about the long term viability of Solarcity at all. I'm no accountant, and I can't counter SBenson at all, but I will roll the dice on them not going bankrupt, or facing a margin call, or any other disaster scenario. You can call me na�ve, or a koolaid drinker, or whatever, I don't care. My goal is a certain number of shares, then sit back and let the excitement unfold.�
1/1/2015
guest I'm perfectly happy to sacrifice my 2017 SCTY options and a bit more of our beautiful environment if it means frackng our way into 2018 and triggering a Saudi revolt. But that's a whole other topic.�
1/1/2015
guest How do LEAP options reprice with a drop like this? Obviously they'll be way down, but does the volatility mean it takes a while for them to really bottom out to rational price?
Hardly and point in buying anything other than share when they're at 18, but I'd still like to do the math on the leverage.�
1/1/2015
guest Delta is the ratio of the change in option value to change in stock price. But I would also expect the implied volatility to shift as well, so it will be hard to anticipate how this all sorts out. It's not even clear if implied volatility will increase or decrease. Usually there is a decrease after ER, but with a big price change maybe not.
FWIW, I've got a limit order set up. Let's see what discount the market will cough up.�
1/1/2015
guest SolarCity Townhall meeting is the 11th. SolarCity Town Hall
I'll not be able to listen to it. I'll be driving to Fremont for a morning Tesla factory tour on the 12th. I'm looking forward to seeing X's being manufactured at Tesla! I could use a dose of confidence.
I picked up another 1,000 shares SCTY at $19.26 this morning, couldn't resist.
Fingers crossed for a pleasant surprise on TSLA ER.�
1/1/2015
guest Are you guys really not going to discuss the earnings call? So many tidbits, the the discussion of a price increase.�
1/1/2015
guest Nothing really changed from last quarter's call, if anything it was much more boring than expected. ~$1B in revenue added to the books, growth costs high, sales low, but on track for 1.25GW in 2016. Price increases have been known for some time, it's part of going cash-positive in 2016. No surprises other than 1Q guidance, but 2016 as a whole remains unchanged.
People will dig deeper and discuss as they have a chance to rip into things deeper. It's 10am the day after, folks west of Reno may still be asleep.
What do you think needs to be discussed? You are one of the guys after all, no?
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Here's a fairly decent early analysis.
Beyond Revenue and Profits: The Most Important Things From SolarCity Corp. Results�
1/1/2015
guest After doing my reading and thinking this morning I'm in no rush to buy. Whatever shares I want will be purchased today or at some point over the next quarter around the 18-25 level. Options might as well wait until May/June because the next call will have the similar revenue and just as much cost. We'll probably do the drift up/crash down cycle all over again.
Once this thing goes cash-flow positive though......look the hell out. The models all these computers are using to gauge value will flip upside down and recognize BILLIONS that were being overshadowed/discounted by what was considered an unsustainable cost structure. Think of those numbers in a cash-flow positive algorithm when we top 800MW installed through 3Q.
If Buffalo weren't delayed I'd say buy 2017s in April and try to time it for a run-up that peaks in Nov/Dec, but it's hard to tell if gigafactory's even being considered in price right now. I don't think it is.
Confusing times, but fortunately the weak 1Q guidance SHOULD buy us a chunk of time to work this out and still get this price point. Things are starting to become clearer to me. We're basically going to have a hybrid of the post-ITC strategy, but with the 30% ITC still in the equation. Cash-flow positive, but with wind at our backs rather than having to drastically cut cost.�
1/1/2015
guest It is confusing times, because I thought 2016 was supposed to be THE year that SCTY was going to explode. But I guess the whole NV situation really messed with people's heads....�
1/1/2015
guest It's 95% macro. The way I see it is SCTY's Business edge is to be a solar financing company. In this macro environment they're getting heavily punished because of their dependence on capital and access to the credit markets. The market is pricing in severely reduced access to capital, at least cheap capital. All IMHO.�
1/1/2015
guest The political environment in the U.S. is adding to the gloom, too:
Supreme Court Puts EPA Carbon Rule on Hold During Litigation (this is the WSJ; use incognito mode or search the title on Google to avoid the paywall.)�
1/1/2015
guest Yeah, I think cash flow positive will be the transformative event for the stock. So with that in mind, I think that as an investor I want to watch for progress in that direction. Certainly, cost per Watt is a key metric, but growth in MW installed is not so important.
I'm quite pleased with the progress driving total cost down to $2.71/W. I'd like to see this drop below $2.50/W by Q2. So installed cost is already excellent at $1.90/W. Perhaps this can drop to $1.85/W by Q2. G&A was a little high at $0.25/W. Perhaps this can drop back to its historic low of $0.20/W. So together that's a savings of $0.10/W by Q2, so what remains is to cut another $0.21/W out of marketing. I was a bit disappointed that marketing came in at $0.56/W, but this is really a big improvement from Q3 at $0.64/W. So I'm delighted with the progress, but can SolarCity squeeze this down to $0.35/W by Q2. I suspect this is largely what the Q1 guidance is about. Marketing spend is a key driver of the pace of growth. Can any solar installer grow at 40% annually while only spending $0.35/W on marketing and sales? That's what we need to find out, and cutting cost in marketing can easily put growth targets at risk. Hence, 180 MW guidance gives marketing and sales a little room to figure out how to market at lower cost. So if they can pull this off, we could see $2.50/W in Q2. I think this would go quite far to help achieve positive cash flow by Q4.
So we should probably have a vigorous discussion here about what all is required to get to positive cash flow. It's also not clear to me how ABS financing fits into that. We need to get a clear picture of what positive cashflow would look like. I am quite sure nevertheless that lowering the cost per Watt is an essential part of getting there, even if I'm not sure what the destination looks like.�
1/1/2015
guest Exactly, and they're 100% correct to be concerned about a model that in it's current state looks to be burning through cash. People need to understand where all these costs are going and what they will look like in the coming quarters/years. SCTY is financing more than 100% of install cost right now due I assume to the flexibility afforded by the ITC credit. That's a wonderful step toward cash-flow positive.
Do the same exercise we've been doing in past quarters, pretend this company stopped trying to grow today or more accurately imagine they didn't need to pay to grow. They booked something like $600M+ in actual total contract revenue in 4Q, the cost to get that revenue was supremely high. $.64/W for marketing/sales is more than the panels cost! The key is to remember that is simply the cost of expanding the business nationwide today, down the line that cost will shrink to zero as it has in Germany. If my aunt has SCTY and loves it, why would I pay a sales team $3k to sign me up? I won't, I'll sign up online and get a lower rate. That's the next phase, who knows when it starts.
So imagine you have a company that booked $600M+ in a quarter, paid off the same costs minus all the mess of sales and expansion. That is a monster. There is no advantage at scale today, but when they get settled and the market gets to scale........they can't be touched. It's remains all about when that can happen.
These algorithms are perfectly logically discounting nearly all current and future revenue and individual investors need to decide whether solar will get to scale soon or not. If so.......zoom, if not......
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All along I thought people would look to installed MW, costs, marketshare, and be able to eventually connect the dots. I thought the massive downswings were shorts spreading FUD and irrational projections. That's not it, it's bots taking the perfectly rational SBenson image of today's reality and extrapolating in a linear fashion.
If you take today's reality and try to make a case for profitability, it's physically impossible. You have to have faith in a growing solar market, the ability of the industry to get to scale, and SCTY's ability to execute their plan to maintain share as they spread. Seems to be going fairly well so far on all fronts.
Still gonna hold off on most options for a few months. A bit of cheap 2017 $60's today before we drift up and a ton of 2018's in April/May if/when there's another dip. I'm already covered with 2017's if it takes off in Nov/Dec as cash-flow positive becomes real and the elections end.�
1/1/2015
guest I will be very disappointed if Elon, Fisher, and others don't significantly increase their positions today. This could make for a huge inverted hammer. Most analysts upgraded SolarCity today. What gives?
Those saying Elon can't increase his stake due to margin are wrong. People forget SpaceX is worth at least $10-$20 billion.�
1/1/2015
guest I would guess their downside price targets have been mostly hit and they are no longer short.
I'm down six figures just in the past couple of months. Can't say it feels good, but that's what I get for investing in a contracting industry of the past with no growth prospects or future - wait a minute! Well, guess I got plenty of company. Have to admit, am looking to average down, but I don't feel we are at bottom yet. BTW, that is your cue to buy as the stock skyrockets with me.�
1/1/2015
guest This company already has a minimum of $2B sitting in contracts to be collected. Kind of hard to value that company at less than the $1.84B it's at today. My grandma could buy the company, spend $60M on outsourced maintenance contracts, and pocket the other $100M.�
1/1/2015
guest So volume is massive today, already at about 22M shares, 23% of shares. So either shorts are covering big time, or shares are shifting to new owners.
Incidentally, the market cap at $20.5/share is about $2.0B. This is right at the PowerCo unlevered NPV less debt reported for Q4. So it will be interesting to see if this new metric can serve as a floor for the market cap. Such a floor really gives SolarCity very little credit for its DevCo and growth capability, but it may serve as a useful backstop in times like the present. Moreover, one can look forward to this metric growing over time. A simple extrapolation from annual guidance gets to about $3.3B in 2016Q4 and $5.2B in 2017Q4. 40% growth is really not that bad for growing cumulative value.
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Your grandma would also have to pay off the $1.1 debt net of cash on the DevCo side of the business, but that is a highly capable business too, worth much more than its debt. It is highly conservative to assume that the DevCo has zero value. In the next 2 years, it is capable of adding 3 GW to the present 1.9 GW cumulative installed.�
1/1/2015
guest I'd like some insight(maybe in the Townhall) about what the cash-flow positive plan looks like now relative to what it was pre-ITC extension. I mean, the main reason it was happening was to deal with that world without the 30% cushion, we now have that essentially forever. I assume there's a hybrid plan that will get to cash-flow positive while not having to dip from 80% growth down to 40%. How about 60%? Done!
My grandma's no fool, she'd carve off that business first and just keep the back cheese. :wink:�
1/1/2015
guest Like Blockbuster? Company's in decline eat up their assets. Not that SCTY is in decline.�
1/1/2015
guest Which 20 year contracts to be collected are you talking about with Blockbuster?�
1/1/2015
guest Late fees build up over the years.�
1/1/2015
guest Haha�
1/1/2015
guest They had a lot of cash when it was clear there would be no more store video rental.
A take on ER:
SolarCity Installed 870MW of Solar in 2015, But Lowers Q1 2016 Guidance | Greentech Media�
1/1/2015
guest 30MM Volume is absolutely bonkers.�
1/1/2015
guest I don't know much about shorting tactics, but everyone should be covering and making an absolute killing today, right?�
1/1/2015
guest TSLA up $20 AH posting a miss but guiding to.....cash positive in 2016. Thumbs up.�
1/1/2015
guest May bode well for SCTY tomorrow as far as investor's confidence in various Musk enterprises.�
1/1/2015
guest I wonder at what point Musk might consider to take SCTY private? Current market cap is $1.71B. Wouldn't be that hard to leverage his other holdings and take it private?�
1/1/2015
guest I don't like that idea. I can be patient. Bought a bunch more today.�
1/1/2015
guest My only concern with buying 2018 leaps at current prices(besides actually finding the money to do so)�
1/1/2015
guest Vivint guy is now CFO.�
1/1/2015
guest Poor guy. My sympathies to Tanguy.
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My prediction is that the stock will eventually drift into sub-$10 territory. It will be taken out private for a "premium" around $15 price.�
1/1/2015
guest I'm surprised there is not a lot of concern here for the Q1 forecast. 180MW borders on shockingly low, even considering Nevada and winter.
Since I obviously believe their PPAs are a crap value proposition, I'm always looking for signals of increasing buyer resistance.�
1/1/2015
guest Not a lot of concern? The market cap is below even the most pessimistic estimate of retained value, what more concern could be shown? This stock is priced at an existential probability of 50/50.
As a guy looking for leverage this is a majorly disappointing week. Shares priced to nothing and the 2018 LEAPs are still pricing as if we're at $30. Will wait as long as it takes for them to reprice to a rational level and snatch up a few shares along the way as I find money in the sofa cushions.
I have had some lucky insight into a local southeast PA group residential solar initiative and have some interesting SCTY conversation points for us to discuss regarding cost cutting. Will wait til things cool down and bring it up next week.�
1/1/2015
guest And yet you never find any.�
1/1/2015
guest You mean other than every SCTY earnings call?
There are a only a limited number of finance-challenged solar buyers. Which is why they are raising prices $.0075/kWh. They can close the increasingly limited number of suckers at a higher price. The majority they have no chance to close.�
1/1/2015
guest Just to add some perspective, SCTY announced what....$650M in booked revenue(they say $890M in"gross value") for a terrible 4Q15? If they're on pace for a weak 1Q yet a 1.25GW 2016, what kind of numbers should be applied to 2Q&3Q16? $1B each? More? $3B combined? More?
How can we care so much about he sales cost? Shouldn't we actually be extrapolating this income at 50% growth as sales costs dwindle to nearly nothing as they did in Germany and logically should do everywhere? This idea that PPA is unpalatable and straight installs will take over is absurd. I can assure you that local installers in the relatively new market of SE PA are paying just as much in sales cost and are landing at $3/W barely making a profit. Are we saying that will last forever?
What if revenue and marketshare trends are maintained for all of 2016, cash-flow positive is achieved and sales costs are clearly seen to drop? All the algorithms flip and all that retained value then instantly counts for something. Hopefully I'm not deluding myself, but that's what it feels like.
Essentially I'm saying SBenson has been right. Until an algorithm can see some trend toward a sustainable model nothing else matters, revenue never makes it anywhere because it's fully negated elsewhere.
Buy low, sell high.
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99% of SCTY buyers are 740+ credit rating, this has been well established. I'm sure half of them could buy panels a few times over with cash if they wanted to do so, they would rather pay a premium for not having to worry about it.
If you have something of substance to add feel free to do so, but please don't just spray nonsense indiscriminately.�
1/1/2015
guest Yes, that is how business without significant IP or barriers to entry work.
Why First Solar and SunPower Are Winning in Solar -- The Motley Fool
"The big revelation after third quarter 2015 earnings were released was that residential solar was not the natural growth market it was made out to be. SolarCity spent 60% more per watt to acquire customers in Q3 2015 than they did in Q3 2013 ($0.64 to $0.40), a trend that could be seen in all residential solar installers."�
1/1/2015
guest A good article at SA - Are SolarCity Customers Getting A Raw Deal? - SolarCity Corp. (NASDAQ:SCTY) | Seeking Alpha - for those who argue that outright purchase beats SCTY lease in cost.�
1/1/2015
guest Ugh. SCTY has a unique product that can turn a consumer's carbon footprint negative and costs them negative dollars, logic states they will not need 80% of the sales effort in the long run. That's like saying people aren't interested in saving money or climate change, I think there's a market there. Check out average sales costs for Germany who is 3-6 years ahead of us.
We all know why FSLR is doing better than SCTY, they make all their revenue now while SCTY has nearly all it's revenue deferred while all cost is up front.
As I mentioned, if you want to add something please do so. We've covered all these old points dozens of times way back in this thread in far greater detail.
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Pretty good article. Pretty bizrre that this question would even be asked when SolarCity is ALWAYS priced lower than the grid. If SCTY is ripping people off, then what are the utilites doing?�
1/1/2015
guest 6% discount rate. Please tell me where I can invest $15K at 6%
6% loan rate - Well under 5% is available most places for people with high FICO
But the biggest problem with using this link in support of solarcity from an investor perspective is that you can't have it both ways. Solarcity simply can't be creating good retained earnings while simultaneously being a good value compared to a purchased system.
Installing commodity equipment that produces a commodity has never created a long term business with high volumes and good margins.�
1/1/2015
guest That's the biggest problem you found in this article? How about the assumption of grid prices increasing at .5% annual for 20 years? LOL!
They've gone up 3% annually over the last 10 years and that's on the back of free lending, all-time low commodity prices, AND not yet having to deal with solar absolutely destroying your revenue stream. It amazes me that people read this things and don't stop dead that their "assumptions". Put out a dashboard with this article and it's torn apart in 10 seconds.�
1/1/2015
guest Purchase solar panels, where else?�
1/1/2015
guest SCTY's beating is totally unmerited wow I wish I had cash to get in more.�
1/1/2015
guest Most people will not "burn the calories" to evaluate the differences between purchasing and leasing solar. SolarCity's future will be directly related to the professionalism/execution of their sales force.�
1/1/2015
guest I'd like to see an online dashboard similar to the model in that "article" posted above. That way you could refute the nonsense immediately. Maybe I'll find a 12 year old that knows how to do that....�
1/1/2015
guest SolarCity credit crisis
The macro winds certainly don't help, like the energy sector getting hammered and banking sector gradually getting into a credit crisis and such. But I honestly think SolarCity is going through some sort of liquidity crisis of it's own.
Lets begin with this:
.
Period
2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 Debt and Cash:
Debt � Recourse $M ($153.40) ($204.70) ($154.00) ($143.70) ($284.20) ($425.00) ($522.00) ($602.50) Debt � Convertible $M ($230.00) ($230.00) ($730.00) ($796.00) ($796.00) ($796.00) ($796.00) ($909.00) Cash & Short-Term Investments $M $519.60 $405.30 $733.50 $642.70 $575.80 $489.10 $418.40 $393.90 Current Portfolio Value
Cumulative MW Deployed under Energy Contracts � EoP GW 0.6 0.7 0.8 1 1.1 1.3 1.5 1.7 PowerCo Portfolio�s Pre-Tax Unlevered NPV remaining $M $1,030 $1,212 $1,445 $1,735 $2,032 $2,391 $2,790 $3,235 Debt � Non-Recourse $M ($206) ($324) ($448) ($485) ($617) ($731) ($1,013) ($1,242) PowerCo portfolio Pre-Tax Unlevered NPV Less Debt $M $824 $888 $997 $1,250 $1,415 $1,660 $1,777 $1,993
Actual contracted $s with proper discounting
$515.00 $606.00 $722.50 $867.50 $1,016.00 $1,195.50 $1,395.00 $1,617.50 Contracted debt vs contracted future revenue
$445.20 $252.60 $124.00 $85.50 ($105.40) ($267.40) ($517.60) ($742.10)
All of the data is from their slide-1 except last two lines. The last-but-one line is my estimate of NPV of actual contracted amounts with proper discounting. In my view it's roughly half the quoted NPV. The last line is basically debt vs contracted-revenue.
As you see the contracted-debt has completely ballooned the contracted-revenue.
My suspicion is that they basically are running out of borrowing options. There are some more strong indications of it recently as well.
In just about every recent CC, management said that ABS will be bigger and more frequent. But what we are seeing now is infrequent and tiny ABS. Lyndon said they had some 100s of MWs that can be put into ABS in town halls and such. But the latest round is for partly 85MWs or something. I don't have patience to dig up exact numbers but what has been said vs what�s happening is roughly a factor of 6 or more.
Stepping back a bit, in case of a company like Tesla when a car is delivered, the burden of finding money for it is largely on the purchaser. Tesla immediately makes money on sold cars. In case of SolarCity they get a contract with tiny-tiny money trickling in each month. Unless this contract is used somehow to raise money SolarCity is doomed. So SolarCity took up the burden of finding money on to itself. But what we are seeing is, they can't finance these contracts completely away. It appears only a portion of the contracts, and that too only a portion of the cash-flows of the portion of the contracts are financeable.
In any case, owing to their business model AND in the interest of growth it appears that they pushed themselves to the edge.
So now they are left with limited options. The recent news that management is looking to outright sell the contracts to 3rd party investors attests to the growing cash/credit pressures. If this doesn't work out, I don't know what will. On the other hand, I am very skeptical that this will be sustainable. In any case, it's hard to pin hopes on an unknown funding model for billions and billions of dollars every year.
SolarCity's clock is ticking. I think utmost they have a quarter or two to right the ship. It is extremely unlikely that they will deliver the 1.25GW installs this year. There is simply no capital for it.
Just to drive home the point, cash-flow-neutral for tesla is very different from that of solarcity. Tesla needs third party capital only to grow, to make investments for the future. SolarCity needs 3rd party capital simply to run the business (even when not growing at all).
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Another note, the convertible bonds that trade in the market is pricing in a default at this point. The Nov 18 one has a yield of 22% and Nov 19 one has yield of close to 20%. In addition to high yields, the inverted yield curve is usually an indication that a default is in cards.
At this point SCTY is a dead man walking, praying for a miracle.�
1/1/2015
guest They just did an ABS like 2 weeks ago for like $185M.
Edit to add: The logic here being that in an environment where investor appetite has always far outstripped supply, these guys are going to have a hard time finding people willing to make 5% off the energy production of consumers with 740+ credit ratings and stable homeownership? As treasury rates plummet to zero? How does that make logical sense?
Hearing so much of this weird logic today. Everywhere. I heard banks are no longer going to make any money.�
1/1/2015
guest Everything the state of Florida is doing is rubbish, I don't know where to start.....
The Koch Brothers' Dirty War on Solar Power | Rolling Stone�
1/1/2015
guest Insider selling:
SolarCity Corporation (SCTY) Insider Trading Activity (SEC Form 4) - NASDAQ.com�
1/1/2015
guest That was MyPower loans which has been in works for a while, almost 3 months or so.
The latest round for $57.5mln PPA/lease ABS is a dead give away that they reached a dead end of how much ABS they can do with their portfolio of contracts.�
1/1/2015
guest From what I gather Florida is actually a pleasant surprise over the last year or so. They should be firmly in the corrupt anti-solar bucket with Nevada/Arizona/ect, but for some reason pro-solar legislation is finding major traction there.
It doesn't help the Koch agenda that Miami has been perpetually under water for the entire winter. Maybe these folks are getting the message? Maybe it's that older people are both cash flush and thrifty. The prospect of halving energy expense is to much to hold back with simple politics.�
1/1/2015
guest And a strong buy recommendation. Hopefully no one acted on this guys advice this morning:
SolarCity Drops 25%: Raymond James Sees Present Value, Axiom Sees Unrealistic Outlook - Tech Trader Daily - Barrons.com�
1/1/2015
guest I was fairly sure I read that deal was a mix with mostly PPA deals. Can't seem to find details by googling either, weird because I can remember reading them a couple weeks back.
Anywho....these scenarios seem very unlikely to me. Every ABS offering to date has been oversubscribed. This is basically a free 5% return in a world where you have to pay the Treasury to sit on your money. Show me a better 5% bet right now than the Sun continuing to shine on rich people's houses.�
1/1/2015
guest Here is the link to $185Mln MyPower deal - SolarCity Completes Industry's First Securitization of Distributed Solar Loans (NASDAQ:SCTY)
The 5% is NOT risk free.
Risk is in the eye of the beholder. The latest Kroll ratings document was pages and pages of net-metering stuff. It's to the investment community to decide how much of that risk they are willing to take. SolarCity is doing all sorts of things like over-capitalization and such to appease to the investors.
Most importantly, SolarCity has NEVER been able to finance away all of their cashflows. They only get a portion of funding through financing.
As you see from the table above they borrow gobs of money in a recourse (non-asset-backed) basis as well. Their debts are monumental and increasing every quarter. If they can do it all with asset-backed financing, why do they take on the more expensive recourse debt at all? They clearly are hitting limits on their asset backed financing.
The point is that the debt they got into is unsustainable. More importantly, I don't know if they can even run the shop (even at 0 growth) without taking on more recourse debt.
There is near 0 chance they will do 1.25GW installs this year.
Well, of course unless Musk pulls off some miracle.�
1/1/2015
guest Hey, Benson, it would be helpful if you could explain your calculations in the last two lines. I can't figure out the math you are using, so I'm not in a position to understand the conclusions you are drawing. So please walk us through the math.
The simpler observation to make here is that cash and CE has fallen $182M over the last 4 quarters and $24.5M in the last quarter. So while they are substantially cash flow negative, the burn rate has improved in this last quarter. Moreover the last quarter is a low solar output quarter. So the net cash was only a decline of about $0.10/W deployed. Thus, had their cost been just $2.61/W instead of $2.71/W, they would have been cash net neutral.
So I think the first order of business is to move to cash flow positive. Then we can worry about longterm value creation. If you are concerned about solvency, cash flow is much more critical that any sort of longterm NPV.�
1/1/2015
guest They are already now financing/monetizing more than 100% install costs, so to me that is already a massive step toward positive flow. Maybe I'm missing something here, but the trends seem right to me. The absolute values of debt are scary to a degree, but this is a fluid operation and this was the exact plan. No?
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Of course it's unsustainable, they're trying to build out a nationwide operation to become the largest energy provider in the US. That's the problem. Every model (including yours) is assuming static costs, that's just silly. I'm pretty sure Standard Oil wasn't cash-flow positive while Rockefeller was running around buying up everything in sight.
I saw a much more detailed piece somewhere, I know I did. Maybe a Credit Suisse PR? I'll look around.
This would worry me as well except that the growth of easy commercial installs will be massive in the middle of the year. They can pick up giant gobs of MWs at a time to close the gap.
I'd rather see residential growth, but they will get to 1.25 to appease the investors. Remember we're ITC-extended now, that makes commercial an easy sell almost everywhere. If they needed to(and they may), they could pivot a bit to focus more on commercial at the expense of residential.�
1/1/2015
guest Last 12 months insider transactions
TSLA - 125,194 shares net sold
SCTY - 10,058,590 shares net sold
SCTY Bulls repeat management's value proposition, while senior management itself heads out the door with a half a billion dollars.
�
1/1/2015
guest Your insider trading hypothesis has been debunked many times before. Why do you bother? Elon alone just bought more TSLA shares in the last week than all insiders put together sold in the last year. (Oh, and I fixed your font size for you.)�
1/1/2015
guest There's a lot to talk about right now, can you keep it down if you have nothing new to add? You're clogging up the thread.�
1/1/2015
guest
What hypothesis? I'm just looking at SEC form 4 filings.
�
1/1/2015
guest I live in FL half the year or more and couldn't agree more (at the state level). From Orlando south there are some very strong districts of support for Alt energy etc. however and its growing rapidly. If that ever converts to a Dem or more moderate Governorship (currently the direction of change), it has the potential to change rapidly. If not, it will become the biggest market for Solar-Storage off-grid in the nation as that cost drops in coming years. I see it as a big spring being compressed, and when it releases S-City and others would be wise to be ready! Thanks for the link�
1/1/2015
guest Purely Anecdotal
I spent four years as a Solar Rebate Inspector with the Los Angeles Department of Water and Power. My assigned territory included Beverly Hills, Bel Air, the Pacific Palisades, Venice and cities south to LAX. I mention this only to add color to my observations. These are some of the wealthiest communities in the world. I also performed a significant number of inspections in middle class neighborhoods throughout the San Fernando Valley.
I made it point to ask each client I met with �Why have you invested in solar power?� From 2010 until early 2012 an overwhelming majority said their decision was environmental. Since that time, more and more of customers mentioned finances as a motivating factor.
I have found it interesting the number of elderly that have invested in solar.
On one occasion I went to inspect a home, and met a woman I assumed to be in her eighties or maybe even older. She was striking in her beauty. You know that rare woman with the bone structure of a model. Even in the twilight of her years, my first impression was that she had lived a life of privilege. The sort of woman whose beauty creates a charmed existence.
When we began to speak, I realized how shallow my first impression was. Despite her years, she was bright, intelligent, witty and charming. Eventually, I got around to asking her my rehearsed, hackneyed question. Why have you invested in solar power? Now I should probably mention, I am six feet six inches tall and weigh about 250 pounds. The elderly lady I was speaking to was about 5 feet tall, and couldn�t have weighed one hundred pounds. She spun around, pointed her finger directly in my face and said, because I like sticking it to the man. All my life, the utilities have dictated what I pay for electricity, the oil companies have dictated what I pay for gasoline. I�m taking control of what I pay. Above this, I�m setting an example for my children. Solar power makes great sense.
This woman made an impression on me that I will carry for the rest of my life. People can and do change the world.
I am no longer working as a Solar Power Inspector. Being privy to the number of solar installations in Los Angeles, I know that we have just scratched the surface. Solar Power is a target rich environment.
Anyone that is peddling SolarCity�s lack of demand, is ill-informed. SolarCity is a dynamic sales organization, backed by an installation team that simply executes. They have an extraordinary work ethic, and they get the job done right the first time. I know this from first hand experience.
Short SolarCity at your peril, they are an organization of true believers, backed by an enormous customer base of true believers. Just my two cents based on speaking directly to hundreds and hundreds of their customers.�
1/1/2015
guest I am beginning to resemble that little old lady. I too am tired of paying the man.�
1/1/2015
guest Hear, hear jack. Glad to hear something sensible in this thread!�
1/1/2015
guest Thanks for your wonderful story. After a while it can be draining to deal with so much difficulty with stocks. So it's good to read a story that puts a human face on all this. In our own way we all want to stick it to the man. We want to be free to make out own choices and free to make the world just a little bit better.�
1/1/2015
guest Stick it to the man.
Save the planet.
Help reverse wealth inequality.
All while saving money and for just a signature.
The idea that this will take $.60/W in sales a year or two from now is preposterous.�
1/1/2015
guest Speak of the devil....
The Caucus to Save the World
�
1/1/2015
guest
This sounds exciting. I know a lot of people feel the same way and that at some point this will be a no brainer for everyone to see.
However your warning to shorts rings hollow. Pretty much every short in the history of SCTY is in the money. And it seems like they will have plenty of time to cover at their leisure.�
1/1/2015
guest Solarcity's success or failure will have no effect on the growth of solar. Solarcity trains future competitors and stimulates new markets. If they face steadily increasing customer acquisition costs they can not be successful in residential. Which is perhaps one reason Rive keeps bring up commercial.
The amount of megawatts to be installed over the five years in the U.S. is remarkable. But no company can be successful paying a lot per megawatt to get that business.�
1/1/2015
guest That's perfectly fine, markets should be cold and objective. I'm fairly confident that once cash-flow positive is achieved there will be a massive swing in valuation and the stock will price based much closer to reality. Gotta change trajectory and get most of the way there first!
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What's up with this FMR LLC SEC filing? "More than 5%"? Is that Fidelity on someone's behalf?�
1/1/2015
guest Commercial Demand Charges
The cash-cow for electric utilities is "demand Charging".
I remain convinced it is SolarCity's greatest opportunity.
Do we have any business owners on this forum that might want to add some color to what their electric bills (demand charges) are?�
1/1/2015
guest
Hello James, The math is pretty straightforward but I probably didn't explain it well enough.
The last-but-one line is simply half of "PowerCo Portfolio�s Pre-Tax Unlevered NPV remaining" line item. Basically this is my estimate of what actual contracted $s NPV with proper discounting would be.
The last line takes the last-but-one line, adds cash and subtracts ALL debts.
This might be a bit rough but here the goal is not to build a precise valuation model. But simply to show 'debt burden'.
Yes, totally agreed that liquidity should be the concern (if at all) and not solvency. But there is a HUGE point that you and TheTalkingMule are missing.
Looking at purely changes in Cash as a liquidity gauge is meaningful for a 'normal' company like Tesla. But not at all for SolarCity. In case of SolarCity the debt and cash are intricately related. Let me illustrate the point with real numbers.
Again all numbers from slide-1 except the last two rows.
Period
2015 Q3 2015 Q4 Change Debt and Cash:
Debt � Recourse $M ($522.00) ($602.50) $80.50 Debt � Convertible $M ($796.00) ($909.00) $113.00 Cash & Short-Term Investments $M $418.40 $393.90 $24.50 Current Portfolio Value
Cumulative MW Deployed under Energy Contracts � EoP GW 1.5 1.7
PowerCo Portfolio�s Pre-Tax Unlevered NPV remaining $M $2,790 $3,235
Debt � Non-Recourse $M ($1,013) ($1,242) $229.00 PowerCo portfolio Pre-Tax Unlevered NPV Less Debt $M $1,777 $1,993
Net increase in debt (all forms)
$422.50
Net-Expenses for the quarter
$447.00
As you see in the bottom-right cell that the net-expenses in Q4, above and beyond the incoming cash flow from consumers, was $447 million. It so happens that out of $447mil, $422.5mil was financed through increased borrowing. While a small amount of $24.5mil was spent from cash.
Now in a hypotetical scenario, if they borrowed only $200mln instead, the cash flow would be -$247mln. If say, they were able to borrow only $100mln, the cashflow would be -$347mil. Lets say they weren't able to procure any debt at all, the cash-flow would be the full -$447 million... I hope you see the point now. The change in cash is very directly related to the amount of borrowing.
This is where my original table becomes applicable as that demonstrates how high the debt has reached and sort of gives the clue that the debt trajectory is un-sustainable. If debt is unsustainable, and they are unable to procure much debt, then the cashflow will be dramatically negative.
In fact if debt stops for a mere single quarter, SolarCity will go bankrupt immediately! Their cash hoard won't be enough to sustain even a single quarter.
I have more to write but I will pause now to let this sink in.�
1/1/2015
guest
Solarcity will need to eventually get PPA customers to buy batteries to attach to the solar system that they do not own. That is a pretty weird business plan.
It is unclear if the SEDG inverters installed to date will eventually work with the 7kwh powerwall and demand response.�
1/1/2015
guest What part of add on services as a business plan is weird? It might be weird if a local Installer installed your system and you never heard from them until years down the road when they approach you about a battery. But for someone who you're paying bills to monthly and is monitoring your system I fail to see how this could be viewed as weird. Even in the local installer example I don't think it would be our of place. ...�
1/1/2015
guest And this is precisely what an average algorithm is kicking out right now, and why stock prices can tank to a floor that is half the cash(really profit) owed on contracts. The reasons may be a bit different, but both parties are knocking off retained revenue due to costs TODAY and taking zero stock in the fact that this industry is lock to be THE monster of the next 10-15 years and that costs are naturally going to be obscene as SCTY builds out at a nationwide scale.
When sentiment is based on the concept that solar will require increasing sales costs over the next few years, that's when I click 'Buy'. That concept is simply blind to the reality of where the market is clearly going. I'm 38 and have loads of friends with money, a conscience and far too many kids to spend the time sourcing solar themselves. The market for "touch-free solar" will be huge, that is an near certainty, so unless there's a major change in the way we source solar in the US......I'm bullish.
We've illustrated time and again the inherent advantages of operating locally, yet we refuse to acknowledge that at the end of this road SCTY is standing alone in a sector that will command somewhere between 20% and 50% of the total solar market. I mean...."ALL DEBTS"? How you gonna value a world-changing initiative like this by paying off ALL it's debts in round 2 of a 25 round battle to the death? I'm pretty sure that's not the gameplan.
Still GREATLY value the pessimist(yet fully logical) view and all the deep figure analyzing. However I do feel it gets a little arbitrary when you start moving around the inputs too much as we saw the other day where a writer tried to imply grid prices would go up .5% each year for the next 20-30 years and several other highly unlikely input nudges. Lo and behold.....a locked in PPA looked mediocre in that scenario. If you want SCTY to pay off all it's debt today, yes the operation will look unsustainable.
They're currently financing greater than 100% of install costs on these ABS offerings. When I get an indication there is less than excess demand I will perhaps be concerned. As I've mentioned in the past, I simply don't see a lack of appetite for 5% returns on bets that the sun will continue to hit the roofs of wealth homeowners. Especially now that the Bank of Japan is charging you to sit on your money and others are talking about it.
Iif this were not Musk I would be 50% more concerned, but it is no I'm not. He's going to Mars for god's sake.�
1/1/2015
guest The ability to generate power (solar), store that energy to batteries, and then use that stored power to offset demand charges will be a tremendous opportunity. Fortunately, California has legally mandated this technology.I would love to see some business owners, or commercial building owners weigh in with how much there paying in demand charges. We can do the math.�
1/1/2015
guest TheTalkingMule,
1) The question is not about how much debt there is. The question is how much more they can acquire. If they can't accelerate debt, their cashflow will turn negative - very sharply!
There are natural limits to how much they can borrow and at what pace. My guess is they are very near hitting the limits. It's game over already. Max they have is two quarters.
The only rescue is to sell the assets (contracts) to third parties. So it's not debt anymore, but sort of revenue in loose terms. Bulls need to pray to god that works out. Even then, you need to hope that it can happen in a recurring fashion.
2) "They're currently financing greater than 100% of install costs on these ABS offerings."
This is a load of baloney. You trust management too much. Look up the table again.
Period
2015 Q3 2015 Q4 Change
Debt and Cash:
Debt � Recourse $M ($522.00) ($602.50) $80.50 Debt � Convertible $M ($796.00) ($909.00) $113.00 Cash & Short-Term Investments $M $418.40 $393.90 $24.50 Total
$218.00
Current Portfolio Value
Cumulative MW Deployed under Energy Contracts � EoP GW 1.5 1.7
PowerCo Portfolio�s Pre-Tax Unlevered NPV remaining $M $2,790 $3,235
Debt � Non-Recourse $M ($1,013) ($1,242) $229.00 PowerCo portfolio Pre-Tax Unlevered NPV Less Debt $M $1,777 $1,993
.
Recourse debt went up, and cash went down by a cumulative $218mln in Q4. This is the money that certainly did NOT come from ABS, which was spent in Q4 (alone).
�
1/1/2015
guest I 100% agree, and apologize for my past lack of faith in your analysis! I just don't think it will be an issue. They are clearly looking to go cash-flow positive in 2016 and with the ITC extended they should be able to do it. That should end any worries.
Again if this were an unknown entity I'd be a good bit more concerned about raising capital, but it's Musk. As long as the long term business model is rational and profitable he will never give up on SCTY.�
1/1/2015
guest Damn, I missed the dead cat bounce.�
1/1/2015
guest Oil is up 10%. For some arbitrary reason. $17 will most certainly be seen again.�
1/1/2015
guest No apologies warranted at all. We all get caught up in our views.
"As long as the long term business model is rational and profitable"
Unfortunately, there is a painful discovery happening right now that it is not a rational business model. It will take time for people to absorb this.
Before I go too crazy on this, I will let jhm chime in.�
1/1/2015
guest In a vacuum....today....with everything staying as is....100% correct. But the idea that tomorrow will even remotely resemble today is just absurd.
We really need to build an online dashboard and work this thing out. I'll get on it!�
1/1/2015
guest He's busy talking up TSLA elsewhere.�
1/1/2015
guest Thanks for your analysis. I want to make sure I understand you correctly. You are saying they have a serious cash flow problem even if they don't grow any more. This is due to the inability to borrow enough to cover the cost of new installations? Why don't you think they can use the "PowerCo portfolio Pre-Tax Unlevered NPV Less Debt" to finance more debt? In this case, what are the "natural limits to how much they can borrow and at what pace?" Why wouldn't the natural limits increase with the Unlevered NPV Less Debt? Why didn't they run into these limits before now? What has changed? I'm not denying anything you've said. I'm just trying to understand.
Thanks again.�
1/1/2015
guest From reddit:
Recently having gotten tons of lease/ppa quotes myself. SolarCity was FAR and away the most expensive.
NRG, SunRun, Vivint, Sungevity, Trinity all were able to provide me with a deal way better than SolarCity was able to provide. SolarCity offered me $0.131/kWh with the 2.9% escalator. The rest all offered me in the range of $0.13 - $0.14/kWh with no escalator.
So if they're not trying to sell to morons, people are GOING to shop around. And they'll rather quickly realize that SolarCity is a bunch of ******** with their pricing. The escalator model doesn't work, it takes 5 minutes of research on Google to figure out that the "utility rate increase" they compare themselves too is highly unlikely to come true. SolarCity was "conservatively" comparing themselves to a 5% utility increase year over year.
Which basic math tells you it's not worth the risk. If my utility right now is about $0.15/kWh and SolarCity is $0.131 sure year one you're saving $0.02/kWh which honestly isn't even that much. I used about 14000 kWh in the last year. It's a different of about $266 in the first year.
Now... SolarCity is 100% guaranteed to increase year over year by 2.9%. Your local utility isn't guaranteed at all. It's an incredibly reasonable assumption that in 5 years you'll be paying SolarCity more money than you pay your local utility.
In no way does their escalator model make sense.
Now, on the other hand, I also got a quote from SunPower which was for a $0.109/kWh rate locked in with 0% escalator for 20 years. Now that's a lease that actually mathematically makes sense to a degree. You're saving about $575 in year one and odds are it'll either remain the same savings or increase as your utility increases.
And within a weeks worth of research I quickly figured out that many local companies will offer you $0/down loans with pretty solid rates to buy your system outright. Giving you the 30% federal credit and all of the SRECs and NetMetering benefits that come with the system. The system I'm working on getting conservatively projects (my numbers, not a salesman) to have a 100% payoff within the first 6 years. After that, it's pretty much all gravy with the way New Jersey's credits work out.
SolarCity is doomed if it doesn't change it's business practices quickly. Solar no longer costs $50-60,000 to get on your roof. They either need to start offering drastically cheaper leases or start being more honest and offering better ownership options. They quoted me $55,000 for an install with a 6.99% loan for 20 years. The company I'm going with is $32,500 with a 2.99% loan. That's not even close, it's literally almost half price for the exact same system. I understand being a larger company you have more overhead then a local company. But that's a BIG ****ING difference. Especially considering that SolarCity manufacturers their own panels and mounting systems which should give them an even bigger difference in their overhead and allow for cheaper installations. But they don't, because they're greedy.
They're in the same place that CircuitCity and Best Buy were in 5 years ago. CircuitCity was forced out of business due to companies like Amazon and TigerDirect offering better pricing online with free shipping. Best Buy almost went out of business but they adapted, they started offering Amazon price matching, allowing you to just go to the store and get your item this minute for the same cheaper price of Amazon. And now their stock is better than it's been in a decade. SolarCity needs to make a similar shift in marketing or they'll slowly die and fade away just like CircuitCity did years ago.
Why are we on /r/solar not talking about the SolarCity stock plummeting? : solar�
1/1/2015
guest This is a good example of how knowing a little bit about something can be worse than knowing nothing.
You've added nearly nothing to the conversation this week, clogging up the thread with little one liner posts that have no point or value. SBenson has spent time and effort posing questions to interested posters and they're now pages back. I've asked politely and will again, if you could collect your thoughts into succinct and less frequent posts it would be greatly appreciated.�
1/1/2015
guest Currently trading well below present retained value. Also currently trading well below where Elon increased his stake. If SolarCity goes bankrupt, the entire Solar industry will go bankrupt. SolaeCity has allies that are unlikely to allow that to happen.
It's only a matter of time until investors realize that state utilities aren't going to be allowed to kill the solar industry.
1) In some states, the utilities are prohibited from owning more than a specific percent of solar and grid storage installations. They are required to contract it out.
2) This would be a no brainier anti-trust lawsuit.
3) My bet is the first residential Powerwall deliveries will go to solar customers in Nevada.
4) Nevada will not set a precident for other states.�
1/1/2015
guest Just to preface: I am an ex-bull, who lost big. I have no stake in this game anymore. I am only doing this for 'fun' (for lack of a better word). I don't have an accounting background, I am a software guy.
Looks like you put in a bunch of inter-related questions. Let me start with the central question:
Why don't you think they can use the "PowerCo portfolio Pre-Tax Unlevered NPV Less Debt" to finance more debt?
First, elephant in the room: that number has massive renewal 'assumed' cashflows. Those 'assumed' cashflows can neither be sold or financed. Man, if only I can sell/finance 'hope'. lol.
So we need to look at the contracted portion of the cashflows instead. As a crude first start, we can start with cutting the 'PowerCo Portfolio�s Pre-Tax Unlevered NPV remaining' by half and then subtract the non-recourse debt.
Here is the table to make it easier for you:
.
Period
2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 PowerCo Portfolio�s Pre-Tax Unlevered NPV remaining $M $1,030 $1,212 $1,445 $1,735 $2,032 $2,391 $2,790 $3,235
Estimated actual contracted NPV with proper discounting $515 $606 $723 $868 $1,016 $1,196 $1,395 $1,618 Debt � Non-Recourse $M ($206) ($324) ($448) ($485) ($617) ($731) ($1,013) ($1,242)
Net left NPV that can be potentially financed
$309 $282 $275 $383 $399 $465 $382 $376
The last line represents what is still left that possibly could still be financed (borrowed against). If you want, you can change the assumption on how much is contracted vs how much is not. But this is the general idea.
Now the next step, why do I not think they can use the last line to raise more cash ?
The answer is simple: If they could, they would have.
The latest ABS offer for $57.45mln is a dead give away that they run out of the financeable portions on the cashflows.
In Q3 CC and multiple calls before that management kept saying that we will see bigger and more frequent ABS. This ABS thing is very attractive for SolarCity because it's non-recourse and the cost of capital is quite cheap. They will try to exploit it as much as they can without doubt. So why only a measly $57.45mln? It's smaller than any deal they have ever done before, by far!
The simple logical answer is the rest of the portfolio/cashflows are not financeable this way for whatever reason. There could be many reasons for it, maybe the deals are over-capitalized by design. Maybe market doesn't take outer year cash flows. Maybe market doesn't like contracts from certain states, or certain fico scores, or certain demographics. We simply don't know. But really, if they could raise more cash this way they would have.
The latest $57.45mln deal makes it disappointingly obvious that they hit the limits.
Next question: "Why wouldn't the natural limits increase with the Unlevered NPV Less Debt?"
Yes, as they install more, the portfolio increases and they can finance more (hopefully). But the overall debt (both recourse and non-recourse) has been increasing at such a staggering pace that it is very unlikely that the non-recourse debt will be able to support the kind of cashflow needs. See my other tables in previous posts for deeper insights.
In my view, it's a dead surety that they won't be able to do 1.25GW. That kind of volume not only needs greater capital for the installs itself, but the so called DevCo needs to be scaledup to be able to do it with additional capital. Here is another illustrative slicing of data:
They had to spend $1.5 BILLION dollars in 2015, above and beyond any incoming cash (customer payments, itc, srecs), to do 870MWs of installs. This year they are talking 1.25GW of installs. How much cash would they need to spend? $2Bil? 2.5Bil? It's anybody's guess. Try to model it out as a fun exercise. But they can't raise capital anywhere close to that. Guaranteed.
Period
2014 Q4 2015 Q4 Change Debt and Cash:
Debt � Recourse $M ($143.70) ($602.50) $458.80 Debt � Convertible $M ($796.00) ($909.00) $113.00 Cash & Short-Term Investments $M $642.70 $393.90 $248.80 Current Portfolio Value
Cumulative MW Deployed under Energy Contracts � EoP GW 1 1.7
PowerCo Portfolio�s Pre-Tax Unlevered NPV remaining $M $1,735 $3,235
Debt � Non-Recourse $M ($485) ($1,242) $757.00 PowerCo portfolio Pre-Tax Unlevered NPV Less Debt $M $1,250 $1,993
Total
$1,577.60
Next question: "Why didn't they run into these limits before now? What has changed?"
My simple explanation is numbers became bigger to a point it is unsustainable. You can always grow your debts up to a point. But then you can't.
The ability to borrow non-recourse debt I believe will be somewhat linear to the portfolio size. But the recourse debt is where the problem is. The ability to borrow there depends on the vagaries of the market. If they were to come to the bond market today, they will be charged north of 20% interest! given how their debt is trading in the market. I also think that the rest of the assets, like warehouses and inventories, don't scale the same way for borrowing as non-recourse debt does. But they need both kinds of debt to be able to accomplish that 1.25GWs.
Here too we have a dead give away from the management itself. They want to sell a portion of the assets (contracts). Why would they want to fundamentally change the business model, if they can happily borrow money instead?
Somebody ought to model out how the dynamic changes when they slow the growth rate. The debt binge we are seeing is partly due to rocket-ship growth in 2015. So how less of a capital strain would it be if they were to grow slower (or not at all). Nevertheless all indications we see don't point to anything rosy.
PS: Take a look at the first post in this series. The last row in the table represents the 'debt burden'. It is an approximation of contracted-debt vs contracted-revenue. Does the trend look sustainable?�
1/1/2015
guest I thought solarcity stopped using retained value.
There are many solar companies. The weak will fail. If solarcity fails, or has 50% market share, it won't make a difference in how much solar is installed in the U.S. over the next five years.�
1/1/2015
guest If SolarCity fails, the entire solar industry fails. This won't happen.
If SolarCity needs cash, Bank of America, Google, Apple, or Morgan Stanley will grant them access to as much as they need. So many entities are setting aside tens/hundreds of billions to invest in Solar Projects.
- - - Updated - - -
Kyndell Nunley� [email�protected]
Hundreds bussed in by SolarCity for rally.Will PUC grandfather in existing customers under old solar rules? @News3LV
10:29 AM - 12 Feb 2016 from Nevada, USA
5 RETWEETS5 LIKES�
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1/1/2015
guest You understand these people had their net metering removed, right?
Nevada solar customers sue SolarCity over marketing - VEGAS INC�
1/1/2015
guest Isn't this question relatively easily answered? These ABS offerings are tied to installations. Ideally they should be bundling and offering at a fairly regular pace, so far I believe we're on 5 or 6 if I'm not mistaken. Can we not guesstimate how many installs have not been monetized?
#4 was in mid-August for $128.5M, then there was the $185M one from a few weeks ago, not sure if that was #5 or #6. I still don't see where this smaller one fits in.
From what I understand these offerings have had far more demand than supply and they're basically financing at greater than 100% of the cost of install. Why should we be worried about that? Or even more....why would that be anything other than easy so long as the installations are all 740+ credit folks?
If anything, we need to start thinking about the subprime versions of this that are certainly in the mail and will lead to the next mortgage-backed bubble. Think SolerCitee.
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Ah, no....they won't. Banks will lend as long as it makes sense and they make money. Fortunately, solar makes sense and makes money.�
1/1/2015
guest I wish I logged in before I came to this thread because I accidentally read a poster's post that's on my ignore list... so, once again, I find myself suckered into responding to something wasting my time.
First, I understand some fellow investors concerns and/or fears since the stock has gone down pretty much since they did the restatement back in February 2014 and at that point it was in $80s. It has been a bumpy ride with these quarterly reports since then. Each quarterly report seems to evolve as we go along this ride and that creates a bit of confusion which again adds to concerns/fears. Add in the macro events as well as pressures from some net metering/utility pressures and you have a few people on edge about whats going to happen to our money in the future. I'm no different in that sentiment.
However, it has and always will be about the company as a long term investment. Not a fly by day trade. An investment. So, for those that are putting money in scty to play the market, I am sorry to say, but you are not an investor. Period. No matter what you say or do, you are not an investor. If you want to talk about trading, create a separate thread. If you want to actually talk about investing in solarcity(or even Tesla for that matter) this is the place. There is a massive, massive difference in trading and investing. Here, on this thread, it is about investing.
Solarcity is a company that is navigating extremely high growth in a transitioning regulatory environment. It is very scary at times, but in the end, it will be positioned for very high success in the distributed energy market as well as next generation utility infrastructure that is currently at the early stages of development.
Remember the last stage before victory is "they fight you." Nevada and the few others are fighting tooth and nail with all their influence and capital to keep the status quo of their business model. But as anyone that understands fundamentals and how they apply to success, if there is a better technology and business model that does things better, it will ultimately win out. What we find here with solarcity, is that they will ultimately win out.
Now, as I've stated time and time again... and it doesn't seem to get through because of the extensive bias of a small, small minority of posters here chose to willfully ignore it because it doesn't fit their narrative for being on this thread.... solarcity is already solidifying the next generation "net metering" regime, if you will, for the entire distributed energy resources industry. They are building the software platform, the grid services, the energy storage, and solar(+smart inverter, smart thermostat, etc..) system, that will be at the center of this new "net metering" regime. Please read the gridx plan for California's IDP and understand today's business model within that context.
Also, here's some interesting facts: 80% of all solar -- all solar -- in the United states is lease or ppa. Now I can easily imagine why the propaganda is strong in saying lease/ppa is bad and buying is good because if buying only was the norm, 80% of the current market would be eliminated and all solar growth would slow down dramatically in competing for electricity sales revenue with the utility. I mean we've heard that lease/ppa people are ignorant/stupid, rooftop solar is subsidy for rich people, lease/ppa companies are dirty hustlers, etc.. you name it its been said here and keeps being repeated over and over, like a programmed robot. But yet 80% of all solar is lease'/ppa. At some point we have to ask ourselves honestly, what's the actual reality here. No smoke, what's really happening out there in the real world of rooftop solar, because it aint what the robots are flooding the threads with.
I wish I could get more in-depth in all aspects of solarcity as an investment, but I would be just repeating the massive amount of actual information already on this thread by many, many other posters here. Please, read the thread if you actually want to understand solarcity from top to bottom. I see far too much just air blast comments that have already been discussed just a few pages back.
I may be alone here, but I have done the long term homework and find solarcity is skating to where the puck is going to be, not where the puck has been. As an investor in a few companies, that what I look for in a strong investment and will continue to do so.�
1/1/2015
guest One beauty of a years long thread is that the quality of posters opinions can be evaluated.�
1/1/2015
guest Didn't realize we had ignore here, apologies.
Looks like Elon bought $10M or so in shares today.�
1/1/2015
guest I helped a local high rise HOA sort through EV charging options and found that demand charges were just a few cents below $20/kW/month and energy was 9c/kWh. A single Powerpack could defeat upto 50 kW in demand charges, but let's suppose on average we could have defeated 30 kW. That would be a monthly savings of $600, which would pay for the $25k battery in 3.5 years. If part of a solar system, a 30% ITC could further reduce the cost. Moreover, in connection with solar, even more demand charges can be defeated. If there is also TOU energy rates or less than NEM feed in tariffs, the battery can also arb these rates without sacrificing the defeat of demand charges. So I think SolarCity can real clean utility clocks with this.
Speaking of commercial, this article is interesting. SolarCity posted this on Twitter so we know that they are thinking about the opportunities this implies. I'm very bullish on commercial.
Prologis, which runs warehouses, is a huge leader is solar energy. Huh?�
1/1/2015
guest
Over the course of the next year we will see demonstrable progress at SolarCity/Silevo's panel Gigafactory and Tesla's battery Gigafactory. Solar+Storage+Demand Logic dovetail into a disruptive business model. SolarCity is based in California where the majority of their workforce and capablities reside.
California Passes Huge Grid Energy Storage Mandate | Greentech Media
US Supreme Court Rules in Favor of Demand Response | Greentech Media
While the market has focused on Nevada's PUC "net metering" decision, California is defining the future of renewable energy. This is the perfect storm for Elon's master plan.�
1/1/2015
guest Another thing to consider: if SolarCity is having trouble meeting targets this year, perhaps the plan is for Tesla and/or SpaceX to place a substantial order to help? Tesla will need solar at the Gigafactory and could become more aggressive in rolling out solar at superchargers. Then the Fremont and Lathrop facilities could start to use solar too (I don't think the Fremont factory currently has it, but please correct me if I am wrong). After all, there has been discussion on the forums of more batteries appearing at superchargers and at Lathrop, so it would make sense to add solar.�
1/1/2015
guest The run rate they exited the year might be a lot higher than median, so just like with Tesla guidance it's possible that 1.25GW is simply what they already have the muscle to build without any further capex. Their installation cost is what, $1.9/W and dropping so yeah they'll need somewhere south of $2.4B. Jhm's math says customer price is about $2.7/W plus ITC. I don't see a problem here. You keep saying they won't be able to finance this, but I haven't seen this being justified in any way. Care to elaborate? In simple terms, clearly they're creating economic value here and the only question is how exactly is it getting monetized. Edit: just to be clear, it's a bit under a buck of value/watt, 1.25GW and current market cap is 1.7B. It's surprising to me SCTY is still trading and not taken off the market.
I see some other possible problems in your logic but I think I'll make a fool of myself with my lack of understanding of basic corporate finances so I won't talk about those.
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Yep. Now the big question is when will the market recognize this.�
1/1/2015
guest Thanks, Benson. What you have illustrated here is the problem of negative free cash flow, which is never sustainable. Without a doubt SolarCity will have to begin generating positive FCF at some point in the future. It is not so much a problem of business model as it is a problem of maturity. Virtually all enterprises begin with negative cash flow before they reach the more sustainable state of free cash flow.
Becoming cash flow positive is a process, and it will take some time to achieve. I'd like to propose three markers along this path:
Net Cash Flow Positive: net cash flow is the change in cash and CE balances. This was just $24.5M outflow. So reversing this means that the cash position does not continue to deteriate each period. So liquidity risk becomes less severe.
DevCo Cash Flow Positive: ok I'm making this up, but there is an important distinction to make between the non-recourse debt that the PowerCo covers from customer contracts and the recourse debt and solar loans in the top section. DevCo debt is much riskier to shareholder and could be harder to obtain in times of distress. So the change in cash and DevCo debt I'd like to call DevCo Cash Flow. This was an outflow of $218M. Once this flow is reversed, SolarCity makes progress paying down debt that must be paid from earnings. The PowerCo debt still remains but it is paid by customers and is directly linked to asset creation. So I think DevCo CF positive may well be sustainable so long as the assets that SolarCity creates are truly more valuable than the non-recourse debt issued against them.
Free Cash Flow Positive. So FCF positive means that cash flow fully funds all growth and asset creation. At this point, SolarCity is in a position to start paying shareholders. Most depreciation is already bound out with the asset financing, so SolarCity is likely to be profitable as generates free cash flow. So paying dividend or stock repurchase become open options to reward shareholders. So we definitely want SolarCity to reach this milestone.
So this is the framework I have in mind. I think it can help us think more clearly about risks and track progress. If SolarCity were to achieve positive DevCo CF by Q4 this year, I would be delighted. At a minimum, management has promised positive net cash flow.
This framework can also help investors know when to invest in SolarCity. So may want to wait for different markers to be passed before investing or increasing their investments.�
1/1/2015
guest For real? He just purchased a whack not long ago.�
1/1/2015
guest Not sure the total, just saw an SEC filing come across.�
1/1/2015
guest Good News! Musk bought $10 Million SCTY
Updated Numbers!
SCTY insiders sold $490,000,000 net in the last 12 months�
1/1/2015
guest I have never regretted my silences.�
1/1/2015
guest Surely someone has called you out on this before, but I can't help myself. And someone please correct me if I'm off base. This isn't my area of expertise.
12,650,045 of those shares "sold" were actually "dispositions" by John Fisher of the Draper Fisher Jurvetson Company. If you look at the SEC filings it appears he is just transferring shares to various trusts and funds within DFJ.
In another example of a "disposition" being counted as "sold", Elon donated 35,000 shares to his charitable fund. Do you think it's intellectually honest to call that a sale?
By my count, even if you pull out option exercises and leave in automatic sales, you're left with 292,374 shares sold and 635,277 shares bought in the past year by insiders. And that's not including Elon's purchase of 569,680 shares today.�
1/1/2015
guest Along with my three cash flow markers, we should probably include change in working capital. This is a standard accounting construct that is reported in the cash flow statement, and it is quite informative. Working capital is the net of current assets (mostly cash) and current liabilities (mostly debt payments due within 12 months). So it is close to net cash flow (change in cash position), but it also is sensitive to mounting pressure from current liabilities too. So it is a little more conservative to watch than just net cash flow. So in my marker scheme positive change in working capital would stand between net cash flow and what I have dubbed DevCo Cash Flow. And Free Cash Flow is now the fourth marker. Of these four, all but DevCo CF are standard accounting constructs.
So I would encourage investors to look at the table at the head of the Q4 2015 Review. You will see Change in Working Capital is a middle row. Last quarter is was a decline of $38.1 M. But notice that is has not always been negative. It was positive for the first 3 quarters of 2014, but has been negative for the last 5 quarters. I suspect this is a large measure of what has emboldened shorts to attack the stock. Regardless of a company's longterm prospects which may be quite compelling, shorts know that as working capital declines the company is headed for crisis, which is sufficient to drive down share price.
So let's size this up in the last 5 quarters working capital has declined $221.9M while the company installed 1047 MW. So WC fell by $0.21/W installed. In this period, the company spent $607.5M on sales and marketing, or $0.58/W, in an effort to continue doubling another year. From 2014 the eyes of Wall Street was on whether SolarCity could continue to grow at this incredible rate, and management attempted to prove that it could. Unfortunately it came at the cost of eroding working capital and throwing the stock valuation into crisis.
What is the road forward? SolarCity has done a tremendous job at reducing the installation cost per Watt. This is truly foundational. What they have lacked is discipline around growth appetite and marketing efficiency. Spending $0.58/W on sales is simply too high. Management acknowledges this and has shown in Q4 that they are cutting this cost. Marketing spend is obviously crucial to how fast they can grow. Waiting for lenders to pull the plug, as Benson has warned, is not the constraint that management should risk. It is not what should prevent SolarCity from installing 1250 MW this year. Rather, in my view it is marketing efficiency that should properly constrain growth. Management should only grow sales to the extent that they can end the year with more working capital. If that is less than 1.25 GW, so be it. But that need not be the case, if they improve marketing efficiency.
So where do they stand? 2015 Q4 the decline was $38.1 M on installation of 272 MW. This is $0.14/W that they must cut from total cost per Watt, but I believe most of it should come from sales. So sales and marketing was $0.56/W. I think they need to reduce this to $0.42/W. I believe this is possible. I also believe that the low 180 MW guidance gives them latitude to move in that direction.
In terms of price action, I think that once SolarCity starts to build working capital, putting an end to this 5 quarter run of declines, shorts will back off a bit and some investors will return. So I am looking to see some improvement in WC and sales $/W in Q1. It think progress here will stabilize the stock, and more progress in Q2 will boost the stock price. Right now, I think the rationale for buying the stock is that you believe that management will turn this corner such that the stock price will be increasing after Q1 ER. If you don't have that confidence in management, you should not be in this stock and should wait until WC starts improving.
As long as WC declines, the stock price will decline as well. This has little to do with the longterm prospects for solar or SolarCity in particular. I remain quite bullish for both. This is about whether management can manage cashflow and not crash the company in pursuit of shortterm growth target. This is not even a question of business model, although that is evolving anyway, but it is a question of managing cash flow. I believe our new CFOs at both SolarCity and Tesla get this.�
1/1/2015
guest Wow. I have to admit after I sold out of my SCTY around $55 I never paid attention to the SP and am stunned where it is at in a few short months. Sorry for those who are long as this is quite a hit. I learned my lesson investing in PBW ETF years ago, markets do not always make sense and there is no sure bet in green energy. The solar industry is brutal right now.�
1/1/2015
guest The most obvious investments in solar seem to have the worst performance. The trick may be to find the companies that get unfairly punished when the whole sector declines. SEDG has done well since the crash late last year. SEDG has risk with big customers like SCTY, but demand for their products will grow worldwide regardless of what happens to individual players.
The risk to the PPA providers is real. On the surface, California NEM 2.0 looks like a win. But in the reg contains soon to come time of use pricing. How will California PPA customers react when they start getting billed extra for expensive power used in the evening? Are they going to blame CPUC or solarcity?
Just a few years ago it seemed that many states would have long term vanilla net metering agreements. This simple world seems increasingly unlikely.�
1/1/2015
guest Nevada decision under tremendous criticism nationwide and now even the Nevada governor is saying it was wrong. Look for a special legislative session to occur reversing the entire net metering change.
Also, rest in peace Justice Scalia. It is a tremendous tragedy to hear of his passing. Even though I might have disagreed on a few of his decisions, specifically the clean power plan stay recently, I respect his service to our country as a stalwart for constitutional integrity.
Implications note:
5-4 on clean power plan with justice Scalia. Now it's 4-4, which has significant immediate implications for the stay on the clean power plan...
http://nymag.com/daily/intelligencer/2016/02/how-scalias-death-will-change-everything.html
"The immediate and easily foreseeable impact is staggering. Last week, the Supreme Court issued a stay delaying the implementation of Obama�s Clean Power Plan. The stay indicated that a majority of the justices foresee a reasonably high likelihood that they would ultimately strike down Obama�s plan, which could jeopardize the Paris climate agreement and leave greenhouse gasses unchecked. Without Scalia on the Court, the odds of this drop to virtually zero. The challenge is set to be decided by a D.C. Circuit panel composed of a majority of Democratic appointees, which will almost certainly uphold the regulations. If the plan is upheld, it would require a majority of the Court to strike it down. With the Court now tied 4-4, such a ruling now seems nearly impossible."
Be Aware, the clean power plan now seen as being certainly implemented. Massive reversal from what was implicated just yesterday.�
1/1/2015
guest Massachusetts solar 'on hold' as incentives in two major programs dry up | Utility Dive
Regulators are now understanding that net metering is far more complicated than a simple pro/con solar issue, regardless of what PR SCTY may present. Most states will incentivize solar, but less and less by simple net metering. Unfortunately for PPA sellers, this expose that they are not "you power company". They are just the people who own the panels on the roof, and shift all regulatory risk to the customer.�
1/1/2015
guest
That is good news on the Governor's position. Hard to think of a better area than southern Nevada for large scale solar. Never thought of the implication of Justice Scalia's death. Need to brush up on Constitutional law for the implication of a split-decision. Guessing this will be a very contentious confirmation fight and there certainly could be an extended vacancy.�
1/1/2015
guest Gov. Brian Sandoval has released a statement on the decision reached by the Nevada Public Utilities Commission:
"While I have respected the Commission and its deliberations by not influencing its process, the PUC did not reach the outcome I had hoped for. I remained optimistic that the Commission would find a solution that considered the economic consequences to existing rooftop solar owners. Today's decision does not go far enough to protect their interests.?Renewable energy development in Nevada is a priority for me and an important and evolving issue. I remain committed to providing a path for Nevada to continue to explore the potential of our vast renewable energy portfolio while ensuring Nevada has an equitable system that balances energy policy with just and reasonable utility rates. There is no greater friend to the solar industry than my Administration. In 2011, I signed legislation enacting policies to stand up the rooftop solar market. In 2013, I approved another measure that doubled the net metering cap. In 2015, I signed into law a bill that again changed the net metering cap and transferred oversight of this complex issue to the PUC. The 2015 legislation received public support from the rooftop solar industry and many other interested parties. When I signed these bills, it was my belief that the utility rates should remain constant for homeowners who installed rooftop solar systems on their homes.?The 2015 legislation was approved by a 41-1 vote in the Nevada Assembly and a unanimous vote in the Nevada Senate. I am aware that many of our state legislators share my concern about today's decision and I am hopeful that the Legislative Committee on Energy as well as the New Energy Task Force will bring forward thoughtful recommendations to ensure that Nevada has a stable energy policy that allows renewable energy in Nevada to continue to thrive."
Thanks Foghat.
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1/1/2015
guest The federal judges ruling on the clean power plan are democratic appointees. They are expected to rule in favor of the plan. If the Supreme Court gets locked up, which a 4-4 would do without Scalia, the lower court judgement stands.Therefore, it is highly probable the clean power plan will be reinstated. A massive reversal to what happened last week. Whether a justice nominee is in or not, the clean power plan is looking to be back on track, a go which will reflect in the market next week and beyond. Wild times, the yo yo continues...�
1/1/2015
guest Yeah, I heard it on the internet so it must be true. (especially if it came from reddit.)
I'm sorry but that's dead wrong. Everybody is "playing the market" whether you are investing long-term or short-term. Everybody is an investor whether short-term or long-term.
All opinions are welcome on TMC.
It's an awfully big bet when they have little margin for error. No room for mistakes in an increasingly competitive market. They've been good at cutting installation costs but have a terrible track record for cutting sales costs.�
1/1/2015
guest No one in any market outside of CA has low sales costs. This $.60+/W of sales is nowhere near unique to SCTY, we just don't have access to every local installer's books. Many are worse than that.
ALL sales costs will drop dramatically from here on out, and as hardware costs are already super cheap......it's a battle of the business models.�
1/1/2015
guest In principle, SolarCity's established market presence is supposed to give them a marketing $/W edge. Trying to grow fast enough to increase marketshare is more costly than just maintaining current marketshare. So if they are content simply to maintain a 32% market share, in theory that should nor require an extraordinary market spend per Watt.
Notice that their sales $/W was $0.49 for the first 3 quarters of 2014. Then it jumped up to $0.57 in Q4 2014. This co-incident with the declining WC, but it was also the period when they transitioned from 25% of the residential solar market to 32% market share. So getting that last 7% of market share was pretty costly. The whole residential market heated up trying to compete with each other for market share. Additionally, they competed directly with each other for third party lead generation and serch engine and online marketing spots. So it is posible that the cost per lead and cost per online impression went up for everybody. This would be symptomatic of too many players in the market vying for market share. So now SolarCity has a special role as market leader to set the pace of growth for the whole industry. Cutting their growth ambition to 40% down from 100% takes substantial presume off the whole industry. Is it enough to bring marketing spend down below $0.49/W again? I don't know, but I hope it is. It does little good to amp up marketing cost for the whole residential market such that nobody can make money in the industry. Utilities are doing their part to create added marketing costs for the industry (through policy uncertainty), so SolarCity as industry leader needs to not drive marketing cost even higher for the whole industry (through aggressively bidding up leads and online ad space). I think SolarCity can kill too birds with one stone by focusing some media spend on directly countering utility BS to reinforce policy solidarity while establishing SolarCity as the voice of the residential solar industry.
I think they may even do well to place corporate ads on CNN and the like to tought the positive social contribution of distributed solar and their leadership in this industry. The aim here is to solidify policy support (which gives consumer more confidence to go solar) and establishes SolarCity brand (which minimizes expenditure on lead generation). This is part of the broader kind of consumer "education" that is needed to transition residential solar from niche market to mainstream. I do think SolarCity is in a unique position to benefit from broadcast advertising.
Their most recent set of video ads on where energy comes from is pretty good. It is directly taking on the complexities and absurdities of fossil fuel generation and utility distribution of power. These are complex processes and markets for consumers to understand. So illuminating just how complex they are turns this against the utilities an fossil industries. By contrast, rooftop solar is incredibly simple and clean. Just put it on your roof, and let the sun deliver clean energy every day to your home. This simplicity is something folks can buy into at multiple levels and refrains the whole discussion. It may not be completely obvious, but all the utility BS about paying for the grid falls pretty flat when people question the essential need for all that complexity. If the sun can deliver enough power to my home and I can store it in batteries until in need it, why is a massive grid even needed. People have come to ask the same kind of question about landlines telephones and cable TV. Not all infrastructure from prior generations will be needed going forward. Much of the political support for the utilities comes down to a very basic presumption that a massive power grid is an essential public good. This is largely a precritical assumption. People just see the world that way and have never really had a reason to question the assumption. So SolarCity�s new ad campaign illuminates the ridiculousness of the convoluted path that energy takes to get to your home. Suddenly, consumers start to wonder if there really is a much simpler way, and once you see that simplicity all the complex infrastructure becomes a giant question mark. So this is some of the deep work that SolarCity needs to do to bring rooftop solar into mainstream consciousness.�
1/1/2015
guest I found a new avatar. Like it?
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1/1/2015
guest The stay of the clean power plan doesn't mean much:
EEI: Utilities moving from coal, toward gas & renewables regardless of CPP stay | Utility Dive
Even in areas where gas users and produces don't like the CPP, they still need to get by regulators and legislators that may have their own mandates. So except for a few big gas users like Florida where climate change officially doesn't exist, the transition continues. But company everywhere in the U.S. risks stranded asset adding more gas generation. Even a republican president will only be in office for a short part of the life of a new gas plant.
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Solar Choice is a good place where users discuss price and technical matters.
If you search out people on the interweb pricing solar, SCTY is the most expensive PPA and outright purchase every time. It seems to me that long term success would come from high volume and low cost. But of course they can't do that, which is why they talk about "white glove service" repeatedly in the earnings call.�
1/1/2015
guest It's not the most expensive every time as illustrated up thread where a user said in Texas they are very competitive.
That being said or speaks very highly of the company is they are able to be the number one installer by volume while having the highest price and lowest installation cost.�
1/1/2015
guest Trying to convince potential solar customers is tough enough even with just a zero down loan, add in all the complexities of the SCTY model and it's even tougher. For now......
Eventually I see SCTY being such a household name that sales won't really be required, other local installers will not be able to do the same in a crowded marketplace where they're constantly undercut on price. That's the SCTY advantage, how long it takes to get there.....no idea. Probably a good couple years at least.�
1/1/2015
guest Bonds Detail
Bonds Detail
I dont really care but holding SCTY stock when bonds are trading like this, and this company needs capital like oxygen, seems irrational.
If nothing changes they are toast this year�
1/1/2015
guest I used to work in auto insurance as a marketing analyst. Have you ever wondered how just about every auto insurance carrier can claim that people who switch to them save money? In fact it is a truthful claim even among carriers that are generally not price competitive. The reality is auto insurance pricing is that there is a lot of noise in pricing any given driver and car. So if you get several quotes, you will generally see a substantial range of rates. And the ranking of quotes can very substantially from one prospect to another. So generally people switch to carriers that offer lower rates for them. Auto insurance pricing is very noisy.
So when I think about solar quotes I suspect the same thing goes on. Every prospect has a different roof. Every solar provider is going estimate its potential differently and configure a system differently to try to optimize that roof. Every carrier has a different appetite for that specific job at that specific time given the capability of their crews and backlog. Every carrier is going to have their own pricing strategy in connection with the marketing strategy. Net result, every quote will be different and the ranking of quotes will vary from house to house. So every carrier will convert some sale and the customers that select them will tend to save money over other carriers. So I thoroughly expect SolarCity sometimes to have the best quote for some homes and the worst quote for others. The same can likely be said of all carriers. So anecdotal evidence is pretty worthless. You have to collect data in a very systematic way to be able to properly general competitiveness trends.
Now, SolarCity has never claimed to be the low price leaders. They do not say, show us your best quote, and we'll beat it. That is simply not their value proposition nor their marketing strategy. Customers seeking the lowest cost system simply need to get a lot of quotes and pick the lowest. And such a shopper will do the same with lenders and insurers as well. When I was in auto insurance we didn't really worry about trying to market to such price sensitive rate shoppers. Why? Because they were not profitable. They simply get enough quotes that they find the carrier with a pricing weakness offering them the least profitable, often unprofitable quote. So if your marketing strategy exposes you to too many extreme price shoppers, you wind up spending to much money offering reasonable quotes to prospect who won't convert and on those how do convert you are under priced and make not profit. So you lose both ways. So most companies find that the only way to be profitable is to target higher value prospects.
So when I hear anecdotes about someone who got lost of quotes and found a carrier much cheaper than SolarCity, I am happy that SolarCity did not come in with the lowest bid. As a marketing analyst, I know that consumers that only go with the lowest quote are generally unprofitable. I am glad that SolarCity has pricing discipline not to write unprofitable business. What impresses me are the time when SolarCity does not offer the lowest bid, but converts the sale. That is indicative of strong marketing and sales execution.
This is yet another reason why SolarCity should be content with only a certain share of the market. To go beyond a certain share, a company is exposed to too many price shoppers and loses margin as a consequence. The only exception to this is if a company enjoys an enormous cost structure advantage over all competitors. I accept that SolarCity may have the lowest installed cost in the industry, but I doubt that it is by such a large margin that it can profitably drive out all competition. As long as their are hungry competitors willing to take a margin well below SolarCity�s margin, it think 1/3 market share is about as far as it makes sense to go. SolarCity can gain market share slowly by allowing these less profitable competitors exit the market. Additionally, the real competition at this point is not even with other solar providers. It is with the utilities. SolarCity needs all other solar providers to help put pressure on the utilities. The utilities are not yet competing on price.�
1/1/2015
guest I am paying a great deal more for my iphones (4 daughters and my wife & I) than I paid for that ATT landline.
The value proposition for solar hasn't been persuasively sold yet. I am looking for Elon to start building a "compelling" market strategy for Solar+Storage+Demand Management . I would like to see a strategic business alliance between Tesla, SolarCity, and SolarEdge developed and marketed to dovetail the master plan.
In West Los Angeles, Tesla's and Solar Power have "cool factor". We have folks in my neighborhood with movie-making/marketing skills that are already on board with the idea. The right minds in Hollywood can sell this.�
1/1/2015
guest Arguably smartphones deliver much more value than land line phones ever did. Just consider the minutes of use per day. Utilization of smartphones is much higher. One element of this is that much of what we might use a PC for we obtain more conveniently obtain from smartphones.
Relating this to solar-storage-demand-management (SSDM), are there ways that such a system can delivery more value than a simple grid connection? Backup power is one such added value. And of course saving money is always in style. But what else makes for a compelling package? This is not a rhetorical question.�
1/1/2015
guest The value of solar is in larger scale ground mount, which is half the cost of rooftop. Every PUC commissioner who is not an idiot understands the basic economics.�
1/1/2015
guest This is one of the reasons why I am optimistic about SolarCity getting into commercial project. The ground mounted systems should be of comparable cost, and the Zep ZS system for large flat rows is very close. So even if a utility pushes feed in tariffs down to wholesale rates, these commercial customers can participate in a wholesale market with very little cost disadvantage to utility scale solar. Add to that a few Powerpack, and you've got something that can compete with any gas peaker when it is not otherwise self-consuming.�
1/1/2015
guest Lyndon Rive will be the keynote speaker at this event.
https://greenchips.org/convene-green/convene-green-keynote-speakers/�
1/1/2015
guest Isn't great to be Lyndon Rive? Solarcity has never made a dime, and he has taken $47,340,739 in equity out of the company. Nothing better than the American dream of complex financial product and massive government subsidies.�
1/1/2015
guest Mods, why is electracity still allowed to post here? He adds nothing to the conversation and posts nonsense that lacks any context. This post by him is a new low.�
1/1/2015
guest Wow. They need to make some big changes very quickly. And they need to hope like heck that whatever they do, it works.�
1/1/2015
guest Excuse my ignorance, but is it not completely expected for the bonds to trade at significantly lower levels when shares have fallen to new lows (2013 levels)? In other words, what does the bonds data add to the discussion that we didn't already know from the stock price (that the market is pricing SCTY at at much lower valuation now than 6-12 months ago)?�
1/1/2015
guest Bonds are guaranteed to be repaid, they are higher up in the Chain above Equity, Equity is an option on any potention profits/dividends, Bonds are a guarantee, if bondholders are expect not to get repaid (as bonds imply) shareholders right are nearly worthless, bondholders not repaid =Chapter 11 or restructuring.
These are very basic concept items, every investor should understand it before getting started (no offense here)�
1/1/2015
guest As I have been posting, they need to increase working capital. It's been falling for 5 quarters in a row. This does raise genuine solvency concerns. In the last 10-K, the auditors raised no going concern issue, so SolarCity is in no immediate risk. Nevertheless, SolarCity does need to reverse this working capital trajectory and become cash flow positive by the end of the year.�
1/1/2015
guest I despise cost, especially sales cost, that's why it took me a while to come around to the SCTY model. Cash positive is great, however I don't want to see this cost cutting for efficiency eat into the company taking marketshare as the only real PPA. The advantage they're building will be insurmountable and must be protected IMO. If the vision is for comfortable dominance in a few years when sales cost are super low then burning through a couple billion over the next 8 quarters is money well spent.
To the highest degree financially possible I still want the company borrowing. The stock price should not dictate direction other than setting an absolute limit for borrowing.�
1/1/2015
guest
Unless you are a big 3 automaker who has the rules re-written for them in chap 11.�
1/1/2015
guest Solarcity has started securitizing their solar contracts. The unsecured convertible bonds issued to date will be subordinate to these new loans.
- - - Updated - - -
The bolded line below. Why are they constrained to not borrow more than the net of their NPV minus unsecured bonds? Why can't they borrow against all of their contracts that have not been used for collateral? Is it in the terms of the bonds?
�
1/1/2015
guest I answered that question (from my perspective obviously) in the same post that you quoted. Right below the bolded line
�
1/1/2015
guest Your saying you don't know. I thought some else may know, especially what is in standard bond agreements that prohibits net negative borrowing.
I do agree about the $57 million deal being close to a smoking gun. It's like seeing your neighbor that lives in a big house getting a payday loan.�
1/1/2015
guest The ABS bond prospectus are not public info. So it would be hard for anyone to find precise answers. The ratings review documents are public though. So maybe some one can dig into those to find any relevant info.�
1/1/2015
guest Not the ABS bonds, the terms of convertible bonds.
But it may be as simple as the fiduciary responsibility of corporate officers.�
1/1/2015
guest I can't imagine convertible bonds blocking the securitization of assets (contracts). Convertible bonds are backed by SolarCity's credit. It would be very weird if they have covenants like that. I would have to check the prospectus to know for sure, but I really would be shocked if we find something like that.�
1/1/2015
guest What if the ABS is being bought by insiders? There was a lot of equity taken out in 2014/15. That could be interpreted as swapping equity ahead of a decline in value for superior secured debt. The insiders protect both their remaining SCTY investment, as well as their capital.
5% ABS seems low consider the extraordinary effort it would take for an outsider to capture the value of the solar contracts in case of default.�
1/1/2015
guest I think slide 10 in the Q4 2015 Review deck helps clarify the issues. The portion of cashflows that is uncommitted is the Levered Project Cash Flow, the green area. Most of the green area is 10 or more years out. Tax-Equity and ABS financing disproportionately take cash out of the early flow. So over the next 5 years the LPCF is about $80M per year. I think that SolarCity needs to keep this flow as a cushion against whatever it may face over the next 5 years. It is simply not wise to overcommit all the cash.
The challenge is how to access the cash that is more than 10 years out. The renewal terms are contingent upon customer elected renewals, and in this time SolarCity will need some latitude to make counter offers, whether upgraded systems or discounted renewal prices, to maximize value. So this pretty much needs to be owned by equity investors. The middle years, 10 to 20, are interesting. Cash to common equity rises pretty fast. So that could be a pretty nice time to own share, but how can the company monetize this now?
I should point out that SolarCity raises an incredible amount of capital withe debt and tax-equity partners, but it does not match this so well with raising equity. I think this is the basic imbalance that is causing some structural strain. To alleviate this, I believe SolarCity should consider offering preferred stock as it raises project capital.
Notice that the unlevered NPV is around $1.20/W at 6% discounting. So this can spin off about 7.2c/W/year. This is an interesting basis for a preferred stock dividend policy. Suppose you issue a share of prefered stock that entitles this owner to the residual cash flow on 10 W of contracts after all debt payments, tax-equity payments, O&M expenditures and taxes. Valuing this dividend stream with a 6% discount is simply $12/share. So I think preferred stock investors would pay $6 to $10 per share for this. So as SolarCity grows it's book it can issue more shares, this funding growth. So this enables SolarCity to monetize the longer term cash flows while balance debt financing with equity financing.
Another curious advantage of this is that it allow the market to determine the value of the PowerCo holdings. Suppose common equity investors want to know what the market really thinks the 1.7 GW that the PowerCo owns is worth. Suppose there are 50M preferred shares in circulation trading at $8/sh. So that places $400M on on 500 MW of PowerCo holdings. If the PowerCo holds 1700 MW in total, then it is valued at $1.36B, of which common shareholder have a claim to $960M in residual value.
I think this could be a better arrangement than spinning off a yeildco. The prefered shareholders own a virtual yeildco, while common shareholders have full control over the PowerCo and the capital structure is all held together in one entity. This would enable SolarCity to attract both dividend investors and growth investors. The growth investors would be attracted to common shares, and since the prefered shares provides a clear market value on the PowerCo book, it becomes much easier for growth investors to value the growth opportunities distinctly. For example, suppose SolarCity were to get into a DER aggregation scheme as an additional revenue stream. This is separate from the cash flow that funds preferred share dividends. This is pure growth for common shareholders to enjoy.
So I think offering prefered shares could be quite beneficial for creating a more robust capital structure.�
1/1/2015
guest The reason it is low is the unprecedented level of repayments. They currently enjoy repayment about as close to 100 percent as you can get�
1/1/2015
guest I agree that the payments are sound, but the holder of the contract also has to perform duties in the contract. To perform these duties takes a solar company. But, if the ABS was bought by insiders who are confident in solarcity being in business, there is no concern about ABS holder's potential obligation.�
1/1/2015
guest electracity
Please provide - jot & tittle - where the $47mm number comes from.
It also would be instructive to learn if you share the same attitude toward other corporate executives and their fiduciary habits.�
1/1/2015
guest You're saying that SolarCity has to collect and process payments and provide ongoing solar maintenance services for the ABS investors to be paid, right? So this gives the ABS investor some exposure to risk if SolarCity should fail in these duties. This is part of why an ABS investor wants SolarCity to retain an equity stake in the underlying assets. But I suspect that their is a Special Purpose Entity that stands between SolarCity and the ABS investor to provide a layer of protection. Certainly any number of loan servicers could process payments and other solar service companies could be contracted to replace SolarCity in the even that SolarCity fails in either of these area. Structured securities like this usually have numerous provisions to protect the ABS investor. So I don't think you can look at the ABS yield and say that it reflects on the creditworthiness of the originator. It is structured to mitigate that sort of risk.
This is also why it is non-recourse debt. It is structured so that it depends on the creditworthiness of the solar customer, not the originator. So it is structured to protect SolarCity as well. ABS investors only have a claim on payments from customers per contract, nothing else. Now to the extent that SolarCity still has equity in these systems and liabilities, it is still exposed to risk of customer default and other physical risks to the solar systems. But it is protected from the ABS investor. So specifically when a customer fails to make payment this hurts both ABS investors and SolarCity, but SolarCity does not guarantee the difference back to the ABS investor. It is structured so that the ABS investors get paid first, but beyond that SolarCity is off the hook. So this is why I view non-recourse debt differently than other forms of debt. It is structured to be much safer to shareholders than recourse debt.�
1/1/2015
guest Yeah, I'm not sure what $57M ABS Benson has been talking about. The last ABS was the first MyPower ABS which brought in $185M in two tranches.
SolarCity Completes First Distributed Solar Loan ABS - Monitordaily
This first four ABS issues were for leases and PPA. These four brought in a total of $450M, and the yield improved with each round.
So $185M on the first try for MyPower is not a bad start. Yeilds while probably decline as the market gets more experience with these.�
1/1/2015
guest
I think AudubonB is referring to electracity comment of Lyndon Rive cashing the shares.
Regarding your question:
First, here is a fun quote from Q3 CC:
<A - Brad W. Buss>: It's like I said before, it's really a function of having a complete tax equity fund to put in there. You really can't split it like in chunks. So as the funds get done, like I said, they'll go in. If you look at it from the end ABS market, and it was a great thing, right. So when we did that last ABS, it was in the beginning of the solar turmoil and I did a postmortem post-op meeting with some of our vendors and the banks and the biggest complaint they had is we want bigger ones and we want them more frequent. And those are great problems to have, and the nice thing is with the backlog of the financing receivable that we have, that's exactly what we'll be delivering going forward. So I think we're in a good position. They'll probably tend to get bigger than what we've historically done because our funds are technically getting bigger. So they'll be bigger and again, like I said, more frequent.
Now about the deal I was talking about:
Here is the related SEC filing
http://www.sec.gov/Archives/edgar/data/1659428/000119312516452117/d49288dabs15g.htm
Here is some additional detail from Kroll bond rating company
Kroll Bond Rating Agency Assigns Preliminary Ratings to SolarCity LMC Series V, LLC, Series 2016-1 | Business Wire
It says that the underlying PPAs represent $76.4mil.
I got to review the pre-sale report they referred to in the publication. It says there will be two notes
Class-A is for $52.15mln and class B is for 5.3mln. Bringing the total to $57.45mln.�
1/1/2015
guest I like http://www.secform4.com/, but it doesn't seem to have recent data. Here's an interesting chart:
�
1/1/2015
guest Ok, thanks. This is now their sixth ABS. I guess in the Q1 ER we will learn what the ultimate proceeds were whether more like $57M or $76M. I do think it is a bit premature to read anything into the size of this offering. It is possible that SolarCity is simply migrating to a more frequent schedule. For example they may move to a quarterly issue. This would help them show positive net cash flow each quarter and quarterly increases in working capital. I'd like that very much. It was a pity they did not get the MyPower ABS out in Q4 because that would have finished the year with positive cash flow and more working capital than they began the year with. So sense the market has become spooked about cash and solvency, they really need to stuff the cash register every quarter. At least that is what I'd like to see.�
1/1/2015
guest For the record, net cash flow for 2015 was $(121.8)M and change in working capital (according to the Q4 2015 Review deck) was $(183.8)M. So had the $185M MyPower ABS been done a month earlier in Q4 both metrics would have been positive for the year. Cash flow is all about timing. At least cash flow should look pretty good in Q1.�
1/1/2015
guest Can short interest works it's way back up toward 30M shares or is that the impossible dream? I assume it's not worth their time to try and drive the stock lower than it's current $1.?B valuation and that the rundown from $52 to $17 was where the money got made. Any thoughts on this? The last update we have is from 1/29 with a slight uptick to 23.9M shares short. Should we expect it's already gone higher from there?�
1/1/2015
guest New York Fed CEO: Economy and Homeowners Are in a Better Position than You Think - DSNews
This is good news. Homes are appreciating about 5% per year. A typical home worth about $200k has gained about $27k in equity over the last 3 years. This is enough to completely pay for a new solar system. SolarCity needs to look into providing mortgage refinancing options (through partnering mortgage lenders) to tap this equity. This could be total cash upfront for SolarCity, which would vastly enhance cash flow.
For the customer, the proposition is pretty compelling. Tap the equity in your home and cut your power bill by 80% to 95% for 25+ years. For seniors living on fixed income, this is much better than a reverse mortgage. Pay no taxes on savings from power bill and get mortgage interest tax benefit, all incremental to one-time ITC.
My analysis of Zillow Home Value Index data reveals that median homes gained over $30k in value over the last three years in 40% of zipcodes, and over $58k in 20% of zipcodes. This means that SolarCity could target a home equity marketing program to about 40% of zipcodes, over 5000 zipcode, where they would find a very high prevalence of SFR homeowners who could fully pay for solar out of existing equity in their home. Of couse, in the other 60% of zipcodes, you can still find homes with sufficient equity, but the prevalence would be lower. So targeting helps focus marketing effort where it can meet with the most success. This is actually a huge opportunity just to focus on the top 20% to 40% of zipcodes.�
1/1/2015
guest That's not necessarily good news if wages are flat. SCTY can roll through the wealthy, and I think they'll have major success there, but what we're looking for is a scenario where the average Joe can easily and cheaply go solar. Banking on the housing market inflating is not a good medium term plan.�
1/1/2015
guest Pennsylvania net metering decision: Full net metering.
Pennsylvania regulators set retail rate net metering for distributed generation | Utility Dive
Cybersecurity for distributed resources validated by NREL(with participants such as viasat).
ViaSat Helps Validate NREL's Cybersecurity Framework for Distributed Energy Grids - Yahoo Finance
"The introduction of new technologies like smart meters and renewable energy resources requires the energy grid to move from a centralized architecture to one that is highly distributed..."
I hope this hits home for many. Our grid will transition to be much, much more distributed architecture, one that Solarcity will have a significant footprint within (and is playing a significant part in designing). It is critical for all of us to keep an eye on the 13 value stacks for its next generation product and how they will be valued. We should see a lot of movement on this by the end of the year, especially as more powerwalls/powerpacks are produced this summer/early fall...
to note, California commissioner peterman recently stated they did not expect to see energy storage prices to be as low as they are right now as they move forward with the new demand response environment. A demand response environment of which Solarcity intends to enter as an aggregator.�
1/1/2015
guest Wages are up 2.5% y/y. Expanding home equity is good for the whole economy. Homeowners are still delevering, paying down debt, but consumption should start to rise with the wealth effect. Growing home equity is especially good for construction and home improvement industries, which including rooftop solar. Homeowners are willing to put more money into their homes when home values are increasing. So this puts an awful lot of people to work.
SolarCity tapping into existing home equity is not a matter of banking on the housing market inflating in the future. It's about helping homeowners monetize existing value in their homes. Being able to cut your power bill by 80% enables the homeowner to weather any adverse economic conditions going forward. For example, if a spouse gets laid off, the reduction in monthly expenses helps the family stretch savings further while new employment is sought. In the extreme where long-term unemployment may lead to mortgage default, it is beneficial that the solar system does add value to the home (studies have confirmed this). Thus, the severely distressed family can sell the home, get out of the mortgage and into lower cost housing. So it is beneficial to both mortgage borrower and lender that the equity that was taken out to pay for solar was also added right back to value of the home. 10 years ago people where accessing home equity to finance cars and vacations. This was very risky because the equity taken out was not put back into the home. It set people up for a negative equity situation. Using equity for solar does not repeat those mistakes. It actually enhances the financial stability of the family. Mortgage lenders should welcome this sort of opportunity to grow assets with less risk than equity out refinancing.�
1/1/2015
guest We should have zero problems out of Pennsylvania for the duration. We have an excellent governor right now who should likely breeze through re-election in 2018 and PECo(Exelon) has been more than decent as far as utilities go. 6th biggest market in the nation is now an even more stable solar market, the only headwinds are zero state incentive and the grid being super cheap and neither of those are really even a negative.�
1/1/2015
guest jhm, Working Capital and Net Cash Flow are not really my concerns.
My core issue is with the need to borrow recourse debt every quarter, no matter what the growth rate is. Some folks here (blake) suggest that such borrowing is to support the future. But you can easily see R&D and Capex and net them out. The problem still remains. SolarCity needs about $200mln of recourse borrowing per quarter to 'run the shop'. This is very unsustainable.
Here is all the data:
.
Period
2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 Line 1 MW Installed MW 82 107 137 177 153 189 256 272
Line 2 R&D Expenses $M ($1.90) ($3.00) ($4.20) ($10.00) ($12.10) ($12.40) ($17.70) ($22.80) Line 3 Capital Expenditures $M ($4.70) ($2.90) ($5.80) ($9.50) ($30.50) ($71.60) ($45.70) ($28.80)
Debt and Cash:
Line 4 Debt � Recourse $M ($153.40) ($204.70) ($154.00) ($143.70) ($284.20) ($425.00) ($522.00) ($602.50) Line 5 Debt � Convertible $M ($230.00) ($230.00) ($730.00) ($796.00) ($796.00) ($796.00) ($796.00) ($909.00) Line 6 Cash & Short-Term Investments $M $519.60 $405.30 $733.50 $642.70 $575.80 $489.10 $418.40 $393.90
Line 7 Cumilative Debt, net cash (not including non-recourse)
$136.20 ($29.40) ($150.50) ($297.00) ($504.40) ($731.90) ($899.60) ($1,117.60) Line 8 Change QoQ - Recourse borrowing done in the period ($165.60) ($121.10) ($146.50) ($207.40) ($227.50) ($167.70) ($218.00) Line 9 Net out R&D and CapEx
($159.70) ($111.10) ($127.00) ($164.80) ($143.50) ($104.30) ($166.40)
Current Portfolio Value
Line 10 Cumulative MW Deployed under Energy Contracts � EoP GW 0.6 0.7 0.8 1 1.1 1.3 1.5 1.7 Line 11 PowerCo Portfolio�s Pre-Tax Unlevered NPV remaining $M $1,030 $1,212 $1,445 $1,735 $2,032 $2,391 $2,790 $3,235 Line 12 Debt � Non-Recourse $M ($206) ($324) ($448) ($485) ($617) ($731) ($1,013) ($1,242) Line 13 Change QoQ - Borrowing done in the period
($118) ($124) ($37) ($132) ($114) ($282) ($229)
Line 14 PowerCo portfolio Pre-Tax Unlevered NPV Less Debt $M $824 $888 $997 $1,250 $1,415 $1,660 $1,777 $1,993
Scroll to the right side if you don't see the full table up to 2015 Q4.
Line 7, 8, 9 and 13 are my calculations. Hope the labels are self explanatory.
Lines 8 and 9 drive home the point.
Of course this is dependent on what happens on line 13. If increased non-recourse borrowing happens, then there will be a lesser need to borrow through recourse debt and vice versa. But my sense is that they are maxing out the potential debt in non-recourse land. So I don't see a rescue unless they change the business model, like keep selling the contracts to 3rd party investors or do more outright cash installs etc. Whatever it is, they not only will have to do it once but repeat each and every quarter. Essential being long now is keeping faith in unknown potential future business model. That is really a leap of faith!
About that MyPower ABS deal, in my view that is not to be counted as a reliable source of debt. We all know MyPower loans are a small fraction of SolarCity's installs. For a deal of that size to happen again, it may take more than an year. I am much more interested in the stream of PPA/lease deals. They are supposed to get bigger and more frequent. Neither of which is happening. In any case, ABS deals and non-recourse debt is not the primary issue here. The need to borrow through recourse debt systematically every single quarter is the big problem.�
1/1/2015
guest Has there ever been a scenario where 'Company A' looking to dominate a massive but fledgling service industry nationwide would ever have a sustainable balance sheet in expansion stages? What about one that's entire model is based around pushing revenue off into the future? I just don't see the logic of looking at today's costs as if that's some semblence of the future norm, especially if indications are toward cash-flow positive in short order.
Sales cost should be the focus, everything else is lean enough for the time being. That MUST be lowered relatively on par with the wider install industry in order for confidence in the PPA model to continue. So far so good, but I'm still not nearly comfortable with the current product positioning in the average non-Californian consumer's mind. That translates directly into sales cost and that cost can quickly become a self-fulfilling feedback loop that ends up validating the original misinterpretation of product value. That's about my only concern right now.
I'm in southeast PA and ready to sign up, how do I do so online with no sales cost baked into my rate?�
1/1/2015
guest 256MWs in Q3, 272 in Q4, with 180 guidance in Q1.
That is no 'take over the world' growth.
You are missing the fundamental point: Tesla sells a car, makes money immediately. SolarCity does an install, makes money in 20/30 years. They need to borrow to survive.
The cash-flow positive that management is promising is utterly meaningless net-cash-flow (maybe you are thinking free-cash-flow, see jhm's markers post to understand better).
That promise has no meaning or value. It all depends on whether debt markets cooperate an ever increasing debt binge. No, they won't.
In any case, I think I made my point with enough posts and content. I will stay out for a few days/weeks.�
1/1/2015
guest Growth was 50-something percent last quarter on October's guidance of 40% moving forward.
Sufficient growth in solar is nowhere near my concern, if the product is tight there will be massive PPA demand. Maintaining of increasing share with shrinking sales cost is all that matters.
The appetite for ABS will never dry up so long as the customer base is this high-end. Might be a concern in a few years as solar wiggles down more average Joe's, but by then it's game over and bond costs will likely be far lower based on a few year's track-record.�
1/1/2015
guest SolarCity Selects Battery System for Kauaʻi Co-op Solar Storage Project -- LHU'E, KAUA'I, Hawaii, Feb. 16, 2016 /PRNewswire/ --
Industries are disrupted when their business models are disrupted. Solar+Storage+Demand Management will disrupt the electric utility industry.
SolarCity+Tesla+SolarEdge=Disruption�
1/1/2015
guest It's real simple: customers have to make their monthly payments to solatcity in order for Solarcity to get financing. Period. It's thst straightforward.
So, let's review... Do Solarcity customers make their payments? 99% out of over 300k lease/ppa customers have made their payments on time since the company was founded 2006. 99%. It's in the investor letter so I advise people read it before they come on here with bold claims of bankruptcy.
Name me me a company with 300k customers that make their monthly payments 99% on time (and soon they will have some thst have done so for a decade on time every time). Now tell me if they great access to capital or not. I'll be waiting.
Bottomline, solarciry conracted payments are an extremely attractive vehicle at all levels of the capital markets. All you got tondo is compare and it's no question, Solarcity will have extensive access to the capital markets for a long time. Hard facts matter.�
1/1/2015
guest Tesla and SolarEdge are good to go, but SolarCity is going to get disrupted by TOU and the duck curve.
just what happens to midday TOU after 2 more years of 40% growth of solar in SCTY's largest customer state?
http://www.caiso.com/Documents/Briefing_DuckCurve_CurrentSystemConditions-ISOPresentation-July2015.pdf
Nevada is small fries, moving Californian SCTY customers to TOU is going to be great for Tesla, but will gut SCTY like a fish, my prediction is that SCTY shareholders are going to be crying (diluted) big time, but the SCTY bondholders will be laughing�
1/1/2015
guest Who takes on the customer default risk? SolarCity or the ABS holders? If the ABS then SolarCity is basically selling the install to the ABS holder through the payback period, but keeping the debt servicing revenue and any overage with regards to life beyond the payback. If SolarCity (through convertible mechanism) then the SolarCity equity holders are taking on the risk. This could have led to lower financing rates to be passed to the customers.
As far as I can tell, continued debt expansion is only need to expand the installs, it isn't used to service the existing debt/ installs. This is a very different model from other growth companies as SolarCity could basically stop new sales but continue to service the existing debt by the existing install base.�
1/1/2015
guest Benson, I think we may be on nearly the same page. Just to recap the four markers I laid out for those who may not have caught them:
1 Net Cash Flow
2 Change in Working Capital
3 DevCo Cash Flow = NCF + Change in Recourse Debt
4 Free Cash Flow
So turning positive on 1 and 2 is very important so that SolarCity can stay in business as going concern. As I pointed out the fifth ABS was just a month late to turn NCF and ChgWC positive for 2015. So I think we are in agreement that this is pretty much in hand. I do think progress progress here will help the stock. It will allay certain fears. But more importantly it will show progress in the right direct. Specifically DevCo Cash Flow will improve.
So we also agree that SolarCity needs to become DevCo CF positive. Cutting cost per Watt, and especially the sales cost will help, but not go far enough. I do agree that the volume of MyPower loans is low so it probably makes sense to roll this into an ABS just once a year. So while these MP loans accumulate, SolarCity needs Solar Bonds to carry the loans before they are securitized. So Q/Q, recourse debt for this purpose may need to accumulate, but Y/Y this should net out when the MP ABS is issued. Now if PPA and leases are securitized on a quarterly basis, then that should minimize exposure to this form of carry. Commercial projects have a much longer development cycles, so that will tend to call for more recourse debt. There are general sorts of timing issues that are intensified by the growth rate. For example, if you double the sales force in a year, you have to hire, pay and train them months before they are fully upto speed. So as the company grows at a high rate it needs lots of working capital to ramp up, and this grows with the scale of the company. However, slowing growth from 80%+ to 40% should relieve some of this presure. Zero grow would achieve a steady state that only needs Solar Bonds for project carry. So I think the combination of cutting cost per Watt while slowing growth will help DevCo CF come in line.
In the longrun, the PowerCo book generates a stronger cash flow as slide 10 shows. This helps move toward free cah flow, but that could be more than ten years out. So this is the downside of the current business model. It will take years to get to DevCo CF positive and many more years to get to FCF. The rate of growth does not really speed this up. In fact, it may well slow it down. So what is missing with this analysis are opportunities to create additional revenue streams. This is where the stock gets much more speculative. Opportunities like microgrid services and aggregated services could build on the existing business model and even customer base to generate much more value per customer. It is nearly impossible to value the opportunities at this point in time. It is a bit like Tesla's move into stationary storage. In spite of progress, we still have no financials on Tesla Energy. So it's value is purely speculative. So with SolarCity aggregated grid services could be huge, but it's purely speculative at this point. A little less speculative is the opportunity for SolarCity to sell Powerwalls. At $4000 a pop, some fraction of new customers will opt for it, and so will some other fraction of existing customers. So at least we can parameterize this and guess at what the uptake might be. Even so, no reported results. However, these things play out, the basic opportunity is to make more revenue per customer. The current business model will take along time to achieve FCF, but an expanded business model may get there a little quicker. Either way a good deal of patience is required of shareholder.�
1/1/2015
guest That would all be a concern if the people served the grid instead of the other way around. You know what that looks like? A storage revolution.
SCTY making TONS MORE money while saving all ratepayers even more money. This new dynamic is inherently better and cheaper, there's no changing that regardless of what any chart says. Adapt!�
1/1/2015
guest what is so difficult to understand? every Solarcity customer in Califorina who does not have a battery is a future liability to Solarcity when they get pushed to TOU rates.
most Solarcity customer in Califorina who does not have a battery is a potential future customer for Tesla (or others) batteries when when they get pushed to TOU rates.
Cetris paribus, it really is zero sum, Tsla benefits at Scty expense.
Every Californian SCTY customer added this year without a battery is a future liability to SCTY.
how is this not obvious? California's duck curve is upto 2 years ahead of original prediction for springtime. look at slide 2 of the previous link and have a cup of tea while considering it.�
1/1/2015
guest So they went with Tesla Energy. Man, I did not see that coming.�
1/1/2015
guest Have you looked at what 2.25/watt of total all in cost will look like at current 3.63/watt npv? Current numbers are based of 2.71/watt costs, but what does 2.25/watt look like?
also, they didn't include the net booked portion of contracts which has been trending at well over $1bln. So, if they are projecting to be well over $4bln npv in current contracted business, how does that affect non recourse debt ratio comparison?
my point is I think we have look at the full picture here. I know they are trying to work out the presentation/expectations/investor value for their briefs and quarterly briefs, but the reality still remains they are continuously creating big value for investors through and through in he real world right now. And we haven't even gotten to exploiting the full value of their business yet. It's like we are only looking at the tip of iceberg above water and thinking that's the endgame. We're not even close to monetizing the full value of what Solarcity is doing or where they are going.
also, look at what the misses are on these quarterlies and it's been really all about their efforts to expand commercial instslls which have more variable lead times do to government inspections and other non controllable government processes. Has nothing what so ever to do with demand, so it is very important to note this when evaluating quarterly numbers/guidance misses. Every single one of solarcity's ABS have been oversubscribed so clearly finance has more to do with timing then problems getting it. All I point out is we have to look at the context to know the reality as it relates to company health moving forward. Solarcity is very healthy in reality.
my assessment is solarcity's issues stem strictly from a investor relations problem as to opposed to business problem. They need to invest in better communications on the investor relations front. Someone needs to sit down and flesh out a clear way to communicate value and progress toward avhieving thst value, especially in our current bi-polar market world. They need to peak shave the market mood swings with a great hand holding message/process. To me, this messaging is the job of investor relations. Rive needs to take a look at how he can improve media/investor messaging and I feel well have less boo birds dominating the conversation in media/internet moving forward.
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Renim, what are those tou rates that will come in NEM 2.0? Please enlighten us, since you have an inside scoop on those not yet announced numbers. Also, any changes only happen after utilties hit there NEM 1.0 cap... Again, do you have some scoop on when those caps will be hit because no one else knows.�
1/1/2015
guest
Yeah, SCTY appear headed into an shitstorm in California. It looks to me like pg&E is requiring new solar customers to use TOU E6 after march 1st. Why this change isn't more understood is a mystery.�
1/1/2015
guest If I generate power with solar (SolarCity), then store it to batteries (Tesla), power flows can then be controlled by intelligent controllers (SolarEdge). This is why the utilities are complaining about Tesla "gaming" the system. A strategic alliance between these 3 companies will disrupt the utility industry business model. Power can utilized at the optimum time to take advantage of time-of-use rates and to mitigate demand charges.�
1/1/2015
guest Again, Solarcity is currently 1/3 of all rooftop solar installs in the untied states. Many of these installs are clustered within specific utiltiy territories. Along with tesla powerwalls, smart inverters by solaredge(and others), Solarcity will have the distinct advantage of being able to aggregate all this energy production(with its proprietary aggregating software platform) in a dispatchable way to the grid when needed by the grid. If Solarcity can aggregate clusters of its 1.7GWs of capacity under current long term contracts, they have a massive value stack that far out values any powerwall sale or solaredge sale in isolation.
Bottomline, Solarcity is the center piece of unlocking a significant value not available otherwise.�
1/1/2015
guest Without batteries there is no aggregation. With TOU and batteries, the electricity is used in the solar customer's home to offset the high rate at the duck's head.�
1/1/2015
guest Under aggregation agreement, Solarcity shares revenue 50/50 with its customer which reduces net cost/kWh for the customer. So consumers save more money being a Solarcity customer under its aggregation agreement then without.
so faced with adding energy storage and a smart inverter without Solarcity aggregation contract savings, or going with Solarcity and achieving higher savings, what would a majority of consumers do?
the answer is clear who holds the keys to the total value proposition(currently at 1/3 the market) in distributed energy resources market. Solarcity. Hard to contort the reality otherwise.�
1/1/2015
guest The customer is not going to sell from the battery and immediately buy it back. Aggregation works with basic net metering. It doesn't work for solarcity with NEM plus TOU.
�
1/1/2015
guest Wow.... Clearly don't understand what aggregation is/does(demand response on the wholesale market).
good to know influence is strong with some members...
again, I have to say messaging would be a significant value add for Lyndon to look into to utterly destroy the uninformed boo birds controlling the message right now in the broader market.�
1/1/2015
guest I'm not the one who is confused.�
1/1/2015
guest Haha... Good comeback... And I mean that in the most sincerely sarcastic way possible.�
1/1/2015
guest In structure finance products like an ABS, it is standard to set up multiple tranches to achieve a higher bond rating for the upper tranches. So default risk is more concentrated in the lower tranches. So the A series get paid first their contracted portion. Second the B series get paid upto their contracted amount. And finally what is left flows to SolarCity as the equity tranche holder. So this is three tranches. Usually structured products will be over capitalized, but with SolarCity holding the equity tranche that really does not matter. So suppose hypothetically you have 100M in scheduled payments with 80 M for tranche A, 15 M for tranche B and 5M for the equity tranche. Let's suppose 1% of payments are delinquent. The A gets 80%, B gets 15% and equity gets 4%. So A and B suffer no loss. Let's suppose the situation deteriorates badly and 7% of payments are delinquent. Then A gets 80%, but B only gets 13% and equity gets 0%. If late payments are received they flow to tranches that have been underpaid in tranche order. This is what makes Series A such a good credit the lower tranches absorb credit risk before it does. So the Equity tranche is most highly exposed to default risk. The equity holder will usually reserve for a certain levels of default risk, say 2%, and adjust reserves as experience accumulates. So it is incumbent on SolarCity to do a good job with maintaining credit standards and to have effective collection processes in place.
So that was a long winded explanation, but I do think it's helpful to get a feel for how these structures work. The secret to the sauce is tranching. And that also explains why top tranches can get much better bond rating that recourse debt on the issuing company. The structure itself makes it so that SolarCity is nearly irrelevant. In the mortgage space, MBSs have pretty much commoditized mortgage credit, which has driven down the cost of mortgages enormously. Even so MBS investors are still exposed to systemic risk as was seen in the 2008 mortgage crisis. This individual credit risks are pretty much washed out by the structure, but when home prices decline across the country with a high fraction of homes with negative equity, then even the top tranches get exposed to macro risk. So ABS investors always do well to consider systematic and macroeconomic risks. Regarding solar ABSs I think the biggest systemic risk is the housing market. Another mortgage crisis would be bad. So long as customers are paying on their mortgages, they will most likely be paying on their solar system too. I do not believe that NEM and other policy changes are a serious risk. If my landline phone company charges me too much, that does not mean I stop paying for my mobile phone. Customers may be disappointed that they are not saving as much money on their utility bill, but that does not put them into financial distress such that they would stop paying on their mortgage or car loan. So there is no cause to miss payments on their solar financing. If anything, a customer with a battery would sooner stop making utility payments than to stop solar and battery payments. That is, some customers may be financially pushed off the grid. Thus, batteries may actually enhance customer credit.�
1/1/2015
guest Just to comment on you r excellent explanation, homeowners pay their electric bill even after they stop paying their mortgage. and if specially a mortgage crash happened in grandfathering states (all except temporarily Nevada right now) then banks would pay the lease/ppa upon taking over the home in order to maintain grandfathering advantages that boost home value on resale. Bottolmline, solar bill is trending out to be of higher quality then a mortgage payment, risk compression is trending better on solar payments then on a mortgage payment. And this is a phenomena that seems to be exclusive to long term ppa/leases, not necessarily ownership (since a new owner does not get grandfathered.)
This is why management has said they see solar eventually matching mortgage rates and potentially going lower in the future.�
1/1/2015
guest What is this statement based on? SCTY welcomed the ruling. They would sure have stated if it wouldn't work for them, like they did in Nevada. Oh and it's not PG&E, that's the commission's decision for the state.�
1/1/2015
guest But the new regime also imposes an �aggressive� move to time-of-use rates for net-metered customers, Commission President Michael Picker noted. Starting as soon as the successor tariff is implemented, net-metered solar customers will be required to move to TOU rates that charge different prices during different times of the day, to better match real-time costs of generating and transmitting energy across the grid at large.
http://www.greentechmedia.com/articles/read/Californias-Net-Metering-2.0-Decision-Rooftop-Solar-to-Keep-Retail-Payme�
1/1/2015
guest The idea that there's any grid rate twist that could be done in CA and not work out to SCTY's advantage is silly.
Solar is cheap and getting cheaper.
Net metering is locked in at totally acceptable rate.
Nothing will change for a couple years at which time batteries become a real option and SCTY becomes even MORE important to energy buyers.
I think it's safe to say CA is in great shape, gaining a foothold at the next tier of markets at a decent cost is the new hurdle.
Duck curve?
�
1/1/2015
guest Actually, TOU pretty much solves the duck problem by pricing power more appropriately. Is there a risk that power prices will go too low midday because of solar? Under flat rate pricing there is because ordinary ratepayers do not have an incentive to increase consumption. But under TOU, all sorts of ratepayers will gladly use air conditioning more liberally or charge their car in the midday if retail rates really are lower. So in this way all ratepayers are clearly benefiting from solar.
How about the duck head, the early evening peak. Ratepayers will easily avoid charging their car or running the clothes drier at that time. They will also cool their home earlier in the day instead of waiting till they get home to run the AC. Potential solar customers with west facing roofs will also be motivated to install panels, whereas under flat rates they had less motivation to do so.
So right off the bat, the answer to the duck curve is TOU. First, everyone can avail themselves of a little demand management, whether using fancy technology or common sense. Second, batteries and west facing panels can bring additional hardware to smooth things out. Specifically batteries will reduce solar export to the grid when midday prices are too low and reduce imports at the peaks.
If it is a zero sum game, who are the losers? Power producers are. Peak power plants are getting much smaller peaks to server. Baseload plants are particularly hit by low midday prices. That makes baseload unprofitable midday and midnight, leaving very little left to serve. So to the extent that TOU supports even net demand across the day, this would be of benefit to baseload at the expense of peak load. But longer term, TOU support even greater penetration of distributed solar which gets us to the place where baseload demand is disrupted.
The winner in all this is the consumer. When proper price signals reach consumers, demand can adjust appropriately and drive the whole market to greater economic efficiencies. Solar, storage and demand management are important contributors to that economic efficiency. Batteries can do a tremendous job in squeezing out inefficiencies and balancing supply and demand throughout the day. But the amount of storage that comes into service of this market will depend on how well the market compensates storage. A fairly mild TOU pricing scheme might not create big enough price spreads to compensate storage. Real time exposure to actual price changes in the wholesale market would go much further. Other schemes where storage is paid for standby capacity and other aggregated grid services may be needed to attract enough investment in storage. Such schemes may be thought of as subsidies and resented as such, but if the batteries are being called upon to provide grid services of genuine value, then it is simple compensation for service, and all ratepayers are the beneficiary of those services provided.
So in all this I see nothing threatening to rooftop solar. What I see are opportunities for solar, batteries and demand management to have an even bigger impact to the benefit of all ratepayers.�
1/1/2015
guest What you, Fog, and Mule don't seem to understand is that there is no more capacity to sell tranches with high bond ratings. SCTY can no longer sell enough bonds and ABS at high enough prices to make it worth selling bonds at all. Yet every new install requires more cash than they can sell bonds to cover.
It doesn't matter that 99% of payments are being made by homeowners if the market won't lend you enough cash to install the systems. Reducing the rate of expansion won't be enough.
The balance sheet doesn't look that bad. They have some nice tech in use and in the pipeline. But they have few options to use it and the markets (both bond and equity) have figured that out.�
1/1/2015
guest Yes, and the CPUC plan is to phase TOU in for new solar customers so they use batteries and self consume in the evening. There will be no aggregation by solarcity because there is no battery capacity available to aggregate. PUCs will make sure electricity is self consumed through TOU pricing. The whole reason the duck head exists is residential electricity demand in the evening after sunset.
As the poster from OZ said, Tesla Energy looks to be in a good position with these changes. Solarcity not so much.
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SBENSON has tried to explain this squeeze, but with little success apparently. The fact that this condition exists suggest that they are not covering the expense of their growth through sales, which means they are undercapitalized for their size. The additional SCTY stock sold in 2014/15 was owned by the original investors as well as founders stock, and did not increase company assets.�
1/1/2015
guest
Facepalm... I rest my case. Please, all, read here on previous pages of this thread, or anywhere else about DER aggregation, demand response in the wholesale market to actually understand the dynamics of what's going to happen with Solarcity in the coming years.
Gridx webpage also is a great place to critique/support this approach as well.�
1/1/2015
guest Good points. The 2015 shortfall in DevCo CF was about $821M on 870 MW inatalles or $0.95/W. Average cost for year was about $2.88/W. So reducing coat to $2.25/W would have glosed the gap by $0.63/W, leaving a gap of $0.32/W or $278M. Had the MyPower ABS Com a month earlier, that gaps would narrow to $94M.
There is a timing gap between booking and installation. I thinknit is about a quarter. So the sales costs for Q1 2016 hit cash flow in Q4 2016. Given that Q1 MW installed will be about 200 in 2016 and was 153 in 2015, I figure that this growth implies a sales cost carry of about $25M. That is, DevCo debt needed about $25M more to cover this timing issue. So it seems our gap of 821M can be whittled down to about $68 by reducing cost per Watt, getting better timing on ABS issuance and leveling out growth so there is not a sales cost carry. The big thing is getting the cost down. With that DevCo CF starts to get pretty managable.�
1/1/2015
guest Solar systems produce the lion's share of their energy during the day when most folks are at work. Since most homes will use the least amount of power when the residents are away, the excess power produced during this time may stored to batteries. Algorithms can be written for the inverters/controllers to optimize power flows. I would even go so far as to suggest they will updated via "over-the-air" updates. PUCs can certainly change TOU schedules, however intelligent control of power flows will be easily accomplished. My point is, we have the technology.
The strategic alliance between SolarCity, Tesla and SolarEdge is positioned to disrupt the utility business model.�
1/1/2015
guest Yes, it absolutely matters that 99% of all payments have been made "on time" because that's the very foundation for which to evaluate a good investment within the capital markets. This is how investors get paid, so even if Solarcity stops functioning, the deployed assets are still churning out revenue regardless. Try comparing this to mortgage or vehicle markets and, thus far under its small/limited exposure, the solar payments are performing much much better, highly competitive in the capital markets. As the solar assets gain time in along with scale(which both are happening with Solarcity assets) it will become even more differentiated as well as compelling to the capital markets. So, it matters a lot.�
1/1/2015
guest Can we talk about normal SCTY items rather than reacting to arbitrary spray? I mean....the Calif PUC declaring TOU war on solar customers? That's not something that requires anyone's attention or discussion.
SolarCity to Use Tesla Batteries for Project in Hawaii�
1/1/2015
guest You might take a look at slide 7 in the Q4 2015 Review. Asset financing for the year was $2.73/W. This comes quite close to covering the full cost of 2.83/W for the year. So about $0.10/W was left for shareholders to cover from other sources. Meanwhile the total value for the year was $3.77/W. Minus cost of $2.83/W, this is a gain of $0.94/W for which shareholders kicked in $0.10/W to close the asset financing gap. So this is actually not bad for what it covers, but it misses other stuff that make cash flow more challenging. Asset financing covers all but 3.5% of the asset financed.�
1/1/2015
guest
If you did understand the concepts, you would be able to take a solar user and explain specifically how that customer would be aggregated by solarcity under a TOU rate scheme. Of course you will not post a coherent explanation, because their is none.
Maybe another post about "disruption"?�
1/1/2015
guest Another tech company issuing $12B in debt this week. Who is this AAPL and should we be concerned about their model? Are profits waning? The next Nokia? How would a pending bankruptcy drag down Samsung?
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This is what happens when you feed the troll. If you can't resist replying to FUD spray, you should consider the Ignore feature.�
1/1/2015
guest I know we can't talk about this but I assume we can post quotes and links:
http://thinkprogress.org/politics/2016/02/16/3749765/bernie-sanders-nevada-solar-workers/
�
1/1/2015
guest electracity has been right for far longer than any one of the residents here, including me. Originally I fought him/her hard. I lost my shirt and he got to keep his. If he was infact a short all this while, he even made a killing. Diss him out at your own peril.
The things that we are discovering now, like: Retained Value is a manipulated number, cash flows are unsustainable are all the things people like Chanos understood far earlier. Show some respect to the other side if you want to not lose your undies.�
1/1/2015
guest Note the emphasis on jobs. Inefficiency creates jobs. Concern about the environment and spending tax dollars wisely does not include rooftop solar. Nevada could more the twice the solar for the same cost doing large ground mount installations. They certainly have the empty land. They also have wind in the summer, which is may be even less expensive than utility scale solar.�
1/1/2015
guest Please post here if anyone finds a way to buy these bonds. I haven't made up my mind if I want to buy them but it's a good idea to keep an eye on them.�
1/1/2015
guest Nonsense. Your posting includes actual analysis, this troll is throwing FUD at the wall to see what sticks. While I may find your analysis is irrationally pessimistic on solar and far too linear in nature, at least it's REAL and seems to come from sincere analytical opinion. It has been a fantastic base from which real constructive conversation can be built.
This poster's content has essentially consisted of "I'm short, and if you're not you're crazy". That's not adding value, that's just trying to push sentiment without adding anything to the thread. All it does is clog things up, bury actual topics and derail any momentum of actual conversation.
Just my opinion. As I mentioned, there's an Ignore function.�
1/1/2015
guest I have solar and been on TOU rates for several years. California is installing lots of Utility level batteries and I hope it comes online soon enough to mitigate that 6pm to 8pm ramp up. I do all my charging and water heating after 10pm at super off peak rates. TOU rates have incentivize me to load shift.�
1/1/2015
guest California wants batteries behind the meter sooner rather than later, which is smart. They don't want to run into the situation of having very low sunny day prices and then a massive spike in the ducks head each evening in the summer.
The context of batteries in this investment thread is solarcity's ability to aggregate those batteries and sell the power.�
1/1/2015
guest �
1/1/2015
guest I think we're looking at the turning point for IOU's ability to push these PUCs into acting against solar customers and lower costs in general. The only reason they can get away with these things in Nevada/New Mexico/Arizona is the public's lack of understanding. How long will that last? California consumers are ahead of the game on renewables and understand cost, therefor the PUC doesn't have the political capital to make such moves, even today. Look at Pennsylvania, if there was ever a state that should rule in favor of protecting natural gas plants it's PA. However we just locked in pure retail net metering and our legislature is every bit as backwards as Arizona.
What happens when solar doubles and then doubles again in short order? A ton of these libertarian semi-conservative types are flooding into solar because of the independence, cost savings and "zombie grid collapse" paranoia. Those folks will occupy federal buildings if the CPUC tries to game the system for IOUs, that's much worse than the hippie/retiree outrage they're facing today.
Once solar more mainstream all these concerns go away, I imagine that's why SCTY is willing to blow through so much cash to get it up to speed. Every doubling of installs multiplies the industry's political power by 10.�
1/1/2015
guest I am inclined to agree with you. I still encounter some libertarian types that continue their resistance, but the free market savings are hard for them to ignore.�
1/1/2015
guest The minute the cost structure works in their region, these types will absolutely dive in. They have that German mentality of making obvious moves when they obviously make sense.
I went to an installer's info session in the PA suburbs on a 10 degree morning this past Saturday and was shocked at the turnout. And all this was BEFORE the new statewide net metering was locked in. The composition and size of the crowd were not what I expected. Have tons of insights from this installer's group buy project and will share when I have my thoughts in order. Lots of SCTY significance both good and bad.�
1/1/2015
guest Made me laugh. Seriously, the only reason why utilities exist as profitable monopolies is because of government protection. Back room deals are the best way for them to hold their cosy political situation. I believe that utilities are making a fundamental political mistake by antagonizing rooftop solar. This pulls all their backroom politics into the public eye and politically activates citizens across the party spectrum to oppose them. They are destroying the political ambivalence that forms the basis of their franchise.
As political support for the utilities crumble, their investors will find that they are sitting on piles of impaired assets.
For example, right before Buffet bought NV Energy, they got the legislature to pass a bill forcing them to shut down coal plant and replace them with gas. But the bill had the provision that NV Energy could continue to recover the undepreciated capital on these plants as an ordinary expense. When the bill was passed Buffett was delighted to buy up the whole company. He knew that NV Energy would profit from both the gas plants and the closed coal plants. This was a huge boost to profits on the backs of ratepayers. So here's the problem. This would never fly in a competitive market. It only works by government fiat. In a competitive market, you can't just keep billing customers for plants that have ceased operation. Moreover, auditors can let you value those assets as unimpaired on your books. Under going concern valuation, a business must write off any asset that no longer has any operational value. So NV Energy is sitting on impaired assets, but through extraordinary political privileged they are allowed not to have written it down immediate upon impairment. The only thing that makes NV Energy a going concern is political favor. Once this is lost, they will be subject to massive writedowns.
I suspect this is true of most utilities. Yet they have bullheaded sense to antagonize homeowners with solar.�
1/1/2015
guest Please read the gridx site. Get informed.
Aggregation is a service to the grid. They are selling a service. Thousands of Solarcity customers can either drop off the grid for a period of time, have a specific mix of customers instantaneously put energy on the grid when the grid requests it... All to manage loads across the grid to flattened spikes, control frequencies, and overall create higher reliability, reduce stress on the grid, increase life cycles, and lower overall costs and capital investments...
This service (controlling thousands of lease/ppa Solarcity systems)will come at a value in the whole sale market which will be measured by dollars for a specific unit of energy per month or year.(and thst can energy taken off the grid or added to the grid, all in the requested action on behalf of the specified stakeholder).
the value of this service is split 50/50 with each Solarcity customer, ultimately reducing each customers cost/kWh paid to combination utiltiy/Solarcity(net cost). Tou arbitrage is a separate service Solarcity provides to its own customers. This all apart of Solarcity software platform that will take advantage of 13 separate value stacks that are desired by all stake holders(utiltiy, iso, retail customer). if you understood that you'd know the difference between tou and aggregation.
Again, I ask this of you specifically since you too seem to have an inside track on info... What will be the actual tou rates for California NEM 2.0 since no one else knows officially yet? Please tell us. I'm all ears... And silence... As per usual.�
1/1/2015
guest LEAP prices finally drift down a bit and the stock jumps 11%, this is getting really annoying.
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Maybe save this thought for a boring downtime in mid-March, but......what if SCTY continued to drift in the $20 region and ended up being taken private and bought by a nutjob like the Spirit Airlines CEO. Lets say he had the buyin from most CA SCTY customers to aggregate is some way, what kind of havoc could he create with installing battery packs in each home? Take the entire entity offline for 20 minutes, then dump all solar and battery back on the grid at once? What does that do if SCTY is 3x as big in CA?
Your comments above bring up a TON of ethical and security concerns. What kind of regulatory body needs to be in place once all these folks are even theoretically able to aggregate and have a large combined footprint. Hacking that could easily crash the grid, no? Wouldn't that be easier to do that than hack a portion of the actual utility and get past all the safety switches?�
1/1/2015
guest Read my post earlier yesterday on grid security... NREL is working on that right now.
According to Peter rive, customers that get solar+storage either sign or don't sign a 50/50 contract to allow their system to be apart of the network of systems under demand response in the wholesale market.
Remeber, each system is apart of a larger whole. That's the power of aggregating, coordination between thousands of systems for the larger grid needs. The whole purpose for a consumer is to lower cost per kWh for reliable personal use when you need it. Everything Solarcity is doing is positioning itself to meet those needs. Security included, just as you use the Internet to purchase goods and services, security/trust is a cornerstone for the entire thing to work and everyone involved is keen to ensure that happens from the start, especially the department of energy. Our current grid system is far more susceptible to security breaches then the distributed grid as it becomes more sizable. As with designing anything, mitigating risks is just apart of what you do, no different here and you can read about it in the current certification processes on going.
again, aggregation is a service, benefit to the larger grid, for all grid customers, solar& non-solar alike. Solarcity and its customers will paticipate in mass to responding to the needs of the grid. It doesn't mean all systems get called to action at the same time, it means Solarcity will be the one stop shop for the grid to call on to get what they need. Solarcity will then deliver that need on behalf of all its customers signed up to offer their specific system for control. The value to this individual customer signing up to be apart of it is cheaper electricity for personal use that otherwise should not be available.
again, each individual system will have software from whatever company tesla, solaredge, etc) but Solarcity owns the aggregation software that manages the entire grid service. That grid service unlocks value not available in isolation of just owning solar+storage. In addition, Solarcity already has a significant competitive advantage to all other competitors since it has 1/3 of all rooftop solar installs in the United States and about 1.7GWs of lease/ppas under management as of the end of 2015.
as a matter of fact, Solarcity could monetize the entire asset and still make money from providing grid services when Solarcity demand response happens in California. They get 1/3 more upfront cash, receive a service charge for providing grid services, then receive the asset back after 20 years and have a substantial cash flow off the remaining 5-10 years of useful life of the system. So, we haven't even started yet with realizing the tremendous value of Solarcity as a company. Not even close.�
1/1/2015
guest I don't have any insider information. I have an understanding of basic information that is well understood by regulators and organizations like CASIO doing smart grid development.
Continue your googling and read about CA rule 21.�
1/1/2015
guest FYI/FWIW, Here's what Fidelity's been paying me to loan out my shares (for nefarious shorting purposes I'm sure):
TSLA
01/21/16 2.00%
01/22/16 2.50%
02/01/16 2.00%
02/17/16 2.50%
SCTY
01/25/16 4.00%
01/28/16 5.00%
02/09/16 6.00%
02/16/16 10.00%�
1/1/2015
guest http://fortune.com/2016/02/16/solarcity-tesla-batteries-hawaii/
The utility will use the batteries to generate power at night, when the sun goes down between the hours of 5pm to 10pm, and when the solar panels are no longer producing energy. The utility will pay SolarCity 14.5 cents per kilowatt hour over a 20-year contract for the combined solar and storage project.�
1/1/2015
guest If I were to guess the price action today is due to (nearly) securing some sort of cash. Asset sales or some thing else, which will help avert near term cash crunch.
If indeed this is the case, the best bet for longs is to sell the news. I will consider going short at that time, with puts covering Q1 ER.
Whatever the cash infusion is, will be most likely one time in nature. Won't help much in the medium-term. We got such cash infusion in Q4 with the silverlake deal. The balance sheet and cash flows still look like sh!t.�
1/1/2015
guest Fidelity has a major chunk of SCTY stock, don't they?�
1/1/2015
guest I'm looking at LEAP prices coming down this morning before this runup and will sit on low orders until they execute on a drift back down.
[UNBIASED POLITICAL PROJECTION]My only concern is that people are starting to see Bernie will likely take Nevada and is on his way from a 5% to 40% chance of nomination.[/UNBIASED POLITICAL PROJECTION]
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There was a Fidelity SEC notice last week, but I assumed it was on behalf of a client. The language said something about "great than 5%", didn't read it.�
1/1/2015
guest scty 22.08 +3.71 (20.20%)�
1/1/2015
guest And Silence continues
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its got to something right?�
1/1/2015
guest I wimped out at 19.80.�
1/1/2015
guest I was talking about that a year ago. When a single entity can aggregate DERs at significant scale, it has to be taken seriously at the negotiation table. The ability to mobilize GW of power make you quite relevant to the wholesale market.
There is an interesting split between FERC and PUC oversight. Interstate wholesale vs state retail. But when you can swing a GW, it won't matter where you stand. FERC will take an interest. So I really do think that scale is the issue here. An aggregator with a GW or more has material impact on interstate wholesale prices. Under FERC regulation all wholesale maket participants are entitled to the wholesale price. So an aggregator will be able to extract wholesale prices for providing grid services.
So SolarCity has 1.7 GW of solar assets under contract. Add to each customer a battery and/or demand management device such as Nest. Make all these devices networkable. Then SolarCity is sitting on about 1.7GW of aggregated dispatchable power. This scale makes them a player in the wholesale market across the country. If a certain PUC tries to block them from participating in a wholesale market, SolarCity can appeal to FERC.
Suppose SolarCity wants to sell aggregated solar sourced in Nevada to California. Does comes under FERC jurisdiction? Can the Nevada PUC block access to an out of state wholesale market? This has not been tested yet, but it could be a significant change of game.�
1/1/2015
guest Even most of the non-technical people here understand why TOU is a problem for any company planning to aggregate kWh from behind the meter residential batteries. I have explained the issue in previous posts. Ask nicely, and I will explain it to you as if you were a five year old.
I've also referred you to CA rule 21 to show you that the vast number of inverters on the future grid will be required to provide support services for free.�
1/1/2015
guest What? The last two ABS offerings in this quarter were not a big enough cash infusion for you? I thought you said net cash flow was not your issue.�
1/1/2015
guest (tap,tap)is this mic on?... Oh flip the switch... Okay got it (speaks into the mic)
"And the silence continues."
(mic drop, walks away)�
1/1/2015
guest Two? I thought only one $185mln MyPower deal. The other one for $57.45mln is still in works (underlying cashflows represent $76.4mln but the ABS is for 57.45). In Q4 there were no ABS deals but still non-recourse went up. So my understanding is that assets simply move from one non-recourse facility to another. So in a nutshell how much this will help avoid new recourse debt is anyone's guess. Overall even if a new cash infusion comes in say around 200mln, that will buy just another quarter. Unless the business model changes, this is a game of surviving one quarter at a time. One misstep - game over. More importantly I think Q2 guidance will come in quite soft at ~200MWs and they might simply abandon the yearly guidance. That will plummet the stock, as market seems to understand guidance more than the underlying cashflow dynamic.
Also, we have to see how the $57.45mln ABS pricing comes out. I am not optimistic on that one. Bad pricing on that deal will blow another hole into the long thesis, if not a death knell.�
1/1/2015
guest I'm still fairly sure the $185M one was less than half MyPower loans.�
1/1/2015
guest Care to show some math?�
1/1/2015
guest I've got a question for you. What is the effective yield on the SCTY bonds? Now what is the effective yield on the AAPL bonds?
Hint: The SCTY bonds have been trading so low that the effective yield has been about 24% until the last couple of days when it bounced up to 20%. Now tell me the effective yield for similar bonds currently being issued by AAPL. Don't accuse anyone of "going silent" until you answer this.
There's a big difference of course. AAPL doesn't need to issue bonds to keep the lights on. They're just doing it to boost the stock price slightly. SCTY by comparison would stop breathing without continuous new cash. Then again it wasn't my idea to compare these two. It was yours.�
1/1/2015
guest TSLA up $11 today as well. No way this is just on the Hawaii news, right? That's been common knowledge since forever.
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I was not implying that AAPL was in financial difficulty. It was a joke.�
1/1/2015
guest Of course - that was your whole point. You were trying to say that just because a company issues debt doesn't mean they are in financial difficulty. But you didn't answer my question. Please don't make somebody suggest that the "silence continues."�
1/1/2015
guest For those that are curious, who do you think is included in the working group in California rule 21? Anyone? What was that? Solarcity? No, they can't be involved in that. No way they've been involved since the start. Not a chance.�
1/1/2015
guest You lost me. Is this a bad day for jokes?
If you want to talk bond rates it's been detailed for about the last 30 pages of this thread. You would see them if there weren't buried under 20 pages of electracity trolling. A perfectly nice thread roon'd!�
1/1/2015
guest Can you guys please all stop replying to or commenting @electracity's posts so we can get back to a more reasonable S/N level?�
1/1/2015
guest You're right. I pledge to stop replying to him. And that pledge will be in perpetuity.�
1/1/2015
guest The technical people at solarcity seem quite bright, and they are certainly always looking at how they can add value. I don't recall solarcity recently making any claims of vast added value in future consolidations of customers.
The solarcity PPA price in Hawaii of $0.145/kWh for solar plus battery explains future value. Do battery owners choose 1) to get paid 7 cents/kWh by solarcity, or 2) to save 35 cents/kWh by using the stored electricity? I can do the math for you if it is a challenge.�
1/1/2015
guest Does your advanced math factor in if it's the customer or SCTY who pays the upfront cost of the battery? It's not like it just appears magically in the garage.�
1/1/2015
guest You've obviously been howling about this for a while now and I get it to a degree, but I'm trying to figure out what the picture look like 3 years from now in say.....California. If I work within an SCTY PPA and agree to whatever aggregating scheme they are pushing at the time, will that potentially get my costs down similar to a straight financed local install? In other words, will I really make that much more than if I were just net metering under the newly announced CA rules? Fundamentally I would be inclined to say "perhaps".
Say I buy solar from a local installer and a mainstream battery pack, but not one that SCTY typically installs....think I will be able to "join" the SCTY aggregated group? If the SCTY grid gateway/safety hardware is robust, any solar(or other) producer should technically be able to join in, no? Do you think there will there be a ton of competing aggregators? IF successful, SCTY will clearly have massive advantages, just trying to poke holes.�
1/1/2015
guest Solarcity will have to get the customer to pay for the battery. I was starting from the assumption that the battery already existed in some future world.�
1/1/2015
guest Says who? In case you haven't figured it out a huge part of the SCTY businesses model is to allow customers to go solar, presumably soon solar+storage, without all the upfront costs associated but instead locking them in PPAs over time.�
1/1/2015
guest Says solarcity. They will do a PPA but the customer pays cash for the battery.
But certainly if you want to make stuff up, this is the place to do it.�
1/1/2015
guest Not in Hawaii they don't...
�
1/1/2015
guest Probably a Mypower loan for off grid.
For their core business, if they add the value of the battery to a PPA, the amount will exceed the prospective customers existing electric bill. SCTY salespeople can't sell that deal.�
1/1/2015
guest Can you guys quit clogging the thread with nonsense?�
1/1/2015
guest Are you saying that the sixth ABS will be issued in Q2? That would be fine with me. I think it is good to spread this cash out.
I still get the impression that you see this company living hand to mouth and could fail in one bad quarter. This sounds like basic solvency is still your issue.
Personally I don't care about the 1.25 GW goal. I'd be happy with 800 MW. Tracking cumulative installation, this would take them from 1.7 GW to 2.5 GW, an that is respectable growth. Getting to 2.9 GW would be fantastic, but not at the cost of weakening their financial position. So I would prefer to end the year with more cash, more working capital, and only a $400M decline in DevCo CF (less than half the $821M from last year). So if they did all that and got to 25 GW cumulative, I'd be quite pleased.
I'd also like to see about 250 MWh of storage installed. 140 MWh residential (20k Powerwalls ) and 90 MWh commercial (900 Powerpacks) would bring in another $120 M in revenue (not all recognized in first year). I'm not sure is Tesla Energy is upto supplying this. If the supply were there, they could double or quadruple this. As they bring on the batteries, I think the market will positive respond. This will be a nice expansion of their current business model.
I don't see their current model as broken: I see it as incomplete. So I am eager to see them offer much more. It will be much more fun when we are trying to guess how many MWh they will sell each quarter.�
1/1/2015
guest I think it will be pretty easy for SolarCity to add a 7 kWh Powerwall to a 5 kW PV PPA for about 3c/kWh. That is you'd have a choice of
12c/kWh PPA for 5kW solar only
15c/kWh PPA for 5kW solar plus 7 kWh Powerwall
Only about a quarter of the power produced will be stored, so the incremental cost of storage is diluted by the total amount produced. The incremental cost per kWh stored is around 12 cents. This is the incremental cost that makes people dismiss batteries. It may be the right marginal value viewpoint for microeconomics, but consumers do not value all option that way. When the price is spread out over all the kWh the system produces, it is really a modest cost for a system with superior performance.
So I think uptake of the Powerwall option will be pretty strong. Many consumers will feel better about going solar if the system includes storage, and there are many reasons for this.
Poll. Suppose your utility rate is 16.5 c/kWh, and SolarCity offers you the PPA options below. Which do you chose?
A. Solar only for 12c/kWh
B. Solar plus Powerwall for 15c/kWh
C. Grid only for 16.5c/kWh
Personally, I know my wife and I would feel best about option B. We almost always choose B.�
1/1/2015
guest B, yes. And I do think SCTY will soon offer this, a true no-money-down solar+battery product financed fully by a PPA. Fwiw I'm not a fan of the MyPower loan product with its escalator that basically makes it a pretty expensive regular loan which is marketed as more of a PPA (which it's not).�
1/1/2015
guest You cleverly skipped an option
Add: this pricing is unrealistically optimistic. Management consistently said they price 15% below utility (without storage of course).
So the correct options are:
A. Solar only 14c/kWh
B. Solar plus powerwall 17c/kWh (only 3c/kWh I have to see it to believe it)
C. Utility 16.5 kWh
D. Get your own solar for far cheaper, no 20 yr contracts, no bs�
1/1/2015
guest What the value proposition for choosing B? What do I get for 3 cents?
�
1/1/2015
guest http://www.renewableenergyworld.com/articles/2016/02/when-is-energy-storage-eligible-for-the-30-percent-itc.html
maybe this had something to do with stock movement today...�
1/1/2015
guest It is was about storage.
Why did SEDG move only 1c ?
It is a key player for integrating batteries with grid / solar panels.�
1/1/2015
guest TSLA and SCTY up big on zero news. I guess something will come out tomorrow, I'm not buying that people care about what happens in Hawaii.�
1/1/2015
guest SEDG already was up a lot this week.
I don't think we know why SCTY moved.�
1/1/2015
guest First, Solarcity is trading at no growth levels right now, so it is extremely compressed value as compared to SEDG.
Second, 30% ITC covers both solar+storage together, so solarcity's solar+smart inverter+storage as a product gets the 30% ITC. Batteries would really see a spike in sales(from basically zero sales) from Solarcity over the coming year and beyond because of it. Remember tesla sells it at full price, Solarcity buys it at full price, then receives a 30% tax credit on entire system costs(panels, inverter, storage and install costs combined). Now that tax credit will be monitized through tax equity partnerships.
Not sure inverter companies would see a big change in orders, at least not as big of change as battery companies in terms of sales growth. Batteries sales are very small compared to inverter sales right now, however, with strong ITC with solar now, then they could experience much steeper growth curve now with ITC.
overall, a clarification of the irs rules just gives Solarcity more certainty with what benefits they get from ITC and how to fully utiltize those benefits to deploy assets.�
1/1/2015
guest 
Spring 2016 is coming up, 'overgeneration' may have some precise meaning, but in about 3 months, there will be occurrences where midday electricity is the new off peak.
but this is a spring effect, not a summer effect. So the lowest price offpeak for spring TOU is very different to lowest price offpeak for summer TOU.
whats a TOU likely to transition to something similar to SCE TOU EV-A as a proxy
https://www.sce.com/NR/sc3/tm2/pdf/ce114-12.pdf
midday offpeak may be worth 8cents per kwh as a full NEM or perhaps 6cents/kwh including some local distribution costs.
sunset peak may cost 17 cents per kwh. 17c - 6c = 11 cents, so by absolute $$ its a more intensive change than Nevada's decision, even though it will still be a 'full' Net Metering regime.
is this obvious?
what if endusers/voters don't like TOU changes based on seasons or whether the day is sunny or not?�
1/1/2015
guest SCTY up because Elon bought another whack of shares.
Musk buys more SolarCity shares, sending the stock soaring - MarketWatch�
1/1/2015
guest In addition to the irs news, Pennsylvania put forward legislation today to open up PACE to 3rd parties(like Solarcity), 17 governors(including Nevada governor) signed a renewable energy accord, Solarcity has already accrued 55000 signatures required to bypass Nevada PUC/state legislature and undo net metering changes through referendum, and news about tesla energy storage selected for Kuaui utilty project(which could be further hightened by the irs news).
Im sure the fact Elon bought a load of shares a couple days helps too, but that was yesterday's news. Maybe we'll learn he bought some more today. Volume was pretty huge today, so maybe some big buying was happening on his behalf(or someone else?).
sunrun was up big today as well so it might be more of a TASC news day event of some sort. I think maybe the news of the referendum having significant momentum... Forgot to mention nv energy created a PAC yesterday which now has a challenge to the referendum in the courts. Funny how they hide behind a pac with "citizens" in the title. What a joke. Not going to fool anyone. However, Florida utilties have tricked a lot of people in thinking their pac is the same one as the solar industry PAC so anything is possible...
its hard not to notice the big volume in scty today, literally 3X daily average. Tsla didn't have that volume nor did sunrun or anyone else among the publicly traded companies in solar. Pretty significant note on scty today.�
1/1/2015
guest SolarCity Statement on California Public Utilities Commission Proposed Decision on Solar Net Metering
SAN MATEO, Calif., Dec. 15, 2015 /PRNewswire/ -- SolarCity CEO Lyndon Rive released the following statement on the Proposed Decision on solar net metering policy released today by the California Public Utilities Commission:
"We support the PUC's proposed decision to continue the state's successful net metering policy. This is consistent withCalifornia and Governor Brown's leadership on clean energy and recognizes the important role of rooftop solar in accelerating our transition to a clean energy economy and providing customer choice.
The proposal to require new solar customers be on time-of-use rates is concerning. As we saw in 2007 when time of use rates were briefly mandated for solar customers, they don't work for everyone who wants to go solar, and would reduce the motivation for installing solar. While these rates can send helpful signals about when to use electricity, we urge the PUC to closely examine the impacts of mandating time-of-use rates."
Parties to the CPUC's net metering proceeding now have 20 days to give feedback on the proposed decision to the Commission, after which the Commission will vote on a final decision.
TOU stays in, and Lyndon forgets his concern:
SolarCity Statement on California Net Metering Decision
SAN MATEO, Calif., Jan. 28, 2016 /PRNewswire/ -- SolarCity CEO Lyndon Rive released the following statement today about the California Public Utilities decision on net metering:
"Today's decision by the Public Utilities Commission will empower Californians to contribute to a cleaner, more affordable, more resilient, and more distributed grid. It will give us the time to prove distributed energy's full benefits to the grid and all ratepayers, while continuing to deploy clean energy and creating jobs today.
"Since December we have seen a paradigm shift on the world's approach to electricity, with the Paris climate agreement, extension of the federal Investment Tax Credit, and now a decision from California that will continue the successful net metering policy while ensuring rooftop solar users begin to provide valuable services to the grid. This new paradigm is one in which our most important goal is to deploy renewable energy as fast as possible. SolarCity looks forward to working with everyone to exceed the world's expectations on how fast we can do it."
�
1/1/2015
guest Of course you can shop elsewhere, but you'll remain in option C until you decide.
Once they add the storage option, they will want to revisit how they price relative to the utility. Do you really think in makes sense to price the battery option above the utility price? I don't. I think it needs to be about 10% below.
BTW, $4000 � 0.7 � 5 kWh/cycle � 5000 cycles = $0.112/kWh storage cost. Suppose 5kW generates about 20 kWh/day and 5 kWh gets stored. So $.112 � 5 � 20 = $0.028 is the incremental cost of storage on a PPA basis.
Of course, SolarCity does not have to use that price differential in their pricing, any more than they must price 15% below utility which has absolutely no bearing on their cost or need for profit. So maybe they price the solar only option just 2 cents below solar with Powerwall. So is someone goes barebones, it's at a higher profit margin. Thus,
A 13 c/kWh solar only
B 15 c/kWh solar plus Powerwall
C 16.5 c/kWh utility
With this price line up, solar with Powerwall is 9% under utility and solar only is 21% below utility. Given the narrow price difference between with and without Powerwall, I think uptake of the option would be very high. But it helps people sort out what they are really looking for in solar. If all you want is to save money, then you go with A or shop other solar providers. So for this price sensitive segment 13c/kWh may not be enough savings to convert the sale. Essentially you loose too many sales to other solar providers is option A is priced too high. People who want more control over how they use the power and value the reliability and flexibility that a Powerwall adds will not need a huge savings over the utility rate. So a 10% discount to utility may suffice.
So one thing that becomes clear about adding the battery option is that the value proposition can be varied to meet the needs of multiple segments. Powerwall represents a premium system while solar only is an economy system. So far the only set of options SolarCity has offered were just financing options. It is probably a better sales process to focus more on system options than financing options. When a premium options are offered it helps consumers figure out what they really value in an energy system. The net result is better sales efficiency. You get more revenue per sale from consumers who value premium options and you can convert more sales from those needing a lower cost system.
One of the big mistakes that people make in marketing is assuming that all customers are looking for the same things, and typically it is the marketer's own consumer values that are projected onto the typical consumer. It takes much more talent in marketing to appeal to consumers who are different from yourself. This is why we get into endless debates around here about whether a PPA is better than an outright purchase of a solar system. What this bold down to is individuals projecting their personal values as consumers and arguing why everybody else is just wrong. But in marketing, what matters is what sells. And what sells is different for every consumer. SolarCity is not going to offer a stripped down system with the cheapest components at every turn and with financing left to the customer to figure out on their own. Is this a bad marketing approach? Not at all, there are definitely consumers that want a stripped down system. And such systems are in fact the cheapest per watt. I believe that SolarCity is not interested in this segment because the margins are too thin, and using the cheapest components even for those who request them can reflect badly on the installer. So if you want to serve a middle to premium market, you need to maintain certain quality standards in all systems. So this were I would position SolarCity. They are quality solar service provider focused on middle to premium segments. Offering Powerwalls will help differentiate SolarCity as a premium solar provider. So within that range of segments it's good to offer both standard and premium packages.
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What do you think you would be getting? What would you be willing to pay for it?�
1/1/2015
guest first choice is option D,
second choice is probably option E, cut ties to the grid and have a home backup generator in addition to a solar + battery. Hawaii has crazy expensive electricity because it is diesel powered + grid costs + retailer on costs. Generally I think a small amount of grid defection is good for the grid, but in Hawaii's case, its ready for mass defection.�
1/1/2015
guest This is interesting information, but there is a big difference between TOU and the low feed in tariff in Nevada. The important distinction is whether the same price is used for both buying and selling (at the same time) or whether there is spread between buying and selling. Why does this matter? First it assures a basic level of fairness. Where there is a spred the utility is trying to make a profit off of the transaction, which is the intent in Nevada where the utility believes it is entitled to recover certain cost from solar owners. The second reason is more important. Buying and selling at the same price sends the same price signals to all customers in the same rate plan so that demand can properly respond.
So the duck curves basically about because of a bad pricing mechanism that does not signal to consumers the current cost of production. So when retail customers can all buy and sell at the same rate and that rate truly reflects the current costs of pruduction, then demand will adjust. Using Nest meters, smart EV charging, smarter refrigeraters, clothes driers, etc. will all seize upon opportunities to buy more power when it is cheap and buy less power when it is pricey. Solar owners with batteries and smart inverters will be right theRe too, making the most of price fluctuations. Until there is not enough price variation to motivate demand responses, that is this sort of pricing plan will level out the curve till no one cares. For example, if you had reliable daily max prices at 17c and reliable min prices at 6c, someone with a battery will charge at 6c and discharge at 17c, thus they would collect 11c per cycle which may oe may not fully pay for the use of their battery. Well is this attracted lost of batteries, the max would fall a few cents and the min rise a few cents. So maybe the spread from 9c to 14c no longer motivates people to use their batteries this way, or even to buy a new battery. Batteries, of course, are just one device that can take advantage of these variations. If I'm going to dry my clothes, I'd be smart to do that at the minimum daily price, right? Or at least I'd avoid the daily max. What does it cost me to do this? Not much, but all these little actions flatten out the price, the spread from daily max to min will get trivially small.
So this is a public good for all, not just a means to recover costs from solar customers in Nevada. What Nevada is doing does nothing to change the consumption behaviors of non-solar customers. It's trying to keep all the old pricing inefficiencies in place so that electricity is expensive for all, but profitable to the utilities.
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That's a good point about the option of going off grid. I think SolarCity does well to position both option A and option B as a potential pathway off grid, not that all folks should go there, but that there is value in taking steps that open off grid as a real option. The step from B to off grid may be as simple as adding a generator. It's would be good to know that SolarCity would support you in that.�
1/1/2015
guest
sigh, rational people can have differing ideas, particular of fairness.
My state labor government (ie left of centre) has reduced the solar feed in tariff even lower than before, and added a solar meter reading cost. Why, because of fairness. If feed in tariffs are based upon costs avoided, then the incremental cost avoided to the energy retailer is very close to the wholesale price. And solar customers do result in more phone help desk time (useless energy retailers are woeful)
Whether its California with TOU pricing or Nevada with wholesale pricing, both are reflecting the same issue, a 24 hour rate applied to a retail feed in tariff is not a true representative of its value to the wider grid once a meaningful supply on the grid comes from solar.
They are really really very closely related, the difference is primarily one of optics, but the core basis is the same.
We don't have utilities like in America, so I don't have a utility bogeyman to see as evil.
both the energy suppliers (power plants) and the retailers are in a competitive environment, no room for excessive profits.
- we have energy suppliers (formerly government power plants sold to private investors, some new plants are still built/owned by government)
- transmission/distribution by a monolithic government corporation
- private retailers who do nothing except run a help desk and (charge around 25% of the bill) , (yet even their costs are high enough that not all regions have private retailers because there was insufficient revenue from poorer regions)
the monolithic government corporation owing/operating the transmission/distribution is not about profits either, but maintaining service so that the current government (whoever it is) does not lose votes due to unnecessary blackouts.
repeat, once the electricity grid is vertically partitioned, it just falls out that feed in solar reduces the demand for power plant's fuel, but does very little to reduce cost for either the transmission/distribution body or the retailer. The retailer has negligible margin anyway, they only save on not needing to pay the powerplant for the energy, so its a wholesale price, not a retail price. The government transmission/distribution entity has negligible benefit from additional roof top solar, so they aren't giving money back either.
Un-subsidized roof top solar is now $1/watt installed in my country with electrician labour rates being the same as USA. That is today's reality of cheap Chinese production and an experienced labour pool of electricians. The USA may not have this yet, but it will come, particularly to the sun belt. Complete solar installs cheaper than the combined price of SCTY's marketing and financing cost.�
1/1/2015
guest Solarcity is creating the "God platform" of distributed energy...
A new kind of utility: Why SolarCity wants to be 'more than a solar company' | Utility Dive
"The interesting part is as the complexity of the network grows and you have more of these edges connected to the nodes, then you are really only limited by your imagination as to how you can provide value-added services on those edges, on those vectors of the network, instead of the nodes themselves."
SolarCity Has a New Plan to Make Distributed Energy an Integral Part of the Grid | Greentech Media
Californias Distributed Energy Challenge: Sharing the Data | Greentech Media
"But SolarCity also wants to use this data to help utilities, he said. �If they have some capacity challenges, we can identify those zones -- perhaps quicker than utilities -- and focus our assets there, and provide tailored grid services that can help them do their jobs better."
http://www.greentechmedia.com/articles/read/solarcitys-plan-for-tesla-batteries-share-grid-revenues-with-homeowners
But he did provide one metric for the value it could capture for SolarCity and its customers -- the rough estimate of $10 per kilowatt-month that California utilities pay for resources and investments to maintain grid capacity.
�In their case, they procure capital equipment and then depreciate it,� he said. �With solar and a battery, you can provide what is a firm capacity resource.�
That�s why the value is presented as a �per-month� figure, by the way. That�s not an amount of energy to be sold to the system hour by hour and day by day. Instead, it�s a payment in exchange for a firm commitment to turn its fleet of battery-backed solar systems into a reliable source of power at moments of peak energy demand, when utilities and grid operators need it the most.�
1/1/2015
guest So are you saying that Australia used to have large well capitalized installer/financiers like SolarCity and then it just devolved into a bunch of electricians willing to work for next to nothing? You see the US solar installers used to be a lot of small outfits that could not offer financing. In deed that is how SolarCity began, but residential solar did not take off under that business model. It started to grow explosively with the introduction of PPAs. SolarCity started doubling annually until it has reached 34% marketshare. And the industry ad a whole has been growing at 40%. So apparently things just evolved differently in the US. I fail to see how the Australian experience has any predictive value for what comes next in US solar. Small local installers can be a great value, but they are not driving this market to grow at 40%. So I just don't see how a bunch of electricians willing to work for next to nothing are going to catch up with the market leaders. That's like saying that bunch local coffee shops with books to sell are gong to catch up with Amazon. Or wildcats are going put Exxon out of business. Maybe if you invent some sort of postapocalyptic scenarios, that's how things shake out, some kind of Mad Max world, but with solar panels from China. But otherwise SolarCity continues to lead.�
1/1/2015
guest Intel campus in Folsom unveils sprawling solar power carport | The Sacramento Bee
Yesterday, solarcity completed the biggest carport in the United States. Funny none of us caught it.�
1/1/2015
guest I think what was going on is they were trying to influence the decision in a way that would give customers a choice of net metering or time of use. Which obviously would be even better than mandatory time of use.
I also think we need to appreciate the fact that if SolarCity can make good profits in California with their TOU rates and the overall cost of electricity to public at least stays the same (indexed to inflation etc.), it will be very difficult for other states to argue against implementing a similar rate system.
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Again maybe a pretty stupid question but with increasing solar generation and decreasing battery costs why would A be cheaper than B? Do you think amortization of the battery will contribute that much? In a nutshell as a customer I'm providing a service to SCTY by "hosting" their battery. If there's no net metering the noon dip on the duck curve will get deeper and deeper and TOU prices around that time will be very unattractive. Looks to me with TOU in place PPA contracts for solar-only installations will have to change to somehow reflect this reality. If there's a battery involved this gives SolarCity a lot of arbitrage opportunities but they'll have to come up with a way to structure PPA contract that is comprehensible to the customer.�
1/1/2015
guest Continuing net metering as the price of solar falls shifts more and more costs to the 80% of the electricity buyers that can not add solar to residential. The solar supports may be loud, but solar pricing is a tug of war between the solar minority and the large majority. Plain net metering will likely not continue anywhere past low % solar installs. It hasn't continued anywhere once solar becomes a significant source of generation.
The road to batteries as standard equipment for residential solar is going to be bumpy.
I still want to know what I get for paying 3 cents/kwh for Jim's battery. What is the benefit? If no one can propose benefits that seem to make sense, how will solarcity gain extra benefit selling batteries? I'm sure solarcity is working hard to find extra value in batteries, but with TOU the possibilities seem limited.�
1/1/2015
guest That's the beauty of it, other than implementaing an outright illegal rate system as in Nevada, there's no move a traditional utility or PUC can do that will erase the opportunity for SCTY to come in at a lower price point. It's just inherently cheaper and "easier" to go solar now and go with solar/batteries 2 years down the line.
Now places like Pennsylvania might be a tougher market due to huge amounts of ultra-cheap natural gas, but I truly think that won't be a problem once costs come crashing down from batteries. Solar is already about to take off like crazy statewide this spring and it'll take a good long while to ramp up to a significant % of supply at peak. By then, SCTY will be very ingrained in the ecosystem and people will look for battery solutions that are nearly on par with the grid.
It'll be interesting to see what average grid prices are like when solar hit's 10% of peak demand in PA.�
1/1/2015
guest The Powerwall can be sold as a back-up in case of an outage. With Powerwall, you can actually use the solar panels during a grid outage. Without the Powerwall, the panels shut-off during outages. That alone is a selling point and competes with backup generators which are not cheap and require maintenence as well.�
1/1/2015
guest I see you're in South Jersey, my parents live down by Smithville/Absecon. Down there in the pines the power goes out for days on end in bad winters due to wind/ice and in hurricane season. In my parent's 55+ community lots of people have medical needs that can't make it through a 2 days without power, so they were buying $14k integrated natural gas backup generators. All these people could easily be sold solar with powerwalls for nearly zero incremental cost and solve the problem, maybe get an extra one for $3k out of pocket that would help you ride out any power outage.
SCTY is already huge there, it would be a simple upgrade they'd be happy to pay for. Also a massive micro-grid market a few years down the line.�
1/1/2015
guest Here is how Green Mountain sells it:
http://products.greenmountainpower.com/tesla-powerwall.html�
1/1/2015
guest Thanks... This is insightful.�
1/1/2015
guest Origin: World moving quickly to renewables as solar costs plunge : Renew Economy
This is quite interesting. Origin Energy in Australia is getting quite bullish on utility solar. They say it is now at AU $80/MWh (US $57/MWh) which is cheaper than gas and wind. They have been writing down lots of assets, especially coal, so that their balance sheet is in good shape to move forward into solar.
That last sentence really gets me. Yeah, these guys know the game being played. So apparently Origin is now trying to get ahead of it. If they really understood the solar pricing dynamic, I can't fathom why they though LNG exporting would be sustainable a few years ago. Solar crushes LNG long before it knocks out domestic NG. So King talks like he knows the game, but other misteps suggest he's just starting to figure it out.
One troubling point, I hear Australia has some electricians who will throw solar on your roof for less than 8c/kWh. Maybe Origin should check these guys out. It might save them some money.�
1/1/2015
guest Note they sell the 7kwh powerwall. They can then later set their customers up for daily load shifting. Did Tesla drop the 10kwh powerwall? It is a good idea to not sell that unit.�
1/1/2015
guest Interesting that they are offering a rental @ $1.25 per day. That's probably about what the typical SolarCity customer saves by going solar so if you get solar and this battery, you will basically break-even vs. utility and have backup to boot. Sounds like a no brainer to me.
Also, in their FAQ's, they say it lasts 4 to 6 hours, but that's without solar and/or at night. During the day, while the sun is shining, you can use the solar energy and not hit the battery much (if at all) until it gets dark so, theoretically, you can get 12 to 16 hours out of it with solar. I hope Solar City offers some kind of financing for the Powerwall.�
1/1/2015
guest January, 2016 solar retail prices in an efficient market:
Residential solar PV system prices for January 2016 - Solar Choice�
1/1/2015
guest Why do you play dense? Of course, you know what the benefits of batteries are. We've discussed them here ad nauseum.
You tell me what benefits you find useful. Then we can figure out if it's worth 3c to you or not.
The value of a battery is inherently subjective because it depends on how the owner uses them and what value that the owner places on those uses. So if you can't tell me how you would use a battery and what those uses are worth to you, I cannot help you decide if it is worth 3c to you.
This is not unlike a Model S buyer puzzling over whether to get a 70D or 70. What does oneget for paying the extra $5k? The value of the D option to the buyer totally depends on what the driver does with the car and what it is worth to the driver.�
1/1/2015
guest Can you stop just spraying this thread with any nonsense you find in a 5 second google search? I'm fairly sure they weren't installing 5kW systems in Australia for $1.04USD in November of 2013. People shouldn't have to put you on Ignore just to coherently read this thread. Purposely derailing meaningful conversation with noise is trolling.
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$70 2017 LEAPS are drifting back toward $.40, nice return on moderately long odds. Very +EV for the poker players here.�
1/1/2015
guest So you don't know the financial benefit to the owner. You don't know the potential financial benefit to solarcity.�
1/1/2015
guest I have not heard anything official about dropping the 10 kWh PW, but it would not surprise me. Tesla will unveil Powerwall 2.0 in the summer. So apparently they are still figuring out how to make a better Powerwall. Also around that time they should have a battery upgrade for autos. So if they forsee cell advances along critical performance dimension that could prompt 2.0.
I do think that for Powerwalls you really do want it to support daily cycling for at least 10 years or 5000 life cycles. So the 10 kWh was not upto that, nor was it cheap enough to make up for having about 1000 life cycles. For someone going off grid, having a daily battery plus a weekly battery could make sense for managing multiday storage needs, but the weekly battery needs to be cheap. For the most part, anyone connected to the grid is just trying to manage daily needs and is not really concerned about multiday storage. The exception here is back up for grid outages and participation in some sort of aggregation scheme to supply peak power to the grid with less than about 100 events per year, i.e., once or twice a week. The value of back up against grid outages depend on what your reliability needs are and just how unreliable the grid is. In places like India and South Africa, grid outages can happen for hours several times a week. I guess another use for a weekly battery would be for defeating monthly peak demand charges, but here you'd likely would want to pair that with a daily battery. The daily would trim your daily peak demand, and the weekly would trim the monthly peak.
Basically if they could offer a 10 kWh daily or 15 kWh weekly PW for $4000, that would be much more compelling than the current 10 kWh weekly.�
1/1/2015
guest Has this already been posted? /SolarCity-Kills-Its-MyPower-Loan-Product
SolarCity Kills Its MyPower Loan Product | Greentech Media�
1/1/2015
guest Just a point of clarification for at least the California regulatory market. I do not believe it is a choice between net metering and time of use. Those are two different concepts but overlapping. Net Metering is a connection philosophy which allows a solar producer to be paid for generation. It does dictate things like the process of accounting, the length of time for the relevant period and the reimbursement rate (defined as some wholesale rate) used to calculate any cash credit at the end of the relevant period. TOU rates are independent of Net Metering. I had a TOU rate by choice before I solar. TOU rates only apply to the power consumed and generated during the relevant period (defined as one year). Even if TOU rates are dictated by NEM policies, the solar producer will have a choice of which TOU rate. Right now, as I know it I have at least three TOU rate choices with SCE.�
1/1/2015
guest So are you as a potential battery consumer only interested in financial benefits? You see, that narrows consideration quite a bit.
The benefit to the customer and the benefit to SolarCity are quite separate things. The benefit to SolarCity is incremental revenue per customer. That comes at $4000 per Powerwall plus whatever a particular aggregation scheme or incentives can dredge up.
The financial benefit to the customer is quite different, and we would need to spell out how they intend to use it. So if you are in Hawaii and using a battery to store solar that gets no feed in tariff to avoid paying 25c/kWh for utility power. Then the financial benefit is 25c/kWh. So that is a very specific context and use case. A customer in a different state faces a very different context and potential use cases.
So I do not know your context or intended use case. So how can I even begin to say what the financial benefit may be to you.
Again I feel you are being intentionally dense so as to make you rhetorical points. You are smarter than that. I don't mind having a conversation with you when you have something intelligent to say, but my patience is wearing thin.�
1/1/2015
guest I want to add to what @jhm said about this. I totally agree that is depends on how you use it. My little battery system gets me several benefits. It provides me a hedge against rate shifts and TOU peak period shifts. That gives me immense pleasure. TOU rates along wiht my battery system allow me to arbitrage between super off peak rate of $0.11/kWhr and summer peak of @0.37/kWhr. My battery system gives me a back up system for my critical loads in a city that has at least 5 outages a year. I decided to build out this system last year after reading a lot of posts on this forum.�
1/1/2015
guest Thanks. This is really helpful.
This is also an example of the kind od self-referential bias that can undermine marketing efforts. The mistake here was that MyPower loans were structured too much like a PPA (but without the tax treatment). So why did SolarCity make that mistake? I suspect that they identify too much with consumers who are inclined to prefer PPAs. They assumed all the same assumptions about who might be interest in a loan, and so the designed a loan that looked like a PPA. This is a serious mistake. There really are consumers out there who would prefer a fixed loan for 7 to 20 years. They are okay with making a down payment and want to pay off the loan as quickly as possible. So SolarCity has been under serving this sort of consumer.
If they come back with a simple fixed loan at a good rate, they can tap this segment. Moreover the can get a 10% to 20% down payments, after all the customer is in line for a 30% ITC in a year. So MyPower uptake was about 13%. Who knows, with a simple fixed loan the uptake could be twice as much, which would probably reduce their sales $/W.
Another option is to partner with third party lenders. Lots of banks would be delighted to do this. This way they can offer truly competitive interest rates to customers, and SolarCity would get all cash upfront. So from a cash flow perspective, this would be enormously helpful.
So the marketing lesson here is offer truly distinctive product options to appeal to different kinds of consumers. Marketing 101.�
1/1/2015
guest General question about the future of mid-sized home batteries to work with solar.
We always talk about powerwalls and the next amazing Tesla product, but why are we talking strictly lithium batteries? Will there not be options far cheaper in the next 5 years? It's my understanding that lithium is simply the best option for uses where size and weight are of massive importance. Laptops, EVs, etc. Well I'm perfectly happy to have two extra refrigerators in my basement if they can give me the same function as two powerwalls in the garage at a lower price or with better properties. Doesn't that open up the possibility to much cheaper types of batteries? I'm currently a bit obsessed with these aqueous hybrid batteries(factory video). There's got to be ways to make those insanely cheap in relatively short order.
To me, this has no +/- implication to SCTY as I envision them as the grand designer and manager of these systems in customer's homes. Just wondering where you think home batteries are going price-wise since they don't have nearly the limitations of car batteries.�
1/1/2015
guest
This adds to proof that switching revenue/cash-flow models is not easy. Good to keep this in mind, when enthusiastic folks here throw in all sorts of revenue models and say SC would do this and SCTY will take off like a jet plane.
PPAs/Leases are working for them in terms of making the sales. But these things are also severely working against them in terms of Business model, which is ever inching into a death trap. I will post some more to back this claim in response to one of jhm's post (as if I didn't post enough data to back it up already�
1/1/2015
guest Exactly. MyPower just reeks of over-confidence and single-mindedness, hopefully they are learning from these errors. No big deal.
IMO they should definitely have a straight install option sitting there for anyone who wants it, but it needs to be toward the top end on quality and price. They can(will be able to) command a much higher profit margin than local installers if they are rightfully seen as the premium option and just let the sales come to them since thy're the reliable big dog. Again this single-minded need to [expensively] drill the sale into customer's minds rather than let them draw their own conclusions cheaply is a bit annoying. They will naturally transition away from this, but it's going to become a drag on growth eventually for a lot of the reasons SBenson has pointed out over the last 30 pages.
3rd party lending is such an obviously better choice for SCTY straight installs, but lets not forget they weren't nearly as plentiful just a couple years ago. And certainly not plentiful outside of CA.�
1/1/2015
guest Jhm, Mule,
You both have expressed interest in SolarCity offering a straight up install with a "normal" loan. That sounds so simple and straightforward that it begs the question, why didn't they do it for so long?
My working assumption is that SolarCity is severely more expensive than others. They sell it through PPAs by pitching themselves against utilities. That obfuscates the competitive landscape. If they sell straight-up on a $/W level, they will lose market share to local installers very quickly. To address this you are saying that they would pitch themselves as a "premium" product/service. Have you really evaluated this though? Back when sleepyhead was around he showed many details proving out that SolarCity uses much lower quality products that what he could get for much cheaper-price. His claim was that SC was willing to take the risk because ultimately they own the system and can quickly replace if/when something fails. So the risk/reward for going with low quality components was more effective. If this is indeed the case, how and why would they be a "premium" product?�
1/1/2015
guest Thinking more about partnering with a third party lender...
In actually there are two products being bundled: the original solar system and a service plan. It may or may not be beneficial to unbundled this for the customer, though part of the sticker shock for upfront buyers is the imbedded service plan. For customers that want to pay cash upfront, it may be beneficial to give the option to pay the service plan month to month.
But in relation to a lending partner, it makes very good sense to unbundle this. The lender can fund the initial system upfront and the scheduled inverter upgrades as they occur. This is transparent to the customer. The customer pays a monthly payment. The lender gets the first portion of the payment and SolarCity gets what's left to fund the service plan. This has benefit to the lender. First, it gives the lender a little more protection from credit risk, since SolarCity absorbs a little more of that risk. Second, it provides a degree of protection from prepayment risk as SolarCity absorbs overpayments first. Also it is more capital efficient only needing funding for hardware as it is needed. For example suppose the initial system is $14k, second inverter $2k present value, and service plan $4k present value. If that is all funded upfront, you've got a $20k loan. Say you lender can offer 4.5% financing or $900 in first year interest. What I am proposing only needs $14k funding upfront. That is just $630 in first year interest. So this works out to about 3.15% financing from the customer's perspective. That's is, the customer sees that they are getting a $20k fixed loan at 3.15%, while in the background the lender and SolarCity are swapping cashflows to optimize capital.
This sort of thing could be done as an ABS, but I think a per loan lending partner relationship could make this work too. The advantage to the latter is that it avoids all the overheard of issue an ABS periodically. On a daily basis, the lending partners can be called upon to fund new loans as systems are installed.�
1/1/2015
guest I like the line in the article linked from Jonathan bass saying that even with only a 13 percent take it is by far the most popular solar loan on the market.�
1/1/2015
guest My philosophy on solar is very simple. Hardware is getting so cheap and the quality curve is flattening so fast that manufacturing is going to rapidly end up just like HDTVs. Installations as a standalone product/service are done on an amateur basis by posters on this very forum in their spare time and at higher quality than a lot of local installers. The best area to differentiate yourself is in total energy management which should be an absolutely HUGE market when things get rolling. SCTY has attempted to start at the end of all this progress and work backwards.
Marketshare at the lowest cost possible is all that matters to the model, and that level of cost is of no concern. The amount of money to be made installing "renewable energy as a service" is so astronomical that nearly any cost can be justified in the early stages in order to be the last player standing after the early shakeouts. SCTY had absolutely insane cost years ago out of necessity, but they're now ahead of schedule to bring them to 2.25/W which is low enough. As evidenced by the yieldcos collapse, their #1 installer ranking and pretty much all other nationwide PPA offerings disappearing, they're doing something right. Or at least right enough to eat up the entire nationwide PPA market. The back end of this from 2017 on as costs become universally low is pure gravy. SCTY will have an untouchable lead and no one will gain traction for years. Installers will do their thing and SCTY will do it's thing with half the market.
The only reason I want them to do straight installs is to take advantage of that premium brand positioning that will allow for best in class margins. If people want a premium product, identify SCTY as that prduct, and for some reason want to own the panels, nothing wrong with doing it for the right price. Especially once Gigafactory II gets rolling(or factory I is expanded to 5 GW).�
1/1/2015
guest The market for third party owned solar is not projected to get huge any time soon:
�
1/1/2015
guest Solar still has its main penetration in the upper middle class and in those with high income. These are the people who buy cars, consumer electronics, college education for their kids etc. cash or with financing from their bank (with excellent terms).
When the general middle class and those with lower incomes see the value in going solar they're going to have to finance and/or lease/PPA/go with 3rd party owned model. What matter for this huge chunk of consumers is lowering their monthly cost. They have mortgages on their homes, cars, even flat screen TVs and phones. If they can go solar with no money down, no mortgage but still lower $/kWh than with their current utility it will be a no-brainer.
Saying these people would be better of buying their system outright is like saying they would be better off avoiding paying interest on their home mortgage by buying their house cash. I bet they would if they could.�
1/1/2015
guest We the public want the system to be set up to incentivise participants to optimize both production and consumption of energy for efficiency and environment impact. If utilities are allowed to push what we now can safely describe as frivolous spending onto ratepayers that's not a good outcome either.
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Thanks for the note. Yes I just used the terms that I thought everyone else uses. AFAIR CA TOU plans are not net metering but close, there are some charges included. So when we talk about CA it's flat rate plus net metering or variable rate and some charges, is that about right?�
1/1/2015
guest This is how GTM has quantifies SCTY's market segment in the U.S. I'm not sure what point you are making. PPA is a loan: Payments on a schedule.
�
1/1/2015
guest My point is that the target audience will soon widen to a group of consumers who are much less able to buy their systems cash or through advantageous external financing.
To then SCTY's offerings may seem a lot more attractive than they do to you or me.�
1/1/2015
guest Telstra takes on energy utilities with home solar and storage plan : Renew Economy
Here's an interesting development for Australia. Telstra, a major telecommunications company in Australia, wants to enter the home energy market. They want connected homes with solar, batteries, and demand management devices. They will bundle this with other telecommunications services. They believe they know how to work directly with customers better than the utilities do. Part of their marketing appeal is to tap into consumer hatred of the utilities.
This should be interesting to watch. If Telstra can pull this off, I think bodes well for SolarCity to move in similar directions in the US. This also poses a very different future than the Solar Mad Max world where roving Ganges of electricians vy to throw up the cheapest panels. Rather energy becomes part of the connected world, where the value of energy devices in the home are enhanced by information based connections. Try to remember the PC revolution before the internet, before even bulletin boards. You could get a lot of value having an unconnected PC in your home, but that value went way up as the Internet emerged and connected millions of PCs. The state rooftop solar is presently not connected. Sure, many have a utility connection, but that carries practically zero information. It's like a modem, but with nothing to dial into, pretty dumb. So we presently have difficulty even imagining what a truly connected energy world would look like. Most of us will have to see it before we believe it.�
1/1/2015
guest I had a PV system installed on my first house here in Colorado back in 2007 using a local installer (Namaste). When I moved, I had SS install a new PV system on my next house last March. Since that time I've also invested in the company (multiple entry points, all currently underwater). I've also been lurking on these boards for the past six months following along.
The above posts applied so aptly to my situation and experience that I finally created a log-in to join the conversation.
When I was shopping for an installer I was surprised that SS was slightly cheaper than the local installer. On top of price, SS had a better design IMO, better customer service (my sales rep was awesome and we have kept in touch), and offered the added benefits of guaranteed production, extended warranties, and the inverter replacement when the time comes (icing on the cake).
I had no interest in the PPA/lease, so I opted for the MyPower loan. This is where the whole thing almost fell apart. My sense is SS was just banking on customers being told that their total energy bill would be less from day one with nothing down and would be satisfied knowing the amount of total savings over the lifetime of the system. This is not how I operate. Once I started diving into the financing agreement I was turned off by the seemingly unnecessary complexity. While not hidden, the fixed production escalators really added up over time. It became obvious pretty quickly that the MyPower loan would really diminish my return on investment over a conventional loan. This shook my trust that I was dealing with an honest broker. I almost decided to delay the installation a year or two until I could afford to buy it outright. Fortunately, the county where I live created an "Energy Smart" program. Part of the program includes rebates and low interest loans for home energy efficiency improvements completed by pre-approved contractors. It turned out solar PV and SS were both included in this program. I was therefore able to get a 5-year loan at 2.75% through my credit union. So, I had SS do the install, got all the benefits mentioned above, and then paid off the entire MyPower loan the first week. According to my SS sales rep, I was the first customer of his to go this route. I believe it as it took multiple calls to the NV office to set it up.
So, I agree whole-heartedly that SS should offer financing for customers that wish to purchase their system, but the financing needs to be simple and straightforward and offered at a competitive rate. Attempting to tie the payback to production did seem like an unnecessary vestige of the PPA program that overly complicated matters and confuses potential customers that want a full understanding of what they're signing. The deal would have fallen through if not for the dedication and persistence of the sales rep.
I was a solar veteran motivated my environmental benefits of solar. The amount of time my SS rep would have needed to close the deal with me, if not for the convoluted MyPower financing, would have been a couple hours. He ended up spending much more time and effort going back and forth trying to explain the intricacies of the financing (not to mention using up my time). Hopefully they have learned their lesson.
Does anyone know if they plan to bring back a loan product? I really think they need to offer one, just a straight forward one.�
1/1/2015
guest Why does the group widen? Doesn't SCTY sell to anyone with a home and good credit?
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Everyone I know avoids bundling. Comcast in particular.�
1/1/2015
guest Now you're playing dumb again.
Of course a wide range of people are already in the target audience for SCTY. The problem is they haven't figured it out just yet. I don't want to waste time typing it out but some keywords should sum it up: it's all about public perception, taking the leap, seeing your neighbors going solar, public policies pushing in the right direction.�
1/1/2015
guest This is called trolling, he's using you to derail the thread conversation.�
1/1/2015
guest Sometimes SCTY seems like Enron minus 30 IQ points.�
1/1/2015
guest Everyone I know bundles. The problem is not bundling in and of itself, it's when there isn't enough variety within the bundles available for a customer (forcing them to take something they don't/won't use) and there's only one company offering bundles. Competition makes for a larger variety within bundling = happy, happy customers who get one stop shopping.�
1/1/2015
guest You are implying something changes for the positive with SCTY. I have no idea what that would be. Why is a carpenter more likely to sign a PPA in the future compared to today? How do solarcity do relatively better in a future market that will likely contain more knowledgeable customers? "Free solar" and comparisons to utility bills is an early game selling strategy. That sales pitch likely becomes less effective as the market matures.�
1/1/2015
guest Man, it's wild times on this thread lately... nothing like a big drop to bring out the best in all of us... especially those crouching in the lurch waiting for such moments...
The reality is the mysolar loan was attempting to bring a product that everyday people would use. The whole reason for lease/ppa doing well is that there is no upfront capital and people save on their utility bill from day one. Normal loans just aren't able to do that right now. No matter how attractive, they just don't work for the average american appetite for debt right now. Loans are a different animal that require a lot more stake then a lease or ppa. With a lease/ppa, all the risk resides with the lease/ppa provider. They must live up to their end of the agreement for the monthly payment a consumer gives them. That's it. Savings from day one is a powerful selling point and it's showing up in solarcity's numbers. Lyndon Rive said nearly 50% of all solarcity booked lease/ppas are now from middle income families including areas that are considered low income by zip code. That's a far cry from what we're hearing in the media saying solar is a product for the wealthy.
Loans will gain more traction when prices for total package install, monitoring, and upkeep can be packaged in a no upfront and offer savings up front from day one. I feel the my solar loan was an iteration toward creating that type of loan product. In my opinion, I think solarcity it needs to hold off on loans until they can offer a loan that is almost exactly like a lease/ppa in it's simplicity and pricing. No upfront cost, savings from day one. There are so many people that want to own, but when they look at the actual numbers(and lack of use for the ITC), they are turned away from loans and either go with a lease or decide to wait it out. Not many are actually willing or able to fork out the upfront cost or much higher monthly payments from day one.
I see that the solarcity loan product might have to wait until the ITC runs out because I feel not many people can take advantage of it in the middle class of America. I mean, there are even massively expensive ad campaigns on tv right now(H&R Block) that market to the massive tax refunds middle class americans receive. That means not many people are footing $6k tax bills on a yearly basis, nor any tax bill for that matter to make the ITC a benefit. So, ownership(through loans) has to work it's way to being cost competitive on a no upfront cost /save from day one basis. By the time that happens, solarcity will easily be there with a product that does that. Until then, lease/ppa will dominate the broader marketplace. It's just the plain reality. So mysolar will return at a later date in a new form that makes sense with the broader consumer marketplace. That's the lesson here. You can't change consumer desires, consumer desires change you.
Given the NEM 2.0 decision and impending "fill up" of the NEM cap, I feel solarcity lease/ppa bookings will be massive. If the bookings in Nevada before the PUC decision last december are any indication of what will happen, solarcity will have a huge booking period through the end of the year.
Also, for those interested in the TOU breakdown, they california utility commission has not set the rates yet. Someone pointed out that Lyndon Rive made an early comment about concern with the tou rates before the decision last month, but then changed his tune after the decision came down. The reason is they are in discussion with the PUC about what those TOU rates might look like. To bring more color to Lyndon Rive's more assured attitude, Peter Rive stated recently that the TOU rates look to be fair and continue to enable the solar market to grow. As such, whatever the commission decides soon on the rates, solarcity feels comfortable with it. So, we should stay tuned for those numbers when they come out to determine the actual impact of the NEM 2.0 TOU rates implemented after the caps are met(which is estimated to be as early as 4Q this year).
Overall, solarcity will have no problem filling in the 13% the loan product took up in its bookings. Especially with the massive number of bookings to come down the line with California NEM 2.0 taking hold as soon as the cap is met. The fact that people booking solar now will be grandfathered for 20 years with the more favorable rate sells itself. A sales person's dream when that happens. If anyone wants to contest that fact, I'm all ears.�
1/1/2015
guest To be clear, my overall SS experience was positive. I'm a fan of the company and an investor that believes that are positioned as the market leader sitting on a powder keg of potential growth in residential solar.�
1/1/2015
guest I agree with the powder keg part. I'm also sure many of their people do a good job. But their finances and sales pitch are designed to deceive.�
1/1/2015
guest utility scale solar
I'm not very knowledgeable, and I do apologise if this post is inaccurate but as far as I can tell they focus on residential solar - I am perplexed as to why they focus on residential solar - why not utility scale solar and solar for governments overseas? Their residential model of selling panels with no upfront payment and charging for usage or annuity style pricing seems highly risky to me - I would have thought the big money is in larger scale solar projects where they can bundle with storage as well.�
1/1/2015
guest I'm gonna sit out for a bit until the trolling cools down, there's just no room to have a rational conversation.
I've gotten the views of sbenson and jhm on recent doings, no need to deal with nonsense.�
1/1/2015
guest I know there are others on this board more qualified than I to answer this question. It's my understanding that SS is branching more into commercial installs. With the exception of the HI project they are not involved in utility solar projects to my knowledge.
I think there is a market for both residential and utility solar, but the two are very different animals. Perhaps SS decided early on they wanted to dominate one sector.
From a personal perspective there is something very empowering about producing your own electricity from your own little solar power plant. My bet on SS in particular and residential solar in general is based on the belief that there are tons of Americans of all persuasions that would enjoy that same satisfaction if provided an understanding of the technology and a clear, logical path to achieving it. I think it really comes down to customer acquisition (read education) costs. Gotta make the leap from the somewhat self-motivated customers to the average Joes.
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I hope you and Foghat aren't putting me in the troll camp. Perhaps my first post was mistimed, but I thought it was on balance positive.
I held my long position through the ITC renewal scare and the first ride from $50-somthing down to sub $25 and back again. Obviously, I still believe in the company and the long term vision.�
1/1/2015
guest Hey WMTribe90, welcome to TMC. Thanks so much for telling your story. It perfectly illustrates why SolarCity needs to offer a simple fixed mortgage. Financial complexity does create uncertainty. So one wonders how many sales SolarCity has lost on that account. Moreover, the time that sales reps must take explaining a complex financial product does add directly to sales cost per Watt. Moreover, processing unneeded loans added to general and administrative expenses. So this is a compelling case for how fixed loans could increase sales and decrease SG&A per watt. So glad you found an alternative loan at an attractive rate.�
1/1/2015
guest I disagree. I think they attempted to simplify and over-complicated My Power Plan agreement, by marketing the critical elements (see below). I don't believe it was an intentional attempt to deceive. They should have just created a simpler instrument.
Nothing down.
Start saving money from day one.
Save long term over sticking with the utility.
Yes, I will save more or increase my returns having secured my own financing. But I am fortunate to live in a place that values energy efficiency and renewables and was therefore able to secure a favorable loan and have the means to pay it back quickly.
For those that lack means to purchase a system, SS offers a tremendous value by allowing these folks to go solar with nothing down. I've yet to see a truly compelling argument that these folks would be better off not going solar now and instead waiting 10 years until they can afford to buy their system.�
1/1/2015
guest That arguement makes a lot of sense. I agree.�
1/1/2015
guest In your own words:
This is where the whole thing almost fell apart. My sense is SS was just banking on customers being told that their total energy bill would be less from day one with nothing down and would be satisfied knowing the amount of total savings over the lifetime of the system. This is not how I operate. Once I started diving into the financing agreement I was turned off by the seemingly unnecessary complexity. While not hidden, the fixed production escalators really added up over time. It became obvious pretty quickly that the MyPower loan would really diminish my return on investment over a conventional loan. This shook my trust that I was dealing with an honest broker.
Solarcity selling of the 2.9% escalator is a deception.
Most of solarcity's crews are good. But you overpaid about 25%. You just didn't find the less expensive good local installer who is always busy and doesn't need to advertise.�
1/1/2015
guest Foghat, I've got to disagree with you on loans. You seem to be stuck in the one size fits all mindset. The reason to offer a simple fixed interest loan is to facilitate sales for consumers who are more comfortable with loans as a standard financial product. A loan does not have to be the best option for all customers. It just need to be the best option for some customers. If someone does not have the tax situation to benefit from ITC, then they need a lease or PPA. There's no problem with offering a simple loan fir other customers. Additionally, zero down payment loans can easily be offered. Sorter term loans like 5 to 10 year build up equity pretty fast, so a down payment is not essential. The MyPower Loan had such a long duration (30 years plus a hefty escalator) that is was important to get the ITC payment early on to secure equity. Many customers opting for a fixed loan will actually want to pay it down quickly. They are not buying into the whole "zero money down, start saving immediately" thing. They understand solar as an investment with really good yield, and want to pay down debt quickly because interest payments cut into their yeild. Someone with that mindset will likely want to use their ITC money to make a big prepayment even if this is not explicitly encouraged by SolarCity.
So SolarCity could roll out fixed loans very quickly, if they wanted to. They could also set up a lending partner very fast. Banks are hungry for such opportunities.
Now if SolarCity really wanted to innovate a loan product that exploited tax equity to secure the ITC for those who cannot use it, here is one proposal. They can create a lease/loan hybrid product. This product begins as a lease for the first 1 to 7 years, then converts into a loan for the remainder of 20 years. During the lease cycle, tax equity partners provide financing and harvest the tax benefits. After the lease cycle the customer pays on a loan for the residual value of the system. The lender can participate from the outset providing funding that the tax equity providers do not cover, and then providing more funding when upgrades of inverters and batteries are needed. So the lender receives payments over the full 20 year term. In the lease cycle, the lender gets paid first, tax equity second and SolarCity last. So the lender has credit protection in the lease cycle while equity is earned, and solid equity once the loan cycle commences. I think this sort of structure could be quite attractive to prospective lending partners. So it would take a little more work to innovate a product like this, but it can be done. Because it is a hybrid lease/loan, it will be more confusing to customers, so many may just prefer a simple loan. But for those who cannot use the ITC, but really do want a loan, this could be worth offering. The customer who needs this will be more willing to take the time to try to understand this.
In sum, SolarCity needs to offer a diversity of financing options to meet very different needs and preferences. They can do this, and they have the scale of operation to make this worthwhile. Smaller installers might not be able to pull this off, but it could prove to be an important point of differentiation. SolarCity should never miss a sale for failing to offer a financing option that a customer may want or need.
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They do some utility work. Specifically, in Hawaii they are building out a dispatchable solar facility with 13 MW solar and 52 MWh of Powerpacks. This facility will store all power to dispatch after sundown. It is essentially a solar peaking plant. So I am optimistic they will do more of these. Moreover they have wonderful opportunities with commercial installation which approach the cost efficiencies of utility scale. Special racking for flat roofs and carports and Powerpacks give them some special products to bring to this market. I expect them to grow this segment faster than residential.
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I really don't think Mule was referring to you.
BTW, it's perfectly fine to express negative views on SolarCity here. Trolling is about rude and disruptive behavior. I appreciate vigorous debate with people who are willing to make a real contribution to the discussion.�
1/1/2015
guest I am not sure the distinction is important for the general topic of this thread. I am sorry I even mentioned it.There may be no relevance in your state.�
1/1/2015
guest Seems that you like being obtuse, so you can ignore nuance, and see what you want to see. As I indicated, my real issue is that SS created a complex product that didn't need to be so complex. I didn't like the escalators because I didn't need 30 years to pay back the loan and it reduced my return. Yes, my trust was a little shaken at the time because hiding fees and like is a tactic of predatory loans. However, in hindsight the escalators were there in black and white and my sales rep answered all my questions forthrightly. There was no attempt at deception. SS still installed my system on schedule for the quoted price knowing full well I intended to pay off the loan in full immediately. They will still service my system if needed, honor warranties, guarantee my production, provide me real time online system monitoring, and will replace my inverter when the time comes. No small local installer offers all those advantages. The local installer I didn't go with installed the system at my first house and does not advertise, so please act like you have some insider knowledge of the local PV installation market where I live. Paying a small premium for a large, financially stable installer, with a proven track record, that works safely, and does quality work is worth the piece of mind. You may find no value in that reasoning, but plenty of people obviously do. Instead of recognizing that reality you choose to believe everyone who chooses SS has somehow been hood-winked.�
1/1/2015
guest I missed the Democratic town hall tonight. Does anyone know if the discussed Nevada "net metering"?�
1/1/2015
guest Seems to me that you are being obtuse, so you can ignore nuance and context, and see what you want to see. As I indicated in my original post, in the end, my only real issue is that SS created a complex product that didn't need to be so complex. I didn't like the escalators because I didn't need 30 years to pay back the loan and it reduced my return. Yes, my trust was a little shaken at the time because hiding fees and like is a tactic of predatory loans. However, in hindsight the escalators were there in black and white and my sales rep answered all my questions forthrightly. There was no attempt at deception. SS still installed my system on schedule for the quoted price knowing full well I intended to pay off the loan in full immediately. They will still service my system if needed, honor warranties, guarantee my production, provide me real time online system monitoring, and will replace my inverter when the time comes. No small local installer offers all those advantages. The local installer I didn't go with installed the system at my first house and does not advertise, so please don't pretend that you have some insider knowledge of the local PV installation market where I live. Paying a small premium for a large, financially stable installer, with a proven track record, that works safely, and does quality work is worth the piece of mind. You may find no value in that reasoning, but plenty of people obviously do. Instead of recognizing that reality you choose to believe everyone who chooses SS has somehow been hood-winked.
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1/1/2015
guest its not a one size fits all, it's just what the broader market wants. Loans are a part of the market, but a very limited part of the market as we can see from the numbers. I think Solarcity will eventually scale up enough, reduce costs enough and offer a multitude of energy services, that a loan and ppa/lease would be very close in cost, especially after the ITC goes away(or reduced to near nothing). I think the ITC favors the lease/ppa model a lot, which doesn't make the average person on a middle/low middle income see a sensible investment in a loan product. The big detractor is a high monthly payment for that debt. Most people are focused on reducing monthly costs, since most people look at their own income in monthly chunks. They say how can I squeeze out a few more dollars per month in costs? If they increase monthly costs with a loan that doesn't see a payback nearly immediately, they won't go solar. So, solarcity's primary focus is reaching this broader market, and if that means lease/ppa then they must do it. I think the loan market is good, but not a priority for the company at this point in time, in my opinion. Yes, they ought to have some kind of loan product, but not Put too much investment into it at this time. I don't think fundamental costs, outside someone who can benefit from the ITC, are there yet to make it a compelling mainstream product right now.
Right now, the product that seems to be penetrating the wider market is lease ppa. That wider market is the most important segment to scaling up and reducing the costs. Loans are not there quite yet to change that premise. Again, no problem with loans, just not where the best avenue to penetrating the wider market during he ITC years as I see it.
Being able to apply the ITC is a big deal for loans to work at this point in America. Just not a lot of Americans that can benefit from it.
To add, I do like the hybrid idea, just would have to understand the consequence/ risk of someone moving before loan part takes over or if the next homeowner would take to this type of arrangement upon purchase.�
1/1/2015
guest Yep, sign me up. I don't think this is a complicated product to sell.
People with uncertain tax liability will love this too. Even people with certain tax liability might like the simplicity, certainty, and timing.
Let me lease/buy my model 3 this way too.
BTW, I think any loan with an escalator is consumer abusive. History shows unsophisticated people sign up for "cheap" without understanding the present value of their commitment, and banks use this ignorance to harvest values, often sold by unscrupulous agents. It's unjust, and a strong sign of organizational dishonesty or at least low integrity.�
1/1/2015
guest the whole point with the my power loan was to offer people immediate savings on monthly bills. Even with the escalator, they would be saving money each month over their utiltiy Bill. But, as Solarcity was discovering, the type of consumers that want a loan are not interested in reducing monthly energy bills immediately, but rather, they sought to achieve a cheaper total cost on investment. These type of people can take advantage of the ITC upfront. They also don't mind paying a little more each month in loan payments to achieve a reasonable payback period from which they then can achieve debt free energy savings every month after.
There was no deception at all in that. Solarcity was trying to create a middle class product, but found it was not a middle class product. It was the wrong product for the wrong type of consumer. That consumer does not hold immediate savings as the most important value. They see the back end savings as more important. As all could see, my power loan was not the product to achieve that specific consumer priority. Just as the cheapest loan is not as long term cost effective compared to do-it-yourself solar project type of consumer.
I think if Solarcity comes out with new loan product it will on par with the best loans out there. Where they will differentiate themselves will be on brand and additional service values. But the fact still remains, the lions share of installs will be lease ppa since thst is the product that best meets the priority value of immediate monthly savings that a considerably large population of amercia desires.�
1/1/2015
guest I know many people on this forum feel like they sound like a broken record. At the risk of skipping my needle again, SCTY cannot roll out fixed loans right now because it would result in negative cashflow. What is the effective yield on SCTY bonds being issued right now? I'll give away the answer by asking another. If you have to borrow cash at north of 20% interest, how are you going to be able to afford to loan money to a customer, or finance the installation of their system at anything close to competitive rates?
That leaves the only other option - partner with a lender. If we've learned anything about what has fueled SCTY's success, it's that they can offer a cost-effective solar installation without requiring a penny up front from the customer. SCTY's growth is a result of the fact that very little financing is available to consumers for solar systems. Banks are not hungry for such opportunities. Banks have offered almost nothing that doesn't require the consumer to put up some cash. And even when the customer makes a down payment, banks have been generally unenthusiastic about solar loans. SCTY is not going to find a lending partner.
<hear needle skipping again> SCTY has a cashflow management problem. There's no way they can "roll out fixed loans" when they don't have the cash to do it and it costs them between 5 and 24% to borrow. No "lending partner" will ever finance 100% of the cost of the install or 100% of the remaining unlevered NPV of the contracts. <needle removed from record>�
1/1/2015
guest Can we agree that about 20% to 40% of the residential market would prefer a simple loan? If not, tell me what you think the size is. Then we can discuss whether it is best for SolarCity to simply pass on serving that segment.
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I happen t work for a major bank and know what I am talking about. SolarCity already offers a loan. Switching from a complex MyPower Loan to a standard fixed rate loan, especially one with a shorter term would actually be easier for SolarCity to fund. They would get there cash much quick. If you look at lie 10 in the Q4 2015 Review you will see that Levered cash flow is most constrained over the next ten year, then opens up substantially after that. Suppose SolarCity offer a fixed 10 year loan. The full cashflow including profit would be collected within ten year. This would be a huge improvement to cash flow.�
1/1/2015
guest Well this is the core issue, isn't it? SBENSON pointed out that their Q1 guidance was likely so low likely because they couldn't borrow to fund the projects. Then in Q2 sales are projected to return to normal growth.
SCTY borrowing of mostly short term money against their capitalized installation costs turns out to be very risky. It seems to me that they have to partner with a lender to get their cost of funds down. But the business case for solarcity was the value created by the finance. So I have no prediction what they will do.
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Unfortunately solarcity contracts for an inflated system value. They gain benefit from showing a system that would have an average value of $20K at $28K. Doing this they max the ITC, and stick the customer with a high cost if the system is purchased due to a home sale.
Most people who understood the tax deal jhm suggests would not buy the system due to unattractive terms. The "bread and butter" of solarcity is a simple deal (PPA) to a low information consumer.
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It depends what you mean by "hood winked". If you goal was to make a sound financial decision to lower your cost of electricity, then you were hood winked. If your goal was to reduce your carbon foot print, then solarcity is an easy choice.
Solarcity is a financially sound installer, with their bonds returning 18%-25%?�
1/1/2015
guest The highest yields on Available Bonds - Buy Solar Corporate Bonds - SolarCity is 5.75
Where are you getting 18%-25%?�
1/1/2015
guest You are showing the secured-bonds backed by consumer contracts.
He is talking about unsecured corporate bonds. Cusips - 83416TAA8, 83416TAC4�
1/1/2015
guest Bonds Detail�
1/1/2015
guest Thanks�
1/1/2015
guest He is referring to the 15 year unsecured bond that solarcity is selling retail from their web site.�
1/1/2015
guest Btw, the yields on these two bonds still show an inverted yield curve (bonds with nearer maturity has higher yield). This generally implies market is predicting that a default is a near term risk.�
1/1/2015
guest I would love to hear a bond traders take on this. They obviously don't follow the equity analysts, so how are they pricing? I suppose bonds traders specialize by industry segment.�
1/1/2015
guest jhm, I have to ask, what % of middle income amercia can take advantage of the ITC? I think that is a big sticking point for low monthly payments. If they can't do the ITC, Increasing fixed monthly bills for years to come is a major hurdle for a average homeowner already dealing with a menu of other big fixed costs like a car payment, mortgage, etc...
So, given the hurdles(I perceive), how big is the loan market? Is it 20% of the broader public? I'm not sure, but I feel that it is significantly lower then a product that reduces monthly expenses immediately.
I I look at this from a business perspective. I'm not against any financial product. I'm for what the broader consumer desires and right now given the dynamics of monthly expenses, lease ppa is that product by a wide margin. It's not even close. Again, the majority of Americans want to reduce monthly expenses, specifically utiltiy expenses. They see electricity as a given expense. reducing that right now is far more attractive then paying more now for a loan to reduce it later. Most Americans see energy as something they have to pay anyway, so a lower monthy payment is more attractive as opposed to a payback period. Savings now is more valued then savings later when it comes to electricity bill.�
1/1/2015
guest Why is the Australian minister of trade and investment meeting with Solarcity execs at Solarcity headquarters today?�
1/1/2015
guest Your batteries are going to kill our utilities. Please go bankrupt soon?�
1/1/2015
guest Ha funny.
dalalsid, I'm seeing the next battle of solarcity's business model being fought hard right now already. The battle is happening at FERC level involving PURPA. Buffet is really moving hard in this direction, since aggregation is setting up to begin soon(meaningful way in 2017). I think if anyone out there has some insight on this battle will be able to anticipate impact on Solarcity Bottomline with greater accuracy. This again, is the wholesale market(Solarcity grid services)which falls under federal regulatory oversight. PURPA related pricing and contract length are the center pieces.
In PURPA ruling, FERC says Entergy not obligated to buy from large QFs | Utility Dive�
1/1/2015
guest If solarcity ends up with 200000 california PPA customers with vanilla net metering, and 10% buy batteries, they will have a max of 120mWh per day to sell in california. By contrast, the Hawaii project recently announced is 52MWh and 13 MW.�
1/1/2015
guest That not how it works... The Hawaii deal is different then aggregation(grid services). solarcity's aggregation is paid for access to firm capacity per month. Hawaii is paying a price/kWh produced.
http://www.greentechmedia.com/articles/read/solarcity's-plan-for-tesla-batteries-share-grid-revenues-with-homeowners
But he did provide one metric for the value it could capture for SolarCity and its customers -- the rough estimate of $10 per kilowatt-month that California utilities pay for resources and investments to maintain grid capacity.
�In their case, they procure capital equipment and then depreciate it,� he said. �With solar and a battery, you can provide what is a firm capacity resource.�
That�s why the value is presented as a �per-month� figure, by the way. That�s not an amount of energy to be sold to the system hour by hour and day by day. Instead, it�s a payment in exchange for a firm commitment to turn its fleet of battery-backed solar systems into a reliable source of power at moments of peak energy demand, when utilities and grid operators need it the most.
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Back of the envelop, lets just use $10/kilowatt-month for rough estimation purposes. What could Solarcity get for 10,000-20,000 aggregated homes in a specifically expensive load location in PG&E utiltiy territory under demand response contract? How could this breakdown 50/50 between Solarcity and customer? How much would thst reduce cost/kWh for customer? How does that 50/50 reflect on revenue/Bottomline for Solarcity compared to net metering only?
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Does anyone know what advanced microgrid is getting paid for this?
http://www.greentechmedia.com/articles/read/advanced-microgrid-solutions-to-build-50mw-of-hybrid-electric-buildings
if known, might get more feel for what is potential for Solarcity aggregation. Remember the have about ~800mws of capacity under management in California alone.�
1/1/2015
guest I don't know how to translate $10/kw reserve to batteries. What solarcity can do with batteries is demand response. The value can't be too high or a competitor will simply reproduce the service on grid with equipment installed at utility scale prices.
The in-home pricing we see for the powerwall is $1000/KWh and $2000/KW.
Edit: Green Mountain Power will pay $32/month for powerwall access. So that is about 45% on the installed cost of $6500.�
1/1/2015
guest That doesn't make sense. Home users are paying for the battery primarily for backup. The grid services are secondary to them to help reduce the cost of the battery. No home user is installing a battery to provide grid services. How is a utility scale provider going to compete with free?�
1/1/2015
guest Solarcity is providing grid services, not the home owner. Solarcity gets paid for the services, then has an arrangement with participating homeowner to split proceeds.
In theory, Solarcity could contract anyone with a capable home system, so they could conceivably have sunrun, vivint, local installer installed homes under grid services resource contracts. This means they are not limited to solatcity only customers. This may prove that solarcity's aggregation software platform is extremely value IP. Since Solarcity has 1/3 of the market, their network might provide the greatest return for participating home owners, therefore quickly raising huge barriers to entry for other aggregation services competitors like sonnen, sunpower and the rest...
Aggregation as demand response looks very compelling as a peaker resource. From a prior post in August:
PJM spent $2bln on a peaker plant that has been used 13 times since 2009, which averages out to $25,000 per Mwh for demand response product. SCE spent $200mln in 2013, at $18,000 per Mwh for demand response.
what would a estimated cost/Mwh for Solarcity demand response in comparison? Might it be significantly cheaper to the grid then above numbers?�
1/1/2015
guest Do you think a lot of users will buy a battery for backup? Especially PPA customer who are apparently motivated by taking $10 of their electric bill?�
1/1/2015
guest This 10/kW-month is to Solarcity as aggregator. To
me, this means the amount of reserve is not dependent on individual batteries, but rather dependent on the entire network reserve. So some batteries may never be used but apart of the reserve network Solarcity includes in a demand response contract with the grid. I think it is more advantageous for us to look at Solarcity aggregation as a singular reserve by which the grid will call upon, not individual systems. The value of that network is vital here to pricing services.�
1/1/2015
guest Somehow I never realised that Solar Bonds are unsecured. That's very interesting.�
1/1/2015
guest It's wild to imagine that after the ITC expires in about 7 years, we could transition to the least subsidized grid the United States has ever had in its history. Imagine how that could impact state and federal budgets? Tax code loop holes? The improvement of our economy as a whole? International relations? This is tectonic stuff were talking about with the advent of a distributed grid in my opinion.�
1/1/2015
guest jhm, Are you able to reconcile the "Change in Working Capital Q/Q" line item from slide-1 with the Balance Sheet in 10K?�
1/1/2015
guest I think your right. But note it is watt, not watt hour. Conventional generation is expressed in watts, which is where the $10KW/Month comes from. Batteries should be worth less than conventional, as the reserve runs out depending on watt hours in the battery.
Looking at the Green Mountain Power offer of $36/month, maybe solarcity could make $20-$30/month per battery subscribed to their system. That is a nice annuity with little cost after the initial software development work.
Competitors can't touch solarcity's PPA customers, but their will definitely be competition to aggregate other battery owners. This could drive down revenue from the PPA customers too, as solarcity would not like to look like jerks by under compensating their customers with PPAs and purchased batteries.�
1/1/2015
guest I just watched the Nevada legislature meeting on net metering where they questioned the PUC chair thomsen about his net metering decision. My goodness, what a mess thomsen. He was asked about legislative intent was to promote private investment in solar and thomsen listed off investments made before the bill. Senator ford reiterated the bill was concerned about investment going forward not in the past. Thomsen then said utility level investment has gone up. But the bill was rooftop solar investment. Also, rooftop applications dropped by 93% and private investors fled. Ford said this created the opposite of legislative intent and thomsen then replied he was tasked to eliminate unreasonable subsidy from non solar customers and he did just that. Ford as what is an unreasonable subsidy, by which thomsen replied "any subsidy is unreasonable." Ford replied that that wasn't the intent of he legislation. He was then asked that about casino paying way more then residential customers, subsidizing all residential rate payers by which thomsen replied thst it was different.
I can't make this stuff up folks.
There were so many things wrong about just to say he said there are 31k net metering customers causing $3 subsidy per month(which had increased from what was just a few weeks ago apparently) on non solar ratepayer bills. He was later called out because 11k of those were not interconnected and or been approved for interconnection so he lied about how many are actually net metering customers. But yet, in all the confusion of his long winded, angry testimony against rooftop solar, none of the legistors could really figure out what the hell he was saying. At one point one of the legistors asked him to stop and slow down sontheyncould understand the numbers he was throwing out.
i can't see how this can move forward in any kind or resolute way... Is so backward that the only way I can see real change in Nevada is through a referendum directly voted on by the people.
By the way Thomsen worked for a nv energy contracted geothermal company(which makes equipment for oil and gas industry). He is on record and I posted his statements earlier in this thread, that solar is overcompensated and will have its day of recognizing that fact. I guess he just had to get on the commission to make that statement true. Totally, totally corrupt and backward over there.�
1/1/2015
guest Aggregation is not tied to a battery. It's tied to the capability of a solar home to aggregate. Solarcity can offer anyone that has the capability to aggregate a contract. A sunrun customer that has a capable solaredge inverter and a capable sonnen battery can be under contract with Solarcity for aggregation services with the utility. Thst is clearly possible when taking about Solarcity aggregation network. It might get interesting if any those companies has a stipulation in their contracts that they can only aggregate through one of them... Then could put them all at a disadvantage on selling any systems if Solarcity turns out to have the best aggregation service terms. At 1/3 the current marketplace, they already have a step ahead in that direction.�
1/1/2015
guest also of special note, thomsen was put on the commission by Sandavol about three months ago... Months after the sb374 was signed into action. It is odd how Sandavol put this guy on the commission to interpret unreasonable subsidy as nothing other than complete elimination. It is funny how that happened after the bill was signed. It's very curious that he be named chairman of the PUC as well... Being be just got there and all... Very interesting to say the g'damn least.�
1/1/2015
guest Well, currently 13% of SolarCity use MyPower loans and 3% pay cash. So that's 16% off the top who can harvest ITC for themself. It think they can boost that to 20% to 40% with a basic loan. Even if it's only 20%, they still need to replace MyPower loans with something or risk losing market share.
- - - Updated - - -
What do you know about HLBV and tax equity structures? My wife who is an auditor will help me wade through these specialize accounting treatments, but right now we drink margaritas.�
1/1/2015
guest Enjoy!�
1/1/2015
guest Referendum, yes, but it sound like there could be legislative action as well. It seems obvious that Thompson. Either had no sense of legislative intent or was himself intent upon evading it. Seems quite contemptuous. I wonder if the legislature has any power to remove such a commisioner, or even to eliminate the PUC altogether and replace it with a more responsive regulatory structure.
Additionally, the PUC has failed to demonstrate that there is any subsidy going on at all because they have not taken the time to quantify all 11 potential benefits of solar to ratepays. If you have not added up all the benefits, it is intellectually dishonest to claim that a subsidy, i.e., a net cost to ratepayers has occured. A net benefit to all ratepayers would imply that solar owners are entitled to greater compensation and that no subsidy from nonsolar to solar has occured. Indeed, there may be a subsidy of solar to nonsolar occurring under NEM and the PUC has made it even greater. I'd like to see Thompsen try to defend his claim of subsidization in court when he has failed to do a complete analysis of benefits.�
1/1/2015
guest So what would it take for SolarCity aggregation to be recognized as a QF? To hit the 20 MW make they need only about 6000 Powerwalls in aggregation. Are there other qualifications?
I wonder specifically if in Nevada, SolarCity can claim both that they are a QF within the state and that the utilities in the state have block their participation in the wholesale market. Adding to this that the PUC asserts that solar owners must pay for access to the transmission and distribution grid, does this access not entitle them so use the grid to deliver power to the wholesale market. It is odd that NV Energy wants to argue that solar owners are only entitled to wholesale compensation for solar exports, and yet they probably do not want to recognize them as a QF or grant them real access to the wholesale market. This seems patently inconsistent and may actually be in violation of FERC regulations.
I'd like to see Obama charge FERC to look carefully into the case for recognizing distributed solar, battery and other energy resources in aggregation as QFs. It would be good for FERC to put some clarity on this and draw lines that utilities and PUCs should be careful about crossing. Again my view is that opponents of NEM have crossed the line using rhetoric that solar owners should be compared to wholesale power producers without granting them any meaningful access to wholesale markets. They really should not get to have it both ways.�
1/1/2015
guest This is good stuff. You can really see how the utility world wants to compensate these peakers for MW capacity rather than MWh production as they are an economic abomination on a MWh basis.
So 300 Powerwalls should provide 1 MW capacity and 2.1 MWh max per event. (I'm actually not too impressed by arguments that batteries sustain fewer hours per peak event given that peaker plants are only utilize about 4 to 5 % or maybe 60 minutes per day. Their ability to sustain way underutilized and can easily complement batteries in a sustained event.) 300 Powerwalls would cost about $1.2 M to install. Note this is $1.2/W which is competitive to new gas peakers which are in range of $1/W.
So let's suppose 1% utilitization. That is 87.6 hours per year, roughly 1 to 2 hours per week. Over 10 years time the at 1% utilitization the cost would be $1.2M/MW � 876h = $1370 MWh, excluding the cost to charge. So by PJM standards, this is super cheap. But I think the utilization can be pushed out to 5%. At this levels the cost reaches $274/MWh. 5% utilitization is stI'll just 437.5 hours per year, 1.2 hours per day. Under day cycling, there are 2.1 hours available each day. So 5% utilitization consumes about 57% cycle depth. Max ulilization would be 2.1 hours per day or 8.75%, which would imply $157/MWh, excluding the cost of charging. This should be seen a theoretical lower bound. 5% utilitization is probably a more robust assumption and gets us to $274/MWh.
Fuel cost, the cost of charging the battery, is even more interesting. Firstly, since we are talking about grid services and costs to the grid, we should consider power at wholesale prices. So the most economical wholesale price is the daily min, which can sometimes even be negative. But even when positive, the daily min can be so low that generators are operating at a loss. Thus, providing load at these prices to secure more profitable price support is an economic benefit to the grid. Suppose coal is at $3/MMBtu and a plant must burn 10.33 Btu/Wh. That's a fuel cost of $31/MWh. But because coal plants cannot ramp down and up quickly, they are willing to operate at below the cost of fuel for many hours a day. They may even need to pay the grid to take load, which is how the spot price can go negative. So batteries can soak up surplus baseload for prices below the cost of fossil fuels, below say $30/MWh. Moreover, if there is surplus wind or solar, this can push wholesale prices down to $0/MWh in absence of baseload plants (coal,.gas, nuclear) pushing the price negative. Indeed, the presence of nuclear power seems to guarantee that when demand is fully satified by wind and solar, spot prices will be negative. So longer-term as renewable penetration increases to a certain level, the reliable cost of fueling batteries may be under $1/MWh.
But what about those transmission and distribution costs? The energy losses in transmission are proprtional to the square of load. Thus, if you can avoid transmission during times of congestion, peak demand, this has a big impact on energy losses. About 10% of generated power is lost in transmission, but most of this is at times of peak demand. So here is where out 300 aggregated Powerwalls really shine. They are distributed. When discharges the power is consumed onsite or distributed within the substation. Thus, they avoid congestion when discharging. Charging happens local or at times of very low load. Not only do they reduce congestion, but they reduce the capacity needed to handle congestion. Thus, distributed batteries can reduce both the capex and opex costs of transmission for the grid. This implies negative marginal cost of transmission and distribution for distributed batteries. Note that centralized batteries used as a grid scale peaking facility do not generally offer this advantage. They have to push power through transmission at times of greatest congestion. The placement of the batteries has a big impact on the transmission losses. T&D costs for residential ratepayers is about $70/MWh. Let's say $50 is avoided on discharge at peak times and $25 is avoided when charging at times of minimal load. So altogether about $70/MWh is avoided in T&D.
Let's put this together. The cost of 1 MW is $1.2M. At 5% utilization, opex cost is $274/MWh, fuel cost $1 to $26 per MWh, and T&D an avoided cost of about $75. Thus, the net cost to the grid paying $1.2 M for this is $200 to $225 per MWh. Coincidentally, $1200/kW divided by 120 months is $10/kW/month. This is really not a bad price for standby power and substantially less than the $190/kW/year that California paid for standby power. If gas peakers really do need $190/kW/year to be profitable, they are going to have a tough time competing with aggregated home batteries at $120/kW/year.�
1/1/2015
guest can this be relied upon to support the grid at its limit state, the once a year co-incident peak? or once a decade? etc
a UPS might be great for 1 hour backup 12 times a year, but if it can't support the 12 hour blackout once per year, then its not a replacement for a generator (or larger batteries) that does.
Fukushima disaster happened because the backup battery had a finite charge holding capacity, and the diesel generator shutdown due to tsunami. Its parallel to the grid is that the capital cost of having a dispatchable permanently continuous power supply (ie fossl fuel plant) is NOT materially diminished by the existence of a backup battery, even if the fuel supply costs are massively diminished.
Fukushima disaster also suggests that earthquake/tsunami zones are not suitable for nuclear power.
Japan has 10% of grid power (26 GW) supplied by pumped hydro. thats larger than its hydro power supply (8% - GW)�
1/1/2015
guest Yes, the most likely highest economic use of batteries in solarcity homes is simply peak shaving by demand response. People who own batteries will likely make the peak shaving deal directly with the utility, cutting out middlemen like solarcity. This is how Green Mountain Power is able to offer $35/month incentive to use the homeowners battery maybe 20 times a year.
Solarcity is an intermediary that will probably be disintermediated by the utilities on systems they do not own. Quite the opposite of having some sort of aggregation advantage on non-solarcity PPA systems. Solarcity is probably an unnecessary middleman.�
1/1/2015
guest Discover magazine did an interesting article on blackouts this month. Apparently the forest fire metaphor has been proven true and current blackout prevention methods help build up the size of the next blackout. I know this is a vague question, but how does distributed/aggregated solar/battery usage help or hinder the effort to reduce the probability of decade-scale blackouts? I would think the sponginess of a distributed battery bank would be beneficial, but I don't know the grid.�
1/1/2015
guest Certainly one can come up with scenarios where no configuration of generation capacity is sufficient to support the grid. In particular this grid itself is vulnerable. Centralized peak capacity are impetent with the transmission lines that connect them to communities is lost. And this happens in virtually every severe storm somewhere. This is why millions of families have generators.
So a much more robust architecture is to have microgrids everywhere that can function in island mode. Batteries form the natural backbone for microgrids, and local solar and backup generators can be integrated for sustained island mode support. So aggregated batteries are an important step forward. If every home had a home battery. That would be incredibly roboust, but add to the the ability to recharge batteries with solar and generators and share that with neighbors, and the sum of the parts is greater than the whole.
Suppose you have a few neighbors who are offgrid capable. What would it be worth to you to be connected with them to share power when your grid connection fails? When the zombie apocalypse comes you'll be glad you didn't kick your crazy neighbors off the microgrid.�
1/1/2015
guest I have not read that particular article but I think AI know the principle that it is based on. Small failures in a system serve to make the system more robust. Efforts to prevent small failures can lead a system to be much more fragile in the face of less frequent events, and so the damage to the rare failure events is more widespread and extreme for lack of robustness.
A common example of this is a developing immune system. It is beneficial for children's immune systems to gain experience to a wide range of pathogens. This helps their immune system develop. Without developed immune systems, a population can become vulnerable devastating epidemics.
So distributed batteries are very helpful for robustness, but local communities need to have experience drawing upon those resources and integrating them with other local resources to really gain the full robustness that is possible.Learning goes way up responding to real crises. But also local disaster planning and testing can help. For example, can your neighborhood function in island mode. Simple planning would reveal many issue. Most neighborhoods have no way to function in island mode. If the transmission resources are down, it's every home for itself. So with a little planning, a microgrid could be initiated. But once installed, it would also be good to test it. Like a fire drill, the microgrid could be forced into island mode as a test. Ongoing island tests at different time and different durations would help the neighborhood maintain and improve its robustness. Or communities could just wait until the next natural disaster and see what happens. But personally, I would prefer to live in a community that does random island testing.�
1/1/2015
guest I believe I mentioned this a while back, but all this reversal of the grid to a more distributed model will clearly necessitate a more federal feel to regulation simply from a national security standpoint. That is not a great considering the govt's track record, but wonderful for solar owners who are currently dodging easily corrupted state "regulators".
Kind of ironic when you think about how some folks are howling to eliminate the DoE just before it becomes 100x more vital.�
1/1/2015
guest I preached this angle in my first comment on this board years ago. National security. National security. National security. I can't understand, for the life of me, why this argument isn't front and centre every time distributed generation is discussed. This is the one argument that will have guaranteed traction with people of all political persuasions. The resilience in the face of both directed attacks and natural disasters enabled by distributed power generation is a strategic advantage of mind-boggling proportions. It is orders of magnitude more consequential than cheap and reusable access to space, and that argument carried the day in the SpaceX vs. ULA boxing match.
SolarCity should rename themselves to SolarSecurity. Candidates pushing policies against distributed energy generation should be called out as Weak on National Security. Heck, call them low-energy, too.�
1/1/2015
guest The key to this is not just batteries but the entire home system(panels, inverter,battery, software)which includes controlling the AC(through nest). The battery is one piece of the aggregation puzzle. Then the central piece is the software platform to enable that network to be controlled/managed.
demand response is a part of battery utiltization. Another part is for the consumer themselves to utiltize in management of the home. Refer to the gridx white paper for the full stack of services to get the complete picture.
Solarcity's system and software platform unlocks all 13 values that are not just battery related, they are whole system related. The same complete system provides services to iso, utiltiy, and customer.
As solarcity's system and software platform may be worth in network $10/kW-month to a utiltiy, the same system also has a price point for the customer services. It is clear the current Solarcity system hasn't even come close to achieve full value yet.
This also applies to all other distributed solar companies as well, it just a matter of how effectively they get there. Solarcity has a step ahead right now in my opinion.�
1/1/2015
guest I think smart occupancy sensor thermostats like Nest and Ecobee is probably as good as it gets for HVAC energy management. Ecobee more than Nest, because of the multiple sensor option.
Extensive use of demand response on residential HVAC is probably never going to happen. The time the utility wants to cycle AC is on the hottest days of the year in the evening. No one wants to come home from work on a hot day and have the utility cycling the AC. Household members now fight over a 1 degree change on the thermostat. Will these household allow the utility to change temp for $10/month? I don't think so. Especially because the people who have things like Nest thermostats and backup batteries have disposable income. They pay for luxury, not discomfort.
Demand response will probably work for heat pump water heaters and EV charging. Beyond those two items it is added inconvenience.�
1/1/2015
guest No, Solarcity does not control the hvac. They manage the energy consumption to provide that air conditioning. The peak loads/spikes are shaved and in mass. The utiltiy calls on Solarcity to do this during peak hours. Solarcity networked(grid) communities may switch to partial self consumption or full self consumption, or if talking about the duck curve, they could also time shift solar energy(from daytime production) to the 6-9pm time frame to reduce "the head".
Solarcity doesn't force you to change your behavior, they change how energy efficiency is mangeed to comply with your behavior. That's demand response.
Nest provides data to the system to appropriately react to reduce electricity costs for s consumer. For the grid services, Solarcity can analyze all the big data in aggregate and react to utilties needs for demand response for the grid at large.�
1/1/2015
guest That is a great explanation and illustrates one of the benefits of aggregation.�
1/1/2015
guest Actually it isn't. Solarcity will only be in the middle between PPA customers with batteries and the utility.
Inverters with batteries will respond to commands directly from the utility if that functionality is enabled. From Solar Edge:
StorEdge� is SolarEdge�s all-in-one solution that uses a single grid-tied DC optimized inverter to manage and monitor both solar generation and energy storage. The StorEdge� solution provides Homeowners with backup power to pre-selected loads in the event of grid interruption. Smart energy management allows storing of solar energy in a battery to meet export limitations, offer demand response and peak shaving, and perform time of use shifting for reduced electric bills.�
1/1/2015
guest Actually it isn't what? A great explanation? An illustration of the benefits of aggregation? @Foghat has a clear writing style and I find it is easier to understand than your style. Don't take it personally, it is probably just me.
An alternate way to lead off your response would be a sentence that tells the reader why it isn't a great response. Is he actually incorrect or do you just disagree?�
1/1/2015
guest He claims SCTY can't function as a utility, while Foghat claims they can. So it's up to everyone to make up their own minds. I don't see a reason why SCTY couldn't act as a distributed utility, with a combination of generation (surplus electricity generated by customers) and storage (batteries in customer's homes and perhaps going forward also other more centralized forms of storage).�
1/1/2015
guest Thanks for the clarification. I tend to agree with you that SCTY could act as a distributed utility. If that fits within what the Supreme Court said about FERC ability to supercede local control over DERs, then that decision is good for SCTY.�
1/1/2015
guest The utility is in the business of extracting money for power from me. Solarcity would be in the business of trying to help me save money by providing a service to the utility. Now as much as no middle man would be advantageous, do you trust the utility to be competent with this service? If so the utility should directly go head on with scty in rooftop solar + storage. They already have a captive customer. Telling the customer, "hey let me put panels on your roof and I'll give you a 10% discount on power" would be much lower SG&a than scty.�
1/1/2015
guest A UPS is a good analogy of battery-based demand. For one thing, it's instantly available. For the other problem, let's say one of your long distance power links goes down. Your situation, "You have 10 milliseconds to fix this problem before you start shedding load" changes to one of, "Batteries are supplying power; you have 30 minutes to find more sources".�
1/1/2015
guest Solarcity can aggregate batteries, there is just no reason to believe they can make much money doing it. Their only advantage is households where they own the inverter because they sold a PPA.
Inverters have microprocessors that run interface programs that can be controlled remotely. It takes a simple application program plus the right security protocols to make the inverter do what is desired. There nothing difficult about writing the code to control one or many inverters. Solarcity's only advantage is that their PPA customers have no choice but to use them as their agent.
People who own their own solar plus battery system will pick the aggregator/agent who offers the best deal. The best deal will likely come from the utility, because it cuts out the middle man.�
1/1/2015
guest Hey jhm, since you keep up with the oil side, have you seen this? What do you think?
Exxon Fails to Replace Production for First Time in 22 Years - Bloomberg Business�
1/1/2015
guest Sanders And Clinton Offer Different Solutions For Nevadas Sabotaged Solar Industry | ThinkProgress
Hillary's Solar Proposal
�
1/1/2015
guest Hillary Clinton's Vision for Renewable Power
Half a billion, that's a good round number. I like it.�
1/1/2015
guest 100 cumulative GW is the GTM forecast for 2020. Clinton's proposal is 140 GW.
Solarcity's problem is not lack of demand. We will find out this year if the PPA business model is valid.�
1/1/2015
guest Thanks! This is interesting and I had not seen it.
So what is going is both necessary and largely an accounting issue. First the price of fuel falls, some oil and gas in the ground become worthless because the cost of extraction exceeds the price of the fuel. So accountants must impair these assets and reserves on the balance sheet shrink. Of course if the prices of fuels recover these nonrecoverable reserves become profitable to extract and come back on the balance sheet. So this is the accounting issue.
But the deeper issue is that companies like Exxon should be very cautious about replenishing reserves right now both for short term and long term reasons. The long term reason is that global demand for oil and gas may well begin to decline within the next ten years. I personally believe 2021 will mark the structural decline of demand for all fossil fuels. But even if my projections are wrong, it may be safer for Exxon to sit on just a 16 year supply than a 17.4 year supply. An awful lot of demand can be lost to renewables and EVs is just 16 years.
The short term reason to pull back right now is that most of the industry is going bankrupt right now, and there is a fire sale of oil and gas assets to be bought up at below the cost of creating such assets. So if Exxon can keep their balance sheet in order, they will be in a position to buy up distressed assets. I've heard accounts that middle eastern oil companies want to scoop up cheap asset, and a lot of private equity is buying too. So now may be a good time to be a vulture capitalist.
So while I'd loves to see oil majors pull back for long term reasons, I suspect the short term opportunity to feast on carrion is just too tasty for them. Notice in a glut failing producers will continuity to pump until they are forced to sell. So the assets get priced lower. The new owners continge to pump, but they've got a much lower cost basis. So now they can operate and profit at much lower price levels for oil and gas. I think prices will stay low for quite some time.
BTW natural gas is continuing to fall even as oil has appeared to stabilize around $30. NG is falling to $1.80/MMBtu. It does not make as many headlines as oil, but it appears to have no bottom.�
1/1/2015
guest Duke Energy's plan for new gas generation 'problematic,' NC regulatory staff says | Utility Dive
Here's an interesting bit. Duke Energy would like to replace a coal plant in the Asheville, NC area with a combined cycle natural gas plant. (Asheville is one of my favorite vacation destinations, and I've actually been to Lake Julian where the coal plant is. Quite a lovely area if you overlook the coal.) So Duke is having a hard time convincing the NC Utility Commission that a 540-MW CC gas plant is needed. Specifically because of advancing "generation, transmission and storage technologies", read renewables and batteries kick butt, the NCUC does not believe that the gas plant is needed now or will be needed in 8 years.
I find it heartening that renewables and batteries are starting to make it hard for any new gas plant, and CCNG is the most efficient, to enter the planning process. Moreover, this breaks the trend of replacing coal with gas. Rather, the new trend will be simply to replace coal with renewables and batteries, and avoid building bridges to no where. As the pipeline of new gas plants dry up, solar will take more market share and both coal and gas will be in structural decline in this country.
I'd also give credit to Tesla for issuing an early price of $250/kWh on Powerpacks. This moved the economic needle on storage and has been impacting the planning process ever since it was unveiled. Thus, Tesla is changing what pencils out for utilities long before sufficient quantities of Powerpacks will have hit the market.�
1/1/2015
guest Warren Buffetts quieter quest to kill solar in the US west : Renew Economy
This lays Buffet's strategy out pretty clearly. The effort to reduce renewable utility PPAs to 3 three years down from 20 is to skirt around PURPA. This aims to kill off competition to coal and gas from utility scale solar and wind. A three year PPA is really insufficient to finance any new productive capacity, but the target here is clearly utility scale wind and solar.
We usually discuss her Buffet's strategy to suppress distributed solar, but in actuality it extends to all renewables. Moreover, the motivation is not merely to make money on the utilities, but also to keep trains loaded with coal and to keep other fossil fuel infrastructure profitable. So really we need to see Buffett as a vertically integrated monopolist. It is the value of the entire supply chain that matters to him. Curiously, this exposes Berkshire Hathaway investors to huge risk as all fossil fuels enter decline. BH is well position to hold the bag on stranded assets.
Oddly enough, I think this may prove advantageous to distributed solar and batteries over utility solar. It is much easier for Buffett to suppress utility solar and distributed solar. Within a few years, homeowners and businesses will find it cost effective to install combined solar and storage systems that have no need to interconnect with the grid. These systems will be given little motivation to contribute any value to the grid, and the 20th century cost structures of BH utilities will continue to mount. This will drive grid defection and load defection to the breaking point. So when economic reality sets in BH will crash hard. They will have one of the most overvalued book of obsolete assets. So write offs will be massive as 21st Century realities set in.�
1/1/2015
guest You are welcome! Yeah, I agree about the decline in general as well even though I haven't put enough analysis on it to give a year like you, but I could see that. I also see a lot of demand lost within the next 16 years and couldn't believe that's all they had when I read that.
Confession guys - I have BH B stock and I need it to do well for the next two years until I can get that Model 3 because it's going to be at least 6k of my down payment. I've been a big fan of Buffet, read his books, liked his style, but I hate that it is coming down to this, our future.
I've always heard he buys a business and lets the managers do the work, so I'm not sure how much his hands are in this battle, but if so, I'm not happy.�
1/1/2015
guest Not knowing anything more about Buffet than just about his name, I'm inclined to stick my neck out and say that strategy is unlikely to be delegated to "managers". At least historically; the man is gettin on, isn't he?�
1/1/2015
guest Apologies I think I mistook what you said earlier. Yes, I do expect the sixth ABS to happen in Q2. In any case it's such a small deal that it won't make much of a difference to my overall point.
I thought we were trying to draw a fine line between solvency and liquidity in earlier posts. Some ultra-bears might argue that SolarCity is not solvent. But I am pretty comfortable with the assumption that SC is basically solvent. But I do think that liquidity is a big issue for them.
With reference to the chart in slide-10, the key issue SolarCity is facing is that a lot of value is locked-up in wayy out years and the firm is having difficulty monetizing it. Every new install is essentially taking up the cash from the front and shoveling it on to the back, less liquid space. That is what brings this business model into question.
Effectively
- the business needs debt to 'run' the operation.
- the business needs debt to 'grow' the operation.
Even if there is 0 growth in new-installs, in other words only do 800MWs of installs in 2016, they still need lots of 3rd party financing.
I think they will be fine for the most part in terms of secured-financing (recourse or not) but they can easily hit a wall with unsecured-financing.
Consider this, they did the Silverlake convertible deal in Q4 and raised $113mln. They still had a net decrease in cash of about $25mln. Had they not done that, the cash would have gone down to $280mln at the end of the quarter. This clearly illustrates living hand-to-mouth.
There are a lot of spooky little details around the silverlake deal but I will leave them aside to not derail the conversation. But I hope we can all easily appreciate that silverlake deal is much more of a one-time deal in nature than a repetitive financing proposition.
So if cash needs are similar in Q1, what happens to net-cash in Q1? How long can they survive like this?
Also, consider the potential increased capital spending needs owing to the Buffalo factory. The 10K clearly states:
"In particular, we may incur substantial expenses in connection with the completion of the manufacturing facility under construction in New York and as we purchase equipment in excess of the amounts spent by the Foundation."
A quick scan on the 10K did not provide any estimates for this. One has to wonder where any cash will come from. The imposed timeline by NY state is very stringent too. Here are a few relevant details:
"In addition to the other obligations under the Riverbend Agreement, we must (i) use our best commercially reasonable efforts to commission the manufacturing equipment within three months of Manufacturing Facility completion and reach full production output within three months thereafter, (ii) employ personnel for at least 1,460 jobs in Buffalo, New York, with 500 of such jobs for the manufacturing operation at the Manufacturing Facility, for the initial two years of collaboration commencing after Manufacturing Facility completion, and we have committed to the retention of these jobs for five years,"
Where will money come from?
I too think aiming for 800 MWs is much more appropriate than 1.25GWs. But I am not sure how Mr.Market will perceive such guidance. In my opinion, part of current SCTY stock price still reflects future growth. Lower the growth, lower the growth-premium. I think it's reasonable to expect the stock to fall on this news.
Additionally, I am not so sure $400Mil additional DevCo borrowing will be enough for it. I think it will easily be north of $600mil. And yet, even at $400mln, I am not sure if they will have an easy time raising that much cash.
The ultimate salvaging of the situation is to somehow monetise the out year cashflows (from slide-10). They want to try to do that by asset sales. I am quite skeptical of such sales for a number of reasons. I can dedicate an entire mega-post just on that. In my view even if such a sale happens, it will be more one time in nature accessing old friends and distant relatives, much like the silverlake deal.
Additionally such sale, based on pricing, will call the 6% discount rate into question and there is a big chance will put pressure on the stock. Or maybe the immediate cash relief will propel the stock up. It's a toss up.
I am quite puzzled. How will SolarCity pay for these batteries up-front?
If the business model is cracking just under the weight of panels, once you add the burden of financing the batteries, it will simply put that much more burden and effectively accelerate the business failure.
Are you thinking that Tesla will provide some sort of financing plans to SolarCity, where it doesn't need to pay upfront? That will simply transfer the business model mess up from SolarCity to Tesla. I am not sure if any of Tesla shareholders will like that.
Now that is only addressing liquidity issues with on-boarding batteries.
Separately, in my view I don't get the sense that battery installations will be immensely profitably to SolarCity. It appears as though between the ITC and grid-services, they might be able to recoup the costs. But will there be sizable profit? That's highly speculative at this point.�
1/1/2015
guest This is exactly what Lyndon was talking about when he said bad policy will lead to grid defection. Similar to the Nevada debacle. If the grid players would play nice most people would feel inclined to have a connection. However, with the net meter changes and additional fees, etc. people are going to find that a stand alone system is far superior and pull the plug. Once they pull the plug there will be no going back.�
1/1/2015
guest To complement your article:
US Solar Market Sets New Record, Installing 7.3GW of Solar PV in 2015 | Greentech Media
�
1/1/2015
guest Well, we'll have to see what management does to improve cash flow. They still need to get to positive net cash flow before we can see how they will make further progress.
There are many ways management can increase cash flow. Fundamentally, they've got to get off the notion that everyone in the market wants to delay paying for their solar system for as long as possible. That's the PPA-fits-all syndrome. They need to find a healthy appreciation for consumers who are quite willing to pay more up front to save more longer-term. Something as simple as a fixed 10 year loan would concentrate 30 years of payments into the first ten. This would nicely complement the PPA payments which push most of the net levered cash out post flip. So if they start by marketing to customers who will pay quicker, this does a lot to improve all the other financing burdens along the way.
Management can do things like market a 10 year loan. The need to decrease the duration of their payment stream. So I wait to see what they will do. If they don't tighten up their cash flow, then we have a basic problem of incompetence, and the fine distinction between liquify and solvency won't matter.�
1/1/2015
guest If 1.25GW starts to look tough around June they can just dial up a couple extra commercial deals for massive filler. I would imagine there are already more than a few of these in their back pocket, Tesla Gigafactory for sure.
Residential demand was up 66% last year and should be an even greater increase this year as solar becomes more mainstream in 2nd tier markets like Philadelphia. The US is still installing less residential in a year than Germany did in their best quarter of 2011, so that should tell you we're still just skimming top. Soft costs are on a steep downward trajectory, commodity prices should temporarily lower some other costs this year, plenty of positives out there as well.
All SCTY needs to do is weather this next 5 months and keep some large commercial installs ready to deploy as needed. Avoiding a massive global recession or banking crisis would be nice too.�
1/1/2015
guest One way to increase cash flow now might be to ask current PPA customers if they'd like to pay off their lease now, in advance. With a bit of a discount, and the fact that people's financial situations can change, often for the better, they may get some takers.�
1/1/2015
guest I could not disagree with this more. The key to everything is retaining differentiation while keeping or growing share. They do that through offering a PPA product that no one else can touch. Going into service-less 10 year loan installs puts them in the same market as premium local installers which will become overcrowded so rapidly that profits will be razor thin. Remember....at least half the market does not want to deal with the details or any worry whatsoever, that MUST always remain the focus.
You're letting all this disinformation and FUD spray distract you from what's been proven successful out in the marketplace. Get this PPA lean so it's profitability sustains growth at scale with prices still under that of the grid. Sell straight installs as a strictly secondary offering with a huge premium.�
1/1/2015
guest Loan product is a must, but as long as people are unable to save day one, the majority will not take out a loan on solar install. Especially as the market expands to lower income households. That's what the American market is indicating at this time. Loans must eventually offer lower payments on day one before they can do any real penetration in the broader market. Ppa/lease are the only real way to penetrate the broader market and expand solar in any meaningful way at the moment. As that penetration continues, all cost drops accelerate to the point a loan product with a shorter term can be a viable broader market product.
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I have to repeat this again, but California is going to have a big boost as they are now accelerating toward the caps being hit by later this year in some estimations. People will sign up to be grandfathered in to the old rates. By the way, grandfathered was essentially guaranteed by the CPUC decision so that will even give greater impetus to go solar now in Claifornia.
Solarcity is the market leader in California, so I expect them to get a big boost in contracts giving confidence to hitting the 1.25GW number.�
1/1/2015
guest Foghat, Mule
I am not sure why you are referring to demand side of the equation. I or jhm are not talking about that at all.
We are only discussing the financial viability in trying to do the 1.25GWs. In other words, the supply side of the equation. Specifically ability to finance such growth/installs.�
1/1/2015
guest solarcity has stated repeatedly they've locked up financing for the 1.25GWs, so it is a matter of seeing if they were correct by year's end. they continue to get repeat tax equity and have expanded that tax equity partnership list as well. In addition, all ABS offerings have been oversubscribed, so demand in the capital markets is strong from historical data. It is my understanding that the last ABS took longer and was pushed into January missing the q4 was due to the complexity of the mysolar loan ratings. They expected this ABS to be apart of q4, so it is not accurate to say they are hard up for capital. It's was a matter of getting a new asset class rated, and not due to lack of interest in the ABS in the capital market. Again, the mysolar ABS was oversubscribed.
I would say if you are stuck on convertible bond market rates, that is not a part of the actual rates Solarcity bonds are purchased at, nor the ABS offerings, which net out to being sub 5% across the board.
Besides the silver lake convertibles, I don't think they've done a convertible offering in about two years, so, Solarcity obiviously does not frequent them for capital. I would say that's not even apart of the central capital aquiring strategy. To base a thesis on this might be short sighted.�
1/1/2015
guest Agreed. We are in fact on the same page, except for a subtle detail.
I understand the need to get to net-cash-flow positive first. In my eyes this has very little to do with costs and such. It very largely depends on the ability to borrow money, in excess of the outgoing cashflow needs for the quarter. So I don't view net-cash-flow as an independent important thing to keep an eye on. What is important to me is the ability to keep borrowing.
On Jan 21, there was $185mln ABS deal announcement.
On Jan 25, there was $160mln financing facility announcement.
There is a $57.45mln PPA ABS deal in the pipeline.
So overall about $400mln new credit is becoming available in early Q1. This should keep the ship afloat for about a quarter.
Now the game is to wait and see what happens for next quarter. At this point it's basic survival one quarter at a time. This only gets worse when Buffalo factory's capital needs become apparent.
They need capital, like now! and that too lots of it.�
1/1/2015
guest to reiterate, as I remember from the q3 conference call, Solarcity has well over 400mws to be rolled onto the abs market, and that was as of last quarter, so they are not lacking capital generating engines at the moment. It will be a matter of timing in my opinion. This is not a matter of can they get capital, it's a matter of how accurate can they predict timing it within each quarter. Evening out as opposed to clustering as we have seen this quarter already.
they also have a $1bln commercial install fund that they unlocked that they continue to receive capital from which is still very much in the early stages of being drawn.
also, to reiterate another point, they will now be pumping out more of the "traditional" ABS which are primary ppa/lease cash flows. The mysolar abs slowed down the pipeline, and now we should see the flow pick back up.
I feel they might have broken up a bigger abs in order the pull out all Nevada ppas/leases from the offering. These smaller ones coming up are a result of that process, in my opinion. I think bigger ones will pushed out later in the year as they can now not have Nevada included.�
1/1/2015
guest "solarcity has stated repeatedly they've locked up financing for the 1.25GWs"
Can you point me to the references? If SC infact said it, it will be a total lie. Have you looked at the slide-1 in their presentation with any attenention to detail? or read anything I wrote since the ER came out?
"they continue to get repeat tax equity and have expanded that tax equity partnership list as well."
No argument from me here. But JP Morgan put out a note on Feb 16 saying that stress is building up in the TE market and apparently TE prefers utility scale solar. After taking at a cursory look at 10K though, I personally don't think tax-equity is an issue.
Tax equity does NOT cover full costs of the operation. They only cover about a portion of the upfront installs (and no over head).
ALL of my posts since ER questioning the financial/business model focused exclusively on post-tax-equity financing. In other words, I take TE financing as 100% guaranteed.
"In addition, all ABS offerings have been oversubscribed, so demand in the capital markets is strong from historical data."
This is Lyndon Rive's deception tactic. I work in the outer rim of the financial industry. I get to see how things work up close sometimes. McDonald's issued 9 bonds worth 11.25 Billion on Dec 2. They were over-subscribed by 10-folds!! But when the pricing came out they issued at about 50bps higher than the bonds that are already in the market.
Over-subscription means absolutely nothing in the primary market. It's like buying/selling homes. Many, many people place bids even if they are not sure, just to keep a hand in. My neighbor placed bids in just about every house she saw in the neighborhood even before she even vaugely considered the pros and cons of the house in question... Ultimately, proof is in the price!
The latest ABS did come out with inferior pricing to the ones before. So we need to see how the trend continues.
Most importantly, I said I am not too concerned about secured-financing. I am questioning their ability to keep borrowing through unsecured facilities, which they need in the tune of about $200mln/quarter at the current run rate.
"I would say if you are stuck on convertible bond rates"
NOPE. re-read my post here. There is not a single mention of convertible bonds in there. You really did not read one bit I wrote but somehow conveniently started off countering the discussion!
Brilliant.
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All of my posts included analysis of the full 8 quarters of data management gave in slide-1, more importantly focusing on the last 4 quarters. It is not a matter of nit picking a particular bad quarter. Re-read all my posts since ER to get an idea. You missed the whole point.
In any case, I see you have an evangelical belief towards SC and it's management. Nothing anybody ever writes here is ever going to touch that faith. Even if SC ever goes bankrupt you will blame everything else except the management or the business model (how about some shorts or irrational market or some such?). So what's the point of this discussion. I think I figured it out.
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Can you show a reference to that?�
1/1/2015
guest listen to the q3 and q4 conference call on the capital for 1.25Gws. The mysolar abs was at a higher % because of its first time rating as was the rating for their very first lease/ppa abs a few years back. Also, I feel a major reason for the ceasing of the mysolar loan product is because Solarcity was seeing the future abs rates were not going to there satisfaction on the capital markets(complexity problem). So they are not going to expend anymore resources on it and stopped the loan program. Again, mysolar didn't have a demand problem from a consumer side nor an abs side(but at higher cost of course).
The forward going ABS that are primarily traditional lease ppa will receive similar ratings and pricing. They have had tremendous success with all prior ppa/lease abs thus far, so the track record is a substantially convincing dats point.
According to the CFO, working capital needs are being met by the sale of Solarcity solar bonds& robust revolving credit so, I think you need to include that in whatever shortfall equations you're getting from tax equity. I'm not sure you have made any point about the 400mws of abs ready funds already in the queue to put out onto the market. In addition, revenue growth from the 800mws+ installed in 2015 should be accounted for in developing a capital requirement for installs in 2016. Peter rive has stated in q3 conference call that he expects a 70% increase in revenue generated in 2016 so fair to say they will have greater revenues to work from as well. Again, all in costs are anticipated to move sub $2.30/watt so things are much different from your predictions as far as these data points are concerned.�
1/1/2015
guest A minor note that Sunrun ABS is restricted to borrowing only 65-70% of the value of the contracts pledged. This seems to produce a deceleration of borrowing ability with each cycle.�
1/1/2015
guest SolarCity Activates Fund to Finance More Than $1 Billion in Commercial Solar Projects with Investment from Credit Suisse | SolarCity
http://www.bizjournals.com/sanjose/news/2015/04/22/solarcity-says-new-fund-will-finance-1-billion-in.html
SolarCity to Expand in Commercial With $1 Billion Fund - Bloomberg Business
Wow, just goes to show you haven't really been doing your homework have you?�
1/1/2015
guest SolarCity...
some analyst�
1/1/2015
guest This is from almost an year ago!
300MWs over 2-year span doesn't mean much, does it?�
1/1/2015
guest So, at 70% revenue increase from 2015 installs, Solarcity projected to achieve approx. $680mln in revenues. In addition, they are projecting a nearly .60/watt cost decrease over 2016 as well. So, 70% revenue increase, and ~80% all in cost decrease.... Sounds like pretty significant fiscal success story to me.
by the way, the remaining balance from credit Suisse fund will cover nearly 100% of all 2016 commerical installs(~190mws) as well, so this perpetuated question of 2016 capital is really skating on thin ice in reality...�
1/1/2015
guest
This is yet another example of Lyndon Rive deception through silly nonsense. I really wondered what kind of fool will fall for it. Well, now I know - it's fool.com - duh!
Again, take a look at slide-1. Right beneath the deception, they list all the debts and cash. Recourse (devco) debt increased by $218mln in Q4. If you look at all of 2015, it increased by $820mln.
fool.com is simply repeating all of managements numbers and words like a parrot. All of it is silly nonsense.
Ultimately if you take the "first principles" approach of count-the-money (or debt in this case), you know what's going on and if the model/growth is sustainable or not.
I don't believe any of their cost metrics and such one bit! So I never referenced any of such analytical metrics in any of my posts since ER.�
1/1/2015
guest Sometimes you look a lot better when you admit a short coming then defending a hollow arguement.
Solarcity activated the fund q2 of 2015, of which ~125mws was funded in 2015. 175mws to be funded still for 2016, which equates to nearly all projected commerical installs for 2016. Now, how considerable is that in your opinion to capital required to fund 2016 commerical installs?�
1/1/2015
guest I am not sure why you are so caught up on commercial. That is what I am asking. Based on your math, commercial represents less than 25% of the guidance. So why get hung up?
You win on that one - happy?�
1/1/2015
guest The question is the following: "will they be able to fund 1.25gws of installs in 2016?" You feel it is rough going, I say they are in good shape. It's that elemental.�
1/1/2015
guest Read the whole piece, it's actually not bad considering MF is usually the same FUD/rosey nonsense as seeking alpha.
The point they were making was the need to disconnect debt trajectory from revenue. Today's debt accumulation is not an indication of 2017 profit margins. I mean, all the line in the charts are steep in the right directions. Looking at this thing in a linear fashion is just silly.�
1/1/2015
guest Ok good. Given that it is so elemental to you, why don't you do us all a favor? Put all the math, data points together and show us the money. Can you do that?
I backed each of my claims with real data and real math. You pointed one (minor) thing that I missed. But why don't you step up and show us everything in one place?
It's elemental right?
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You are taking me out of context. I am specifically talking about their deceptive claim which sounds something like all of Q4 was financed through non-recourse (secured) debt. Many people unknowingly fall for that.
Add in the increases to the revenue. Net out the cost reductions. Then plug in all the available known new credit facilities. Does 2016 look good? Try it out, put it in excel and show it.�
1/1/2015
guest Can I take a moment to point out how pissy this thread has gotten since trolling reared its ugly head? These two used to converse with civility and logic.�
1/1/2015
guest Im just going to ignore the temptation to engage. added one more person to my pledge of non engagement.
i just wish the ignore list post didn't show up in my thread leaving an annoying dent in the timeline conversation, especially if another poster responds to the comment they made...�
1/1/2015
guest Setting aside the pissing match, I too would like to see the math.�
1/1/2015
guest Again, I take no issue whatsoever with your numbers. Maybe a bit here and there....some assumptions may be way to pessimistic for me, but on the whole they're fine. Everyone is aware that there is debt being accumulated each quarter and that it eventually will put a strain on their ability to expand via simple debt. That's the whole point of cash-flow positive in 2016, no? Not to start somehow paying down that debt in a significant way, just to assure the wider investing world of model profitability and get into the next phase of scaling.
They're borrowing every dime they can to expand share as rapidly as is humanly possible. Isn't that precisely what we want them to do? This is a 35% share of our nation's future energy monster, we should be content with far worse books than this IMO. A handful of billions at the early push-out stages to become the biggest energy player in the nation? How is that not a bargain? I mean, NV Energy made $750M last year and SCTY will own their territory in 2-3 years.
They'll be cash-flow positive with costs shrinking each quarter while NOBODY will be able to jump in and mimic their product for years. A two year head start on "renewable-energy-as-a-service" is one of the most valuable concepts I've ever seen, arguably more valuable than Tesla's lead in EVs. That is obviously IF plans X,Y, Z, AA, AB, and AC all work out fairly decently.
I don't know why you can't see the value in this. If you don't think PPA will be a success in the medium term, then why are you even on here? If you think it will, then SCTY clearly will hold or increase their lead as solar gets to scale and soft costs melt to nothing. You seem to be hovering in neutral ground where PPA never quite wins and never quite loses. How is that possible if there's only one major player?�
1/1/2015
guest Bay: 'Too Soon to Say' if PURPA Needs More Changes | RTO Insider
PURPA is the next new metering battle. Buffet knows this is where the puck is going and is hellbent on cutting if off before it gets there.�
1/1/2015
guest SunPower claims 22.8 per cent solar module efficiency record : Renew Economy
Good on SunPower for setting a new panel efficiency record, 22.8%. I like this direction. OK, Silevo you're up. Let's see you top that.�
1/1/2015
guest Here is an interesting tidbit.
Out of $214mln debt that Solar Bonds helped procure, a whopping $165mln comes from SpaceX.
Aside from SpaceX, Solar Bonds succeeded in procuring only a paltry $49mln so far since launching on Oct 15, 2014.
Given that these are un-secured/recourse bonds, much like the convertible bonds that trade in the market, these Solar Bonds are very overvalued. One would have to be a fool to buy these when you can directly buy the convertible bonds in the market for a lot higher yield. Effectively what's happening is SpaceX is executing a back door bailout of SolarCity. It remains to be seen how long this can continue. For reference, sources indicate that Musk owns about a third of SpaceX. If it was wholly or largely owned by him, this backdoor bailout can continue for far longer.�
1/1/2015
guest I think calling it a bailout is far too harsh. SpaceX received a $1 billion investment from Google, et al. SpaceX didn't have immediate need for much of the cash, so it could have lent it to others on the money market at about zero interest or could have lent it to SolarCity at something higher than zero.�
1/1/2015
guest It is a different risk proposition for Musk/SpaceX to own this debt. In fact, if SolarCity were at risk of default, I think Musk would buy up as much debt as he could. This would position him to own the company after reorganization. From this vantage point, it may make more sense for Musk to buy up convertible debt than to buy more shares.�
1/1/2015
guest Fair enough. At the time when SpaceX made these investments in Solar Bonds, the convertible bonds were trading for lot lower yields. So it makes sense to put the cash into Solar Bonds, especially because they are of shorter maturity.
Here lies the bigger problem, SpaceX may not be able to put these kinds of cash into Solar Bonds anymore. If it's done, it will be against fiduciary duties to SpaceX's shareholders. So Solar Bonds program becoming a smaller source of debt is problematic to SolarCity.
Here is an even BIGGER problem. SolarCity needs to return $90mln in Mar 2016 and $75mln in Jun 2016. It's all in 10K, search for keyword SpaceX.�
1/1/2015
guest 1. SpaceX has sharesholders? Where do I get me some of those shares to become a holder?
2. SolarCity isn't going anywhere. It's part of the 'package'. So all this angst is for naught. It might be interesting to see how things develop and whether Solar City goes back to being private, or if Elon does what he's hinted at before and makes all three companies a whole, or if Solar City morphs into a different role than its current one, or, or, or, or... There is synergy in everything Elon and family are doing, so while the three companies are technically separate via money eyes, they really aren't.�
1/1/2015
guest 1. SpaceX has sharesholders? Where do I get me some of those shares to become a holder?
That's an odd question. Private companies have shareholders too. Not all private companies are owned by a single person.
2. Yes and yes.
SolarCity as a company and it's operation will survive one way or another, in one form or another. I never doubted that. After all GM is alive today! after coming out of a bankruptcy and wiping out prior shareholders.
The discussion in this thread, being part of Investors sub-section, is - what will happen to current SolarCity shareholders, as in, what happens to SCTY as a stock.�
1/1/2015
guest Some of the Solar Bonds have shorter maturity than the convertibles, so they still may be more advantageous to SpaceX's shareholders.
As for the Mar 2016 and Jun 2016, SpaceX may just roll those over for another year. We have limited visibility into SpaceX's cash flow. I would imagine that the Autumn was tough for them, but the aerospace industry works on progress payments -- it is sometimes less lumpy.�
1/1/2015
guest Anyone has access to JP Morgan's note today? Can someone post an excerpt?
Apparently they downgraded today based on "business model uncertainty". Do these guys have my profile bookmarked or something?�
1/1/2015
guest Seems like a responsible statement.�
1/1/2015
guest It is hard for me to understand how these analysts have jobs:
https://www.tipranks.com/analysts/paul-coster�
1/1/2015
guest I'm fairly sure that 5 Fidelity funds and Google put $1 billion into SpaceX, so you could buy some of one or more of those, in this case google is your friend in finding which�
1/1/2015
guest I don't see any of this happening. I'm sure Elon likes to float the idea just to keep them guessing, but he's made it pretty clear he wants to focus on SpaceX once Tesla is on stable ground in a few years. Smashing things together is likely the opposite of his preference.
SCTY can be propped up for this semi-difficult 6 months in any of a hundred different ways. Sometimes it's hard to remember there are about 7 people in this world that don't have faith in The Musk and 4 of them are posters in this thread. The idea that it will be difficult to find people willing to take an advantageous financial position in a solar enterprise run by Musk that already has 35% share is just silly. It doesn't seem silly right now because we're in the eye of the storm, but it will certainly be silly in retrospect.
Buy a distressed oil services firm at major discount or drop $100M into a Musk operation in solar at a major discount? There will be plenty of buyers with probably some coinciding dilution. Not great for us, but it's not gonna matter once they go cash-flow positive and the stock takes off.�
1/1/2015
guest [SPECULATION]
I wonder at what point Google would take an interest in buying SolarCity? It could be nice to pair with Nest and the whole IoT thing.
[/SPECULATION]�
1/1/2015
guest Mule, you have a very wrong idea of what cash-flow-positive means. You seem to be thinking of free-cash-flow-positive, where incoming revenues pay for ALL expenses. SC is several decades away from that, if ever.
What management is aiming for is net-cash-flow-positive, where they will be taking on adequate debt continuously (but not equity) such that their cash reserve does not go down. This very much hinges on their ability to keep rolling existing debt, while simultaneously taking on more debt each quarter.
So 2017 is no different from 2016. And 2018 is no different from 2017. You seem to think of this as some temporary situation. I don't think so. All data indicates that the business model is fundamentally broken. It needs to be augmented with some sort of additional revenue streams (like jhm's idea of 10-year loans) to make it viable.�
1/1/2015
guest No, I'm not. I think I've been clear that I see any debt unrelated to direct sales, installs and servicing as unimportant. You see it as a $3B monster that's growing, I see it as peanuts.
We need focus on profitability in a bubble for every market where SCTY is up to scale. You could maybe consider parts of CA and NJ as scaled, that's about it. Bring down soft costs and especially sales costs. I want sales at like $.15/W in mature markets pronto!
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And can we talk about this nonsense?
are they thinking making their positioning joke-based? What is this, Geico or the future of energy in America?�
1/1/2015
guest FSLR is up after hours for a good ER. Hopefully it will help the whole solar sector tomorrow.�
1/1/2015
guest When will Natural Gas Peak in the US?
Natural Gas Prices Are Unsustainably Low | OilPrice.com
September 2015 could prove to be the peak production month for natural gas in the US. Since then, production has fallen 1.2 billion cubic feet per day (bcf/d). Consumption and domestic production are both about 75 bcf/d, but with imports near 2 bcf/d, the US is deep in a gas glut.
Conventional gas has been in decline while shale plays have grown the supply enormously. Art Berman notes that about 15 bcfd of new capacity must be added this year to keep supply levels constant. However, many producers need gas prices over $4/MMBtu to be profitable. Thus, the supply will decline until supply becomes tight enough to boost prices to "sustainable" levels.
However, I have to question whether there is any sustainable price level for natural gas. Gas at $3/MMBtu in a boiler is able to produce power at a fuel cost of $31/MWh. Wind and solar PPAs, however, are in range of $25 to $45 per MWh. Thus, burning natural gas is not competitive with wind and solar at above $3/MMBtu. Moreover, solar will continue to come down in price 10% or more per year.
US wind installations were 8.6 GW in 2015, up 77% from prior year, and solar installations hit 7.5 GW. This was in a year when gas mostly traded below $3/MMBtu. Apparently, cheap gas is not sufficient to halt the advance of wind and solar.
Moreover I estimate that the 8.6 GW of wind and 7.5 GW are sufficient to offset burning 0.64 to 0.82 bcfd of gas for power. An offset of about 0.7 bcfd is significant in a market with an oversupply of 1.2 to 1.6 bcfd. An yet this offset each year can grow nominally around 30% per year. At this pace, we are looking offsets of 0.9 in 2016, 1.2 in 2017 and 1.5 in 2018. Demand grows only about 1 bcfd per year. So within the next three years we should cross a threshold where renewables satifying a demand for incremental natural gas.
Excluded from this calculation is substitutions with coal and oil. While oil is in a severe glut of its own, it is unlikely that natural gas will find favorable substitutions with oil. Coal and gas have nearly the same price per Btu, thus the offset should impact both proportionately. So about half the offset to gas and half to coal. Additionally, batteries will have a greater impact on peak gas consumption. This would intensify the gas offset since peakers use more BTU per MWh than baseload gas or coal. Thus, the offset in 2018 very well could be sufficient to remove all growth in demand for gas.
So if the peak was not already September 2015, I am pretty confident that the peak occurs by 2018. If the current glut is sufficient, demand may never push supply to higher levels of production.
Coal has peaked, and now natural gas is peaking. These have profound implications for the distributed solar. One, it is not possible for gas to fall low enough in prices to slow down the uptake of renewables. However, gas price will need to increase to maintain supply. When this happens, renewables will be decisively more competitive. Two, utilities will be burdened with increasingly uneconomical generations assets. They will attempt to recover these losses from ratepayers increasing the burden of being on the grid. Three, rooftop solar will increasingly be in direct competition with utility solar. Batteries will be important for price support in the wholesale markets. Advantage goes to batteries in distribution. The value of location will need to be given serious consideration and is currently neglected in rudimentary attempts to value distributed solar. But distributed solar and batteries have considerable location all value.�
1/1/2015
guest Innovation: Pre-fab solar farms could slash cost of big solar : Renew Economy
This is a fun idea: prefab, redeployable large scale solar. SolarCity also had some ideas along those lines. I'd love to see it.
Curiously Buffett minions have be trying to fight FERC and solar by cutting the length of PPAs down to three years. Well if a solar field is highly redeployable, that suppression strategy won't work.�
1/1/2015
guest Wall Street Won't Give Up On Its Energy Bets | OilPrice.com
A look at the bets some investors are making in gas and oil. Turns out that Buffett is loading up on Kinder Morgan which owns about 84,000 miles of gas pipelines. Now what would he want with that? And to the point of my earlier post, as gas moves into post peak reality, what becomes of gas infrastructure?�
1/1/2015
guest People keep worrying that solar/wind won't take over if cost is merely on par with the cheapest possible natural gas turbine production. That is inherently irrational. Human existence acts in it's own interest in the long run, have some faith.�
1/1/2015
guest I am finding easiest to understand Solarcity by viewing the company as a lending institution. They have made long term fixed loans financed by short term borrowing. They have interest rate risk, and liquidity risks, that would never never acceptable in modern banking.
They have an ROI implicit in every PPA. While there are many interpretations of what that ROI may be, once their cost of capital exceeds that ROI they will not be profitable.
They seem to have set up an olde tymie bank where their finances had to proceed according to plan.
Credit Susse credit line may explain the apparent hard limit on borrowing. Solarcity may have to renegotiate this line of credit, or other credit lines, to borrow more. It is notable that the Credit Susse terms announced does not encompass residential PPA. Why is Credit Susse not interested in recourse involving residential PPA?�
1/1/2015
guest I think it's just Buffett's mentality to buy when a company's stock is down and a good buy. He did this with the 2008/2009 stock market recession. He has investments in renewables, but obliviously is still focused on dirty energy. I don't agree with it, but maybe it's his best way to return profit during the rest of his tenure with the company. He's gotta retire soon....dude is getting up there!�
1/1/2015
guest Americans Chose Solar Power at Record Rates in 2015 | Inverse
Residential solar was the growth segment in 2015. US solar installation when up 17% across all segments. But residential when up 66% while utility and commercial were relatively flat only growing 4%. So now reselidential is about 30% of the solar industry.
I think this goes a long ways in explaining why SolarCity focused on residential. That's where the growth was.
I expect commercial solar to pick up the pace in 2016, and residential may moderate.
Utilities invested heavily in wind last year, installing 8.6 GW, up 77% from prior year. Wind was cheaper than utility scale solar and does better job complementing residential solar. So until solar gets cheaper than wind, perhaps utilities will do the regulatory minimum amount of solar. I do think that NV Energy may attempt to fight rooftop solar with utility solar. I believe this is primarily to justify a low feed-in tariff for distributed solar. But I do not see how this is a good strategy for balancing generation capacity to load. It is merely a strategy to suppress distributed solar and maintain market share. Other utilities like Green Mountain have a strategy to make best use of distributed energy. A utility like that will add solar only if there is additional need beyond what distributed solar is supplied. So utility generation is supplemental, not competing supply. It will be interesting to see how utility solar grows in 2016. Will it be dominated by NV Energy types, Green Mountain types, or regulatory minimalists?
My hunch is that the minimalists will continue to set the pace. If so, residential and maybe commercial will continue to gain share in the US solar market. In any case, I think storage is becoming incumbent upon residential solar. The utilities will continue to suppress solar, but having batteries gives homeowners much more leverage. It is a hedge against adverse policy. As a class solar owners do not want to be pushed around by utilities, so they need the exercisable option to refuse to supply the grid. Only those who can walk away have any say at the negotiating table.�
1/1/2015
guest I still think commercial and utility will grow faster this year. These guys react to lower prices faster than "regular folk" and the utils are waking up the the fact that they need to get as much solar behind their paywall before the decentralized wave hits them full blast.�
1/1/2015
guest I thought this was a great article on the transition that needs to occur from Steve McBee, although I already see SolarCity becoming that 2.0 energy company.
McBee Insists a Next-Generation Energy Provider Is Coming to Market, NRG Notwithstanding | Greentech Media
�
1/1/2015
guest its wild what is happening in California around Solarcity right now. They are in the midst of valuing out the benefits of solar+smart inverter + storage + smart thermo through the sunspec alliance project right now, so we'll no longer speculate about how to value Solarcity DERs for much longer soon.
also, if you look at the Solarcity white paper, you'll get a good indication of what Solarcity is going to look like over the next 4 years, 2016-2020. The cost benefits to the grid of what they are doing is staggering. The big revelation is that smart inverters is the big push, accounting for approximately $1 billion of cost savings to the grid alone. Solarcity is deploying smart inverters almost exclusively now so it's really moving forward fast. California estimates are about 900k installs into 2020, so a massive increase in smart inverters to be deployed over the course of the next 3-4years. However, the benefits of energy storage will be staggering. At 100% deployment of energy storage with solar, cost benefits grow 250% to $3.5billion in savings annually to the grid. That is undeniable to California commissioners as the future has arrived in a eye poping way. It is seriously a major concern to traditional cost-plus monopoly stakeholders. There really is no turning back and this is why we see the big "war" happening. It is time to adapt or get assimilated. No other way around it. Current Net metering is an investment in these massive savings that will be available nearly immediately over the next 4 years as opposed to paying higher rates to utiltiies whose investments would take decades to reap any benefit at all.
Here is another reason I think people will re-up with Solarcity: they will replace your old inverter with a smart meter at the 10 year inverter replacement mark. This "upgrade" will open massive additional value to the system for now it has controllable capabilities that were not there before. remember the vast majority of solatcity customers have come in the last two years, so by the time replacement time comes, smart inverters will be the mostly only thing on the market at that time. Solarcity aggregation software platform(and customer service) will be key to differentiating itself and maintaining thst consumer relationship. Looks like again they already have one step ahead of the rest in this direction.�
1/1/2015
guest Aloha and E Komo Mai
Looks like the full package is now available in Hawaii, of SCTY just sent and email out anyway. not sure if this was fully announced already.
�
1/1/2015
guest Yes yes yes. All good things!
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I just read this article on locational pricing for my state, found it fascinating.
Location, Location, Location: DERs Find a Market Opportunity in Texas Through Locational Pricing
�
1/1/2015
guest Positive article on the citizen revolt in Nevada:
Nevada Residents Fight Energy Monopoly's Attempts to Control Solar Power�
1/1/2015
guest For the longest times I wondered why Elon Musk didn't get personally involved in NV fight. In hindsight that looks like a very wise move.
"The White House is said to be considering Gov. Brian Sandoval (R-Nev.) as a nominee to replace Justice Antonin Scalia on the Supreme Court."
Republican governor of Nevada Brian Sandoval being considered for Supreme Court - The Washington Post�
1/1/2015
guest This is wonderful. I lovethe combination of elements. If SolarCity can succeed in avoiding exports to the grid, the utilities can just stuff it. This also goes for bigger game than what utilities provide. It is really distinctive to have this all integrated into one package. I think they should call it the HomeGrid.
SolarCity can test out the concept in Hawaii where the cost of grid power is so high just about anything else will pencil out. If it works well it can be brought to other states.�
1/1/2015
guest This is very helpful for understanding congestion and locational pricing. My impression is that congestion is quite a dynamic process. So distributed batteries be the most valuable sort of resource. Persistent locational pricing anomalies seem like something the grid operator would try to resolve over time, bUT this costs mone to resolve. So the locational value of solar would be as a potentially lower cost alternative to other transmission solutions. The article here did not discuss that potential. Since batteries can resolve both positive and negative congestion, it is really the volatility of congestion that matters. So they need to look a a suitable volatility metric like the standard deviation of location all prices.
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Ugh, why do I get the feeling the Buffett recommended Sandoval to Obama?�
1/1/2015
guest I don't know that Obama takes his cue from Buffett to pick his nominees. Besides, I would think Sandoval is more useful to Buffet as the governor of Nevada.�
1/1/2015
guest its still winter, what happens in spring?
http://www.caiso.com/Pages/Today's-Outlook-Details.aspx
looking at todays caiso's net demand (not actual demand)
what happens when Nevada brings on another 6GW of solar farm?�
1/1/2015
guest Interesting article on grid, Buffet and renewables:
Why Buffett Needs West to Get Over Enron and Link Power Grids - Bloomberg Business�
1/1/2015
guest Nevada Copper Corp - News Releases - Nevada Copper Forms Strategic Alliance with NV Energy on Solar Development Opportunity - Wed Feb 24, 2016...
mines typically pay a very high demand charge, not from operating, but from restarts (and skip lifts)
a grinding mill uses a lot of energy, but the grinding creates an incredible amount of demand when first starting, so the mines have paid for and deployed solid electrical infrastructure, just waiting to be used for more than the occasional mill restart.�
1/1/2015
guest A legend would be helpful. On the website, the solid dark blue was actual demand, the dotted light blue was 1 hour ahead futures, and the dotted purple was the day ahead future. I am not sure what the green line is supposed to be. It makes sense that the hour ahead and actual would be close together. If the green line was day ahead, then the gap would represent a missed opportunity to ramp up some cheap baseload.
If the green line is demand net of behind-the-meter generation, it does not make sense why hour ahead would be that far from it.
Regardless to answer the question, adding 6 MW of solar would be helpful for reducing the amount of thermal power needed. But that power would be supply not net demand in any case. So if the objective is to generate lower cost power with zero emissions, this would be a welcome addition. But if your objective is to support the fossil fuel generation, then I suspect you might see it as a problem.
For me, the goal is to push out coal and gas anytime the sun shines or the wind blows. Save fuels for backup for power. How else are we to even approach a 100% renewable grid.�
1/1/2015
guest It was Harry Reid.�
1/1/2015
guest I don't know much about this so I am posting this more as a question. Based on the above Bloomberg article I posted, I get the sense that that TOU rates in the middle of the day will drop to zero in CA, effectively homeowners getting no credit at all for any excess energy shipped to the grid. But homeowners will be charged what ever prevailing rates in the evening hours when they rely on the grid. So essentially all solar systems will become more or less useless unless backed by batteries. So now Solarcity and others will need to include the cost of the battery in their solar system costs in an attempt to beat the non-solar utility bill, which could make this challenging. Am I on right track on this?
Also there is no grandfathering of anyone in this, correct? TOU rates apply to ALL consumers it appears, old solar, new solar, non solar.�
1/1/2015
guest A legend would be helpful. agree, it was just a link to caiso, and a link to a caiso picture, they separated the legend out!!!
Nevada solar farm is trending from 4 cents /kwH to 3 cents/kWh in the mid term (2018 new build)
how California grids and Nevada interact, I don't know. Generally I consider that excess solar flows east, resulting in California being stuck with something of a Loch Ness curve instead of a duck curve, while the rest of America can enjoy cheaper solar power than California.
since THAT decision, Nevada seems to scoring lots of solar farms getting the green light, simply because it IS the cheapest new electricity to be brought online, it has affected SCTY share price.
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a 4 year phase in, a 12 year phase in, a 20 year phase in, are all forms of grandfathering but differed by duration and abruptness.
intent to go to TOU was demonstrated, but content of going to TOU was not fleshed out.
somebody in California is going to need to fund purchasing many many batteries, Japan has about 10% of daily power requirements from pumped hydro, so there is precedent for large scale, grid energy storage.�
1/1/2015
guest Nice find. Opening up interstate transmission would be fine. But what California needs is about 10 GW of storage. If 3 million homes had a home battery or an EV available to charge that would cover it. That may seem far fetched, but it does point in the direction that leads to a 100% renewable grid. Imagine if California had 10 GW of batteries all linked to the grid to soak up oversupply. It would also supply 10 GW of peak power as well.
So, yes, exporting the power to other states could be cheaper in the short run. But in the long, they need to roll out the batteries and charge EVs.
BTW, I do think that PTC on wind is problematic. In my view, I think PTC should be restricted when the wholesale price is negative, unless the producer stores the power for use at another time. The price can drop to $(23)/MWh for wind because at this price PTC nets out to zero. So PTC creates an artificial incentive for negative wholesale prices. If the PTC were adjusted to motivate self storage, two problems could be solved. I also think it may be time for a federal battery tax credit. This would round out incentives leading to a fully renewable grid.�
1/1/2015
guest TOU is not the same thing as wholesale prices. TOU is retail, and it is the same buying and selling. So it is highly unlikely that any TOU would go to zero. Why? That would motivate huge demand for home batteries not to mention EVs to harvest free electricity. And here I am not talking about just solar owners. All ratepayers would benefit from harvesting free electricity. Dry your closthes, heat your water, defrost your fridge, etc. The only time that zero TOU makes economic sense is when wholesale prices are negative. Then the utility can make money providing load. But the utility still needs to make 7c or so to cover transmission and distribution costs.
So once you recognize that TOU is the price at which retail power is sold, it becomes clear that the utilities do not have an incentive to underprice it. It is far different with a feed-in tariff, which only applis to buying power from customers not selling. A utility does have an incentive to underprice a FiT, but not a TOU. So with a TOU, you get demand response across the customer base which serves to level out demand net of supply throughout the day.
Much hand wringing has been done over the so called duck curve. I fail to see it as something that is bad. Rather it is an opportunity to set up intelligent rate plans that allow consumers to benefit from lower prices and avoid higher prices. So why should consumers run their closthes dry or charge their car in the duck's? That's the sort of stupidity that flat rate plans encourage. But in a TOU plan I can save 5c or whatever over the flat rate just by charging my car in the early morning or maybe midday. That to me is a terrific opportunity.
There has been this question about how solar benefits nonsolar ratepayers. Well if I get to save a few cents per kWh charging my car at midday because of an abundance of solar, I'm happy about that. That's a solar benefit to me. If I own solar and generate a little more than I need, I'm happy if some other retail rate payer gets to benefit from saving a few cents off my surplus power. Moreover, it is not a total loss. I may not be at home on certain days so that I charge my car, but somebody else is. Then on a day when I am home, I get to charge my car for cheap too. So over the course of the week I get the same benefit. So maybe I'm charging at 20 kW but my solar system only provides 4 or 5 kW, so in one day of charging, I'm getting the benefit of 4 or 5 days of solar production all at the same cost. So if I'm withdrawing power at the same time of day as I'm generating power, there is no net cost of power. I'm just time shifting over the days of the month. But even if I am not netting out in this way, if I am conscientious about making the most of TOU rates I have lots of opportunities to benefit from low rates and avoid high rates. If SolarCity is helping me integrate solar, batteries, smart theromstat, and a smart water heater, then I am well on my way to optimizing my power bill. I just need Tesla to program my car for smart charging too.
This is also an opportunity for SolarCity. They are diversifying their product line. There are opportunities for repeat sales with existing customers to add batteries and smart devices. If SolarCity is going to install hot water heaters, what about refrigerators and other appliances? How about HVAC systems? The key thing is making sure it all integrates flawlessly. This was a huge selling point for Apple. Home energy services are not even limited to solar customers. TOU plans that can be exploited by smart devices create a home energy market even among homes that cannot install solar. In this market, service and integrated products are key. So I'm not saying that SolarCity shouldgo in all these directions. They need to explore what makes most sense. But I do think that home energy services could be a very good theme around which to innovate and build a franchise.�
1/1/2015
guest SolarCitys System For Self-Supply in Hawaii Includes PV, Storage, Water Heater and Nest Thermostat | Greentech Media
Solarcity Hawaii lease option is cheaper then retail in Hawaii, so savings upfront. With 30 day permit approval process, I wonder how many homes they could pick up this year? Maui and the big island offer even bigger savings then Oahu, how many homes there as well?
probably looking at some significant orders that could dwarf any Nevada losses since Hawaii has basically been stagnate for a couple years now.
It will be an interesting q1 report to say the least because of this. New economics of solar+storage+water heater + nest thermo should be outlined.
P.S. Arizona is looking to go the same route as Nevada decision, only grandfathering looks strong to be maintained at the moment. Be on the lookout for UNS Nogales decision soon. Hearings live on ACC webpage Friday.�
1/1/2015
guest Net metering would likely be grandfathered in California for users installing 2017 and earlier. If the deal those users have becomes too good post 2020, other charges will probably be added to their bill. New solar users after 2017 will have a special solar TOU. The implication is that after sunset, the new solar user would pay the difference between the day rate and the high evening rate. So new solar customers have "net metering", but the "net" comes out to an additional charge each month.
California will push solar users towards batteries while trying to not kill the solar marketplace.
The implication for PPA sellers is finding an effective sales process. At what scale does selling PPA work without claims of "free solar" and "we are your power company"? Solarcity customers in Nevada found out who was really their power company.�
1/1/2015
guest Jhm, Thanks for the excellent detailed response on TOU rates.
I am not big on demand response actually. If my dryer ever decides to not run immediately when I press the button, I will throw it out of the window and hope that some GTM folks or RMI folks are walking by at that time. A dryer with it's own mind is too smart for itself. More importantly, who will go out and buy a brand new dryer for the sake of saving a few pennies for each load. Nobody. Dryers last like what 20 years. And even the folks who are in the market for a dryer, many of them will be put off by the price premiums the manufacturers charge for making them "smart". These types of analayis make sense in the abstract worlds of RMI and GTM. The last thing a typical American comfort creature cares about is electricity bills, and much less optimising it through demand response. We are not in some third world, where the stay-at-home mom yells at kids for not switching off the ceiling fan when walking out the room.
On the other hand I think batteries will find immense opportunity in this. Especially the commercial, industrial facilities, will get Musk's big boy PowerPacks to not only reduce demand charges but also take advantage of TOU pricing. As gigafactory ramps up, maybe the CA duck won't look as silly as projected. In any case, I don't see a much of an opportunity for SolarCity in this. This is more of a burden or hurdle that they need to jump over to keep business running.
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Wow foghat the unwavering evangelical enthusiasm is really something. Where do you get that from? Declare a complete victory when SC barely files a lawsuit. Now the talk as though SC officially bought the state of Hawaii in entirety when a press release comes out with no detail. Incredible. Amazing.
Anyone interested in a bit more due diligence, have a few questions with respect to this press release.
Is this meant to be a solution for grid-supply or self-supply option? In the past SC management sounded like they are not interested in grid-supply option but they are working on self-supply option. But the issue with self-supply option is you can't really tap the grid at all. So you need a backup generator as part of the package, which SC announcement didn't have. So it's not clear what they are doing.
Any thoughts?�
1/1/2015
guest All these extreme TOU scenarios and excessive fee scenarios are basically the same as saying "you can stop solar". You can't stop solar and to say that it's likely is highly irrational. Compensation for energy pushed to the grid will always eventually wander back toward average wholesale or better. In anything other than the short term why wouldn't it? (unless you live in China)
Today far less than 1% of people are educated enough on decentralized energy to put up a meaningful political fight for this. What happens when that very quickly hits 20%? It's the Information Age folks, the political pressure will be immense as normal people start realizing how vital self-production is to personal wealth and power. Human consumers like wealth and power.�
1/1/2015
guest That is an interesting prediction for California that doesn't follow what I thought the California PUC recently decided. I thought the PUC did garantee NEM for 20 years and required new solar to be on TOU rates. What remains to be seen is how those TOU rates rates will be changed. You imply that there will be separate solar TOU rates and I have not seen anything that suggests that is going to happen. All consumers have choices of different TOU rates including at least one EV rate.
I realize this is a SCTY thread and some of these comments might best be discussed in the California rate thread.�
1/1/2015
guest Leave the personal attacks at home they are getting old. I thought the self supply option would still allow you to tap the grid it just would not allow you to sell back to the grid? I'll check out the details later if nobody knows off the top of their head�
1/1/2015
guest 46 States Took Policy Action on Solar in 2015 | Greentech Media
I expect investors will increasingly expect solar installation and finance companies to show a profit.�
1/1/2015
guest People lose their shirts by falling for crap when they don't look carefully. I get called out as FUD even when I am presenting basic facts with figures and numbers. The unwarranted hype and hopium is dangerous and needs to be called out, just as unwarranted fud needs to be called out. Didn't you and I lose enough money because of this already?�
1/1/2015
guest CPUC can guarantee NEM while adding a special grid fee to NEM customers. NEM isn't a contract, and current CPUC members can't speak for future commissioners. But I don't expect a "Nevada" in California. The politics are different , and California has high renewable goals.�
1/1/2015
guest Most folks here haven't lost a dime, we are just waiting patiently for our investment to pay off.
I think the personal attacks comment was referring to your snarky Foghat comment above. While they're no big deal in my eyes, I do think you'd be better off in both your analysis and posting it you took a less emotional path.
Again, it's pretty clear that the trolling in this thread has taken the overall tone of discussion to a bad place. Definitely NOT referring to any of your posting as trolling, other folks.�
1/1/2015
guest SCTY's up to 19% now. TSLA still at 2.5%.�
1/1/2015
guest Hey maybe a smart dyer does not fit your lifestyle. How about a hot water heater or refrigerator that goes through a daily defrost cycle. The cycling of these appliances should have no discernable lifestyle cost. Moreover the cost of adding a controller that connects with Nest or whatever is trivial. So the next time you have to replace such an appliance, it may just be standard. EV charging is a big deal. 40 miles per day needs 10 to 15 kWh. Plug in when you get home, and you don't care when exactly it charges so long as you so long as you have enough range for the next day. So if smart charging saves you 5c/kWh that's $15 to $22 per month. So these may all be little things, but they add up. The key to smart technology is to make the operational aspect of demand response pretty transparent to the user and minimize any sort of lifestyle cost.
Regarding HECO's self-supply option, this does allow the solar owner to feed in surplus power for zero compensation. The customer does remain fully connected and can buy or give away power at anytime. Essentially, HECO is offering a backup power service to solar customers. Whether this service is competitive to having one's own backup generator remains to be seen.
So SolarCity is setting up a package that leaves open the possibility of selling grid services to HECO. Will they bite? With the combination of dispatchable supply and load, SolarCity could definitely help HECO balance its grid. So for HECO to refuse to play leaves money on the table. Moreover, it leaves SolarCity�s customers little incentive to use HECO's backup service. HECO could well face outright grid defection.
So I think that SolarCity is loading up customers with dispatchable technology to increase the value of those customers to HECO. This puts SolarCity in a much stronger bargaining position, and it may only need to be strong enough to influence the PUC. I believe ratepayers have an interest in accessing the benefits of these DERs and extending high enough compensation to induce them to remain connected. So after the break down in net metering, I see a bargaining phase beginning. Solar owners and installers need all the chips they can bring to the table.�
1/1/2015
guest If you're convinced that SolarCity is a scam, and the Rive brothers are lying on their CC's, then why are you here? To help us see the light and sell for a massive short term loss? Out of the goodness of your heart? If you are so down on the company and the stock, then maybe you should just walk away and find another forum.�
1/1/2015
guest Awesome news, thanks for keeping us in the loop on this! So if they're giving you this, the cost to borrow shares must be absolutely through the roof.
Wish I could loan out my shares
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That's what I can't figure out. The amount of time spent posting and level of analysis fits into no rational category of investor that I can think of other than someone shorting and not too concerned about an accurate portrayal of fundamentals and outlook. Either way, I'm infinitely grateful for the analytics because he's clearly painting a picture very close to how a typical algorithm currently sees the stock. Just before 3Q earnings he warned that panel makers would do well and SCTY might tank because algorithms will not like the model and all the unrecognized future revenue. It's by looking from the SBenson perspective that I've become comfortable with the Street's view of the stocks value and I can more closely guess when it will pop like mad.
I'm a poker player, whoever has all the money is currently considered "right". When you're right a few times in a row, I don't care much about why you're right, there is something of value in your thought process.
That being said, I think my unanswered question from a few pages back is a valid one.
�
1/1/2015
guest Move over to Fidelity! These shares are in my Fidelity IRA. These interest rates are so good I'm looking at moving my non-retirement securities over to Fidelity as well.�
1/1/2015
guest Maybe I will actually. My solar wagering funds are in a Wells Fargo IRA and the options fees seem high to me. Thanks again for the info.�
1/1/2015
guest You need to learn more about trading equities.�
1/1/2015
guest and here is a followup
http://news3lv.com/news/local/sandoval-says-he-does-not-want-to-be-considered-for-supreme-court
oh, good lord.�
1/1/2015
guest Can we talk about flexibility?
Renewal Value
Are we nearing a point where SCTY can safely say they'll give you the panels after 25 years? Why not have that as the standard part of the contract? I can't imagine it would be logical to keep the panels up in year 26 under a PPA, and any decent company wouldn't have the solution be to discard them when they're still 80% effective. Why not entice people with the concept of ownership at the end of a 5 year renewal?
As I've said a bunch of times, the value in these PPA contracts is the relationship building. If they execute properly, SCTY will have a "total energy solutions" customer for life. Why worry about a few panels with minimal residual value? I don't see a scenario where that seriously undermines the future business model(replacement revenue, etc.)
Sales Cost
So here we are at the tipping point. Total hardware costs have nearly bottomed out relative to the decline curve of the last three decades, but soft cost are now the big glaring issue. Customer acquisition, sales, marketing is like $.60/W+ for SCTY(more or less for local installers) and MUST be trimmed substantially by end of 2017 to remain competitive with local installers who will soon be able to charge $2.00-$2.50/W for quality products profitably at scale.
SCTY talks about this and seems to have a plan, but at what point am I going to be able to simply sign up for SolarCity PPA online and get a rate that reflects that $.60/W savings? I've sent a few emails/facebook messages to SCTY and have gotten no response. Obviously there are concerns about undermining the business model by offering lower online pricing, but there must be a nuanced solution here.�
1/1/2015
guest no it means the opposite, TOU midday rates come from solar, utility solar is at 4 cents / kwh in the states neighbouring California, it will get to 3 cents per kWh in about 2 years. Yes NIMBYs can stop utility solar near them, but they can't stop it over the border.
TOU in California appears to be heading towards being the trailing 12 month average of last years price, so it should be 'gentle'. but it still heading towards midday TOU being the same same rate as middnight TOU. By 2020 midday TOU will be less than midnight TOU.
great for TSLA, lousy for SCTY�
1/1/2015
guest Grid Resiliency – Distributed Energy Resources| SolarCity
yes yes and yes... This video is exactly the message by which Solarcity needs to market Solarcity products. Regulators can get it, and regular people can get it. Visually demonstrate the benefits and go viral with it continuously on the net.
The message is "everything is just better" with home solar grid.
its time for Solarcity to get this vision out there for everyone to get familiar with. As we seen, it is a media war over the future of energy with incumbents. Have to win the game on messaging and this can do it. The better this gets, the sooner we can fully transition the grid and all energy production and consumption.�
1/1/2015
guest Linear thinking. You can't beat solar by manipulating the TOU to extremes, it simply won't work. It'll be too easy for people to adjust. They can do it today semi-economically, how do you think the landscape will look in 2 years when Gigafactory 1 is open and other(even cheaper) home battery companies are online? There's no way for traditional utility production to wiggle out of this new dynamic.�
1/1/2015
guest Have you calculated solar added year by year to reach this conclusion? Sunny day electricity obviously becomes low cost, but I would be surprised if the drop is that quickly. This price drop will have some interesting opportunities for industry.�
1/1/2015
guest Not sure if it was discussed, but a judge seems to have cleared the way fro SUNE to finally buy Vivint for $1.9B That's been held up for a while now, right? Isn't Vivint just a bunch of sales guys? Don't you want to be trimming sales at this stage?�
1/1/2015
guest Yes, this video is a good start. But on that whole page, there is still no mention of increased security (they do mention it in the video). They have white papers and data sheets on other subjects, but not the security aspect.
This type of attack is what I am talking about. SC should really start making noise about this to build support from conservatives. Distributed solar is clean, but so is utility solar. OTOH, only distributed generation is secure.�
1/1/2015
guest You need to remember to add about 7 or 8 cents per kWh for transmission and distribution. This will be included in TOU, even if solar takes wholesale prices below $30/MWh. Somebody's got to pay for the grid, right?�
1/1/2015
guest Zero chance of this Nevada model standing up there, let alone speading to legitimate states. 3 cents/kWh when the alternative source would be 12 cents if solar weren't there? Good luck with that.
Don't forget, these companies will be broke very soon, so we won't have to worry about governors being utility puppets.�
1/1/2015
guest SolarCity Creates New Fund to Finance $249 Million in Solar Projects -- SAN MATEO, Calif., Feb. 25, 2016 /PRNewswire/ --
Add a $249mln tax equity fund to the capital raise for the quarter.
oh yeah, once done, will add another $249mln after it...�
1/1/2015
guest
Nevada solar farm is being added at about 100MW / month, since THAT decision, Nevada solar approvals are trending to 200 MW/month. But as these are farm solar, they tend to single axis tracking and horizontal alignment, so not optimum for panel efficiency, but good for afternoon higher value solar. Current market price for new solar farm in Nevada is 3.87 cents/kWh. Its not that hard to see further engineering 'mounting' improvements shave this figure down to 3 cents/kWh. Further panel improvements should get it below 3 cents/kWh.
The sunbelt states near California have plenty of mines, already serviced with good preexisting electrical infrastructure and land available for 'sun mining' Its dual use.
Hard rock mining tends to have a gold rush mentality. Its not hard to see a couple of dozen of Nevada Copper Forms Strategic Alliance With NV Energy on Solar Development Opportunity | Energy and Mines going ahead in the next 4 years. In each of the sun belt mining states (particularly Arizona, Nevada, Utah, Colorado, New Mexico) kinda similar shale gas boom, but focuses on solar rich, dry air, elevated states.
I don't know if much of that solar production will go west, but it will block California solar production going east (which is the natural flow of solar power). Powerwall/powerpack batteries have a significant price advantage for single large installations, the solar farms should install their powerpacks at a significant discount to what SCTY can install powerwall units at.
Interesting times ahead, SCTY reminds me of BTU, too much debt spent in expensive legacy infrastructure, facing a wall of tsunami of cheap solar coming.
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the transmission will be included in the TOU, but domestic solar users will still have to pay for distribution. Somebody will pay for the grid.�
1/1/2015
guest History and logic state the utilities lose out here. There's simply no way to wiggle out of this decentralized future. Those who adapt to service the new grid will survive, those like NV Energy....�
1/1/2015
guest
well, SCTY seems particularly poor at adapting to service the new grid if they over-expend on production at too high a price. It really is not that hard to disconnect from the grid, seriously.�
1/1/2015
guest We are talking about California's NEM 2.0, right? I believe you are mistaken the is a NEM transaction so the same rate is used for buying and selling retail power at a a specific time of usage. There a a few unavoidable cost which the seller picks up, but this is very small. Please, prove me wrong with some credible source. Otherwise, I think you are misinformed, which is why you think NEM 2.0 is some serious setback for solar.
Inside the decision: California regulators preserve retail rate net metering until 2019 | Utility Dive
So NEM 2.0 preserves full retail credit.�
1/1/2015
guest Looks like more of that money showed up today.
SolarCity Creates New Fund to Finance $249 Million in Solar Projects -- SAN MATEO, Calif., Feb. 25, 2016 /PRNewswire/ --�
1/1/2015
guest So with tax equity financing at $1.55/W on 1.25 GW for the year, SolarCity will need about $1.94 B in TE funding. So this announcement of $498M covers one quarter.
Do we know how much was lined up previously for Q1 2016. It could be worth tracking these commitments to see how close they are to locking in the full year.
I'd also like it if SolarCity could offer shares of project equity to retail investors. The TE structure may be too complex for retail. But some sort if preferred stock based on the performance of contracted cashflow could be attractive.�
1/1/2015
guest As I mentioned before Tax Equity funding has never really appeared to be an issue.
From the 10K - As described below under ��Financing Activities� Debt and Financing Fund Commitments,� as of December 31, 2015, we had $657.7 million of available commitments from our fund investors and $234.2 million of unused borrowing capacity available under our credit facilities.
Another related statement - We have financing fund commitments from several fund investors that we can draw upon in the future upon the achievement of specific funding criteria. As of December 31, 2015, we had entered into 46 financing funds that had a total of $657.7 million of undrawn committed capital.
Not sure why that JP Morgan dude was making a stink over TE. We need to keep a close eye on debt instead. That's where potential problems are.�
1/1/2015
guest Pretty clear that this 30% cushion can backstop a lot of otherwise difficult borrowing scenarios. I still think when we look back 3 years from now it would have been more advantageous to expire the ITC after 2016 and let the hardcore shakeout occur. Musk could have gotten SCTY through that and the share gains would have ended up better than having this 30% cushion extended so far out. If our main goal is the expansion of solar, I guess it's a good thing.
I mean, would SUNE be alive right now if the ITC were set to expire? Would they be able to drop $1.9B on Vivint? No way in hell.�
1/1/2015
guest First and foremost, keep in mind I don't have an accounting background. I am an engineer with analytical skills.
I have been digging into their 10K since a day or two. The most comprehensive information on debt is available in section "11. Indebtedness". If you download the excel, it is sheets named TABLE51 and TABLE52.
I have to say their latest slide deck with debt breakdown/trends does a very poor job of portraying the situation.
What is really important to understand is how much of increase in borrowing is through secured vs unsecured. Because secured borrowing is very reliable (or we hope so). While unsecured borrowing depends on the vagaries of the market. So this type of breakdown and trends should be of key interest to investors.
The slide deck breaks it down by recourse vs non-recourse, which totally portrays a wrong picture. That breakdown is only useful if you are really thinking in terms of liquidation and who gets what. Again trends here show a wrong picture, confusing with the real picture.
Coming to the secured vs unsecured trends, what I see is that the vast majority of increase in debt is all secured. credit facilities, ABS, vehicle loans so forth. This is very good. A big positive.
The goal here is to figure out how much non-asset-financed spending is the company incurring to run the installation business, whether that non-asset-financed portion is coming through increased unsecured borrowing or through decrease in cash.
The only two line items which represent increase in unsecured borrowing are:
Zero-coupon convertible senior notes due in 2020: $113mln
Increase in Solar Bonds borrowing: $210mln
That brings the increase in unsecured borrowing to $323mln
The decrease in cash is $249mln
The net non-asset-financed expense is $572mln
This $572mln is what we should be watching for. Are future trends into this sustainable. We will come back to this again.
But for analytical purposes now lets look at at non-asset related expenses over the year:
R&D Expenses - $65mln
Capital Expenditures - 176mln
Combined - $241mln
So only $331mln was the non-asset-financed capital that was poured into running the business of doing installations. On 870MWs that translates to $0.38/W. This number right here is not scary at all. Now all of a sudden the management talk that the installation business will become self-funding becomes credible. This is a big deal - in a positive way.
Now lets get back to that $572mln to assess sustainability. So what will happen in 2016, is it sustainable. There are couple of key trends here.
- Revenue increase of about $230mln (analyst consensues estimate)
- Lowering of costs of about $0.20/watt (my estimate), which translates to $174mln savings on 870MWs (last year) or $250mln on 1.25GWs (guidance)
- Pushing out some of the capital expenses to 2017 about $70mln
On a net net basis, it appears though they will need less than $100mln additional unsecured funding. This is a very small number that Musk should be able to arrange somehow.
Overall the plan checks out.
The only other remaining critical element is finding money (re-finance) for the expiring unsecured lending:
Solar Bonds SpaceX expiring debt of $165mln
Two term loans thar are expiring in 2016 with cumilative amount of $147mln
Total $312mln
Their cash balance more than compensates for this.
Net-net it appears that barely $100mln to $200mln is all they need to come out with flying colors (assuming the flow of secured financing continues as usual supporting the full 1.25GWs). This is really much smaller than the trends in their slide deck indicate.
The real issue with SolarCity is the struggle to present the financials in a clean way. And more importantly the lost credibility due to over-zealous presentation of certain metrics in the past.
Retained Value of $33/share changed to $17/share with a new name that no one can pronounce "PowerCo portfolio Pre-Tax Unlevered NPV Less Debt".
This is the sort of behavior which creates a serious drop in credibility. Given the complexity of the Business model, most investors just drop the shares and walkaway. For once I agree with Mule. They need a better person than Lyndon Rive to be the public face of the company. He lost wayy too much credibility.
Summary: The business model appears to be very much sustainable. Nevertheless contingent on continued market support in secured borrowing and of course continued success selling PPA/leases on the demand side.�
1/1/2015
guest Solarcity Corporation patents list (updated weekly)
A few fresh patents filed�
1/1/2015
guest Credibility is the wrong word here. The financing of business operations and installations is 70% of their product, so in effect your request for clarity is a request to give away intellectual property. They will disclose precisely what is legally required plus any detail that is more beneficial to the stock price than it is detrimental to their differentiation.
This is obviously a leap of faith since you need to trust the top of this entity to execute properly while acting responsibly. Not a massive leap to get behind Musk IMO, others disagree.
I don't want clarity around the financials, I want the masses to have a clear understanding of the value proposition.�
1/1/2015
guest I want you to know that I appreciate your contributions to this thread. Pls don't go away.
I was wondering how you came up with $0.20/W cost savings. Personally I'm worried that any cost savings will be eaten up by a reduction in profit margins. In their efforts to achieve 1.25GW they will have to offer more competitive pricing and it will be hard to reduce things like cost of sales. Their competitor's costs are likely dropping just as much as SCTY's.
He's here because this is a discussion about investing and any good investor wants to hear both the bear and bull arguments. The purpose of this thread is not to be unwavering cheerleaders for SCTY. All opinions are welcome and encouraged on TMC. He's doing you a favor because he's one of the few people who provides badly needed balance.�
1/1/2015
guest What competitors?
Oh boy, it's going to start sinking in soon.�
1/1/2015
guest In the short term TSLA thread I read a lot of bear and bull arguments about how every little state committee vote, court ruling, review by car magazine, financial website article, analyst note, oil trend, macro event, or otherwise news of the day might affect the stock price in the short term. I have enjoyed reading both sides and it is clear both are sometimes right, and each person's opinion is colored by whether they are short or long, or recently made or lost money. My problem with his eternal pessimism is that it seems to be grounded in his opinion that Solarcity's business model is fundamentally flawed and doomed to fail. While I agree Lyndon is not the best spokesperson I get tired of SBenson constantly trying to prove that Solarcity is lying about their financial situation because he can't figure out the numbers. He's used words like charade, doomed, misrepresented, "they're toast", and many more I've forgotten. My point is that being pessimistic or optimistic in the short term is healthy, and discussion of the pros and cons and risks, is good. If you're trying to figure out macro/market mood and time your entry and exit points, long or short, that one thing. But if you think the whole thing is about to collapse any day now with no way to right the ship, then you shouldn't be an investor, and flinging 50 pages of accusations on an investor thread is what exactly? I can't quite bring myself to call him a troll, even though he only seems to care about trashing SCTY all the time. At least he's not trying to drive traffic to a paid per click blog on SA. I've not put him on block unlike that other guy who's just annoying. I appreciate that he's trying to go through the financials, something I don't have the experience or time to do myself. I know a serious professional investor would want to go through it with a fine tooth comb.
I'm not a professional, but I trust that some of the largest financial firms in the world seem perfectly willing to keep lending money to them to finance projects with a VERY long payback time. I have enjoyed reading JHM's rebuttals and have learned a lot. Also like TheTalkingMule said they're not going to show you their books, just the legally required 10K stuff. The only people screaming bankruptcy are shorts like Chanos. Shorting the stock while saying it's going to go down is a self fulfilling prophecy, so it's hard for me to take people like Chanos' opinion as just another valid one. If he was agonizing over what to do with his money that's one thing, but he's sounding more and more like Chanos. Like I said, I can't bring myself to accuse SBenson of anything, I just get tired of hearing how he's the only one who can see through the big conspiracy. Besides, if I want to hear "the other side" I'll just read literally any freaking article on yahoo finance.
Back to lurker mode.�
1/1/2015
guest Mark Ruffalo wil be on the Bill Maher show tonight. Just saying.�
1/1/2015
guest Officials point fingers as state vows to disburse SolarCity funds early next week - City & Region - The Buffalo News
�
1/1/2015
guest Oh, cool. Thank's for the heads up.�
1/1/2015
guest A new Solar City SEC filing this evening indicates that another $15 million in solar bonds will be issued. Seems like a small amount compared to the previous offering, and higher interest rates too.�
1/1/2015
guest SBenson appreciate your time and skill to dig into the undies pile, thank you! In all this I hope they're spending as much as they need to spend figuring out how to play the new game of TOU+batteries. For me this looks like the biggest unknown at this point -- what kind of money can be made, and is SCTY too focused on cash and could miss some business opportunities because of that? The hope is they already have spent enough to have the basics covered, but we don't really know.
I probably will be kicking myself later but at this point I'm holding off on putting more money into this gig. The best case scenario being TSLA shoots up soon-ish and I can then rebalance some of the gains into SCTY. I see no reason for it not to go back to mid 20's but beyond that I think they'll have to show the money or show the future.�
1/1/2015
guest recent Nevada announcements
180-MW Switch Station 1 and Switch Station 2
79-MW Playa Solar 1 plant
50-MW Boulder Solar II park
65-MW Luning Solar Energy Project
reality won't be smooth like the approximation of the model, but it is coming.�
1/1/2015
guest Radford Small is apparently now in charge of all financial vehicles and certainly his game on point. Even when asked a purely financial question, he still manages to circle back to the value proposition. This is how you position your product in the minds of consumers.
Edit: (and investors)
�
1/1/2015
guest NEM 2.0 (intermediate NEM) mostly preserves full retail credit (nonbypassable charges now fully apply, priory it was a net basis)
the big deal as I can see it is that those who get in before the 5% limits are reached get grandfathered for 20 years, those who get in after the 5% limit is reached get pushed onto a TOU, and a reducing full NEM. Details of the TOU seem very much in the still to be explored .�
1/1/2015
guest After the benefit of a good night's sleep I would like to say that I came off a bit harsh and would like to apologize to all involved. Being down 50% makes one a bit snippy. Everyone is welcome here and all opinions are valid. I do think this thread could benefit from being broken up into sections like the TSLA investors section - short term thread, long term fundamentals, trading strategy, etc. New threads could break out when there is a NV style dust up. It is hard to keep track of who said what at 533 pages. It would also allow us to self filter what we read rather than having to block somebody or read endless arguments that don't interest us.�
1/1/2015
guest Plus one.�
1/1/2015
guest I have thought about multiple threads a well but that is kind of asking for a solar city sub section. I would like it but it may be straying to far from TMC for the mods to go for it... That being said +1�
1/1/2015
guest I just assume TMC will carve off a separate Energy section once Tesla Energy gets moving a bit more. Powerwall/pack talk, battery competitor talk, SCTY talk, renewable energy investment talk, global warming talk, etc...�
1/1/2015
guest Since solar power (SolarCity) is central to Tesla's "Master Plan" it makes sense to give it broader coverage. To this point, I would like to see topics on the interrelationship of Tesla and Solarcity, and the Tesla's battery Gigafactory & SolarCity's panel Gigafactory.�
1/1/2015
guest You're correct that solar power is central to Tesla's business model but SCTY is not. The moderators have already said that this thread is tenuous in the investors section and suggested that maybe it should be moved to off-topic.�
1/1/2015
guest Is it your position that a strategic alliance does not exist between Tesla Motors and SolarCity?
If that is true, I need to rethink my investment strategy.�
1/1/2015
guest They definitely have a strategic alliance. From scty helping with the design of the power wall to scty being the first company to install power packs.
Looks like buffet is aware he is betting on the wrong horse.
Warren Buffett: Solar and Wind Could | Greentech Media�
1/1/2015
guest Sure I will stay on as long as this is an intellectually stimulating exercise that this is.
About that $0.2/W savings estimate:
We don't have any guidance from management on that one for 2016. There is only this remark in the shareholder letter "We remain on target for our cost goal of $2.25 per watt in 2017." This certainly includes the expected savings of $0.20/W from the Bufffalo factory panels. We now know there will be no panel production in 2016. So excluding that, the projection is $2.45/w cost in 2017. Purely taking the numerical average of cost/w in four quarters of 2015 we get $2.85/W. So just doing a linear interpolation from 2.85/W in 2015 to 2.45/W in 2017 gives 2.65/W in 2016.
Another way to look at it, the $0.2/W represents 7% cost declines. Last year it was 5% decline. So 7% is no too far reaching.
Competition: This is a loaded topic. SC pitches itself as competing with utilities and is in fact planning on raising the rates in tandem to increase in utility rates. As long as this pitch against utilities works, we can assume cost savings accrue to shareholders. But I don't know how long this will work. It seems like SC identified niche demographics where the house-hold income is very low that they don't have enough taxes to capture tax-credits, but these folks are somehow homeowners and have good credit scores. You have to wonder, if SC is primarily targeting really old, retired people. What happens if people die before contracts expire? Hopefully nothing bad to SC. I don't know the intricacies of it. Nevertheless the size of these niche markets is unknown. So when buying SCTY stock, market wouldn�t want to pay too much for the future growth. There are way too many risks, business model risk, a very dynamic regulatory changing landscape, unknown potential market size.
In any case, my exercise was to assess cash-flow/debt pressures. So in that sense, regardless of profitability, we are just purely concerned with costs because costs go out as cash-flows fully upfront. Is that sustainable is the question. So lower the costs better it is to answer that question.
This is infact the very reason why I cringe when people bring in powerwalls as a positive thing for SC. No, not necessarily. That simply increases the cost, outgoing cashflow, up-front. Which is bad, very bad for this business model.�
1/1/2015
guest Buffalo savings(whatever it may be) is not entirely comprised of efficiencies related to self-production. If they were talking "$.20 less cost" once operating out of Buffalo, you'd have to estimate somewhere around $.10 of that would be naturally felt across the entire sector. In essence, just buying panels on the market will be $.10 cheaper vs. whenever that statement was made, especially as SCTY's buying leverage grows. Then you also don't have the expense of ramping up production, etc......
Quality hardware is cheap, getting cheaper and will be cheap as hell when Buffalo opens. It's just not a major concern to the business model anymore. In my SCTY valuation, Buffalo plays purely a marketing role. "American made panels by an American company installed by American employees making a living wage. Blah, blah, blah" It's marketing for the next tier of "middle America" customers.
Sales costs must be chopped by 2/3 in 2-3 years.
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The more SCTY does for it's customers the better. Battery packs are just a weapon against uncontrollable grid costs and will be deployed as necessary. They're only deployed when increased costs allow for the battery to pay for itself with cost savings in a very short period of time.�
1/1/2015
guest Fidelity's now paying me 21% for my SCTY position. TSLA unchanged.�
1/1/2015
guest http://video.cnbc.com/gallery/?video=3000497624&play=1
Warren Buffett says: Don't penalize non-solar customers. In other words, invest in my fossil fuel utilities.
I personally believe in a carbon tax.�
1/1/2015
guest So is flat out lying or confused? Perhaps he's being a bit misled by NVE execs and that's enough to swing his "official opinion"? He just portrayed a scenario where a solar customer is compensated at 10.5 cents and he'd rather buy at 4.5 cents or "produce it ourselves" for 4.5 cents. It's my understanding that NV Energy peak production that is being displaced by solar production has a wholesale pricetag around 9-14 cents. Is that not the case?�
1/1/2015
guest sorry if this has been mentioned already here, but when will SC be free cash flow positive ? end of 2016 ?�
1/1/2015
guest Is the oil crash over? Prices are up 30% from lows - Feb. 29, 2016
Might T Boone have been right?�
1/1/2015
guest That's not in the cards. They are talking about being net cash flow positive.
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Well, traders are still putting more oil into storage. Supply and balance have not balanced.
I've been predicting for a while that the storage puts a floor somewhere between $25 and $30. That is, there is an equilibrium price based on storing oil and selling future contracts. So the price of oil can trade around this equilibrium for quite some time. So I don't see oil at $34 as any sort of recovery. Real recovery will not happen as long as oversupply continues to put more oil into storage. And even with that there can be short term fluctuations that signify little.�
1/1/2015
guest only when the sun is not shining:biggrin:
seriously, NV Energy has a wholesale price for solar at around 4.5 cents/kWh how many MWh do you want?�
1/1/2015
guest NVE is a regulated monopoly there to provide services in the public interest and take a small amount of profit for their trouble. If people want rooftop solar, the costs should be levelized and the grid can proceed from there. Costs are not nearly levelized under this proposed plan.�
1/1/2015
guest costs are levelized when rooftop solar is at wholesale price.
just split the electrical grid between power producers, network providers, and retailers
then it becomes obvious what the costs should be,
there is no cost savings for the network provider, so the retailer just buys less from the power producer.
That is to say, rooftop solar is essentially wholesale power.
everybody knows that the value of solar in Nevada is around 4.5 cents/kWh Buffett strikes cheapest electricity price in US with Nevada solar farm: pv-magazine again the question is how much solar do you want?�
1/1/2015
guest Renim that does not tell the full story. You cherry picked the cheapest Solar that has been sold in the nation. They also have a 20 year PPA with a utility solar plant that is over $0.10 a kilowatt hour I believe�
1/1/2015
guest Costs for NV Energy are levelized when rooftop solar is at wholesale. If Nevadans choose to supply their own power at peak they are under no obligation to replace that lost profit to NV Energy, it is the regulated utility's responsibility to work around them in a way that is fair for all ratepayers.
Amazing that we've somehow ingrained a slave mentality in this country. Since when do we care more about the profits of a corporate entity over self-reliance, grid efficiency and resiliency? When Germany got to 30% solar at peak they didn't protect utility profits at all costs, they simply let them lose the vast majority of their profits. Now they're slowly coming around to reality and focusing on grid services and renewables.�
1/1/2015
guest Thank you. fair enough.
here's the BBG analyst recommendation and PT overview. Morgan Stanley's Stephen Byrd has reduced his PT within a month or so from initally $104 to $78 and now down to $52...well, looking at the current stock price his PT doesn't seem so bad.
�
1/1/2015
guest after being interested in renewables for the last 50+ years, finally "money was invested in renewables ($367 billion US) than in fossil fuels ($253 billion US) in 2015." (on the planet.)Renewable Energy Investments Soared in 2015
My informal market research of friends, relatives and such, reveals a growing interest, so i point out Solar City has a solution of battery and PV�
1/1/2015
guest Wow, it's nice to see that. Understandably, the oil and gas gluts are holding back investments. I expect that will continue through this year and maybe the next. Longer term renewables are cutting into growth opportunities for fossil fuels. So there is the chance that annual fossil investments may never catch back up to renewables. Worse, if this were not the case, a couple of years with a return to high investment rates could precipitate another glut and just intensify the problem of stranded assets. Across the globe fossil assets are going on the auction block as their original investors try to avoid bankruptcy.
I do expect that Powerwalls will stimulate consumer interest in SolarCity systems.�
1/1/2015
guest I don't see a way that demand can catch back up to production without a major cut. We're over-producing for the next 18 months, EVs and efficiency are taking over the US/EUR/China autos, anyone remotely equatorial will switch off diesel electricity to 50% solar.
Maybe India ramps up their building of a middle class and things get nuts, but I can't imagine they or China will screw up by investing in gas infrastructure rather than electric. If oil does go back to $80+ it'll be on the back of huge global growth which isn't the worst thing.�
1/1/2015
guest That sounds about right. Watching fossil fuels is like watching Thelma and Louise in really slow motion. The first axle is over the cliff and we're waiting for the second axle to clear.�
1/1/2015
guest http://www.streetinsider.com/dr/news.php?id=11375682
So the sixth securitization is in. Nearly $50M, this one is a little different. They are getting $3.13/W, which more than covers the $2.70/W or so of total cost. So they are getting profit upfront, which could help with the cash and recourse debt situation. This deal is inclusive of tax equity and privately placed. So it could imply a very different cash flow profile than what we've seen. The deal is small, but that may be a function of trying to match particular investor requiremts. It sounds like a TE investor who was interested in a larger share of the payment stream. Yeild is 6.25%. This may seem a little high, but it does involve tax equity.�
1/1/2015
guest SolarCity's numbers and statements are always as mystical as ever.
"$3.13 per watt of generation capacity in the portfolio inclusive of previous tax equity financing"
I don't think this is some sort of combo-deal with Tax Equity and ABS lumped together.
So if we take that misleading snippet out, the actual sentence in the press release is: "SolarCity completed a private placement that resulted in proceeds of $49.6 million with a yield rate of 6.25%"
That is quite a big negative headline. In the first place the deal is quite small (why?), second place the yield is quite high.
From the ratings doc that I read from Kroll a few weeks ago, the deal was overcapitalized and such. So the comparison of $/W in terms of financing vs cost may not be apples to apples. I will double check that one tomorrow.
Looks like this is what caused the mini-slide this morning.�
1/1/2015
guest From the press release:
This language seems fairly clear that there is just one transaction that is covering $3.13/W. IIRC, SolarCity was exploring the possibility of deals that would sell the entire cash flow. This deal would be quite close to that. The remaining $0.50/W would be retained by SolarCity to cover maintenance, inverter replacement, and insurance.
I do think that 6.25% financing for such comprehensive coverage is a good deal for SolarCity. Consider that when a solar system is sold outright for cash, the customer is effectively offering 6.00% financing to SolarCity. So SolarCity is getting third party financing for just 25 basis point concession, or about $0.0856/W. One can see this as a modest transaction cost.
I think what makes this yeild look questionable is that we have become accustomed to the 6% discount used in book value metrics, and lots of patchwork financing that leaves SolarCity with much more equity risk in the underlying systems. An ABS that only covers $0.95/W is a pretty choice cut for 4.5% that leaves SolarCity to have to find additional financing that puts shareholders at higher risk. So it is not apple to apple to compare 4.5% on $0.95/W to $6.25% on $3.13/W. There are many other issues that can make the latter a much more favorable deal than the former. Let's suppose that SolarCity wants to get to DevCo Cash Flow positive with a growth rate in excess of 20%. Under this sort of internal rate of return target, cash flows to SolarCity should be discounted by at least 20%, not 6%. Under a 20%, this deal for $3.13/W upfront is much better than holding a PPA with only TE and ABS financing. This is exactly the kind of deal SolarCity needs to make in order to avoid using recourse debt for project financing.
Of course, the stock reacted negatively to this yesterday because investors do not yet understand this deal. It is different, but it is hard to know for sure if it is different in a good way or not. The market naturally takes this a uncertainty and moves the price down on uncertainty. By the Q1 ER, investors should get more insight into how SolarCity is evolving it's financing strategy, and so uncertainties will be removed. Most of us here belive that SolarCity needs to move to a DevCo Cash Positive basis. This requires changing the way they do project financing. So we should expect to see change. Change must happen, and change is good. In the short run, however, the market takes the view that change is uncertainty and uncertainty is bad. But if this is management righting the ship, then change is very healthy and ultimately good.�
1/1/2015
guest So just a test run for 120% financing?�
1/1/2015
guest Yes when I read the press release it sounded exactly like management said they would be doing in the last conference call monetizing more than the entire cost of a projects in the very beginning.�
1/1/2015
guest Yeah, consider where this is going. Suppose they get to the $2.50/W total cost level and can finance $3.13/W @ 6.25%. This increases working capital by $0.63/W, or 25% above cost. This extra $0.63/W can pay down DevCo debt, fund R&D and new investments, and increase the cash position. This is what we've been looking for.
The question remains what are the limiting factors and other downsides to this. The first limitation may be that this sort of financing requires TE investors who are also interested in the non-TE ABS cashflow as well. Not all TE investors will have this appetite so it could take a while to attract an adequate base of investors who are. A 6.25% yeild is certainly attractive. In the short run, the among of capital raised this way may be limited, hence on $50M in the first run, but if investors like this, they will attract more. The other limitation this sort of financing imposes is cutting into the idea of retained value sitting in the PowerCo. Essentially, this allows the DevCo to capture more value upfront handing over less value to PowerCo. Of course, this whole distinction is a sort of fiction, perhaps a usual fiction, but in reality SolarCity is just one whole company. If monetizing some installations at 125% of cost led to a surplus of cash (over time, we're not there yet), then the level of overmonetization could be reduced allowing more retained value to flow into the PowerCo. But before that happens it makes sense to pay down some of the more expensive DevCo debt. Benson and others have pointed to convertible debt with yeild around 20%. If SolarCity had surplus working capital, it would do quite well to buy back some of this debt. That would be capital much better spent than retained value with a nominal 6% yeild. In general principle as long as SolarCity has debt with yeild in excess of 6%, it is beneficial to overmonetize new projects.�
1/1/2015
guest All the lines in the lines in the chart are moving in the right direction. So long as execution is handled reasonably well, all these hesitance on the financing(and investor) side will melt away as solar becomes more mainstream nationwide. I'm expecting a robust nationwide conversation this spring/summer. Hopefully it sinks in and costs drift down before my 2017 LEAPs expire. [fingers crossed]�
1/1/2015
guest Am I missing some news on SCTY? It's jumping pretty quick.�
1/1/2015
guest From the last CC transcript:
So SC was contemplating selling operational asset upto 7.5% yeild and upto a $0.50 to $0.60 spread over cost, thus $3.20 on a cost of $2.70/W. In this light, the latest securitization looks like very good price discovery, 6.25 yeild instead of 7.50%.
It is also tempting to consider the spread on $3.13. Could this mean that the cost is now in rage of $2.53 to $2.63 per watt? Given the favorable yeild and sitting on an opportunity to repurchase convertible bonds at 20% yeild, they would have plenty of motivation to maximize the spread. So $0.60/W would be super. Why didn't they finance at $3.20/W? It could be that marinal yeild for the last $0.07 was over the cost of their highest yeild bonds.
For example, if the yeild was 6.55% for $3.20/W, the yeild on the extra $0.07 would be 20% which would make little sense to incur. However, if 6% can be obtained on $2.53 and 6.25% on $3.13, the $0.60 spread has a marginal yeild of 7.30%. This is a very good deal. If management had better use for the cash than to repurchase convertible bonds, that would surely create shareholder value.
I think we need to keep our eye on the financing spread. It seems pretty key to improving the capital structure.�
1/1/2015
guest What does $2.25/W look like given the current pricing? How will this affect the yeild?
Solarcity guides for $2.25/W by 2017, so we're looking at some significant reductions over the course of 9 months, by which time pricing only becomes much more favorable to them.
Special note: Arizona is going through the UNS rate case right now. It is significantly important to net metering and other charges applied to distributed solar. I watched yesterday's hearing online and the solar groups made very compelling opening statements. The hearings will continue through the end of the week and into next. Go to the Arizona coporate commission site to watch tomorrow and Friday: Arizona Corporation Commission
add: UNS has already stated within their opening statement that they support full grandfathering for those customers the made investments under previous net metering arrangements... So already, no repeat of Nevada in the utility's plea before the commission. Even went so much as to say no significant cost at all to do so. This is going to be clear ammunition in the case against Nevada since that thomsen lead commission said the "cost shift" on non solar customers from grandfathered customers was significant and unfair. Good luck proving that in court as more and more evidence mounts to the contrary...�
1/1/2015
guest Everything SolarCity says is full of deception. Always be very careful in reading/listening to their stuff.
Here are the specifics: Kroll Bond Rating Agency Assigns Preliminary Ratings to SolarCity LMC Series V, LLC, Series 2016-1 | Business Wire
In the news wire they give a link to the "Pre-Sale Report". I have access to that report. I also have access to the "New Issue Report" that they published yesterday. In both reports they state that the "Aggregate PV System Size (MW DC)" is 35.6. If I get a chance I will post a screenshot from home. Or just try to get access to that report through that link.
So in this specific transaction SC got $49.6Mil over 35.6MWs. That translates to $1.39/W that is raised in this specific transaction.
You can prove that out even just through the Kroll press release link above. It states that the ABS is for "5,645 photovoltaic residential solar installations". That translates to raising $8,787 per home. If it really represented $3.13/W then the average system size would be 2.8KW! That is clearly much lower than what we all know the average system to be to be 6KWs to 7KWs.
Having said that, whether it's two transactions or one, being able to raise $3.13/W is a positive thing against a lower cost figure.
I don't know of any other news for the price action today. Maybe the market took a day to realise that, even though the higher yield puts a dent in the valuation, it does represent a big positive in terms of cash-flow management.�
1/1/2015
guest As SolarCity pushes its costs down to $2.25/W and below this can only increase the spread. So this year the spread may be $0.50 to $0.60, but next year it could be $0.65 to $0.85, so long as utilities keep raising rates. So this Day One spread puts the right sort of focus on cutting cost and cranking up volume. Then, the stock will be more accurately valued as a DevCo than poorly valued as a PowerCo (yieldco).
Note also that guidance puts cash flow positive off to Q4. Why? With increasing monetization they can easily increase cash sitting in the bank. That's not the issue. The issue is that they have much higher uses for cash than parking it in the bank. As long as they've got convertible debt trading at a yield above 8%, it makes more sense to put extra cash to buying back that debt than saving it in the bank. I think this was a point we all missed about the significance of becoming cash positive. Underpriced debt needs to be snapped up first, especially convertible debt as this poses a dilution risk to shareholders. So the first three quarters this year, we should see the bond yields improve, which will claw back the bear case. We should see the stick price improve.�
1/1/2015
guest I reject your premise that everything SolarCity says is full of deception. Why is it your intent to attribute malice to everything SolarCity says? It's quite tiresome, and I wish you would stop. It's enough to sort out the facts and try to make coherent sense of statements. It's quite another thing to presume bad intent.
That said, there are ambiguities in the press release. Just how TE and the ABS are related is not clear. And there are legal distinctions to be made in owning equity in the solar system or not. So Kroll is simply evaluating the ABS piece which does not involve an equity stake. Both pieces TE and ABS could easily be part of one transaction as that simply means they are sold together.
But as you point out whether this is one transaction or multiple, the benefit of improved cash flow remains the same. So we certainly agree on that point.�
1/1/2015
guest State says SolarCity contractors being paid Wednesday
I can't imagine this would affect price action.�
1/1/2015
guest Benzinga - Actionable Trading Ideas, Real Time News, Financial Insight
"The ABS offering has enabled SolarCity to generate $3.10/W of upfront cash flow, including $1.61/W via securitization and $1.50/W via tax equity. This implies an operating margin of $0.40/W, while retaining ownership of the residual cash flows and the customer relationship via future upsell opportunities like storage and home energy management.
Moros also pointed out that the advance rate of 75 percent was the highest for any PPA or lease offering to date. He added that the company�s ability to complete a deal in the tightest financial market conditions is a testament of investor confidence in its asset base."
An analyst who clearly gets it!�
1/1/2015
guest Is Retained Value of $33/share at end of Q3 not deceptive enough for you? If SC can lie about the very core premise of long valuation, why should one trust that management has good intent with what they say?
Sorry if it bothers. I provide clear evidence when I come negative like this. So one should take it up to IR or someone at SC if facts bother.
Nope, there is not one bit of evidence showing that except for the clearly deceptive language formed to deflect the attention from the actual pricing of the deal.
Here is the related SEC filing - there is no indication of TE being part of it what so ever: http://www.sec.gov/Archives/edgar/data/1659428/000119312516452117/d49288dabs15g.htm
Yes, agreed.
If one wants to trust, you still must verify. Especially so with SC given the track record.�
1/1/2015
guest Hoping this is Radford Small taking control and pushing for as much financing as possible, illustrating more clearly the model's value to the investment/finance world.
Imagine what these press releases will look like when sales cost are down to $.20/W and solar is no longer a fringe product. They'll be printing money and untouchable at 35% marketshare.�
1/1/2015
guest Kroll Bond Rating Agency Assigns Preliminary Ratings to SolarCity LMC Series V, LLC, Series 2016-1 | Business Wire
Ok, let's see we can make sense of the numbers in this link. 5645 residential systems with "aggregate discounted solar asset balance (�ADSAB�), consisting of the discounted payments of the leases and PPAs... approximately $76.4 million. The original term of each PPA or lease is 20 years."
The total value of the 5645 systems is the ADSAB plus 30% ITC, about 7c/W in state incentives and renewal term worth about 35c/W. The total value is about $3.62/W. Subtracting off state incentives and renewal term the value available to TE and ABS investors is $3.20/W. So let's divide this into the ADSAB grossed up for ITC, thus $76.4M � 0.70 � 3.20/W = 34.24 MW. Divided by 5645 customers, this is 6.07 kW per customer.
So this all looks quite ordinary, 5645 customers, 34.24 MW, with $3.20/W available for TE and ABS financing. The combined value financing is 34.24 MW � $3.13/W = $107.2M. The ABS is $49.6M leaving $57.6M for TE. Thus, TE contribution is $1.68/W, and ABS $1.45/W.
These numbers all seem reasonable. TE is about $1.7/W and the ABS is about $0.50/W more than the typical $0.95/W as seen last quarter. Boosting the ABS to $1.45/W does not appear problematic because there is more than $3.20/W available from customer cash flows and ITC within the first 20 years of the system. Actually we are underestimating the total tax credits because ITC is based on the whole value of the system not just the first 20 years, and accelerated depreciation yields more tax benefits to the TE investor.
Suppose the full cost is now $2.60/W. On financing SolarCity nets $0.53/W plus $0.07 incentives and another $0.07 or more of unfinanced value in first 20 years. That's $0.53/W on day one, $0.14/W or more within 20 years and $0.35/W in renewal term. This is a net retained value of $1.02/W with the majority of it realized once TE and ABS transactions are complete. Notice that with most of the cash in on day one, it is simply not necessary for investors to be all that concerned with retained value. About $0.60/W of cash shows up in the first year, so if that is sufficient to grow the business, the other $0.40 or so is just gravy. In two decades, shareholders will really like having those renewal terms on the books. Their future value in 20 years will be nominally $1.12/W, but by that point in time investors will be in a much better position to understand the uptake of renewals. In our present day, we are at a great disadvantage even to imagine what home energy services will look like in 20 years. It's a bit like investing in PCs in 1990, trying to figure out what home computing would look like in 2010. Que sera sera. For now, $0.60/W first year cash is a pretty good deal. This is a new business model for SolarCity.�
1/1/2015
guest So simplistically, if SCTY can install a system for ~$2.70 and turn around and sell the installed system for $3.13 (16% gain) how is this not great and just getting better as costs drop? I don't have a good grasp of all the math and accounting, but it seems like this shows they can be profitable without the dark cloud of worries about renewals, house selling etc. No?�
1/1/2015
guest People will still need to make payments for 20 years on those contracts.�
1/1/2015
guest Oh so they didn't sell the stream of payments? They just used the stream of payments to secure a loan?
Why wouldn't they sell the stream of payments for it's net present value? Because no one wants the risk?�
1/1/2015
guest SolarCity still holds equity interest in the solar system. A big chunk of this is the renewal term, but also they have service and warranty liabilities. So they are only selling a portion of the customer's payment stream. What is being advanced here is just how much of that stream can be monetized. They were doing $0.95/W in an ABS, but now they are experimenting with pushing that out to $1.45/W. As ABS investors become comfortable with that, we may see the yield come down.�
1/1/2015
guest Study says rooftop solar good for all utility customers
It is good to note that west facing panels may be worth 6c/W more than south facing. This seems an important dimension for the net metering debate.�
1/1/2015
guest Base load� power: a myth used to defend the fossil fuel industry : Renew Economy
A lot of good stuff in this one. Baseload is bunk. Utilitization of coal plants in China and India is moving to 50% and lower. Coal is now a marginal producer.
�
1/1/2015
guest Australian pro-CCS institute one of many lobby groups hit by Arch Coal bankruptcy : Renew Economy
Ok, on the more political side, the bankruptcy of Arch coal leaves lobbyists as unpaid creditors. Bankruptcy of fossil fuel benefactors is becoming a serious risk to the lobby industry. Thus, a political shift could result from renewables outcompeting fossils in the marketplace.�
1/1/2015
guest Some car sales info out today reported by CNBC. Leases are now 29% of new car sales up from 25.1% in 4Q last year and 20% five years ago.
A good chunk of people clearly look for simplicity these days and are more interested in the service rather than the product.�
1/1/2015
guest SolarCity Investors Encouraged to Contact Securities Law Firm about Investigation into Allegations... -- NEW YORK, March 3, 2016 /PRNewswire/ --�
1/1/2015
guest Insert [Facebook IPO investors] [Tesla IPO investors]........�
1/1/2015
guest *yawn*�
1/1/2015
guest Didn't see this posted, but on TD Ameritrade I'm seeing "Hearing unconfirmed market chatter Elon Musk will acquire Solar City" posted at 8:02am. That's most likely the cause of the spike, but I don't see it reported anywhere else yet.�
1/1/2015
guest Wouldn't surprise me even a little bit. I have a theory and it would be a piece of the puzzle that fits that theory. Nope, not sharing.�
1/1/2015
guest Almost 100 Million Homes May Run Only on Solar by 2020 - Bloomberg Business
�
1/1/2015
guest Dang it. I don't want to sell at near these prices.�
1/1/2015
guest No kidding. I hope any offer from EM is extremely generous...�
1/1/2015
guest We've been forgetting that one of the ways to value a growth company is to consider acquisition value. Musk is certainly the most likely person to take SolarCity off the market. At what price is he willing to do that?
The market cap is about $2B. Musk may very well believe that the retained value alone puts the value at around $3.5B. So if buys the company out at $2.5B, he adds $1B to his networth.�
1/1/2015
guest So forgive a novice asking here. In reality, if Elon was to try to take SCTY private, how does he go about making an offer to buy all the shares at one particular price? Or to frame my question differently: what if I'm not willing to sell my shares for less than $100?�
1/1/2015
guest Realizing of course that this conversation is based on a comment of the ubiquitous "some guy".�
1/1/2015
guest "Some guy" he must be indeed - SCTY up 20%
Buy the rumor, sell the news.�
1/1/2015
guest +1 to Johan's question.�
1/1/2015
guest Elon messing with shorts? He's done it before with both SCTY and TSLA.
Squeezing up past $23....LOL�
1/1/2015
guest Indeed, it is just a rumor. But just the opportunity to be acquired at a low price should wake up investors.
There are two ultimate ways that shareholders are paid back: dividends and acquisition. So what a company might be acquired for is a valid basis of valuation.�
1/1/2015
guest I bid $215/share. Going once......�
1/1/2015
guest If Musk wants to offer shares of SpaceX for SolarCity, I could be persuaded.
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Do you have $20B to back that offer up?�
1/1/2015
guest Sign me up.�
1/1/2015
guest Razzing the shorts is great sport for Musk.�
1/1/2015
guest SolarCity call activity attributed to LBO speculation SCTY - The Fly
It's kind of funny. Leverage-buyout of a highly leveraged firm.�
1/1/2015
guest Not a great answer but "it depends" based on the offer. Usually, they just need a certain percentage of the shares for it to go through (e.g. 51% or 2/3). For the people that didn't tender their shares, what will most likely happen afterwards is they just keep their shares for a while. Then they'll have a secondary round where they buy up the shares for that set price anyway. In the mean time, the shares will get more and more illiquid over time as Elon buys them up. So the end difference, most likely, is that the people that tendered their shares will get paid sooner and the people that didn't will get paid once the buyout is fully complete, months/years later. This is all assuming that Elon gets the threshold 51% (or whatever the agreement is).�
1/1/2015
guest I'd enjoy the pain of losing my LEAPS if it meant SX shares.
Haven't checked today, hold on......
No. I'm about 99.99% short. Spot me?�
1/1/2015
guest Haven't we been through this rumor before? The internet is one big echo chamber where the slightest comment on a site like this can cause all sorts of "unconfirmed reports" news articles. I don't believe it is real.�
1/1/2015
guest Seeking FUD has now picked up the "story". LOL
When is human intellect gonna adjust to the Information Age?�
1/1/2015
guest Dunno, I'm still throwing stones at the communal tree.�
1/1/2015
guest "I'd enjoy the pain of losing my LEAPS if it meant SX shares."
What does happen to LEAPS in the event of a buyout? LEAPs above the buy out price are worthless? And LEAPs below are exercised and the profit is the difference, but the time value is lost?�
1/1/2015
guest Please no buyout Mr Musk. Just give me a few more months of these crazy low prices and keep it public!
I know out of the money leaps would be instantly without value. I believe your assessment is pretty close on in the money options�
1/1/2015
guest Looks like you're right. From http://www.optionseducation.org/tools/faq/splits_mergers_spinoffs_bankruptcies.html:
I own a September call option for company XYZ. News has come out stating that XYZ is the subject of a cash buyout closing in May. If the merger is approved, what will happen to the call option I own?
When an underlying security is converted into a right to receive a fixed amount of cash, options on that security will generally be adjusted to require the delivery upon exercise of a fixed amount of cash. Additionally, trading in the options will cease when the merger becomes effective. As a result, all options on that security that are not in-the-money become worthless and all that are in-the-money have no time value.
I guess the thing everyone is holding their breath on here is what the SCTY buy-out price will be. Even then, I'm wondering if it's prudent to take what I can get for my Jan 17 $45 calls...
�
1/1/2015
guest Wild guess: Is that a good joke in reference to this:
�
1/1/2015
guest I would give more credence to the rumor of musk/Solarcity aquiring sunrun/and or vivint at these prices....
Another rumor, what at about an enphase acquisition? Doubled up, Jumped up from $80mln market cap in recent days(30% today), might this be a tesla/Solarcity target?
lots of questions, could be slot of things going on right now...�
1/1/2015
guest I would be willing to bet that this Chipotle E. coli outbreak was a coordinated stock swindle. Is the SEC looking into that?�
1/1/2015
guest You got me.
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Yeah, I'm not buying this rumor. I think it makes more sense for Musk just to keep buying shares when they are super low.
I do think that the rumor did startle shorts, but they'll be back.�
1/1/2015
guest I'm not buying the rumor. It might be something that has yet to come to light.�
1/1/2015
guest SolarCity (SCTY) Stock Climbs as Smart Money Gets Interested - Modest Money
Hey, we got your smart money right here.�
1/1/2015
guest State of New York TV Commercial
Watching the Republican presidential debate tonight, the state of New York ran a commercial touting their business environment, showcasing SolarCity's gigafactory.
Great commercial. Just saying.�
1/1/2015
guest I think Musk is anxious to move on to SpaceX full time. He wants to get the Model 3 up and running then step it down a good bit, then exit. The last thing he wants to deal with is taking on a finance job for 12-18 months.�
1/1/2015
guest Another thing is, to come up with the money he would need to use his stakes in Tesla and SpaceX as collateral. So by assuming to take all risk on Solar City, he would also put at risk the mission of SpaceX and Tesla. He is one of the biggest risk takers out there, but only if the purpose is to survive when his back is against the wall. I don't see him doing it for an opportunity to increase his stash.
Unless he does it by bringing in other investors, in a way that allows him to maintain ultimate control without jeopardizing his other two companies.�
1/1/2015
guest "Optimism? Pessimism? _____ that. We're going to make it happen. As God as my bloody witness, I'm hell-bent on making it work." - Elon Musk
SolarCity is part of the master plan.�
1/1/2015
guest My guess is he does not see very much risk in taking it private because he sees the value in solar city. The sale of everdream (the last lyndon start up) provided the capital needed for elon to keep tesla afloat. I imagine by the time space x needs funds that can't be raised elsewhere Elons stake in scty will be worth more than his current stake in tesla.�
1/1/2015
guest Question to you guys, what would happen to TSLA if TM was to acquire SolarCity? Given the potential synergies, and given that Tesla is a much more powerful brand, that might certainly help Solarcity's business (also for an expansion internationally). Quite a number of people around the globe would love to have a Tesla rooftop combined with Powerwall and Model 3, I'd reckon. But only few people know Solarcity over here in Europe.�
1/1/2015
guest The biggest risk in owning SolarCity as a shareholder is the market risk of the stock. The value of the stock gets pushed around with waves of sentiment and macro economic even while the business continues to make steady progress. Additionally, shorts borrow shares and expand the gross shares long diluting the value of each long position. So gross shares long is the sum of the float and shares short. Additionally, bond investors take their cue from the share price intensifying stock price risk on the ability of the firm to get debt financing. In private ownership these layers of stock price market risk is peeled away, and the private owner is left with a risk profile more concentrated on execution risk, competion and macroeconomics.
This is not to say that I think Musk should take SolarCity. In fact, I do not believe he should. I am simply trying to highlight some of the reasons why it can be attreactive. And Musk knows these issues well. He is very deliberate about not taking SpaceX public. He knows that if SpaceX were public. He knows that that bringing on shareholders to SpaceX would greatly complicate execution on his strategic vision and subject the value of SpaceX to all the whims and passions of the stock market.
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I think bears would have a field day with this. They'd be able to point to all the complexities in SolarCity to cast doubt on the entire enterprise. If would be much harder for the market to value the combined company. On an executional level I'd love to see it, but as a stock it would be much harder to get a fair valuation.�
1/1/2015
guest Pretty severe spike just now. Wonder what the algo's are picking up.�
1/1/2015
guest Thank you, James. So, short-term negative for TSLA (in that described scenario Tesla aquiring SolarCity) and mid to long term possibly very positive, I'd think?
And what's the likelihood of such a move? For some reason my gut's saying this is more likely than SolarCity going private but that's the gut of a newbie. ;-)�
1/1/2015
guest I agree, I'm not saying that the risk is necessarily very high, but it's not theoretical either. I'm thinking primarily about the regulatory risk, especially if we get a Republican president and Congress. Macro risk is also non-negligible; it can have a big impact on their future funding.�
1/1/2015
guest Just bought 36 shares. I'm in...plus I have them on my roof.�
1/1/2015
guest Awesome! Glad to have you on the smart side of the investment and very cool you have them on your roof
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http://www.streetinsider.com/dr/news.php?id=11387663
Adding to the rumor solar city declines to comment on rumor of buyout�
1/1/2015
guest ???�
1/1/2015
guest Have you noticed the Ignore feature on this board yet? :wink:�
1/1/2015
guest Ah, that button over here. Thanks! :biggrin:�
1/1/2015
guest So rumor of going private...buy options! :wink:
http://www.cnbc.com/2016/03/04/musk-rumor-sparks-options-explosion.html
Hochul: Late payments at Riverbend won't happen again | WGRZ.com
�
1/1/2015
guest Al Gore: The Case For Optimism
Al Gore: The case for optimism on climate change | TED Talk | TED.com
Just a little perspective.�
1/1/2015
guest Video: Lyndon Rive 3-3-16 | Watch Ralston Live Online | KNPB Channel 5 Video
lyndon rive responds to warren buffet in this interview. Like I've said before, if Solarcity can get a strong messaging campaign going, they win improve market valuation significantly. They will accelerate winning over more citizens, politicians, and regulators, which will reduce uncertainty and unlock market value quickly.
solarcity's number one mission should be creating broad scale messaging of the promise of their products/solar as a technology to saving consumers money and bringing control to consumers energy use unlike anytime in human history. There are many many other huge values such as national security, international relations(making fossil fuels valueless), and environmental impacts... Everything starts with the individual customer and builds from there. A complete 21st century global economic transformation. It's that big of a deal.
add:
solarcity has the ground campaign, but now need to implement a strong national air campaign(talk shows, tv episodes, high profile news interviews... Basically putting the executives out there on that national stage for max awareness.) The air campaign will really accelerate the ground campaign because of the pre-awareness created from the national media coverage. Create the narrative, don't react to a narrative. Solarcity needs to take control of their narrative, not let others do it for them.�
1/1/2015
guest Just watched the video and as a Nevada SolarCity customer I hope more voters will watch it also. Thanks for posting that link!�
1/1/2015
guest Interesting...
�
1/1/2015
guest Not sure it anyone saw this yet...seems insanely high...if i studied SCTY as much as I did TSLA and was confident in SCTY's future the way I am about TSLA's future then I would say what this article is stating is a hugely bullish sign for SCTY stock price in the near-term...very high squeeze potential like TSLA back in early 2013
https://www.interactivebrokers.com/en/index.php?f=5599&vid=8851�
1/1/2015
guest Interesting indeed. Rule 204 means brokerages must buy shares on the open market if the shares they control are fully loaned out, so as to prevent naked shorting. I.e. if a client holds SCTY long and broker loans the share out for someone to short but then the original client sells his long position the broker must first buy SCTY on the open market to replace that share (which is still loaned out). Did I understand correctly?�
1/1/2015
guest Thanks for the link! For whatever reason my box isn't showing the video as-is but this link (pried out from the page) does work http://urs.pbs.org/redirect/0a33cb20c27e4b20b1a4087621b09ce3/ ,skip the first few min it's all ads and BS.
Much better performance on Lyndon's part, still got work to do though. Don't talk energy tech terms with TV audience. Come on now how's that not obvious, you got brains just not the social awareness.
Buffet now sounds like an internet troll, just a version with a hell of a lot of money.
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Yep that makes me doubt my decision to stay neutral on SCTY. The rubber band is stretched pretty much to the point where it's gonna break.�
1/1/2015
guest Poor articulation of the business model and value proposition remain problem #1, sales cost remains problem #2, and I'm seeing no progress on either front.
We continue to see poor articulation from Lyndon and these ridiculous Ra commercials with the bird-man. Locally I'm seeing SCTY miss out on TONS of semi-early adopter business in southeast PA because of their sales model. The well-paid sales force is clearly pushing back against efficiency as cost cutting is an existential threat to their juicy income faucet. For every penny that overall costs shrink while sales cost remains static, SCTY is losing it's competitive edge vs local installers.
We will see the Tesla 2013 scenario, but not until a critical mass of people understand the product and a plan is put in place to remove 70% of sales cost. Neither of those seem eminent.�
1/1/2015
guest I agree, however, the trade volume on Thursday and Friday were extraordinary. It is difficult for me to believe that it was driven entirely by the Elon taking SolarCity private rumor.
It seems entirely plausible that there is something that has yet to come to light. HMMMM.�
1/1/2015
guest Au contraire, they would both be eminent, in my view. Did you mean: imminent? / googlelpful pitnick :wink:�
1/1/2015
guest Doh! Yes, sorry/thanks.
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The kind poster in the thread below is reporting 24%+ being paid to those willing to loan out their SCTY shares through Fidelity, so they must be getting paid astronomical amounts by shorts. I'm sure there will be another squeeze up to $50-$60 soon, but that still doesn't properly value to company.
The amount paid to short this stock is similar to where TSLA was prior to that squeeze in 2013, but the squeeze MUST come in concert with Wall Street capitulation or it won't have the steam to reset valuation up above $100 where it belongs. I would like the common investor to more fully understand the product and it's value and I don't think it's ridiculous to ask SCTY to be much better at providing that clarity.�
1/1/2015
guest Good point again, Mule! I might just consider pivoting back a little bit; sold a few scty to buy tsla last week. Both rose since. Both may well rise further. But when? HMMM, as the saying goes.�
1/1/2015
guest HMMM?�
1/1/2015
guest HMMM, as in ruminating ponderously.�
1/1/2015
guest
"Triple digit borrow rates could be in the near future for short holders." Holy Cow Batman! What would happen if people loaned out their stocks, only to turn around and buy more??? That could get ugly fast. I'm on the same discount brokerage I started with a year ago and they don't offer to borrow shares. How hard is it to transfer shares to another brokerage? Would IB allow me to loan shares if I just signed up?
Edit - Ugh, never mind. It takes 4-8 business days. The situation could be completely different by then, so probably not worth the hassle.�
1/1/2015
guest Then you should write Hmmm and not the bolded Ms because they imply it's an acronym, which goes well with your "as the saying goes" but not at all with Onomatopoeia (words mimicing sounds).
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Then you should write Hmmm and not the bolded Ms because they imply it's an acronym, which goes well with your "as the saying goes" but not at all with Onomatopoeia (words mimicing sounds).�
1/1/2015
guest Caution to the wise... Arizona is currently in the midst of a net metering / demand charge rate case this week. The utility wants to do the same as Nevada, but allow for net metering. Still, if they get what they want, it would severely damage rooftop solar sales moving forward. Whatever results from this case, APS(the big utiltiy) will follow suit in summer rate review. So, the current case is pretty big with regards to uncertainty of Solarcity sales moving forward in Arizona. Need to be aware of this as you are considering big option plays right now. Might be a news cycle shorts might be planning for as negative.�
1/1/2015
guest Right. I'll think about that then! :wink:�
1/1/2015
guest Is anal retentive hyphenated?�
1/1/2015
guest Only if your circum-scissor has poor eyesight. Sorry, couldn't resist.�
1/1/2015
guest Has popped 10% now, perhaps the squeeze is imminent after all.�
1/1/2015
guest Senate energy bill might be moving closer to passage with King-Reid net metering protections in it. This would be big news if the case and would definately move the stock needle if passed into law.
Last week senate committee chair said the bill could quickly move forward this week...�
1/1/2015
guest Trudeau is scheduled to meet with Obama this week to set North America's climate change policy. Could be interesting as these two are very much aligned on direction.
It's all starting to come together.�
1/1/2015
guest Welcome, Jeff. We could use some Nevadan perspective on this thread.
How do solar owners in Nevada feel about adding batteries to their systems?�
1/1/2015
guest Can Water Kill the Duck Curve? | Greentech Media
We've debated this. The duck curve can be reshaped.�
1/1/2015
guest That makes sense to catch a lot of the asset-holding TV-watching older generations, but it wouldn't hurt to keep the whole family involved in the conceptualization education by also putting short educational pieces on SmartPhone spreadable media and passing it around a little.
E.g., post some Instagrams and such, written by and for typical Instagram users. This is an example; I know Instagram is now kind of outdated.�
1/1/2015
guest News released this morning that SCTY will be installing solar in 100 Whole Foods Markets starting this spring. This represents approximately 25% of Whole Foods locations. The installs look to be focused in the Northeast.
SolarCity to Work with Whole Foods Market to Install Solar Power Systems Across the U.S. - MarketWatch�
1/1/2015
guest Nice news blurb for SCTY today. Retrofitting 100 Whole Foods stores with panels.
http://www.prnewswire.com/news-releases/solarcity-to-work-with-whole-foods-market-to-install-solar-power-systems-across-the-us-300232309
Edit: what he said ^^�
1/1/2015
guest I say again, keep your eye on that senate energy bill. Last time the stock jumped was when the tax credit was extended... Someone had info it was going to pass and the stock jumped big on the rumor. This feels the same. Someone might have info the senate energy bill with the king-Reid net metering protections amendment will be pushed through soon. Grandfathering and manditory rate case that considers all benefits if utiltiy decides to lower rate below retail.
This is is actually the most significant legislation yet for Solarcity. Its bigger then tax credit extension. If it passes into law, scty could really jump higher then ever before.
keep your eye out this week and possibly next for movement/momentum on the bill.�
1/1/2015
guest
Ive googled a number of sources. Does anyone have a good link for tracking Senate progress?�
1/1/2015
guest Whole Foods teams up with NRG and Solar City to install rooftop solar at 100 stores - LA Times
It looks like SolarCity�s PR neglected to point out that NRG got 84 out of the 100 stores that Whole Foods is retrofitting with solar. So SolarCity only gets about 16 stores, not 100. This is a misleading omission, and I expect bears to make something of it.
It seems that SolarCity needs to take its commercial business into all states to better serve national accounts like Whole Foods.�
1/1/2015
guest First time I ever heard of a PPA was a 2007 documentary on SUNE's installation on a Whole Foods. I guess that relationship has fizzled.�
1/1/2015
guest Geez, NRG could have used a little boost from getting 84 Whole Foods stores. The NRG stock is down over 8%. Maybe they did not want their fossil headed shareholders to know they still did solar.�
1/1/2015
guest S.2012 - 114th Congress (2015-2016): Energy Policy Modernization Act of 2015 | Congress.gov | Library of Congress
S.Amdt.3120 to S.Amdt.2953 to S.2012 - 114th Congress (2015-2016) | Congress.gov | Library of Congress�
1/1/2015
guest Southern California Edison, 2 other utilities urge PUC to vacate or modify solar decision - LA Times
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1/1/2015
guest 10 Breakthrough Technologies 2016: SolarCity's Gigafactory
Some great press from M.I.T.�
1/1/2015
guest Senate Energy Policy Modernization Act of 2015
This link and screenshot is from Senator Murkowski's website.
Sponsored Legislation - United States Senator Lisa Murkowski�
1/1/2015
guest SolarCity co-founder Peter Rive to speak at UB Wednesday - Business - The Buffalo News
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1/1/2015
guest I'm starting to agree this federal legislation may be the impetus for a short term squeeze to 60. IF it's applied in the ways described here it would be the last major hurdle to easy financing. Grandfathering certainty then investor clarity gives us our two tiered squeeze to 60ish then 100+ at some point in the next year or two.
Excited to research this pending legislation today.
Get to this first tier then execution, communication, sales cost chopping gets us to the next.�
1/1/2015
guest Arizona Study Claims Solar Leasing Companies Can Afford to Make Net Metering Changes | Greentech Media
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1/1/2015
guest Bipartisan Energy Bill Inches Towards Finish Line | The National Law Review
get ready soon, looks like the bill is going to be passed with the Reid-King amendment. Not a single senator has tried to pull it out as a condition for passage, so, at this point, it looks to be just a matter of when. When looks like next week.
again, this would stop state by state net metering changes to setting a national standard for making those net metering changes, including all solar users to be grandfathered as well. This is a big big boon for Solarcity for it reduces much of the arbitrary regulatory uncertainty state by state politics embodies. Now they all have to consider the benefits of net metering before they can make any changes, and this will be federal law.�
1/1/2015
guest SCTY short interest is up to 27,443,163 shares (previously was 24,204,207). And Fidelity just raised the rate it pays shareholders loaning out SCTY to 28% (was 24.5% for about the last week).
I bet there's a good pressure cooker analogy in there somewhere...�
1/1/2015
guest Do you need a large account at fidelity to loan out shares or do they do that for anyone who asks?�
1/1/2015
guest There is a limit. I forget what it was but it was quite a bit higher than interactive brokers when my buddy who uses Fidelity checked�
1/1/2015
guest Limit is $250k.�
1/1/2015
guest The shorts do not seem to be doing a good job at keeping a lid on prices. My impression is that there is now steady buying pressure. Momentum could turn against the shorts.
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Because everybody knows how profitable these companies are. What's that profit margin again?�
1/1/2015
guest This reminds me of the "argument" made by one Indiana senator during the hearings for the Tesla-killing bill: "your cars are already expensive, you can afford to work with an independent dealer to sell them", meaning "you can afford to give some of your margins to someone else as we mandate, in order to keep the gravy train going".�
1/1/2015
guest This is going to be good. The market is an amazing thing, just when I thought there was no chance of a TSLA-esque squeeze these fools jump on again. And after the ITC extension??? How are there not 1000 better things to short than the leader in solar installs? God bless the chart worshipers.
Just squeeze us up to 60 so we can start building toward 100 at the beginning of fall. Maybe Bernie will have a big day on March 15th(FL/IL/MO/NC/OH)? Good lord, what if he does and the bill passes on Wednesday?�
1/1/2015
guest It also makes you wonder why the utilities don't try to partner up with SolarCity to capture some of those sweet, sweet profits...rather than fight them. I'm not sure how to play this Senate bill and pressure cooker but I was thinking over whether it was already too late to pick up some calls. The oil glut hasn't truly been resolved of course...�
1/1/2015
guest I used to wonder that too, but Lyndon Rive actually explained it quite well (most recently on Ralston Live). Utilities have the wrong business model. They are incentivized to just build more infrastructure and live off the 10% of their investments that is their guaranteed profit. As a protected monopoly, they don't need to be concerned with efficiency, the environment, or customer satisfaction.�
1/1/2015
guest The usual suspects have changed in this thread.
Just makes you say Hmmmmm. Notice the little ms?�
1/1/2015
guest Yep, the flip side to this is that the utilities are getting a 10% profit margin, so surely they can afford to hold their rates down and not pass costs on to non-solar customers. Nobody is forcing them to make so much profit, right? So it is actually the utility that is cost cost shifting, not solar customers.�
1/1/2015
guest There's no fuel for solar. It ruins the entire profit model for all the reasons above plus all the even more important intertwined businesses.
Warren Buffett owns NV Energy. Do you think it's in his interest to make his grid as cheap, efficient and sustainable as possible? He's got infinitely larger operations that rely on maintaining the status quo, that's the real impetus for purchasing a private energy company in Nevada. Yes he made $750M with NV Energy last year, but it's more about keeping his rail cars full of coal and his methane burning.
It's like gasoline. Why on Earth would you want to use gasoline engine in cars if they're inherently inferior? Because the focus is the supply not the demand. While making kerosene these guys are stuck with gasoline and need to be able to sell tons and tons of it. Have the car companies use gasoline. Boom, problem solved.�
1/1/2015
guest The oil market has been moving upto $38/b. It seems delusional. The the inventory build is still quite substantial. There is hope that OPEC or somebody might pull back production, but this strikes me as magical thinking. I think the reality is that the prospect of oil rising into the $40s just encourages marginal producers to stay in the game. As I've speculated before, this floor is just a function of storage. Prices are low enough for investors to store up oil for future generations. It's a floor, but it is no basis for "recovery."
At least, a little hope in the oil market spares the rest of the market barrels of misery. So SolarCity is free to rise, even though oil really has very little to do with the business.�
1/1/2015
guest Florida legislators put solar energy incentives on August primary ballot | Bradenton Herald
very interesting... Florida might open up to Solarcity next year? Another positive policy move today in Florida state legislature...
by the way, the energy bill is tied to the flint funds so even more momentum to get it done then ever before. This has political expediency written all over it. Next week(or sooner) is becoming a strong probability now...
Democrat places hold on Flint, energy bill package | TheHill�
1/1/2015
guest US solar market to more than double in 2016 to reach 16GW : Renew Economy
2016 could be a huge year for solar in the US, about 16 GW. Most of this is utility solar already cued up to lock in the ITC before it was to expire. The extension did not undo these projects. One can see here just how sensitive the utility solar market is to ITC. Residential and commercial will continue to grow regular rates, showing almost no sensitivity to the ITC issue.�
1/1/2015
guest Would be a site to behold.�
1/1/2015
guest I've found it interesting that most articles I have read from local Nevada press are pro solar. Here's one worth reading:
If Nevada officials hoped the national impact of torpedoing the state�s net metering policies would die down, it appears not to be happening. Business and environmental media are folding the Nevada dispute into other stories, and new developments continue to unfold. Some of that coverage has been devastating to economic development in Nevada as other Western states carve out their own renewable niches...........................https://www.newsreview.com/reno/net-loss/content?oid=20308969�
1/1/2015
guest Interesting watching the presidential debate, one candidate had no fracking stance which would be a positive benefit to Solarcity.
Secondly, I saw this today and my jaw dropped: http://video.cnbc.com/gallery/?video=3000500281
By this reasoning, more people could potentially afford solar sooner which also would be a significant positive for Solarcity.
Add this up, if things go this direction in the election, then Solarcity could really see a big big push starting 2017.�
1/1/2015
guest Just posted the video to my facebook.�
1/1/2015
guest Trying to keep direct political comments out of this as much as possible, it's absolutely shocking to hear him drop this commentary on CNBC. It's simple common sense Capitalism and speaks to the shortsightedness of today's "investors" and CNBC types. Gordon Gecko on the other hand sees the fairly obvious truth that eroding buying power for the lower 90% is the quickest way to an anemic economy.
As we move along it's becoming quite clear that the barrier isn't going to be price or regulatory uncertainty, it's lack of information and ease of transition. Solar is just now viable in most markets at grid parity and folks just need one spring/summer to educated themselves on their options/regulations.
Then we're simply left with the annoyance of transition. Who is best in that arena?�
1/1/2015
guest I can't watch video where I am at. Can someone please summarize the video? Thank you in advance! (it seems like in 2016 they would have software that would provide some sort of transcript with each video)�
1/1/2015
guest Alternet transcript�
1/1/2015
guest India's growing coal glut stalls mines : Renew Economy
This is interesting. Coal plants in India have declining utilization and are at risk of becoming stranded assets. Not the argument in the next to last paragraph. If some major industrial customers defect from the coal centered grid, this could force the distribution utilities to raise rates on residential customers. And this would pave the way for rooftop solar.
There is a potential strategy option here for a player like SolarCity. Conside this SolarCity builds out a national foot print for commercial and industrial solar. Thus, the enter new states where perhaps the residential market is not yet attractive. In these areas, growing out the commercial solar base puts pressure on utilities. Once the utility raises residential rates to offset revenue lost in the commercial segment, then SolarCity springs into the residential segment as well. It's a bit devious, but it could work. Also in a place like Nevada, SolarCity could continue to build its commercial business. This would save a few jobs and keep pouring pressure on NV Energy. Net metering is not much of an issue for commercial, since demand charge peak shaving pays for Powerwalls.�
1/1/2015
guest Very interesting :
Hillary Clinton fundraiser will take place at Lyndon Rive's house.
Hillary Clinton back in Atherton for another fundraiser | News | Mountain View Online |�
1/1/2015
guest 
This illustrates how hot water load can be used as a solar sponge to help move demand away from peaks.�
1/1/2015
guest I was thinking today about how hot those panels must get up on the roof at 3pm on a Philadelphia summer day. Do you foresee some kind of hybrid PV/hot water solar setup as being the standard at some point? With a massive pile of heat stored for a hour or two of energy production?
I can't even imagine how much heat could be pulled off a roof in an afternoon of panels baking under the sun. Is there a way to have a closed loop heat transfer system covering the panels?�
1/1/2015
guest
Australia been using separate meters for hot water and irrigation since the days of Skylab.�
1/1/2015
guest Yeah, I've wondered the same thing about hybrid PV/hot water systems. Does anyone know why these aren't more common? As solar installations get cheaper, something like this could be a means for SolarCity to push more product on the customer.
- - - Updated - - -
I'm not sure how the economics work out, but a company called SunDrum claims their hybrid system captures 70% of solar energy. Note that in addition to providing hot water, the thermal system increases the efficiency of the PV's by keeping them cool.
�
1/1/2015
guest A little good news out of N.H.
House backs bill to expand financial solar power incentive | Regional | caledonianrecord.com
House voted for a bill to double the net metering cap from 50 Megawatts to 100 Megawatts�
1/1/2015
guest http://www.bizjournals.com/buffalo/news/2016/03/09/solarcity-co-founder-peter-rive-says-you-need-to.html
�
1/1/2015
guest I took some time to read up on the details around this bill and it's recent history.....could be absolutely HUGE for SolarCity. Much like lifting of the oil export ban was the real impetus for ITC extension, this one looks like it's all about LNG exports. Considering how well the ITC extension was negotiated, I'm expect a very robust return for solar in this bill. These fracking interests are rightfully freaking out that their days are numbered and are willing to undermine their future to keep their heads above water for a few more years.
Locking in grandfathering nationwide and limiting the shenanigans that IOUs can pull cannot be overstated here. Having nearly absolute 20 year certainty on the revenue side at the point of sale is 1000x more important than the ITC being extended. Unlike the passage of ITC extension, this bill helps SCTY much more than local installers because SCTY is entirely dependent on future production revenue certainty.
This piece, followed by a summer of increased customer/investor understanding of the model, followed by a Dem victory in November should make my 2017 calls gold. And that's really what's most important here.�
1/1/2015
guest solarcity has been on a lobbying spree lately to include this candidate. However, this could be problematic since Hillary is also supported heavily by warren buffet and as we know, there is a clear fight happening between distributed solar and buffet monopoly utilities. I wonder who would win out on any policy favors? It's a bit of a playing with political fire here for Solarcity. On the other hand, if Hillary can broker a deal between buffet and Solarcity by promoting infrastructure as a service for the utiltiy model, then maybe it could be a very positive thing. But, my gut tells me the highest bidder might be the winner and buffet has deep pockets and connections to Hillary so...
I think there are many within Solarcity executive management staff that are supportive of Bernie sanders given the mark Ruffalo connection and his fierce support of 100% renewable grid. So, I wouldn't discount smooth shift to Bernie sanders support if Bernie ends up the nominee. However, I feel this would be a tough transition for buffet to make. So in the case of Bernie becoming the nominee, Solarcity could have a greater probability of gaining he upper hand on buffet and/or getting favorable terms on a infrastructure as service utiltiy model design.
Presidental season is wild, isn't it?�
1/1/2015
guest I think there's ample opportunity in using water pumping, too, and in my Californian mind, far more so: many water suppliers have networks of water that have storage that requires pumping to get to. A lot of this pumping can be shifted from one part of the day to another. Unfortunately, a lot of the pumping equipment was perfectly sized for 100% utilization for all day use, but a program of upgrading to efficient dynamic pumping during their regular facility maintenance and rehabilitation could slowly turn this into another big sponge, especially in California. Or, they could attempt to shuffle their current pumping assets around to bring in efficient big dynamic pumps in the biggest pump loads and shuffle those pumps down the chain into smaller facilities, raising the size of each pump per pipe, increasing the opportunity for dynamic use. Like I said, in California, this would be a huge sponge.
I'm concerned that you can't shift a lot of hot water use, simply because it tends to be cold outside and not much sunlight exactly when you need it: when you get back from work and are all dirty and need to take a shower (for physical work with long commutes and long hours), or for office workers, when they get up in the morning (or are done with their morning exercise). Granted, for physical workers who shower in the afternoon, that's a match made in heaven, but essentially there's no shifting going on there anyway -- that's just straight up use during peak supply.�
1/1/2015
guest After Tuesday's primaries, (Ohio, Florida, Illinois), there should be a great deal of color added to the status of the election. It will prove very telling how each candidate handles today's events in Chicago.�
1/1/2015
guest http://www.nytimes.com/2016/03/12/us/trump-rally-in-chicago-canceled-after-violent-scuffles.html?_r=0
I'm not sure that's a good sign, overall. But better not get too far into politics.�
1/1/2015
guest
I'm not sure that's a good sign, overall. But better not get too far into politics.[/QUOTE]
I realize that the forum rules dictate the content and tenor of the discussion. However, it would be disingenuous to say that climate science, environmentalism, and politics are not directly related to SCTY investor discourse.�
1/1/2015
guest Granted and agreed. But when someone (me actually) brings in the riff-raff whiff of street thugs from 1930's Germany, a line might have been crossed.
I'll try to contain myself forthwith.�
1/1/2015
guest I couldn't agree more. One point on one of the Democratic debates Bernie was asked to defend his position about climate change being the most important foreign problem we have, he missed a response like this: "the Syrian problem started because of a six year long drought which wiped out many in the agricultural sector. Also, there are news reports the Middle East as a whole is experiencing the worst drought in 900 years." Politics in the Middle East are bad enough as it is; how much more they are because of climate change is just a warning of more to come.�
1/1/2015
guest 'A battery in every basement': How the lowly water heater could power the smart grid | Utility Dive
This is a good source on smart water heaters and other smart energy devices.
The opportunity with water heaters is much bigger than I thought. It is the only common appliance that actually stores energy. A single heater stores 12 to 14 kWh of energy. That is actually quite alot compared to a 7 kWh Powerwall. Of course, storing electical energy in a battery is much more useful than storing thermal energy, but still 12 kWh can soak up a lot of surplus solar. So it totally makes sense that SolarCity would pair this with solar panels. The cost is also cheap enough that some utilities are paying for them straight up. So this seems a real opportunity for SolarCity anywhere NEM or flat rates are compromised.�
1/1/2015
guest Great thinking. I may have stumbled into that when I got the Connect Plus gateway for my Geospring heat pump water heater. Previously I controlled it by a relay that ran it during the super off peak rate. Now I can set schedules based on temperature. There is an opportunity for energy management with these devices and Solar City would be wise to integrate all of this in a system.�
1/1/2015
guest I've been watching the Arizona corporate commission hearings on UNS utility net metering and proposed three part rate design and have to admit, the future is clearly in Solarcity's favor nationwide in future rate cases on net metering.
First, the utility wants to put solar customers in a separate customer class. However, they haven't done a cost of service study on what it costs to serve solar customers. This is standard procedure to put anyone in a separate rate class, but I guess not for solar. They say there is a cost, but don't have a single data point to prove it. I have to say the same situation is also in Nevada. Nevada just put solar customers in a separate rate class with no cost of service study on rooftop only customers. This will be a significant problem for a commission to dismiss, since if they allow it, it shows a discrimination toward specific utility customers since they are treated differently when evaluating rates. Across the nation, the same discrimination situation will happen if a cost of study is not conducted on rooftop solar customers by themselves. This then leads to actual analysis on costs associated with rooftop solar in public hearings and put on the record for all to see. Those numbers will reveal a different story then the "assumed" cost model utilities are using and will be in Solarcity's favor.
Second, they are saying all rooftop solar customers are being "subsidized" by other non-solar ratepayers and this is the most pressing issue to stop this subsidization now. However, even if everyone of UNS customers are causing a cost on other customers, UNS actually has 92% subsidization happening from other causation points. Wow, if the goal is to reduce subsidization then how come 92% of the problem is ignored to focus on rooftop solar? Oh by the way, UNS doesn't even know what the cost to serve solar customers, but they know it does and it's the cause of rising rates on other customers. This argument fails even basic scrutiny and is very relevant to all utilities across the nation in their net metering arguments.
Third, and I'm just going to stop here since there are many many other points to shoot down, the utility sees any cost saving by a customer as a problem. In order to justify "revenue requirements" they have to identify the costs. The utility sees costs(with guaranteed rate of return imbedded) should equal revenue. If revenue does not cover cost, then they need to raise rates on rate classes. It was shocking that the utility representative said that if customers save money, then that is cost that does not provide the "revenue requirement" needed to cover the cost, so they will need to either redesign the rate or charge more on the rate classe(s). He said the goal in rate design is to be "perfect" and he sees himself well retired before that will ever happen if ever(and he laughed at this too). By this logic, no matter how much customers save, they will ultimately have to pay whatever the utility needs to recover those savings either through "proper rate design" or increasing rates under current rate design. This is the fatal flaw under the monopoly utility model as it is and will be clearly exposed as customer sided energy efficiency and energy production products proliferate. As it stands, as DG proliferates and reaches scale, the monopoly utility model will have to be dismantled and a new utility model develop nationwide. It is inevitable since there is no way utilities can justify cost-revenue requirement business model under a commission. As such, more cases that go through the current "rate case" process, the more and more evidence to demonstrate this becomes accumulated. Solarcity and other DG will benefit wildly as they will build even more negotiating power to move to a utility as service model.
The question is how long will this take? Will the national net metering law be the massive catalyst that will get us there sooner then later?
Wild times of change...�
1/1/2015
guest I agree. Privately owned utilities are incumbent monopolies, with regulated profit margins. Muncipal utilities amplify this by providing civil service job guarantees to their employees. This creates a wide spread corruption that is incapable of competing without regulatory capture.
Distributed generation will empower the "Democratization" of energy.�
1/1/2015
guest Up nicely today along with TSLA on a very bad oil day.
Can someone decipher this SEC filing for me?
SolarCity - Statement of Changes of Beneficial Ownership�
1/1/2015
guest Looks like Fisher Draper and Jurvetson redistributed a lot of shares of SCTY from and between their funds and personal trusts. The distributions are not all evenly disposed of and acquired by other funds so entities outside of their organization may have received about 75,000 shares.�
1/1/2015
guest Still no SolarCity sub-forum.�
1/1/2015
guest Solar Power Is About To Get MUCH Cheaper | OilPrice.com
�
1/1/2015
guest Will we get another tank when 1Q earnings are announced May the 3rd? Logic dictates that we will since guidance was already revised lower for that quarter and the algos should sound the alarm again, but sentiment could flip at any moment and trigger the climb. Thoughts on this?
My thought is that we follow the normal path of drifting upward through Mar/Apr perhaps with a min-squeeze up to $50+, but will still tank again on earnings day. Is that possible? Now that I type it out it seems unlikely. The East Coast is getting more an more saturated with solar, investors will get the picture just like they did when they could actually test drive a Model S in 2012.
Looking to advise my homies for final 2017/2018 LEAP purchases before the Big Squeeze that should happen between now and Inauguration Day. First week of May sounds like the time to buy Jan2017's.�
1/1/2015
guest My expectation is that there will be yet another big drop with Q1 ER.
Revenues will be relatively low due to seasonality and there are one-time charges associated with NV pullout. These things will put pressure on cash-flows. I'm sure Management will do all sorts of number magic in trying to isolate these things but I don't know if investors will have enough patience/tolerance to understand all that, given that the model is already very complex. My suspicion is that the bots will puke as all the one-time stuff is hard to code.
Ultimately in my view, it's all about cash-flows. We should see "bigger and more frequent" deals like Brad Buss envisioned in Q3 ER CC. The latest ABS deal was for a mere 35.6MWs filed on Feb 5th. For 1.25GWs of installs, we should see twice as much on a monthly basis! This is something we should keep an eye on.
Short rebate rate is hovering at around 90%!! This is both exciting and scary at the same time. Remember, generally speaking shorts are very smart, that mostly get things right. Yeah, occasionally they get it wrong like they did will Tesla (but to be fair even the shrewdest longs get things wrong occasionally too). Overall as a group they get things right in general. Here is an anecdote - link. To my cautionary sentiment, the very high short interest is a negative.
I don't know whats all brewing in the legal/regulatory landscape which is causing the current up-trend. It's become way too complicated for me to follow closely.�
1/1/2015
guest I don't know the in's and out's of the corporate bond world, but it seemed like Jan/Feb were insane across the board so reason dictates a frontier operation like SCTY would have trouble. Looks to me as though that whole mess has passed and ABS demand remains high even at 100+% of install costs.
As for short interest being so high......that is a gift from the gods. If you're looking for massive upswing, I'm not sure how you could see it as anything else. This stock is artificially low to the tune of at least 200% due to shorting and FUD. The squeeze will be insane, just like TSLA. Unless of course you don't think solar has a future in the US.
If I had to bet, I'd say another major tank after 1Q earnings. Hell, these guys are smart enough to play the movements both ways. It'll run up to $50 and they'll run it all the way back to $30 or lower, taking a slice in both directions I'm sure. Missing the boat is always a concern though.........�
1/1/2015
guest It may be smart to wait to accumulate shares until just after the earnings release. Ignore the rumor, buy the news.�
1/1/2015
guest The Federal ITC passed, the stock spiked. Guess what happened? The short-interest went UP!
Then subsequently the stock slid down dramatically. Guess what happened? Short-interest went DOWN.
Shorts have been quite correct lately with respect to SCTY. I don't know if they have ears on the ground or what. But they do seem to sense the price action better.�
1/1/2015
guest People here are mostly investors, not traders. At this point folks should have bought in at $18, but knowing how long we'll be in this range is crucial to LEAP purchasing. Timing this upswing(should it happen) is another in a very limited number of opportunities to ride the Musk wave. It's not like he has his hand in an unending string of ventures for the market can undervalue, this may be it.
Short players know that a company with this much potential and uncertainty can be manipulated with great ease, so they do it and make tons of money. However, like all gamblers they will at some point make one too many bets and get burned just like TSLA. The smart ones have been making a killing and jump out when the writing is on the wall, the majority will get sucked into yet another Musk squeeze.
Starting to look like there's a TSLA squeeze coming too if the Model 3 reveal goes well. Interesting times.�
1/1/2015
guest Looks like this Flint water/ energy bill won't be voted on this week. I'm assuming this is the bill Foghat was talking about that would lock in the grandfathering of net metering nationwide. Need this to pass ASAP.
It looks like New Jersey just passed a law to buy 80% of their juice from renewable sources by 2050, but will likely get vetoed by Christie who is somehow still the governor of that state.�
1/1/2015
guest http://www.nytimes.com/2016/03/16/business/dealbook/the-financial-alchemy-thats-choking-sunedison.html
I detest following the political antics, but this blurb in Politico had a summary of the holdup in energy bill.
�
1/1/2015
guest Sweet revenge against coal: North America's largest coal power plant to become 44-MW solar farm
Ontario completed a phase out of coal power in 2014, which included the shutdown of the Nanticoke plant.
The site's redevelopment into a solar farm will be led by Sun Edison Canadian Construction LP, which will partner with Six Nations Development Corp. and Ontario Power Generation.�
1/1/2015
guest Utah Passes a Major Clean Energy Bill That Elicits �Mixed Feelings�
So this article backs up what you are saying, just in a different location. I can't believe this:
So they say solar puts a cost on ratepayers who don't have it, but are now making ratepayers in general cover their own costs?
Then there is this: Wasted money towards coal plants
�
1/1/2015
guest Elon Musk taking direct approach to lobbying Nevada lawmakers on solar energy
This is very interesting.�
1/1/2015
guest 
�
1/1/2015
guest Check underneath your panel...you get a Tesla!
/s�
1/1/2015
guest Shocking IEA Data Points to Flat CO2 Emissions in 2015 | OilPrice.com
This is very good news. The globe may well have hit it's carbon peak. It's been at 32.1 Gt for 2015 and 2014, and 2013 was just 32.0 Gt. This is what we're working for. Let's see if emissions can drop below 32.0 Gt this year.
It's gonna take lots more wond, solar and batteries to drive this curve down.
Many of you are familiar with how I've been predicting peak combined fossil fuel demand by 2021. We are still on course with this. Peak carbon is happening now primarily because coal has already peaked and is in structural decline. Coal is the biggest source of carbon emissions, about 80% more CO2 per MWh than for natural gas. So switching gas for coal has definitely helped carbon level out, but even gas needs to be displaced by renewables. Within the US, natural gas consumption may have seen its peak last September. But it is too soon to be sure that this is structural decline and not mere seasonal variation. In Europe, there is not an abundance of gas. So renewables have been primarily displacing gas and not coal. Basically the cost of importing gas gives coal an economic advantage. My sense is that to know when gas is in decline globally you need gas demand to decline domestically in gas exporting countries. The cost of exporting will everywhere put exported gas at a disadvantage to wind and solar. So based on the US, I think that we are likely at the global peak for natural gas this year. The big challenge will be to push oil into decline. Without a massive EV fleet, solar can maybe displace 5% to 10% of oil consumption. This is primarily taking oil out of electricity generation (5%) and then displacing products like kerosene and lamp oil in places in the world not served by grids. So distributed solar is really key to displacing oil. EVs, however, are needed to tackle the 68% of oil consumption that goes to transportation. China, for its part, is targeting 5 million EVs by 2020. That is enough to displace 200,000 barrels per day. Hopefully, the rest of the world will keep up with this and the global EV fleet will stand at 25 million displacing 1 million bpd of oil demand. If so, the peak for oil demand may come as early as 2023. These are exciting times.�
1/1/2015
guest Methane emissions (which are multiple times more damaging then Co2) have gone up approximately 30%- 60% and have been rising steadily since 2007, unlike any time in our recorded history. Arguably the United States has contributed significantly during this time frame.
We reduce one emissions problem for a far, far worse one.
As we all know, time to ditch the gas and fast.�
1/1/2015
guest Yep, gas is a transition fuel to nowhere. I would much rather run a coal plant for a couple more years and replace it with renewables than to build a new gas plant to replace a coal plant only to have to replace the gas plant with renewables several more years out. This has been the basic con of the gas industry. The shortest path to renewables is renewables. So let's get on with it.�
1/1/2015
guest The really scary thing about methane is what's happening to the permafrost as a source, and then there's all those flaming lakes in Siberia! Is nature on a rapid course we started but cannot possibly stop?�
1/1/2015
guest Regulator: Nevada's solar rate hike was right decision
�
1/1/2015
guest They did not value any of the benefits. They only counted cost, not benifits. So non-solar customers are now get all the benefits for free with no cost. Thus, solar customers are now subsiding nonsolar customers. There was never any net subsidy to begin with.�
1/1/2015
guest Yes, that accounting is ridiculous. It ignores the cost to the solar customers to generate their own electricity, and the benefit to the system of not having to generate it.�
1/1/2015
guest they would've attempted to count both, its really clear to do the counting in a district where the producers/wire network/retailers are all segregated, but the result will be the same, nonsolar customers deserve to pay the same price for electricity to the producers of solar - be it utility farm based or distributed household based.
My own state's labour government allowed a special solar reading surcharge just because solar customers required more telephone support than non solar customers. My gut feeling is that it was fully evidenced based, even though i don't feel the retailers add any value to anyone, I accept that their costs are higher for me, than for others.�
1/1/2015
guest I know this was previously posted. However, I felt this article added a little color.
Why Nevada Legislators (& Leonardo DiCaprio) met at Tesla's Gigafactory�
1/1/2015
guest www.bringbacksolar.org
Help put rooftop solar on the ballot in Nevada�
1/1/2015
guest Should we really care if solar is temporarily locked out of Nevada? These states will simply be disadvantaged as the gold rush to get into renewables accelerates. Shouldn't electing energy puppets have repercussions and wouldn't it be best to allow those repercussions to be handled by Nevada voters? the more IO think about it, the less i want federal rules to lock in things like net metering. Forward thinking states should be rewarded for their efforts by becoming natural hubs for renewable energy companies.�
1/1/2015
guest I find it hard to square this IEA data with reality: CO2 levels are reaching record highs.
Earth saw 'explosive' annual growth in carbon dioxide in 2015
I understand the El Ni�o taking place in the pacific has an effect on this, but still. Best case scenario, we are simply wrong about the emissions data and are in fact emitting much more than we realize. A much more scary scenario is that we have already reached a natural tipping point where the carbon sinks are no longer able to absorb carbon like they used to and "nature" (like permafrost) has begun emitting more carbon than it absorbs, leading to a runaway C02 problem. I really hoping I am wrong.�
1/1/2015
guest Here's how I think about it: CO2 emissions are cumulative (at levels above the carbon cycle's equilibrium point -- this point is pre-industrial levels, AFAIK, so we are way above it). Even if emissions stay flat or even decrease, CO2 concentration will increase until we drop emissions below the point that the carbon cycle can absorb the emissions.�
1/1/2015
guest While I agree completely with that thinking, what scary is that last year's year over year increase was the highest in recorded history (last 56 years). 3.05 parts per million increase last year. A steady or declining emissions rate would imply a steady or declining year over year increase in total carbon levels (i.e. <2 parts per million). I understand the planet is a complex system and year over year data is full of "noise". Still, I get this feeling that there is more going on here than what we are measuring with this emissions data.�
1/1/2015
guest To be clear, the IEA is only counting energy related CO2 emissions. There are presumpably other human sources of CO2 emissions whatever the measurement errors may be. I think the focus here is merely on emissions that can be impacted by energy policy and energy economics. Hopefully we don't have too many other non controllable problems kicking in. We've got to make swift progress on decabonizing energy, no matter what.�
1/1/2015
guest I see the fossil fuel industry fighting distributed generation in every way that they can. They are protecting their incumbent monopoly. Utilities are cultures of entitlement that will utilize their financial resources and regulatory capture to prevent the disruption of their corrupt business models. This is David and Goliath and Goliath has brought a knife.
Renewable energy freedom of commerce is a right that should be extended to every home and every business.�
1/1/2015
guest Some of the rooftop solar supporters in Nevada pack guns...to PUCN hearings. Goliath may need more than a knife.�
1/1/2015
guest CANCER and CLIMATE CHANGE
http://www.nytimes.com/2016/01/17/opinion/sunday/cancer-and-climate-change.html?_r=0�
1/1/2015
guest Nice reflection. It matters what we leave behind.�
1/1/2015
guest
"A society grows great when old men plant trees whose shade they know they shall never sit in."
Mr. Sellers, I wish you well Sir. You have my respect.�
![[?IMG]](http://www.politicsforum.org/forum/images/ranks/100.gif)
1/1/2015
guest PV Magazine Mobil: US solar system prices fell 17% in 2015, finds GTM
Update on solar prices. Solar prices are declining for all segments except residential. Residential remains at $3.50/W. My take is that residential competes with residential utility rates which have not come down. Soft costs, especially marketing and sales costs could be reduced if there were competitive pressures to do so. Case in point, SolarCity has reduced it's installation cost substantially, but it is not lowering its retail prices.�
1/1/2015
guest Great article, thanks for posting.�
1/1/2015
guest $100 million in 2017 bonds available, with $90 million being purchased by SpaceX: SolarCity - Prospectus Filed Pursuant to Rule 424�
1/1/2015
guest National companies seek to stop solar deal struck in Maine�
1/1/2015
guest From the latest 10K -
"In March 2015, Space Exploration Technologies Corporation, or SpaceX, purchased $90.0 million in aggregate principal amount of 2.00% Solar Bonds due in March 2016."
So essentially the new SpaceX purchase looks to be a mere re-financing operation (at a higher rate of 4.4% from 2%).�
1/1/2015
guest I'm on the fence with this Maine legislation, seems to me it's all about labels. What's the difference between "net metering" and a feed in tariff that equals retail?
The thing I'm concerned about these days is making sure an individual homeowner's right to power their house comes first. What happens when these utils scramble to add tons of utility solar and we end up with an excess? Where's the legislated requirement to absorb a homeowner's excess rooftop production?
Does the grid exist to serve the people or the other way around?�
1/1/2015
guest "To serve humanity"
You know that's a cookbook...�
1/1/2015
guest The best anti-terrorism strategy we can adopt is distributed generation and the electrification of transportation. It is time for western democracies to divest in Saudi Aramco.
Saudi Arabia taking control of America's largest oil refinery�
1/1/2015
guest SunPower's Big Play for the Rooftop Solar Market
�
1/1/2015
guest SunPower trying to have it both ways. That rarely works out.�
1/1/2015
guest What do you see as the problem with SunPower trying to serve multiple segments? Or are you thinking of something else?�
1/1/2015
guest If you're going to be "full service", you need to provide the services. What's the point of signing a PPA with someone when the install is done by an unknown entity and any needs you have down the line will be handled by the same unknown entity or some other if the original goes out of business?
To me, the value proposition of SCTY is that you get top products and top service from a known entity who will be around forever. If I'm going with a stranger, why would I pay the premium price of a PPA? I would just finance the purchase outright.�
1/1/2015
guest I like SolarCity's vertical integration, but it seems that other players have to figure out where they can add value and where they are better off partnering. For example, Sunrun mostly partners with other installers so it can focus more on marketing, sales and financing. SunPower is firstly a panel maker, so I see this as an attempt to assure that their products remain relevant to the rooftop market. They can't simply rely on small installers to select their product. They need to round out the total package to compete with SolarCity.�
1/1/2015
guest I also like the additional sales and marketing efforts...which will lead to SolarCity getting some calls for competing bids so it should float all boats for rooftop solar. SunPower's decision also flies in the face of the dead end business model line of reasoning in which all the wealthy solar customers have been cherry picked and all that's left is a sub-prime leasing market. I think SolarCity will compare favorably.�
1/1/2015
guest Anyone have thoughts on why Solar City fell nearly 7% today?�
1/1/2015
guest Sandoval aide: Nevada�s clean energy reputation is damaged | NevadaAppeal.com
It sounds like political pressure is starting to set a new agenda in Nevada. Perhaps the meeting with Musk at the Gigafactory may be bearing some fruit as well. Governor's staff is starting to frame this as an economic imperative. Yes, it is.�
1/1/2015
guest I'm not sure. There's no substantial news that I am aware of.�
1/1/2015
guest How/will electricity retailing be disrupted?
Nice comparison.�
1/1/2015
guest Starting to see some more political fallout from the Petrobas mess...26 Billion in debt and low oil revenue is the new normal.
Brazil sees some of the largest antigovernment demonstrations in its history
�
1/1/2015
guest Energy task force taking up solar, other hot-button issues
Another article on the "Task Force".�
1/1/2015
guest Interesting. 11 quarters of declining GDP. I guess the oil collapse could expose alot of political corruption and lead to regime changes.
Perhaps this would go better under the shorting oil thread, but it's good to see how these things are connected. Thanks.�
1/1/2015
guest Everybody is experiencing these early stages of the Information Age differently. In the US it's facilitated deeper corruption via disinformation, Brazil has it even worse, the Middle East is flipping between full on revolution and whip-saw repression.....some European nations are leveraging it to the advantage of the people. We'll all eventually end up more enlightened and it's positive effects should grow exponentially.�
1/1/2015
guest I thought about the short oil thread but decided it fit how I've been thinking about SolarCity lately. Political squabbles, utilities, NEM or macro market conditions have seemingly been moving the stock more than anything SolarCity has done either way. The Riverbend factory is coming online and Powerwalls are coming soon too in quantity so it's mostly watching these external forces effecting the stock lately. Happy to move it as well if anyone cares enough to do the paperwork.�
1/1/2015
guest No need to move it. I see your connection here. It is indeed frustrating to see SolarCity defined by the political struggle that surrounds it. We need to need to work through that.�
1/1/2015
guest Right. We are struggling to move from the Age of Oil to the Information Age. The later derives wealth and power from controlling extractive resources and the means of distribution of extractive resources.
Consider the music industry. It used to be about scouting talent. Locking that talent up in contracts, producing and distributing its recording. So music was an extracted resource embodied in physical media, a record, a royalty, a tee-shirt. But the Information Age totally upended that whole extracted resource business model. Artists no longer need to be mined and produced. Music is no longer controlled and distributed by physical media. So the music industry shows this this sort of transition. In the end music creators and their listeners are in much closer relation with much few economic opportunities for business to mediate the relationship.�
1/1/2015
guest I've stayed with SolarCity while the price went down (no options, just common stock).
I wanted to buy more in the recent lows, but held back.
What worries me somewhat is the CFO story. Brad Buss leaving so soon, then Tanguy taking the job.
Tanguy may have been a totally wonderful and competent COO, but when I have heard him speak on conference calls, my mind conjures up the image of a character who might not be best suited to the roll of CFO.
Any thoughts on the CFO position in general?�
1/1/2015
guest My sympathies to anyone taking that position. Particularly Tanguy because apparently he doesn't even get a pay hike for the dual role. What a pity.�
1/1/2015
guest Rooftop Solar Booms in Japan as Market Moves Beyond Rich Nations
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1/1/2015
guest I'm not as concerned about the CFO role as I am the role of managing institutional capital sourcing. Now that Radford Small has been bumped up to that role as EVP Global Capital Markets, I'm all good. CFO needs to be someone who can articulate on the quarterly calls and see the short attacks coming, that's it.�
1/1/2015
guest
I am a little reassured by what you say about Radford Small. But I have little to go on, other than a few good things happening with his name on them.
BTW, I share your concerns expressed a long way upthread about the public 'voice' of the company.
SolarCity needs a spokesperson who can deliver two or three hard punches all in one 30 second soundbite...that's the art of a politician, though, and not just an ordinary politician, but a really really artful one.�
1/1/2015
guest SCTY down 10% today solely on a potential SUNE bankruptcy? I guess that makes sense.....a little sense.�
1/1/2015
guest It's disgusting how those reporting about SpaceX and SolarCity don't seem to understand how bonds work.�
1/1/2015
guest They know exactly how bonds work, they just know how to manipulate stock valuations works too.�
1/1/2015
guest http://www.baltimoresun.com/business/bs-bz-exelon-pepco-approved-20160323-story.
D.C. regulators green-light Pepco-Exelon merger, creating largest utility in the nation
�
1/1/2015
guest http://www.nytimes.com/2016/03/24/business/energy-environment/fight-to-keep-alternative-energy-local-stymies-an-industry.html?ref=energy-environment&_r=0
�
1/1/2015
guest The drop in price of SCTY made me buy more shares. If it keeps dropping I may just feel compelled to buy alot more...as long as they are still a viable company I can't see a down side.�
1/1/2015
guest It's hard to imagine how SolarCity + Tesla Energy wouldn't remain a viable company with the vast amount of work that needs to be done globally... for the foreseeable future at least.
Venezuela Rations Electricity Amid Energy Crisis
�
1/1/2015
guest The Venezuelan government is enormously dependent on oil revenue. So this situation does not surprise me.
I could see wealthy people in such an area loading up on Powerwalls and solar. This could allow even more political support for the government run utility to die. So it continues to get worse until most people have become off-grid capable. Not a pretty transition, but the end state could be much better than what they've got now.�
1/1/2015
guest No, that was not cherry picking, that was an easy to find and very relevant to the situation in Nevada.
Cherry picking, check out the solar price in New Mexico 3.5 cents per kilowatt hour
http://www.bizjournals.com/albuquerque/blog/morning-edition/2015/10/two-new-nm-solar-farms-states-biggest-line-up.html sure it may levelise up to 4 cents, but it is a realistic price 2016
again the question is
How much solar do you want?
the wholesale price of solar PV panels from China is about 50cents per watt
its not that hard to fill a sea container with 840 panels
ironically the wholesale price of a solar panel is about equal to Solarcitys marketing cost
free solar panels anybody? because solarcity basically has a price double due to marketing cost.�
1/1/2015
guest Except that rate payers in NV do not pay 3.5c/kWh for that electricity, do they?�
1/1/2015
guest The "Nevada situation" is fairly easy to analyze. Retail is 11� 24/7. Baseload wholesale is 3�, peak wholesale is 8-14�. (I think these are near correct)
Solar customers currently get net metering (11�/kWh) for energy pushed to the grid and NV Energy wants to shift that to the baseload rate of 3�/kWh. They also want a $39/month fee for solar customers.
Simple logic states that if the solar customer were not there to provide energy at peak, the utility would need to source wholesale energy at 8-14� from a peaker plant. So all these fees and lower payback rates are to fill the lost revenue to NV Energy, not to make the cost structure "more fair" to nonsolar customers. The fair and free-market way would be to shutter newly redundant peaker plants, not build even more at $900M a piece.
Residential solar is being driven out of the state to protect the inefficient but profitable status quo while NV Energy simulraneously builds out utility solar to keep all production behind the meter. It's clear as day.�
1/1/2015
guest Solar competes at the retail level. Oh wait, utilities can't compete at that level............. Regulatory Capture.
What is 'Regulatory Capture '
Regulatory capture is a theory associated with George Stigler, a Nobel laureate economist. It is the process by which regulatory agencies eventually come to be dominated by the very industries they were charged with regulating. Regulatory capture happens when a regulatory agency, formed to act in the public's interest, eventually acts in ways that benefit the industry it is supposed to be regulating, rather than the public.
Read more: Regulatory Capture Definition | Investopedia Regulatory Capture Definition | Investopedia
Follow us: Investopedia on Facebook�
1/1/2015
guest Tesla, Switch backing effort to end NV Energy monopoly
�
1/1/2015
guest The Energy Modernization Act of 2015 which includes the King-Reid amendment for "Net Metering", also includes an appropriation for the Flint Michigan water crisis. It is being held up by Utah Senator Mike Lee.
Is this not definitive "Regulatory Capture".
Michigan's lament: As Utah senator holds up aid package, Flint suffers
�
1/1/2015
guest Sent SolarCity Investor Relations an email looking for clarification around customer acquisition costs. They responded by putting me on the sales list and cold calling me twice on Easter Sunday. Not feeling great about the direction and cost of the SCTY acquisition process.�
1/1/2015
guest China Is on an Epic Solar Power Binge
�
1/1/2015
guest Ouch. When did you email them? If during the holiday, maybe some AI intern was on call. Otherwise, not a very good sign.�
1/1/2015
guest Just a guess. If SunEdison goes bankrupt, SolarCity will be able to buy pieces of its portfolio for pennies on the dollar. SolarCity has plenty of cash and wealthy backers.�
1/1/2015
guest Wait, what? Any serious hints SUNE might go belly-up? What happened?
I haven't been watching since I divested about a year ago or whatever. Glad I did, now!�
1/1/2015
guest A potential SUNE bankruptcy was what tanked SCTY and others 10% the other day. $14B in debt or something like that?�
1/1/2015
guest Vivent is very close to a MLM scheme that only happens to be involved in the Solar sector. Basically they have a gigantic mailing list and existing customer base and try to bundle together /sell every conceivable service related to the home. However, if you check out the BBB website, it's clear they use loads of subcontractors and questionable contracts to acquire and hold onto customers. Also, there
Basically everything that has to do with the home. Home security, TV, Internet, and Energy,
Sunedison and Terraform buying Vivent Solar was probably not a good idea, unless the objective was to get them out of the market so Sunedison could be acquired.
Also SunEdison is an old company with a lot of problems. This article does an okay job explaining certain things. (See link for the rest of the article)
Understanding SunEdison's Business Model - Market Realist
Disclaimer : I understand very little about how these types of maneuvers work, or if this is what happened, but it sounds plausible.�
1/1/2015
guest Thanks! Someone posted a link to powur the other day. Impressive sales videos - for what smelled to me like a MLM scheme based on climbing over subordinate people making a few hundred bucks for sales leads to SolarCity. Higher bonuses for more underlings and leads. Holiday Magic all polished up!�
1/1/2015
guest VSLR acquired most of its customers from its existing customer base and door to door sales. VSLR doesn't have much if any technology advantage nor does it appear to have a credible accounting strategy.
SolarCity is a vertically integrated technology company, that relies on word of mouth advertising, along with sales people to grow. SolarCity has partnered with Tesla Motors, SpaceX, Nest (Google), Home Depot, the DOD, Walmart and many others. Additionally, SolarCity has acquired companies with real value. The acquisitions were conditioned on time, quality, and other factors. Also, SolarCity has access to an almost unlimited capital due to Elon Musk, Bank of America, Morgan Stanley, Goldman Sachs, and Google, not to mention Sergei Brin and Larry Page.�
1/1/2015
guest Nevada judge rules to disqualify solar industry�s ballot measure
�
1/1/2015
guest so we all need to be on the look-out for that list for us to sign.�
1/1/2015
guest There's no shortcut to sustainable success in the PPA world. Operations like this want to have it both ways, outsource all the work effort AND maintain top notch quality. The model itself breeds horrible service, there's no way around it.
You MUST keep everything in-house, that's why SCTY's lead in the industry will be so valuable in 2-4 years when it's near scale nationwide. You can't walk into an industry and show a record of 10 years of unwavering service, you have to earn those years and it sounds like everyone other than SCTY is going to get shaken out this year.
Solar will obviously continue to grow.
Cost will continue to drop.
The PPA model will continue to appeal to 40-60% of solar customers.
SCTY may very well be the only top quality nationwide PPA option soon.
�
1/1/2015
guest This is the right time to do it. The monopoly is no longer in the best interest of the people.�
1/1/2015
guest Daniel Burrus - Techno Trends
Perovskites???�
1/1/2015
guest Had read something on perovskites so there is likely some such thing. Can't remember what. However, Burrus'es link to ecole polytechnique federal de lausanne was a 404 - verry 1337 indeed.�
1/1/2015
guest Rooftop solar could provide nearly half of US electricity demand
Here's some good news for rooftop solar. NREL estimates that rooftop solar can provide 40% of electricity consumed in the US. This was based on using 16% average panel efficiency. If 20% efficiency is assumed this goes up to 50% of consumption. SolarCity, SunPower and Panasonic are now building panels at about 22%. So perhaps this gets up to 55% potential. Also canopies and ground mount are ignored in this study.
So it looks like SolarCity has an addressable market of about half of all electricity consumed. That is enormous.�
1/1/2015
guest Not really. Many people choose to buy direct. We don't actually know the addressable market. We can not really base the split between buying vs PPAs based on the rate of current installs because we don't know how much sales effort is being expended on either side.
From all indications it appears like that SC found a niche market where people don't have pay much taxes and thus can not make use of tax-credits fully. I didn't run the numbers but it would be interesting to find out demographics on that.�
1/1/2015
guest In other news, grid based solar is growing like a crop.
Harvesting Sunshine More Lucrative Than Crops at Some U.S. Farms
Eventually we will have so much solar that it will be very over-flooded. Batteries will be desperately needed for growth and the ultimate growth constraint will be the amount of storage. Cost of batteries needs to be factored into any parity analysis with fossil fuels.�
1/1/2015
guest Navy goes solar in Saratoga County
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1/1/2015
guest The key word here is "addressable." They are addressing the whole rooftop and canopy market; how successful they are in capturing market share is a separate matter. It's a big pie whatever their slice.�
1/1/2015
guest Considering the 740+ credit score demographic of SolarCity's customer base to this point, I would say that conclusion is nearly 180 degrees incorrect. Half of the retired customers(which could be a substantial amount) would perhaps look at it from that perspective, but the vast majority of customers to date have incomes well above average.
Not having to deal with the tax credit likely has brought in more customers than the need to bypass it.�
1/1/2015
guest And it's not addressable production percentage that counts, it's addressable current dollars spent on electricity. Clearly residential/commercial is the sweet spot for that, and those just happen to be the sectors that didn't have the option to self produce.....until now. Targeting the industrial customer is like targeting utility scale solar installs, there's never going to be any margin.�
1/1/2015
guest Not sure I agree that SC can't successfully compete on the purchase front. Imho, at least here in California, I think they have the market power to successfully compete in any part of the rooftop market (PPA, purchase, financed, etc.).
Thought I'd weigh in on this point with my own anecdote.
Both my brother and sister have installed solar on their homes in the last 2 years (they are basically professional middle class and can use the tax credit, but live paycheck to paycheck). Both used "cheaper" installers.
I have meaningfully greater resources than either my brother or sister and have complete flexibility in making a choice of installer for my own install later this year.
- My sister opted for a PPA. Ultimately it worked out, but her installation was a nightmare. It took months of delays and non-communication from the installer. She had the panels installed for 4 months before anything was turned on. Start to finish it took almost a year.
- My brother opted for a PPA at first. Installer took his deposit and basically never performed the work -- although they did upsell my brother on overpriced energy efficiency upgrades. My brother ultimately got his deposit back but it took months of wrangling. My brother then managed to successfully find another installer and get the job done on a purchased basis (albeit financed).
Much like with any contractor I hire, I will not choose the cheapest installer -- particularly for something being installed in my roof. Like most homeowners, I made too many mistakes earlier in life with low-bid providers doing shoddy work, or even with high quality installers failing on communication.
On solar directly, I've heard way too many anecdotes -- and not just from my family members -- for it to ever be worth my time and aggravation to save even $1.50/watt. I'll choose the dominant provider in my area -- the one that can deal with my utility, my city and install a clean technological product in a timely professional manner.
Heck, I still haven't ruled out using a PPA even though I could purchase outright.
SC might not be that provider, but I can guarantee that my decision will not be based on price. If you were to ask my brother or sister to choose again, they wouldn't be choosing based on price either.
And as an aside, it's always mystified me the stigma put on choosing PPA over financing/purchasing. Much like with car leasing versus buying, many rational people would choose a PPA over purchase. It could be because of psychological comfort about obsolete technology or it could also be that your own cost-of-money is sufficiently higher than what a PPA is charging you (e.g., you have better investment opportunities) or it could be for myriad other reasons.�
1/1/2015
guest Come on people! Why has this video only been viewed 24 times?
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1/1/2015
guest Because it is over an hour long and there is no statement as to why one should see it?�
1/1/2015
guest Utah guv signs bills on power regulation, porn and lands lawsuit
To be fair, they also signed a bill declaring pornography as a public health crisis....so obviously they have it dialed in.�
1/1/2015
guest thanks for sharing! Great presentation and rebuttal from Lyndon.�
1/1/2015
guest Ohio electric bills may increase: PUCO to vote on deal to help FirstEnergy keep two high-cost plants running
Modi's Plan to Clean Up World's Worst Air Resisted by Indian Power Generators
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1/1/2015
guest I'm so freakin tired of this resistance. It.is.going.to.happen. I want to pull out my white glove and give them each a gentlemen's slap in the face.�
1/1/2015
guest How is the SUNE debacle not dragging down SCTY? I was expecting a nice dip in options pricing and it keeps drifting upward.�
1/1/2015
guest �
1/1/2015
guest Maybe all this new interest in Elon and Tesla is shining on some SCTY panels today?�
1/1/2015
guest The same analogy can be made to say that McDonalds has enormous potential to deliver all food to all Americans who are hungry. It's a stretch to link one particular company to the entirety of the need of the population. Especially when economics and supply/demand/competition are involved.�
1/1/2015
guest I think the more apt analogy would be that restaurants can serve half the food consumed. It's not that SolarCity can realize a market share of half the US electricity consumed, but that all rooftop solar has that potential. The critical issue here is that the protected niche of traditional utilities is shrinking. The utilities are safe from rooftop competion for about 60% of the market with solar at 15% efficiency. But this shrinks to only 20% safe with solar at 30% efficiency. In 20 to 30 years, 30% efficiency may be a possibility. This combined with batteries and other forms of distributed generation suggests that utilities may simply not be needed in 30 years. They will have to compete on service and price for any market share they are to retain. Remember that the retail cost of transmission and distribution is about 7c/kWh. As solar and batteries approach that price in the coming decades, the competitive landscape will change enormously. Electric utilities could go the way of landline telephones.�
1/1/2015
guest Given that this is not reported here
Outten & Golden LLP: SolarCity Corp. Accused of Failing to Pay Overtime to Installers�
1/1/2015
guest Saw and talked to a guy who works for and was wearing a SolarCity shirt today in line at the Dallas gallery. This was great exposure for the company.�
1/1/2015
guest Here I gotta disagree with you, even with 100% net generation with distributed solar the need to operate the transmission and distribution is minimally impacted, and the need for coincident peak power generation still exists (but moved and reduced) and the need for a billing and customer 'service' entity is unchanged.
in my country SA is approaching 100% daytime energy from renewable (mostly solar) at around 2023 Rooftop solar to cut total grid demand to zero in South Australia but they will still need those powerlines
in my country Tasmania exported too much zero emission energy due to the carbon tax and is now rushing to run on diesel because their dams are too low. Labor, Greens call for Senate inquiry into energy crisis
the cost of customer 'service' transmission and distribution is high and generally fixed, going 100% net solar does does materially impact those costs. cutting the line to the grid eliminates those costs.�
1/1/2015
guest American Electric Power, FirstEnergy Get Ohio Approval to Shift Some Cost Burdens to Customers
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1/1/2015
guest I'm talking about the economic opportunity decades out when batteries are cheap and abundant. At the present moment, Australia is in sore need for batteries. IIRC, Tasmania lost its transmission to the mainland and is in a crisis situation. These situations will radically change as storage is added to the mix.�
1/1/2015
guest I expect that grids will be retained; they're far too useful in cities.
However, it's already uneconomic for extreme rural areas to be on the grid. Think of the options:
(1) Lots of batteries and solar panels. There's plenty of space for them, the land is cheap....
(2) Big copper distribution wires running for hundreds of miles just to reach you. Poles. Guys maintaining the poles and wires. Trimming trees. Etc. For a few guys living in the middle of nowhere. They're highly subsidized right now.
I expect the rural areas to go off the grid fast. A few utilities in Australia have *already figured this out* and are paying the remote rural customers to install batteries so they can take them off the grid.
Now, here's the thing: with the rural areas removed from the grid, *the cost to operate and maintain the grid drops*. It may become quite competitive to maintain it in the big cities.�
1/1/2015
guest We need distributed batteries - such as 500 kWh units sitting at the head of a cul-de-sac. Times thousands. Fill them up at night using base-load plants, top them off during the day if the homes have solar on them. Net-meter excess back to the attached grid. Perhaps allow homes to back-feed into the batteries should a grid-down event happen. A cul-de-sac of 100 homes, with 20-30 of them housing solar, could aggregately recharge a 500kWh block of batteries if they provide grid-up signaling and re-charge limiters should voltage hit max. I don't think it is nearly as efficient to install batteries in each and every home. Community battery is where it will be at down the road.
Same for a business building that has high demand (steel mill, for instance). I was just at a steel mill in Iowa recently and their powerline connection is enormous and it's a small mill. They only need the full power primarily when starting up the furnaces. The rest of the time, their demand is limited. I don't think steel mills will use batteries - but their furnaces burning during peak daytime load events along with high levels of AC and other business functions is where some of the problems lie.
When I shopped for my Solar PV array in 2009-2012 (installed Dec. 2012) -- Installers were telling me we had to reduce need for peaker plants. Those plants actually are rarely used. Baseload plants have moved from coal to Nat Gas during this time and their efficiency in both labor (cost to run) and fuel (NG is cheap now) makes them more interesting as a near-term power supply. But NG is only 25% less CO2 output than a coal plant for each MWh produced. Carnegie Mellon says NG produces 600 kg of CO2 per MWh while coal 800 kg.
What we also see - with the recent Tesla Model 3 reveal - is that 100,000's of new EVs will be recharging at night (primarily). Solar PV alone isn't going to be a solution there - wind farms are. Wind in Texas at night allows some people to pay negative rates on night-time power demand. We need to see more homeowners considering local wind power in the Dakotas and other wind-zones. Wind is just as viable of a product to offer customers.
I am actually surprised that Solar City isn't in the homestead wind installation business. It is just as lucrative as the now lower-margin Solar array business.�
1/1/2015
guest Nearly 600k shares in the first 12 minutes of trading. Not too shabby.�
1/1/2015
guest Almost all power delivery is done using aluminum wires. And we know the price of aluminum is down well from it's highs. (so is copper too). I live near a whole bunch of people who are not on the grid. They do fine. They're called The Amish. A few use a small wind turbine to recharge batteries. A few have a couple solar panels to recharge batteries. The main problem is the enormous power needs of the "modern electrical family". 2500 sq ft homes using up to 2000 or more kWh per month. Inground pools dot the landscape. Pumped and kept warm for the few times we use them. The problem is if we lived smaller and lighter - we could actually live in self-contained, off-grid homes. Why not have a community pool rather than everyone having their own?
The power grid is the largest, most well maintained and most reliable "machine" on the planet. I just don't see all the negativity of the grid. One day it is "coal is bad", the next is "grid maintenance is expensive". But when you make everyone's home its own power station, you end up with so many points of failure that need annual maintenance, 1-2% annual production decrease due to loss of efficiency of solar PV modules and battery degradation. The issue is "just who is right?" It is some combination of all things. To make every home self-contained, off-grid - the cost is easily 4-5 times that of the grid itself. Even with sub-$100/kwh batteries. The batteries need to be replaced every 10-15 years after 3600 cycles if they use more than 75% of the state of charge (I'm talking Li-Ion still, not LA). If I was building a rural home today, I would first make it very energy efficient. I would take into account all conservation measures possible (ie. no inground pool for one). I would put up enough Solar PV to account for double my EV miles expected. And then I probably would still want to be connected to the grid because the kWh costs are still quite cheap versus the alternatives. Now, if I was living in a rural place in India or Africa where power outages are daily - sure, off-grid I would go. Just like many middle-class and upward homes in India have backup battery systems now.
I really think community and campus battery systems would be a good thing. If me and my neighbors could share a battery system and even tie-back solar pv production into recharging those batteries and the batteries were grid-regulated to act as a "little mini peaker plant" then I think we will be getting somewhere. In America, we really don't like sharing because we fear "someone else may get the better of me in the deal". But if the grid providers could offer cost of scale deployment of batteries in a sensible manner that also allows for battery-backup should a grid failure occur - then it's far more equitable.�
1/1/2015
guest I could only find this blurb in the free Politico Morning Energy section. Isn't the Senate Energy omnibus supposed to start up again this week?
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1/1/2015
guest PJM's market management is what should make for a fair market. Locking in old plants at higher than market rates isn't really fair in such conditions. Let the market decide what power prices should be. The end result with higher generation prices - higher end-user customer prices. It hurts more to help the few.�
1/1/2015
guest Someone needs to be the adult and decide where the cutoff will be for new plant construction. I'm perfectly willing to give these utilities some slack since they've put so much money into plants that the market asked them to build. However, if I lived in Nevada should I not be livid that I am going to end up paying for this new NV Energy peaker plant that will be obsolete on day 1?
Someone needs to come up with the rules for transition. I'd say Congress, but that is an utterly laughable concept. Hopefully DoE is working on the rules that will bring a bit more order.�
1/1/2015
guest bonaire:
In Australia a remote community just had its grid connection destroyed in a wildfire. The utility decided it was cheaper to buy a bunch of batteries and solar panels and build them a "microgrid" than to restore the power lines.
This is what I'm talking about. The big electric grid is more suited to suburban and urban density. The rural one-house-per-mile (or less) areas are a huge drain on grid maintenance costs and are heavily subsidized. There's a reason the US had urban electrification in the 19th century, but didn't have rural electrification until it was subsidized by FDR as part of the New Deal.
But these same rural areas also have gobs of space to put the solar panels and batteries, and enough space to locate the solar panels optimally. Often they have enough space for windmills, too.
I think the remote rural areas will be taken off the grid, because it's cheaper for them to be off-grid. And I think that will bring the grid "distribution and transmission" costs *down* for the rest of us, making the grid a better deal.
All this has nothing to do with the utilities with antiquated business models who are trying to subsidize obsolete fossil fuel plants, who are just trying to get away with something. I live in NY where we already separated generation from distribution, successfully, and our utility is behaving itself.�
1/1/2015
guest neroden - up in Rochester NY, some startups are working on trying to find the next gen Li-S batteries and other advances. The goal is double today's density (double what Tesla cars have on a per-kg basis). I also think Li-S negates the venting with flame issue. Both positives. Give us 3000-cycle Li-S batteries at double today's density and then we'll see things take-off for grid-operators and for EVs. What we really need are ways to hybridize the trucking industry. We can do electric local delivery trucks (FedEx, UPS) but we have a hard time with the big-rigs.
Land ownership. In the outback of Australia, it may be easy to install a MW or many MW of solar and wind in one spot to take a town offgrid. But in the USA where land ownership is a costly thing, you almost have to subcontract with farmers to install something to serve a small region with some of their land. Right now, the USA has tons of subcontracted "land" where a cell tower is installed on private property and the owner gets paid for that service. Will power companies offer land owners such a scenario? It would seem wind turbines and batteries would work out better for farmers than solar arrays and batteries. You can still farm the land under and near a wind turbine. Once the 1MW takes up the 4-5 acres, it's hard to use the land effectively.
But before we get too crazy with renewables, I would like to see Thorium reactors be attempted for viability and even deployed. There is hope that thorium nuclear reactors would be a great solution to older heavy-water nuclear plants. Great for base load and very green. Nuclear is quite green. Only problem is the radiation.
Thorium Power Is the Safer Future of Nuclear Energy
My room mate in college was from Ithaca. Nice town. Back in the day, I remember bike racing around Cayuga lake.�
1/1/2015
guest Maui Now: HECO Proposes Modernizing Plan for Hawai�i�s Grids
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1/1/2015
guest SunEdison "preparing to file for bankruptcy". Maybe a nice SCTY buying opportunity coming up?
I know they're nowhere near the same model, you know they're nowhere near the same model, but this MUST have some downward effect considering it doesn't seem to take much these days.�
1/1/2015
guest So, timing can be critical. Will I have time to take a little profit on TSLA to put into SCTY before the solar price contagion sets in? That might be nice, in re-diversifying a little.�
1/1/2015
guest Same thoughts I had for a while now, that would be the best case scenario. I don't expect much good from next SCTY ER so that could provide another opportunity.�
1/1/2015
guest the tweet is a year old�
1/1/2015
guest My bad�
1/1/2015
guest My only concern is that the guidance for 1Q was set obscenely low. Certainly odds are we're in for another ER downturn, but one these quarters it's gonna shoot up.
I'm gonna give it a few weeks and reevaluate the odds before earnings.�
1/1/2015
guest ...or is it?
Rural land remains extremely cheap. In the great deserts of California, Utah, Arizona, and New Mexico, and the ranchland of Texas, Oklahoma, Colorado, and so forth, it's *extremely* cheap. Even in the fertile Great Plans and Northeastern Forest, land is quite cheap. We don't have any truly remote communities in NY, and yet the acreage is still cheap. People building solar farms in upstate NY are leasing the land from farmers and the farmers are very happy for the income; I'm hoping it was unfarmed, fallow, marginal-for-agriculture land, but sadly I'm not actually sure.
Since we don't have any truly remote communities in NY I expect the whole state will stay on the grid. But I look at places like the Navajo Reservation, and I think "The grid is not right for this; they need to be off-grid".�
1/1/2015
guest While I don't know those specifics, Australia is about 95% connected to the grid, 4% connected to private commercial off grid, 1% connected to residential off grid. Off the 5% not connected to the grid, they all are paying big $$$$ for fuel for electricity, and have/were the natural base from where Australia's solar PV aptitude came from. We also have legion of small micogrids (diesel) which are too far away from transmission for connection. There is indeed a a lot of subsidy in our northern states to keep these communities lit up. Think WA,NT,Qld�
1/1/2015
guest rural land is valued on its productivity, if there is a lack of water, the land is cheap
if it is arid or semi arid, the land is cheap, perhaps free is some value add will occur
desert dwellers will understand it instinctively, but it is counter intuitive for people used to paying for land.�
1/1/2015
guest SunEdison Plans To File For Bankruptcy | Fox Business
More than 750 Arizona rooftop solar customers at risk as bankruptcy looms for Missouri-based SunEdison Inc.
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1/1/2015
guest I would have thought all that SunEdison bankruptcy news would tank all the solars today, but I woke up to find SCTY is up 90 cents? I guess oil and macro are more important. I've given up trying to predict what this stock will do near term.�
1/1/2015
guest Maybe it's up today based off the overwhelming Model 3 reservations as potential client pool for a minimum of installing charging if not panels or smart home systems sales leads? Shrug.�
1/1/2015
guest SCTY monetized $40M worth of SRECs. Wondering if anyone knows the structure of these deals and more specifically if it leaves SCTY with the upside if they balloon in value.
PA SRECs for instance are worthless today because the previous governor purposely sabotaged them by allowing out of state SRECs to count in PA, but not vice versa. If the new admin somehow locks that down and can also get targets raised, that could lead to massive increases in SREC value. So will SCTY retain that upside or is it considered to be part of the value within whatever instrument monetized them?
If state governors find the SREC program to be a useful lever in countering anti-solar moves by state legislatures, isn't SCTY sitting pretty on 20% of all SRECs?�
1/1/2015
guest Solar farm developers target New York with lease offers
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1/1/2015
guest This came out today:
Stifel�s Sven Eenmaa maintained a Buy rating for the company, while reducing the price target from $65 to $56. Investor interest seems to be centered on financing.
�With several term sheets received and being negotiated, the company appears to be making progress on the monetization front with the aim to deliver better IRRs than SolarCity�s current stock valuation implies,� analyst Sven Eenmaa wrote.
He expressed confidence regarding the probability of successful transactions over the next six to nine months, adding that management�s continued focus on reaching the previously guided cash flow positive in 4Q16 was encouraging.
�Cash and liquidity available to SolarCity as of 4Q15, pro forma for recent financings and including tax equity, amounted to $1.9bn+ per our calculations, which to us implies no immediate funding need and sufficient time to negotiate,� the analyst commented.
Eenmaa pointed out, however, that while the stock�s risk/reward over a 12-month horizon appeared favorable, �we view the transaction timing here as not without risks, which could have implications on 2016 installation volumes.�
Read more: ENERGY TRANSFER PARTNERS (NYSE:ETP), (SCTY) - Stifel Cuts SolarCity Target, Downgrades Energy Transfer Partners: Here's Why�
1/1/2015
guest We're still in "Existential Land", with these folks pricing SCTY as if there's a risk they go under. Fair enough, there are certainly going to be weaker players "shaken out" in this sector. Not sure how much longer analysts can look at this company and see anything other than the PPA winner. I guess you also need them to realize that PPA itself isn't going away either.
$2.4B for this company is a joke, but they're gonna need to show 2Q installs and costs on pace for 2016 goals to quell the solar & PPA jitters. That should be easy enough. I mean, 1Q install guidance was set at like 20% yoy so............�
1/1/2015
guest Plus maybe they can take over with first class servicing some of SunEdison former customers, or buy assets for pennies on the dollar. Obviously...it's not as lucrative as running a failing fossil fuel utility with stranded assets where the regulators will guarantee your profitability by shifting the costs to the retail customers *cough*, Ohio.
Seems weird to me too.�
1/1/2015
guest Was thinking that today. What kind of leverage dies SCTY have as the best positioned option to maintain these SUNE contracts? Should be some really nice PR that's worth going after.�
1/1/2015
guest Convince me that PPA isn't going away. Every time I read a head-to-head price comparison, it tells me people are better off (a) buying outright, which is obvious, no interest costs, and (b) getting a home improvement loan, which is the thing which threatens to kill PPAs.�
1/1/2015
guest Don't underestimate consumer's love for simple solutions. I have a buddy who lives in San Diego, makes good money and is smart as all get out. He just signed a PPA contract with Solar City. Before that he asked me if it's an Ok deal (I had to point him the elevator clause in the contract, he didn't read in enough detail), and I told him to do the math on the outright purchase. He just doesn't want to deal with it and also didn't want to increase his debt ratio, so PPA it is. He gets his energy cheaper than from utility and everything else is taken care of. He's happy and doesn't care about price comparisons.�
1/1/2015
guest Do you think that leases for cars or homes are going away? Outright ownership of these assets are often financially beneficial in the same way.Longterm I think the specific threat to solar leasing is simply that solar system will be subsumed under homefinancing, i.e., when you buy or lease a home with solar included, there is no needs to break solar out as a separate asset with separate financing. But even then when one has to upgrade or replace solar assets, separate financing may again come into play.
Another angle on this is that utilities and industrials have used PPAs for quite a long time. I've heard no one suggest that one day utilities will abandon buying PPAs because it is somehow inferior financing to alternatives. If PPAs are good for utilities and commercial entities, why not residential?�
1/1/2015
guest I will predict that when solar PV generation ramps up to high capacity, electricity will be much less expensive in the daytime vs. at night. Especially during the summer. This will really put the pressure on to install workplace charging, so workers can recharge during the day, after they arrive at work. This seems like a more elegant solution to me for reducing the CO2 required for EV charging.
GSP�
1/1/2015
guest GSP - I would love to see workplaces install both Solar PV and car-charging stations. Typically, they install the Solar but lack the charging. Reminds me of a brewery near me. Made a big stink about installing Solar PV but kept the whole restaurant setup with 60W incandescent bulbs that they could dim.
In the future you will commute-in, plug-in, get your re-charge while the sun shines and not tap into the peak demand because you are fully charged before 3pm where peak demand begins. Then when you arrive home you can either set charge for the early morning hours (low TOU rate) or just re-charge the next day at work again when solar is at its peak. That is the future of commuting.
There are just so few EVs on the road nationally that this scenario is decades away "large-scale".
Also, for jhm above - car leases are one thing but PPA is another. car leases are 3-year (sometimes 2) commitments. If Solar PV drops enough per Watt that it makes more sense to install for cash or HELOC over PPA any day. With 300W and denser modules and if costs of scale reduce module and racking costs further, anyone getting a roof replacement will think about adding modules at the same time. Six 300W modules would be enough to offset one EV bought into a family. Most homes can offset their entire electricity bill with more modules. My own system uses 255W modules and the same manufacturer makes 310W modules today of the same size. I could have done the system for $7000-8000 less today than back in late 2012. PPA can be misleading if it includes annual price adjustments to raise rates based on an assumed utility-price increase.�
1/1/2015
guest Cost of stopping new coal and gas projects in freefall, costings reveal
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1/1/2015
guest You'll just have to figure that one out for yourself. From my perspective....I'm a childless solar nut with great credit who built my own deck and I'm still actually considering SCTY instead of a straight install. I want access to SCTY's services down the line and like the idea of being able to seamlessly jump from solar to battery to microgrid all while staying right at the cusp of the tech curve at no cost..
I also kind of like the idea of doing it myself and then maybe talking microgrid with SCTY in 6-10 years. I'm personally on the fence and will likely buy, but I'm 38 and I don't see the majority of my 2+ child friends ignoring the simpler route with a premium. The trend is clearly toward "____ as a service" and that's just what SCTY provides. Everyone wants to "go solar", but is turned off by the hassle. Sadly they care, but not THAT much.�
1/1/2015
guest This was the free blurb from the Morning Energy page. It sounds to me like the utility is at least trying to adapt, in California anyway, and officially recognizes the benefits of distributed generation to the utility itself. I couldn't find any other news on this proposal.
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1/1/2015
guest Shorts covering today I presume? Maybe they've decided to flee their positions in TSLA and SCTY en masse.�
1/1/2015
guest Bonaire, this thread has spent at least 100 pages debating PPA. It's a pet issue of SolarCity bears. I've lost interest in debating it further. If you see some way for SolarCity to grow faster without offering PPAs to their customers, I'd be interested.�
1/1/2015
guest Utilities are actually prohibited from owning generation where I live. PPAs are their only option. Industrial and commercial operators who have the cash or decent financing rates usually do take the cheaper option of owning outright.�
1/1/2015
guest Sure there are occasionally regulatory reason, as well as tax, balance sheet and other strategic reasons for PPAs. PPAs are a form of off take agreements widely used in many industries. For example, one could argue that airlines would be better off owning oil refiners directly for the fuel they need. And by extension they should own the oil pipe lines and oil wells as well. Yet many airlines are content to have forward purchase agreement with a fuel supplier. Off take agreements of all sort are important strategic options. And this is no less true when the product is electricity. Sophisticated power buyers know how to work through all the details to arrive at the best choice for them.�
1/1/2015
guest Mexico solar capacity to surge 521% this year, says GTM Research
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1/1/2015
guest Does anyone know what's driving this awesome upward SCTY march? TSLA halo effect? Gradual acceptance of importance of solar (despite some pending solar bankruptcies)? Shorts slowly getting out? All my dreams finally coming true?�
1/1/2015
guest Probably all those things.
Loosening of the corporate bond market.
Far less worry of a global or US recession.
Jobs reports.
The election primaries.
I still think we drift up toward that semi-pessimistic $50 level over this month then do the 20% tank after earnings in May. That being said, I've timed this wrong so many times, my guesses should probably be taken as the exact opposite of eventual reality.
If Nevada resolves itself either locally or federally, that could be the big symbolic trigger. Perhaps that's happening in the background as part of that Senate energy bill seemed to have fizzled.
May have to bite the bullet and buy the final batch of 2018 options, but will wait til some folks hopefully take profit and we drift back down.�
1/1/2015
guest I think it's also becoming clear to many investors that the Tesla Gigafactory is now on hyper expansion planning and not a fairy tale. No matter what the utility monopoly tries to impose, solar + Powerwall can compete directly with the increasing retail grid prices. Plus the Riverbend payments are back on track and the Senate is debating a solar friendly metering policy, supposedly, I think.
Lots of blue sky perhaps?�
1/1/2015
guest Looks like pressure is mounting from all sides to get the Senate energy bill passed, so perhaps that's a reason for the upswing. Two idiots from Utah and Florida(shocking) are holding the whole thing from getting a vote. Pretty much a walk if it can just get to a vote.
Flint, energy bill talks stall in Senate
It is my understanding that any changes to net metering in any state would be required to account for the benefits of solar to all ratepayers when attempting to revise net metering rates. Essentially, they'd need to use realistic math and accounting rather than just look at costs. Since solar is going to be more efficient(cheaper) in almost any scenario, this means net metering will be very hard to challenge. Also somewhat locks in grandfathering of net metering rates for existing solar customers. You can imagine how huge this all would be for SCTY.�
1/1/2015
guest Nice update and run down on the SC Buffalo factory
A Gigafactory Is Rising in Buffalo, And It May Change the Solar Energy Industry�
1/1/2015
guest SolarCity Closes $150 Million Non-Recourse Financing Facility with Credit Suisse for Commercial Solar and Battery Storage
New financing information.�
1/1/2015
guest I like how they included commercials for their hardware partners in the release. They're learning.
No cost info though? I assume that means it's ugly.�
1/1/2015
guest Ex FERC chair joins SCTY as Chief Policy Officer. I like the sound of this.�
1/1/2015
guest $188M in the second tax equity deal. Money is flowing, we just need some federal protection for net metering.�
1/1/2015
guest Warmed up to an idea of picking up some OTM LEAPs.. Alas, J17's are too close (or put other way, not cheap enough) and J18's too expensive.�
1/1/2015
guest Wellignhoff is tremendous additional to Solarcity. Perfect background in legislative & regulatory matters, with the right mindset regarding electric vehicles and renewable energy.�
1/1/2015
guest Holy frijoles!�
1/1/2015
guest Elon Musk on Twitter
SolarCity is getting some free tie-in publicity from Tesla. Riding the Model 3 wave could be a good thing for SolarCity. Market, yes, but also policy. Consider net metering for a family with two EVs. They need about 20 kWh extra each night for charging. This could be variable, but even just night time demand should be attractive to utilities. Policy makers will need to think through how best to support EV charging and rooftop solar. Utilities need to consider what they lose when a two EV family goes offgrid. Residential consumption coukd rise from 30 kWh per day to 50 kWh. That's a 60% growth opportunity that utilities won't want to miss out on.�
1/1/2015
guest This is utility scale (which is, frankly, Solar City's biggest competitor). The bids were incredibly cheap. GTM is quite right to expect a massive boom in installations as a result.�
1/1/2015
guest Elon is beginning to sell the "Master Plan". It is the aggregation of renewable energy, electric vehicles, and energy efficiency (think LED lighting) that will disrupt the entire energy industry. I want my children and grandchildren vested in this transition. The declining cost basis of solar panels and LED lighting foretell batteries and EVs.�
1/1/2015
guest This will sound nay-sayer but is also realistic. It will take some time but the utilities and markets, like PJM, need to think ahead. It looks like the growth in new ICE vehicles sold is larger than the total Plug In market in the USA. See data here. Meaning, more new ICE sold "in addition" to the prior year's sales outpace total plug-ins. They need to see that balance change so that more new plug-ins are sold per year than the growth in the ICE market to indicate a ground-swell. Especially in China where the # of new ICE per year is far bigger than the # of new EV. China wants to do something about it - they know things are not looking good. Companies in the China sales regions are rapidly responding, which is good. Not that the quality is good but that they are offering some lower-priced vehicles for the lower-paid population to choose from.
It's much like when a family decides not to have children due to the growing population - there are dozens of nearby families out there having lots more children. Especially those indoctrinated by religions who "help" using scripture to facilitate growth. The "fix" is that government mandates get stronger for plug-ins, their prices fall dramatically, fuel for them is visibly much cheaper, the public charging grows far more extensive and the culture begins to adopt the change. All of that has to happen including showing how buying a Solar PV is the right thing to do when you add an EV or two to the family. My own Solar PV array makes far more kWh than I use in the car. And if you cannot add Solar PV, there should be supportive laws to support community solar where shares in a solar farm can be bought and apply for the ITC for your portion. We subsidize farmers to make or not make crops, to pour milk down the drain, etc. Why not subsidize them well to use half of their land for solar and wind? I don't even think we need farmers that much. Use the scrub land of the mid-west through western states.
Interesting stats today - the breakdown of top Solar cities. It can also show the top-heaviness of CA.
Report Ranks Top Solar States Of 2015 :: Solar Industry�
1/1/2015
guest That's true, but is quite good that the country is opening up to solar. Distributed solar is essentially competing against the cost of transmission and distribution. So it will find niches virtually everywhere. Another thing is that Mexico has a federal virtual net metering law that is very favorable for allowing industrial and commercial entities set up generation assets anywhere and send power through the grid to where it is used. So virtually every business could tap into utility scale solar wherever it is cheap.
There may even be ways to tap this for residential. Imagine a massive GW scale solar farm where you own say 4327 W of its solar and 7789 Wh of its storage. So you get to use virtual net metering to access that at your home or business. This is sort of a timeshare type of model.�
1/1/2015
guest So I'm reading that SCTY is planning to ramp the entire 1GW of Buffalo capacity at once rather than in chunks like the TSLA gigafactory. Should be a big boost in the fall.�
1/1/2015
guest I wish they would expand into more states. I would be FAR more likely to put solar PV on my roof in Missouri if I could get Solar City to do it. Honestly, I don't really trust anyone else.�
1/1/2015
guest Put-call parity is broken down in SolarCity options. For example, implied volatility for an ATM Call April 22 is about 0.75, but for Puts IV is about 1.20.
This is a telltale sign that shares are very expensive to borrow and puts are in very high demand.
I do not recommend buying options when IV is high, but this may be an interesting opportunity to write a put contract.
Regardless, SolarCity is gaining in share price even as sorts are desperate enough to pay a large premium for puts. So we've got strong buying pressure that shorts cannot tamp down.
"The suspense is terrible. I hope it'll last."
�
1/1/2015
guest Donors seek to harness Hollywood to boost liberal causes
The focus of Tesla from the beginning was to build a compelling car. I have always believed that the challenge of climate change and Tesla's "Master Plan" ought to be told as a compelling story. Since West Los Angeles is the center of Tesla's world, since it is inhabited by an amazing population of progressives committed to advocacy of good earth tenets, since these same folks are in fact the most renown storytellers of history, doesn't it follow that they would volunteer to tell the tale, spin the yarn, film the story.
Consider for a moment, the finest screenwriters, the world's best actors, the most talented cinematographers in industry coming together for a project driven by passion. Coming together to change the world.
Just thinking out loud.�
1/1/2015
guest It's an awfully big leap to set up in new markets that don't have substantial state subsidy and substantial existing demand. Very much a Catch 22. This is why install costs, and most importantly customer acquisition costs, need to come down rapidly and they are to a degree. SCTY can afford to set up shop in Missouri without state subsidy so long as all the customer simply sign up online and they don't need to have people sit in your house and convince you to buy. That's the issue.
That's the beauty of the SCTY PPA model and their value proposition. They're taking the hard road now so that when things get a bit more mainstream they are up to scale, have been around forever, provide the best product and therefore engender the greatest level trust from potential customers.
It's starting to look like there will be no other PPA option operating nationwide in the summer of 2018 and it'll be a massive undertaking to build up such an operation without outsourcing the most of the work-effort in the years that follow. Their premium will be easily justified and they will have no real competition. Yikes.�
1/1/2015
guest I have to admit I googled this to try and understand it. Does this result in upward or downward pressure on stock price, or is it strictly an arbitrage opportunity with options?�
1/1/2015
guest LOL I was just reading a Morningstar Quantitative Equity Report of SCTY dated 6 Apr 2016 and it referred to the solar ITC dropping down to 10% in 2017 under the Bear View summary. I get that these might not be updated very frequently but it referenced an analyst note from Andrew Bischof, CFA, Eq. Analyst, 11 February 2016 which explicitly states "We believe the solar investment tax credit continues after dropping to 10% in 2017." Are these analysts really that clueless about the companies and industries that they rate? How many companies does a typical analyst rate? Are they overwhelmed and going off of skimmed quarterly reports? Are they phoning it in? I feel infinitely more educated just reading this forum.�
1/1/2015
guest SolarCity selling tax credits to finance growth - The Buffalo News
�
1/1/2015
guest SolarCity: There's Sunshine in SCTY's Future
Another article covering SREC securitization.�
1/1/2015
guest SCTY expands into Western PA. It would be an interesting exercise to guess why SCTY is willing to move into a fracking state like PA where grid prices are super low.
Also, Pittsburgh is going to be an active market in the west, but Philadelphia still has no SCTY while the immediate Philly suburbs do. Unions? To many flat roofs? Poverty/avg credit rating?�
1/1/2015
guest Charles Schwab went from paying 23% for SCTY shares, to 25% on April 7, to 28% today.�
1/1/2015
guest Philly has issues. One thing is 4% Earnings tax for operating in city limits. With a tight margin business, that won't work.�
1/1/2015
guest Wage tax is for employees and more than offset by much lower property taxes. It has to be unions, not wanting to deal with the customer base, permitting process...
Though the base of operations is in the suburbs, so perhaps the extra wage tax hit for working jobs in the city would need to be considered. I was just surprised. It'll be interesting to see if they start doing commercial installs, but not residential.�
1/1/2015
guest What I just wrote to Senator Nelson (my rep):
Message:
Senator Nelson, I'm worried about why you have a hold on the energy legislation currently being considered by the senate. I understand and agree that further fossil,fuel exploitation especially offshore drilling is not desirable. However, if we hold up legislation the further encourages solar and wind penetration as well as energy commerce rules we may be missing the opportunity to put the final nails in the coffin of fossil fuels. I believe we are toes over the precipice of a clear economic advantage of alternatives to fossil fuels. Right now Tesla Motors per KWH cost of storage is very close to breaking the sub $100 per KWH level. The completion of,its first gigafactory in Nevada is all that is needed to achieve this level and lower. Storage at this price point and capacity that the factory will bring on will end the argument on an economic basis. I now see that the way to end offshore drilling and our fossil fuel economy is to strangle it by allowing solar wind+storage to be unimpeded by utility monopoly rules and regulations that make it difficult and/or illegal for distributed energy to take hold. As you know the utilities in FL have a deceitful ballot measure to cement their monopoly, stop free market capitalism and dismantle the current net metering laws on the fall ballot. Federal policy on energy to stop the state to state differences may be the key to defeating the incredibly strong forces lobbying for their very economic fossil fuel legacy business models. This economic change must be shown for what it is, an economic boom machine that will be and is unstoppable. Again, between wind/solar+storage and sustainable transportation (EV's) all aggressively becoming economically available to middle income America, this is the train that will end the threat of further drilling/fracking etc. as it just flat out becomes a non business solution. Remember what happened to,the whaling industry when "rock oil" displaced it and what happened to horses. They were RUN OVER by fossil fuels for both cost and convenience. Last week 325000 people put down $1,000 for a compelling, affordable American built car, virtually sight unseen! This is one canary in the coal mine that must heeded. It is also a path to accomplishing the task of transitioning to the Fusion (solar/wind+storage) which will result in the desirable consequence of drilling offshore becoming economically unviable. Boom problem solved. Please press hard to make this legislatively possible. We have voted with our pocket books and enjoyed having the sun provide almost all of household and transportation energy needs via 12KW of solar utility intertie and 2 Tesla Model S's. This is for my daughters and their generation. Please, let's make the next gen say "those guys gave us a gift" Thanx Dave Israel (U and Patrick... gotta keep ya in DC)�
1/1/2015
guest Senate Energy Bill Still To Clear Hurdles Before Floor Action; Renewables in FAA Reauthorization; Methane on the March | Capital Thinking
Our do-nothing congress continues to do nothing.
Davecolene0606 you have my respect for possessing the strength of character to act upon your convictions. Well done Sir.�
1/1/2015
guest What happens to the Flint bill and the net metering grandfather rules if these tax break extensions are achieved through amendment of the FCC bill?
There's a big thing in the House on Wednesday regarding the Flint water crisis, hopefully public outrage spurs the bill through the Senate.�
1/1/2015
guest Well played.�
1/1/2015
guest When PA lost the solar incentive, it didn't look like they were going to enter PA. But they have bought-up at least one suburban installer, MainLine Solar, and integrated them into the company. They were a small installer and the employees fit the Solar City mold. There are still a good number of independent solar companies in PA and many do very good work. The ITC extension and lower product prices are helping them stay in business for a few more years.
Philadelphia work may be unions. They also have the office of L&I which is really an overseer of many things. But even for employees who live outside the city - they still have to pay 3.4% in wage taxes for work done in city limits. Either the company pays it (and hurts the profit margin) or the employees pay it and it is not much fun to pay 3.4% more for the "privilege" of working there. Or you can try to work in the city without reporting and that can be a dangerous thing longer term if a disgruntled employee blows the whistle.�
1/1/2015
guest When writing politicians, lines like the one bolded above are actually a threat. They imply that people want to hurt a segment of the business world, including other Americans who have viable jobs. Maybe take a different stand and say things like "slowly, but steadily, move off our heavy reliance on fossil fuels and transition those jobs and tax revenues to other high-wage positions in the renewables energy industry." Retaining and re-purposing businesses and jobs is key to a smooth and vibrant transition to the next century's primary growth industry - alternative fuels and energy distribution." Also, by naming names of specific companies, politicians see constituents "picking winners". Naming names is the fast way to be ignored by a politician. How can you help people - your co-habitants of this nation. How can you help your brother succeed through intelligent change? Through naming names, you indicate to a politician your intent to showcase one public company whos stock you may have interest in bolstering. Policy, the lifeblood of the politician, is blanket-based (across the populace) and not specific to a named company.�
1/1/2015
guest Would love for you to post the letter/s you've sent to your state senators and other politicians. Then we'd have that perfect example.�
1/1/2015
guest I'm not entirely sure what to make of commentary like this.�
1/1/2015
guest I've worked in the State Department and in conjunction with the communications office years ago. I know how little good some letter writing actually does. Also have seen many politicians request "what will it do for the majority of my constituents?" as their primary reason to even listen to a topic. A politician has to work for the body of the people and their averaged interests. No matter how much good something can do. The problem with politics is the nature of politics. It's not like being a parent where you can and should change the child. Making change in politics is nearly impossible because the body politic is so hard to please as a whole. Look at the disconnect now between the mindsets of Trump supporters and the Bernie supporters. Entirely different sectors.
The way renewables make the most charge-ahead is by dropping the incentives and surviving incentive-free. That removes a lot of the stigma that some groups are crowing about. This may include trying to transition from ITC to state-based PUC driven incentive programs. For instance, instead of 30% ITC, there could be a $.50/kWh FIT or similar production incentive. That is well above market rates for generators to ignore. Then you get the large-scale power producers ramping up larger many-MW sites. FIT is how Ontario grew its solar initiatives. But ITC does not require production levels to be good. You can install on the wrong side of a house or have huge shadow effects - the ITC payback doesn't care. Make renewables consumption-based to grow the most.
CA and NY are way ahead in giving away money for renewable programs - but those states also supplement the ITC as well making for enormous incentive packages. But to make for national programs that are equivalent, each state needs to see the value similarly. Every state wants power. Not every state is ready to hand over the $ Billions to do it in large-scale. And the only way to reach senators and congress (state or federal) is through influential lobby programs and action committee groups (also PACs) who may have some "big name" members.�
1/1/2015
guest I think he/she was saying that it's rude and off-topic to critique a letter that's already been sent to another member's legislator.�
1/1/2015
guest Sarah Palin and Bill Nye featured in anti-climate change film
Sarah Palin vs Bill Nye, the jokes will write themselves.�
1/1/2015
guest That is what they are paying to borrow the shares from customers?�
1/1/2015
guest So oil is up, SCTY is up and crazy short interest still. The suspense is killing me so I picked up some $40 J18's that I'm Okay keeping long term but will eagerly sell if there's a big move up. 3 times cheaper than the onese I already have at that strike, ugh.�
1/1/2015
guest Yes.�
1/1/2015
guest So,
a) you don't have any examples of letters you've written to your senator or other state officials/politicians for us to read as excellent examples, and
b) you just wanted to trash someone else's efforts to make yourself look good, because you believe from your own experiences that it doesn't actually matter how good or bad the letter is written, it will be ignored.
�
1/1/2015
guest bonaire's post was informative and helpful for someone who wanted to improve the impact of the letter they send. No value judgement in that one, just useful, relevant information coming from experience. The fact that you see it the way you do tells a lot more about you than about OP.�
1/1/2015
guest I didn't find it informative or helpful. Did you not read his second post on the subject? Let me quote you his first two sentences just in case you missed it: I've worked in the State Department and in conjunction with the communications office years ago. I know how little good some letter writing actually does.
TheTalkingMule got it exactly right, but I gave Bonaire the benefit of the doubt (against my better judgement after reading his opinions on SA vs what he posts here) and asked him to share with us all one of those perfect letter examples he talked about that he'd written to his state senator. That way we could all get it right next time any of us wanted to try to make a difference. Instead Bonaire came right out and said, 'I know how little good some letter writing actually does.' So, what was his point of dissecting Dave's already sent letter? At least Dave is doing his part and trying. We now know Bonaire isn't going to bother.�
1/1/2015
guest It seems that SolarCity's stock price seems to be moving in parallel with crude oil. This would explain recent price gains.
I had tried to see if there was a correlation, but the relationship seems unreliable over time, sometime positive sometimes negative. More recently before the end of 2015, SolarCity had a tremendous run up owing to ITC extension. And this was contrary to movement in oil and made recent correlation negative.
So I will be taking a second look at hedging SolarCity by shorting oil. If you are interested in this, I will be posting on this topic in the Shorting Oil Hedging Tesla thread.�
1/1/2015
guest THE MAN IN THE ARENA
Excerpt from the speech "Citizenship In A Republic"
delivered at the Sorbonne, in Paris, France on 23 April, 1910
download PDF of complete speech
It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.
I say, write the letter. Act upon those things you believe to be moral imperatives.�
1/1/2015
guest Top U.S. coal company Peabody Energy files for bankruptcy
Good things happen, when good men do the right things.�
1/1/2015
guest That's surprising, they were paying 4% for tsla as of a couple weeks ago.�
1/1/2015
guest TSLA has been at 3% at Schwab for a few weeks at least. You might be thinking of another brokerage.
You mean "surprising" that it is so high compared to the rate for TSLA?�
1/1/2015
guest Regarding letter writing - I was trying to state that politicians do not want to be told which company is doing what and also which will "put the final nail in the coffin" of certain industries. Their own people/constituents and even family members may be employed there. Rather, look at ways to say that the new industries offer a far better long-term alternative for humanity.
Do I write letters now? No. The reason is that they do no good. I've written to my state representative to ask them to vote for certain bills in DC regarding climate initiative. I never keep copies of what I send through the onilne access portals for reps. I have republican federal representatives here and trying to get them to do good in DC for climate cause or renewables is not exactly going to fly. One of our big city democratic legislators who attended and spoke at a plug-in day three years ago has been indicted on related to their alleged roles in a racketeering and influence-peddling conspiracy. I have a power company who cannot even put together a TOU program after spending $500 Million of government funds to deploy smart meters. And when we write to legislators, instead of asking for more incentives, we need to look at what does the most good for everyone.
Education.
Let's get people educated first, guide them to buy the energy-wise, implement laws for community solar and wind "group buys" to allow shared ITC aggregation. If 100 homeowners paid into a 1MW solar PV array farm, at perhaps $2/watt installation, that does more good for the community than 100 homeowners installing 100 10KW solar arrays on their houses at $3/watt. Cost of scale is what we need for the most common good for the best results. With community solar, you also can have centralized management, centralized cleaning services and a far more expedient installation program. Modules installed per hour on a solar farm blows away home rooftops. But since rooftops take up "zero new land" they make some sense in denser populations. We have to decide; do we want an energy program or a jobs program? Are we pumping our favorite stocks or are we building a truly sustainable future in a very cost effective and fair manner? Maybe we should work under a "profit limit" environment like the 8-A government agency set-asides where prices of installation is limited to cost plus a small profit. Where companies cannot over-state the market value of their installed sites to get the most government incentive payback.
Besides solar farms, next best option would be government owned land such as parking garage-top solutions and building-top solutions on state and local government-owned buildings. They're not going anywhere.�
1/1/2015
guest Senate reaches deal on long-stalled energy bill
�
1/1/2015
guest If news from the Senate move the stock tomorrow that would be a good indicator that it'll move more if the bill passes.�
1/1/2015
guest �
1/1/2015
guest NV Energy-backed group pushes to keep solar rates high
�
1/1/2015
guest You guys see Sune this morning? At one time it was up 102%. There must have been at least a lucky few buyers from yesterday.�
1/1/2015
guest Have you tried to short any SCTY to see what Schwab is charging borrowers? Fidelity is 45% to loan, ~67.5% to borrow. Curious if Schwab has a larger spread or is charging less to short...�
1/1/2015
guest Shorting Oil, Hedging Tesla
SolarCity investors may want to see my post on optimizing a portfolio of SCTY, TSLA and SCO (double inverse oil ETF).�
1/1/2015
guest http://www.nytimes.com/2016/04/14/us/politics/senators-reach-deal-to-act-on-comprehensive-energy-bill.html
I haven't found any mention of the specifics but I'm assuming this contains the NEM rules?�
1/1/2015
guest It just tells me it's "ineligible to be shorted or shares must be borrowed externally" but if I'm willing to short $50,000 worth and pay a fee, I should contact Securities Lending to determine the fee amount.�
1/1/2015
guest I'm not seeing any chatter about FERC rule revisions in this Senate energy bill that would help lock in grandfathering of solar net metering. Anyone have insight on this?�
1/1/2015
guest S.2012 - 114th Congress (2015-2016): Energy Policy Modernization Act of 2015
There are 362 amendments. The one in question is 3120, technically an amendment to an amendment. I wonder what fraction of these massive bills ever gets read, let alone seriously discussed, in congress?
S.Amdt.3120 to S.Amdt.2953 to S.2012 - 114th Congress (2015-2016) - Amendment Text
There are several amendments within THIS amendment which to me looks like a poison pill to kill it off entirely. Sen Menchin from WV slipped in language authorizing a staggering amount of money being spent on "clean coal" programs:
"
(1) Authorization of appropriations.--There are
authorized to be appropriated to the Secretary to carry out
this section, to remain available until expended--
``(A) $632,000,000 for each of fiscal years 2017 through
2020; and
``(B) $582,000,000 for fiscal year 2021.
``(2) Allocations.--The amounts made available under
paragraph (1) shall be allocated as follows:
``(A) For activities under the research and development
program component described in subsection (b)(2)(A)--
``(i) $275,000,000 for each of fiscal years 2017 through
2020; and
``(ii) $200,000,000 for fiscal year 2021.
``(B) For activities under the demonstration projects
program component described in subsection (b)(2)(C)--
``(i) $50,000,000 for each of fiscal years 2017 through
2020; and
``(ii) $75,000,000 for fiscal year 2021.
``(C) Subject to paragraph (3), for activities under the large-scale pilot projects program component described in
subsection (b)(2)(B), $285,000,000 for each of fiscal years
2017 through 2021.
``(D) For activities under the net-negative carbon dioxide
emissions projects program component described in subsection
(b)(2)(D), $22,000,000 for each of fiscal years 2017 through
2021."
I like how anything Obama wants to do is "too expensive" and "picking winners and losers" and solar is "cost shifting" but this douchebag can put billions of pork projects that benefit his home state into an amendment and the tea baggers and budget hawks are totally silent.
The more I read through the text the more disgusted I get. I am getting very disillusioned with the democratic process in this country.�
1/1/2015
guest My generic take on this Congress is they are willing to give Renewable their equal take, in exchange for whatever their now desperate Fossil Fuel interests latest plan to hang on is. The ITC got done in exchange for lifting the export ban...and they need to make another panic deal in a poisoned Congress. Didn't Obama threaten to veto the House version and the Senate is cooking up the finished product?
Maybe it's just Game of Thrones time of year rolling around...�
1/1/2015
guest Yeah, I don't know much about that side of shorting but I would have thought tsla and scty would be about the same, but I guess it's probably demand and supply.�
1/1/2015
guest First Solar Making Panels More Cheaply Than China's Top Supplier
�
1/1/2015
guest (Posted in short interest thread)
3/31 short interest numbers are now on the NASDAQ site and are list SCTY at 23.7M, even lower than the last report. How do we reconcile that with the insane rates being paid to short this stock today? Costs to short SCTY have to be near an all-time high, perhaps short interest has ballooned since 3/31??
I'm trying to figure my plan for the earnings call first week of May. Guidance was revised so low for 1Q16 that I can't imagine they do anything other than outperform considerably, especially given the weather or lack thereof. Will we still get our regular post-call tank? A lot of uncertainty has been cleared up and this energy bill might be nearly the last piece. I'm looking at 2018 $80+ calls and am worried we might run up to $55+ and never get back below.
SBenson, I'd be interested in your 1Q prediction since you've been most accurate for the last three reports. Most of the headwinds we've talked about since October have cleared up or have at least eased to the point of manageability. I think we're nearing a point where the market recognizes all this backend revenue and value as valid. To me it's an 80% certainty to be recognized by the 3Q16 earnings call, but what are the odds for this call? I think 10-15% is fair odds, perhaps 20% since the weather was nice. Thoughts?�
1/1/2015
guest Mule, I am flattered that you asked for my opinion. I didn't get a chance to do any sort of deep dive. But my gut sense is still very negative towards SC. The recent financing rounds deal with the near end of the curve. What we really need to see is monetisation of the outer years. More ABS, or ABS of out years, or sale of assets (leases/ppas). We haven't seen any of that except one very small positive deal a few months back. More importantly, they stopped releasing the interest rates on the new credit facilities, which is suspicious. The firm is still very much in survival land is my gut sense.
Separately, just now checked IB rebate rates for shorting. They are north of 107% !!!!
OMFG what is going on here? The only explanation I can think of is that the firm is at a brink of a liquidity crisis and some folks know something inside... Think about it, as SC goes around asking for money (credit), more people will get to see their books, the information leaks and spreads. Otherwise why would anyone possibly pay that kind of rate just on merely speculative bet. They would have to be 100% sure to place a short bet like that.
I'm just merely staying out, watching from sidelines.�
1/1/2015
guest Have you guys seen what's happened to SUNE (formerly $30 stock, now $0.35)? I don't think this will happen to SCTY, but solar companies in general need to be careful and not take on too much debt!�
1/1/2015
guest So want happens to the solar industry if SC goes under? They are the number 1 installer at the moment......�
1/1/2015
guest Well, they were also paying 85% to short TSLA when it was at $30 so you can't just automatically assume people know something based on the short interest.
I would think that if there were any glaring problems with their books, the companies that they opened them for probably wouldn't be agreeing to lend them money after seeing them.�
1/1/2015
guest I think they had a tough time in Jan/Feb just like everyone else and decided that not including interest rates was a good idea, which it wasn't. Solar companies are so used to bending the truth that they seem to be having a hard time in a world where solar really truly IS the cheaper option.
I think they're over the hump here, perhaps not in sentiment, but it reality.
SolarCity Financing Concerns 'Alleviating,' Deutsche Bank Says
SolarCity Gains 4%, Deutsche Bank Sees More Tax Equity Transactions Over Next Few Months Boosting Shares
Keeping in mind this is precisely the setup of TSLA prior to the 2013 squeeze from $30 up to $120+. Shorts see SCTY as an inevitable failure, so they're doubling down....and doubling down.....and doubling down.
My concern isn't so much around IF a run-up will happen it's when. I think we may be underestimating the impact of the lowered guidance from a couple quarters back. 180MW for 1Q would only be 18% yoy growth, by far the lowest ever. Does that seem likely?
If they come in well above 1Q guidance, announce lower 2017 cost guidance AND the Senate all but locks in grandfathering of net metering......anything could happen. That being said, I'm inclined to agree with the negative sentiment. The world just hasn't woken up to SCTY model yet, just like no one bought into TSLA until a certain amount of people actual drove it.
Probably one more quarter of chaos.�
1/1/2015
guest Wasn't the rate briefly above 100% a few months back when we all got excited about a possible short squeeze? As I understand it it's only a matter of supply and demand. Desperate shorts trying to keep a lid on stock price willing to go that high. Fortunately for them I think falling oil prices may help them this time too.�
1/1/2015
guest My favorite Elon Musk quote:
Optimism, pessimism, f@%k that; we�re going to make it happen. As God is my bloody witness, I�m hell-bent on making it work.
Elon Musk has built an electric car that is outselling it's ICE competition from Mercedes Benz in Europe. He is delivery payloads to outer-f@#king space. He has developed built, and deployed reusable rockets.
Yet there are those convinced he is failing as Chairman of the Board of SolarCity. In the words of the Virgin Mary, come again?�
1/1/2015
guest HBO's VICE Interviews Elon Musk on "The Future of Energy"
SolarCity is an integral of Tesla's "Master Plan".�
1/1/2015
guest Question:
SCTY has guided for 180MW in Q1 which is down ~30% from the ~250MW they installed in Q4. They've recently been talking about reducing sales costs to get the cost per watt down but it seems likely that they'll have pretty much all the same sales staff employed in Q1 as they did in Q4 (minus a few from Nevada presumably). So their total sales cost in Q1 seems likely to be not that different from Q4, while installed watts is down 30%, so it appears that sales costs per watt are likely to be much higher now. Is this a fair evaluation? A jump from $0.60/watt to $0.80/watt would look pretty bad even if it will reverse the following quarter.�
1/1/2015
guest Q1 of every year for SCTY is a down quarter. Last year they dropped from 176MW to 153MW Q4'14-Q1'15 (link). Hard to install lots of solar panels during winter.�
1/1/2015
guest Sales people work almost entirely on commission, so less sales equals less cost. And they were cutting some of the more expensive means of closing sales. Not exactly sure what they meant by that,perhaps paid leads.
Guess how much commission the salesperson gets for each panel that goes up......�
1/1/2015
guest too much is my answer.
all in, nil subsidy, first world labour rates, solar should not be more than $1,200 per kW for a 6kW or larger system, with German inverters, make it $1,000 per kw with Chinese inverters.
if SCTY 'marketing' commission is $400 per kW, then thats an unnecessary 40% cost burden on the price of domestic solar.
Its also a cost burden that utility solar does not pay. another reason why 3.8c - 4.5c /kWh is not cherry picked, just representative of 2016 pricing. (although there are estimating involved for utility solar)
i think the major headwind for SCTY's financing is not sector wide issues, or market wide issues,
its the growing realization that charging 11cents/kWh plus a 3% escalation is not a bankable asset vs utility solar at 3.8c-4.5c/kWh. Yes the FICO scores of the homeowners may be great, but the asset itself is very overpriced. As the year goes on this becomes more and more obvious.
what is also obvious is that the shorts were too greedy, slow squeeze is occurring now.�
1/1/2015
guest This article adds quite a bit of color to the "Energy Mondernization Act".
Senate�s On-Again, Off-Again Energy Bill On-Again - Exchange Monitor
It is still difficult to expect anything from congress.�
1/1/2015
guest The problem isn't the price, it's the cost. Going solar with just a signature while undercutting the grid and will be considered one the the great products of our time, it's just not well positioned in the consumer's mind yet. People can't figure out if it's the Walmart, Amazon, McDonald's or Uber of energy.
Acquisition cost is keeping SCTY from offering a bit more flexibility around escalators, contract length, etc. So we have a bit a of chicken/egg issue here. If they had that $.67/W back to play with, all these little annoyances could be taken care. But I think we've now seen what happens when you try to find a way around real customer acquisition.....
SunEdison probe reveals 'overly optimistic' numbers
In answer to the sales commission cost....it's $32 per panel. And that's just for the outside sales rep. Once they figure out how to let people simply order SolarCity online it's game over, and to me that's an inevitable reality.
Half the market will be attracted to quality hardware installed inexpensively, the other half will be attracted to the zero-hassle model. Competition in zero-hassle is getting mighty thin, just need to get over the marketing hump.�
1/1/2015
guest Finally scty is over $30.�
1/1/2015
guest SolarCity and SolarEdge are both up substantially. I point out SolarEdge because SolarCity is its leading customer. The market seems to be bullish on installations.
SolarCity put/call parity continues to be broken. This thing is way over shorted.�
1/1/2015
guest I am still mostly confused what the market or shorts are so afraid of regarding SCTY. Their costs are dropping and once Riverbend and GF1 are online they will be able to sell retail power competing directly with the grid pricing. Maybe I'm the sucker for missing some critical flaw.
Regulators Reject Third-Party-Ownership Petition in North Carolina
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1/1/2015
guest Well this is a surprise. I sold all my shares late last week in anticipation of oil plunging and taking down SCTY, but oil being where it was on Friday and SCTY being UP $1.50 is surprising. Looking to get back in, but hesitant. I always seem to panic and buy/sell at the absolute worst time.�
1/1/2015
guest With earnings right around the corner and a 10+% drop after the last few quarterly calls it may be safe to hold off a couple weeks to gauge the immediate response to the call. It sure smells like "the market" is just creating volatility for volatility's sake. Buying as the stock naturally drifts upward then sowing irrational doubt and shorting the quarterly tank. These people must just make money hand over fist.
To me it's a greater sin to buy at $30 before a tank to $24 than to miss buying at $30 and buy at $40. Remembering of course that this whole range is irrational. Anything below $50 is a bargain when you're targeting $160 within 12 to 36 months. That's my psychotic logic.�
1/1/2015
guest I have been thinking the major catalyst is as soon as this week if the Energy bill gets voted in, much like what extending the ITC did for SCTY.
�
1/1/2015
guest Tomorrow is do-or-die for the Sanders campaign, needs to win NY by 6-10pts or so to have any real chance. Might have some interesting SCTY impact if he does very well.�
1/1/2015
guest I buy at any technical entry points, then prepare to add more during a deep pullback. The long-term (10+ years) upside of this stock is greatly under estimated by the market. The downside risk is greatly over estimated. The method I used to value this company is trying my best to predict where this company will be in 10~20 years, instead of paying a lot of attention to what will happen in one or two quarters. One thing I know for sure, is this company will install huge amount of solar panels in the next 10 years. Elon said so.�
1/1/2015
guest I think in 10~20 years the concept you would ever need a public utility to provide something as simple, cheap and ubiquitous as electricity will be as mind blowing as a desktop computer in every home having been eclipsed by a smartphone in every hand across nearly the entire planet.
In Energy Politics, Simple Wins, But Simple is Usually Wrong
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1/1/2015
guest Wow, that article is really badly framed. It presents a strawman argument and a false binary choice between coal and natural gas.
We need renewables to displace both. The debate right now is whether we need to go straight from coal to renewables or use natural gas as a bridge between the two. The author is probably enough of a sophist to know this and not to mention it. So this is pure propaganda for the "we need natural gas" camp. Gas producers are feeling threatened. In January FERC reported no new gas capacity added to the US grid. That's right, gas is getting edged out of the new power plant capacity market by renewable. Increasingly the US grid is going straight to renewables.
Moreover, this year the US will add about 9.5 GW wind and 16 GW solar. That's enough to generate 135 GWh / day and offset over 1 BCF/d of natural gas.
Where the antifracking people get it wrong is that we actually do not need to ban fracking to stop it. All that is needed is to continue to step up renewables at a pace that no new gas wells or coal mines are needed. We are just about at that scale this year. Already there is such a glut in both coal and natural gas that prices are below $2/mmbtu, which is unprofitable for both industries. So continuing to step up renewable will keep these price unprofitably low and will remove economic incentive for incremental fracking.
The author tells something which is fundamentally untrue about renewables. He presents the push to 100% renewables as something that requires government meddling to accomplish. The idea that renewables are dependent on politics to succeed and cannot compete on simple economics is wrong and misleading. It is actually gas, coal and nuclear that depend on politics for their continued existence. They depend on anticompetitive government sponsored monopolies. Opening up the utilities to genuine competition from distributed generation would drive coal and natural gas out of the market at an accelerated rate.�
1/1/2015
guest First Grid-Scale Rail Energy Storage Project Gets Environmental Approval From BLM
ARES uses electricity from the grid to drive loaded locomotives up a grade. As the train cars descend, their motors then act as generators and provide electricity to the grid. According to VP of operations Francesca Cava, the round-trip efficiency of the system is 85 percent.�
1/1/2015
guest Senate Shows It Can Make a Deal on Energy�Just Not a Big One
�
1/1/2015
guest Supreme Court rules against state power plant subsidies
More details:
BREAKING: Supreme Court rules in FERC's favor in Hughes v. Talen power case�
1/1/2015
guest What we've seen so far is the fossil world activating their puppets in Congress to cover their needs regardless of consequence. This allows other members of Congress to insert any old renewable energy language they like and it still passes. To me, this is a net positive since renewables will win on any vaguely flat playing surface.
Fossil interests are selling their future in order for individual players to survive a few more moments, make their boatload and get out before the whole thing comes crashing down. I'm semi-fine with that so long as we can get fair rules set in stone.
So if there any word on this bill grandfathering net metering at a federal level? That's the rumor on here, but I'm not seeing it definitively in the press. Considering the SCTY stock action on plummeting oil, I have to think it's in there.�
1/1/2015
guest ![[?IMG]](http://coconutheadsets.com/wp-content/uploads/2009/12/sisyphus.jpg)
�
1/1/2015
guest Solar is now cheaper than coal, says India energy minister | Climate Home - climate change news
�
1/1/2015
guest There has been mention of the possibility of a looming short squeeze but there appears to be no real catalyst for it. Is the 2nd quarter ER likely the best catalyst for that?�
1/1/2015
guest I'm in a New York state of mind.
Hillary Clinton wins New York primary
Elon Musk Helps California Rank No. 1 for Hillary Clinton Fundraising
Hillary Clinton back in Atherton for another fundraiser
New York Utilities, Solar Companies Offer Alternate Payment Plan�
1/1/2015
guest Let's get more info on this alternate payment plan. From the Bloomberg peice, I can't quite tell what solar installers really get from this connection.
I have long favored a virtual net metering alternative to net energy metering. The key difference is that in NEM the utility is the buyer of surplus solar power at residential rates, but in VNM there are third party buyers of surplus power and the utility is merely compensated for distribution service between the buyer and seller. What I like about VNM is that it truly moves to a free market solution. Buyers and sellers agree to whatever price they contract at and the utility is not obligated to participate in that transaction other than to provide distribution services. Tranditionally, utilities have fough this because it actually cuts into their monopoly. Could it be that some New York utilities are starting to see the light on this. So long as utilities demand to be a monopoly seller, it is incumbent on regulators and legislators to oblige these monopolies to buy surplus solar power at some regulated price. So VRG gives them a way to avoid being an obligated buyer while preserving a monopoly on local distribution of power. The writing on the wall is that there is practically no profit to be made from generating power, but operating a distribution network had durable value as energy technologies advance. So it is time for utilities to get out of the business of controlling buying and selling power and simply be a network operator. My hope is that NY other utilities are warming up to this reality, and we can finally get past all the nonsense around NEM.�
1/1/2015
guest I've started an American Fossil Divestiture thread in the Energy forum to track the reaction of utilities to renewables. Tactics like what we've seen in Nevada will buy you a bit of time, but are not long term solutions. It'll be funny to watch the spin as utilities try to sell off all their "valuable" production capacity.�
1/1/2015
guest Did you see this official press release? It has a link to the proposal doc with a lot of detail.
Six Investor-Owned Utilities Join Solar Companies in Landmark Proposal on Long-term Solar Growth in New York�
1/1/2015
guest Zooming past $33, up 9+% in the early going.�
1/1/2015
guest I don't really get the short dynamic here. Whether we look at exchange data or MarkIt data, the short interest is stable. BUT the rebate rate is going through the roof. The rebate rate was supposed to be based on supply-demand. If demand is constant, supply must be shrinking somehow. I wonder if management figured out a way to squeeze the supply and thus put some heavy pressure on the shorts through the ever higher rebate-rate. The price action and the rebate rate dynamic looks like a short squeeze to me.�
1/1/2015
guest Exactly. The indications we have here based on price and cost to short just haven't been matching up to the number of shares shorted when they get announced every few weeks. There's no way the shorts are fluctuating that much day-to-day. That being said, I know nothing of short market dynamics.
Inside 1Q numbers could easily be floating around.....
This NY plan may have folks thinking......
Zooming past $33.50 up 11+% thus far. I still see SCTY drifting up toward $50 only to get smacked down after the call for seemingly irrational reasons. These clowns are just manipulating the uncertainty and riding the stock on the ups and downs. Nice work if you can get it.�
1/1/2015
guest The supply of shares that can be lent is bounded and inelastic. So shorts are bidding against each other for a finite supply, hence, the rebate rate goes through the roof. But this also means that shorts have no incremental fire power to exert selling pressure on the stock itself. So they are really backed into a corner.
Time to buy shares.�
1/1/2015
guest Hey guys, let's not squeeze them too hard now...I'm enjoying the ridiculous premiums to lend out shares.�
1/1/2015
guest Noob question here but how exactly do you lend share to a short? What are the potential negatives for the individual loaning the shares?�
1/1/2015
guest Your brokerage has to have a program, you have to qualify, then they will either solicit you or you have to call in and ask. More info in the Tracking Short Interest thread.�
1/1/2015
guest Kaine applauds Senate passage of Energy Policy Modernization Act
Loving this.�
1/1/2015
guest Did I speak too soon......can't find anything on the King-Reid Amendment. Was it included?�
1/1/2015
guest I think the House now negotiates updates with the Senate before passage.
Things that seem pertinent to SCTY as of now....
Senate Passes Broad Bill to Modernize Energy Infrastructure
Since passage of the last major energy law, the United States has gone from fearing oil and gas shortages to becoming the world�s leading producer of both fuels. The use of wind and solar power is accelerating as those sources become cheaper than fossil fuels in some parts of the country. And President Obama�s environmental regulations are reshaping power systems as electric utilities close coal-fired power plants and replace them with alternative sources.
But the nation�s energy infrastructure has not kept pace with those changes.
The bill would promote renewable energy by requiring operators of electricity lines, transformers, and other elements of the electrical grid to upgrade the system, with a focus on large-scale storage systems for electricity to better accommodate the expanding production of wind and solar power. The bill would create and strengthen several programs devoted to improving energy efficiency in buildings.?�
1/1/2015
guest This model reminds me of the DSL over copper Telecom type arrangements of the 90's where any DSL reseller paid pennies for access and were able to charge retail DSL rates and turn a profit. If I'm properly understanding the concept of this NY proposal that is. I would think this is absolutely perfect for SolarCity to basically become a modern, hybrid utility of sorts.�
1/1/2015
guest Could you spell this out for me? Thanks.�
1/1/2015
guest Foreigner question: What does it mean, that the senate passes this bill?
Can it be stopped now? How possible is that?
And what does the bill mean in consequences for the Solar and battery industry?
The most stuff I can follow at TMC, but there knowlege-gaps on how the US-legislation works.
Maybe someone can help me out.
Greetings
Earl�
1/1/2015
guest Well, it seems to me this agreement is that SolarCity pays a nominal fee (wholesale grid maintenance) but is guaranteed access to grid services in exchange they can resell on the retail market. Instead of giving the net metering to the end user they are giving it to SolarCity (any grid re-seller) who then is the new customer facing utility? Also for SolarCity they can offer a competing off grid battery option as well?
I was thinking of how Speakeasy was a DSL ISP in Seattle...running their network over QWEST Telco copper lines. As I remember it they offered better service, speeds and pricing than QWEST did over their own lines.
�
1/1/2015
guest Quick response not meant to cover the detail
In the US all legislation requires passage by both Houses of Congress (House of Representatives and Senate). Typical of our process here, a similar bill was initially passed by The House last year. This one now passed by the Senate all but assures passage of final, but first a conference committee works out the (usually) small differences between the two bills, then both Houses should pass the same final bill (normally that process is fairly quick from here). Then it goes to the President for signature or veto. Obama expected to sign this one. So should be fairly clear sailing from here (theoretically of course).
Generally the bill is supportive of Solar Wind, requiring Utilites to accommodate them I hadn't looked at details myself - others have posted it locks in Net metering and other. I'll let others detail the bill itself�
1/1/2015
guest An Unlikely Alliance Is Born in the Battle Over Solar Power
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1/1/2015
guest Here is a very interesting article about how the future of solar could be affected by "value deflation". In a nutshell, the marginal value added by new installations drops over time, due to the fact that beyond a certain level of solar penetration overproduction is inevitable. Increased grid redistribution capacity, intelligent demand smoothing, and energy storage can alleviate but not completely solve this challenge. The article concludes that in order to stay competitive in the long run, the price of solar must be dropping much faster than it already is.
The article doesn't seem to have an agenda. It has a neutral, even solar-friendly tone, seems well-researched, and provides many supporting links, some to other studies (I have not followed those links). It is a worthwhile read.
How cheap does solar power need to get before it takes over the world?�
1/1/2015
guest Hi all,
First time post, long long time lurker. I got the dreaded e-mail from my broker today, saying that they are returning my loaned SCTY shares (and no more 28% interest on those shares). I would have expected that instead they might have backed off the interest paid, but I probably got dropped because I was a late comer to the program (my shares were only loaned out for a 1.5 months). I believe that priority goes to those who have been in the program longer. Oh well, still getting paid to loan my TSLA.
Anyway, I rather expect that the squeeze has hardly begun, and I'm in no way ready to sell, but I'm curious what experience others have had with loaned shares recently. Also, can someone remind me when/where we will get next short interest numbers for SCTY?
And just a brief context on myself and SCTY: I'm only recently above water, having accumulated shares on the way down over the past few months for a current basis of around $29/share. And this little pot o SCTY shares constitutes my "dry powder" for accumulating more TSLA on some future pullback there. I bought SCTY on the way down thinking that it's share price is likely to outperform TSLA for the foreseeable future, choosing SCTY even when TSLA was at it's recent lows, betting that SCTY could see 2 or 3x gains or more before TSLA. So the play just described constitutes my only short-termish move. Other than that, I've been long TSLA and accumilating shares since 2012. No margin accounts, no options, and not really a savvy invester, just taking advantage of the future that is laid out for all to see if they just look.
Finally, thanks to those on this and TSLA short-term forums, for cluing me in to the share loaning program. I know there are mixed opinions about whether loaning shares to the shorts is wise, but my view is that if the company is sound any effect on share price from the shorts will be negated in the end with the inevitable squeeze.
Thoughts on any of this would be greatly appreciated, especially on the subject of my SCTY -> TSLA play.
Regards,
Doug�
1/1/2015
guest Interesting how the former energy sec was promoting natural gas and saying it was low carbon emission "bridge fuel." However, as we all know, the real problem is currently methane emissions which is 25X worse then co2(in addition to ground water contamination and earthquakes). Over the past 9 years we've seen a massive uptick in fracking/natural gas extraction in the us and in various areas of the world. Coincidently, Over that same time period , we've seen a dramatic increase in global temp rise while at the same time we've claimed a reduction in co2 emissions. Hardly a strong long term energy policy to espouse as a working solution to climate change.
Also, not one mention of distributed energy resources even after the little segment on Solarcity and Elon energy storage. Storage was mention as "grid storage." Nothing mentioned about a network of distributed energy which is (as many argue here) actually materializing as potentially the center piece of our future of energy network infrastructure in the us.
The nuclear fusion piece is so far down the road in actual business model application I don't even know why they mention it in such a significant way as the climate change and fossil fuel transition needs to be conducted over the next 20-30 years, not starting 20-30 years from now with fusion. The mini fission reactors will never materialize as a viable business model since the collective waste material would be a massive environmental disaster in its own right 30 years from now.
The episode did get one thing really right: We already have the tech, right now, to transition completely to a sustainable energy economy. Just the fact vice journalists didn't focus on that thesis was a little disappointing, especially when they had access to Elon the entire time.
The question oight not be what is the future of energy, it ought to be how do we expeditiously and efficiently transition to that 100% sustainable energy economy right now. Again, Elon might have had some key insight for the vice journalist... Maybe they will cover this in another episode.
Add:
I'm going to speculate Solarcity will have some type of earth day announcement on Friday. Also, I think we should hear something about the long drawn out (4 years now!)treasury case soon, maybe early May, so potentially a catalyst for the market if it turns out to be a good judgement. Would be one less risk factor in the quarterly so would be nice.�
1/1/2015
guest Thanks, Doggus. Yes, this sounds like a truly awesome opportunity for SolarCity. Essentially they can aggregate surplus solar and sell to a segment of customers. Let's call this segment Solar Consumers. SolarCity's current customer base with solar installations, let's call them Solar Prosumers, as they produce and consume solar power. The Solar Consumer segment is strictly defined to exclude Prosumers.
So suppose I live in a home where a rooftop or other solar installation is not a realistic option. So I cannot become a prosumer, and so up until now I could not become a SolarCity customer at all. But under this new arrangement, I can now become a Solar Consumer. I can buy power from SolarCity that it aggregates from its prosumers. Now this may seem to be limited to buying power at only certain times of day, but with the advent of batteries, it is not. For example, perhaps SolarCity can install a Powerpack at my home. So SolarCity charges my Powerpack to about 90 kWh each day when surplus solar is available. My family uses about 25 to 50 kWh each day. The additional stored energy is available for SolarCity to use to provide grid services and backup to other SolarCity customers. So my Powerpack is supplying 20 to 30 kWh of peak power to the grid on a typical day. Because I am willing to host a Powerpack at my home, SolarCity is able to incremental storage at $250/kWh instead of $430/kWh for a Powerwall. I buy all my power from SolarCity at a low rate in part because I am hosting for them. Moreover, as a grid service, citing a Powerpack in my neighborhood or utility substation creates substantial value for my local utility. My Powerpack provide peak and backup power to my neighbors which minimizes network congestion and improves local reliability. The utility can spend less of network hardware and reliability system redundancies through this mechanism of localized storage. These benefits are in addition to merely avoiding construction of new peaking plants.
So does all this seem remotely consistent with the proposal? Or am I just reading in my hopes? I do think that what I have set out would be mutually beneficial to utilities, utility only customers, SolarCity and SolarCity�s customers. It would also foster renewables and and new industry within the State of New York. It even solves the problem of how rooftop solar can benefit high density urban areas such as New York City.
So this seems to be a win all the way around excluding power producers, especially peak power producers. By allowing SolarCity to aggregate and retail power, it does have the potential to draw SolarCity under the same regulatory scheme that the utilities operate under, but this also has the potential to impact wholesale power markets as well which would draw it under FERC jurisdiction as well. There is lots of complexity here to watch out for. But ultimately this seems to be the sort of direction things must go in. You can't operate at SolarCity's scale for long without coming under regulatory oversight and without needing access to the wholesale power markets too. So a new deal must be struck.�
1/1/2015
guest short on time currently, but a quick comment
There's another 'hidden' risk as well. For the first time in history, energy is a by product of technology and scale (ala semiconductor). Current technologies in the labs etc. may (will) drive the cost of solar-storage to a near zero level (20 year time frame). The market for retail energy in today's curve is a diminishing one to near zero imo. SCTY must structure to balance this curve-�
1/1/2015
guest Did anyone see the curve moving this quickly within the US?
Shock (realizing the impact of solar growth out West, fossil plants can never be built profitably again)
Reaction (knee-jerk sabotage by Nevada PUC on behalf of NV Energy and others)
Counter (many states quickly move to stabilize net metering)
Progress (NY looks like they're laying the groundwork for future energy markets, HI is going full solar micro-grid)
All this has happened in about a calendar year.......which is insane. Where will we be next summer?
Crossing $34 in the early going, up 5%.�
1/1/2015
guest Bloomberg feature: Deputy Crown Prince Mohammed bin Salman is preparing Saudi Arabia for the end of oil.
Sample quote:
"Prince Mohammed picks up the questioning: �How close is Saudi Arabia to a financial crisis?�
Today it�s much better, Al-Sheikh says. But �if you�d asked me exactly a year ago, I was probably on the verge of having a nervous breakdown.� Then he tells a story that no one outside the kingdom�s inner sanctum has heard. Last spring, as the International Monetary Fund and others were predicting Saudi Arabia�s reserves could stake the country for at least five years of low oil prices, the prince�s team discovered the kingdom was rapidly becoming insolvent. At last April�s spending levels, Saudi Arabia would have gone �completely broke� within just two years, by early 2017, Al-Sheikh says. To avert calamity, the prince cut the budget by 25 percent, reinstated strict spending controls, tapped the debt markets, and began to develop the VAT and other levies. The burn rate on Saudi Arabia�s cash reserves�$30 billion a month through the first half of 2015�began to fall.
Al-Sheikh finishes his fiscally mortifying report. �Thank you,� the prince says."�
1/1/2015
guest Great article, thanks for sharing!�
1/1/2015
guest I confess I posted it before I finished reading it. I had hoped it would be more informative of how exactly they are preparing for "the end of oil" and of their thinking process, but it's more of a puff piece. Still, it shows that change is on the way for Saudi Arabia, one way or the other.�
1/1/2015
guest True, but that is for April 25th, no?�
1/1/2015
guest Trying to make sense of the current situation:
- AFAIR Musk was buying at $34 before it got to $17
- Super high short term tension situation: shorts can't be in for the long term with these rates
- Positive Fed level legislative action imminent
The only rational way to explain this is that shorts expect a very negative Q1 ER. If legislative catalyst proves to be as substantial as ITC extension then it should be a repeat of a previous short squeeze: jump and then all the way back to 20's if not lower.�
1/1/2015
guest SunEdison (SUNE) officially files for bankruptcy � Wall Street couldn�t wait
SunEdison Undertakes Chapter 11 Reorganization�
1/1/2015
guest The sentiment on TMC about SolarCity has been absolutely ludicrous. A thread was even started asking what effect SolarCity going bankrupt might have on Tesla. All of this because of oil prices falling and some pundits believing Sunedison's bankruptcy might devistate the entire industry.
As I've said many times, I think it's far more likely Sunedison's bankruptcy will allow SolarCity and others to acquire parts of Sunedison for pennies on the dollar.
SolarCity, Sunedison, First Solar, and Vivent Solar are very different companies. Expecting a pullback, but also expecting SolarCity will go much higher following any new developments. I suspect many more states will begin to require all new homes to have Solar Panels. This will make the transition smoother and will make it easier and cheaper to install Solar Panels on homes. It will also force home builders to work with companies such as SolarCity. Once battery storage kicks in, the cost savings from switching to solar will be even greater.
Also, remember, SolarCity also has a tiered executive incentive package that implies the stock could be worth ~ $40 billon. I'll try to find a link to the document a bit later.
Note to any journalists looking for a topic to write about: There have been very few articles published about this, so it's a bit hard to find.
Note: I'm also eying Yingli. China will do everything possible to protect its solar panel manufacturers.�
1/1/2015
guest True enough, but this is why you don't want to be on the wrong end of poles and wire. As the cost of distributed solar and batteries come down, first thermal electric power plants lose value. Then the transmission lines connecting thermal plants to customers lose value. Then utility solar and wind lose value and their transmission lines. Then distribution networks lose value. Along this curve, it is always better to be closer to the customer.
The distance from the source of energy to point of consumption of energy will shrink. Energy used to begin in some mine or well, transported, transformed and transmitted at great cost. With a utility solar or wind farm the source of energy is at the point of transmission, a much shorter path. With rooftop solar, the sun distributes energy directly to your home or business, and there is no need for transmission or distribution, except for the economic benefits of trading power. But with cheaper batteries there is increasingly less value in even trading power. Next step, you've got solar cars and solar powered personal devices. Spray on solar could remove enormous installation costs. Just spray it on and power up. You could tan at the beach and power your smart phone and personal A/C from the rays bronzing your skin.
The less time, energy and money we use just moving energy around, the better off we will be. If the cost of energy goes to zero, that would be ideal. It will free up much more opportunity to do greater things, like freezing margaritas on the beach while tanning.�
1/1/2015
guest A must read IMO, if you are interested in understanding the developement of oil.�
1/1/2015
guest BTW, those of you who are interested in oil, I post most of my oil thoughts on the Shorting Oil thread and would love to have a discussion of Prince Mohammed there.�
1/1/2015
guest Republicans Are Warming Up to Renewable Energy
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1/1/2015
guest
SolarCity's Rive Gets $77 Million Grant Just Like Musk at Tesla
"Rive has ten years to earn as many as 3 million stock options with an exercise price of $48.97 according to the filing. He can do so by achieving pairs of goals, with half tied to SolarCity�s stock price and half tied to operational goals such as increasing customers, and lowering the cost of generating solar wattage. Every time he achieves a pair, he earns one-tenth of the options.
...Rive hasn�t yet earned any of his options, according to SolarCity�s proxy. While the company has achieved two operational goals, it needs to bring its stock price to $84.07 before he earns one-tenth of the options. SolarCity closed at $33.87 on Thursday. Rive will only receive all the options if he achieves all operational goals and the company rises to $400 per share."�
1/1/2015
guest Earth Day: We're not doomed (Opinion) - CNN.com
Happy Earth Day.�
1/1/2015
guest Bloomberg and CNBC guests keep touting US high yield as the place to be right now. I know nothing of finance, but I interpret this to mean the return vs real risk is very high relative to things like treasuries or whatever. SCTY ABS offerings fall into this category, no? Therefore if all else remains the same we could expect to see ABS costs drift slightly downward as the market adjusts?
Basically, I'm taking this as a sign that everyone saw inflated cost in Jan/Feb and we should see costs moderate in the next few ABS offerings. Is that rational?
Sounds like there should be a LOT of ABS coming down the line, so I'd like to set a level of expectation in my mind before the costs are announced.�
1/1/2015
guest Glad to know some journalist read my post.�
1/1/2015
guest I'm excited about Tesla's new pricing for Powerpacks, $47k or $470/kWh. This is comparable to the $3000 price on a 6.4 kWh Powerwall. We'll have to wait and see if the Powerwall price stick as they may change that too.
My hope is that both Powerpack and Powerwalls will be priced at the same $/kWh. I believe such pricing avoids giving utilities a clear scale advantage over residents who own Powerwall. Utilities will be more motivated to innovate around aggregated storage if there is not a significant price difference per kWh. So this would be really good for SolarCity.
I think it may be more strategic for Tesla to favor Powerwalls over Powerpacks. The more residential ratepayers have Powerwall, the more it forces utilities to buy into Powerpacks as well. Some utilities may want to drag their feet and keep building out peak power plants. But when solar owners are fully armed with Powerwall, it shifts issues on the footdraggers. They either need to get with distributed battery aggregation or buy their own Powerpack, but in either case it become harder to argue for a new gas peaker.
BTW a 1 MW / 2MWh system Tesla prices at $1.2M. So $1.2/W plus installation costs. I think this is still competitive with a gas peaker. Tied with utility solar, the levelized cost is about $200/MWh. Gas peakers have levelized costs in range of $180 to $270 per MWh. But batteries have faster response time and can take surplus load to enable better utilization of baseload capacity. So at a comparable levelized cost batteries are the better value. So Tesla may be pricing Powerpacks low enough to compete with new gas peakers, but not so low as to leave money on the table.�
1/1/2015
guest the commercial sized units will tend to always have a significant discount compared to consumer sized units for a number of reasons, even if the they are both bought by an entity buying bulk.
1 BMS cost is based on series of cells, a 400Volt BMS is the same whether it is for 2kWh, 20kWh, 200kWh or 2MWh (although the burnoff resister will be different)
2 Cooling, the larger the system, the more cunning the cooling system can be deployed, the lower the cost per kWH throughput. (Ie sea container with drip water vs alternatives etc) (this may also only be primarily visible on a lifetime throughput basis)
3 packaging, a pancake packaging is more expensive than a loaf, particularity as it relates to the surface material used.
4 customer 'support' this is the big one, all else being equal 1 customer is cheaper than 1000 customers to support. (and a 1000 customers provides so much room for 'value' adding)
I think the item no. 4 (customer support) is both the largest and most opaque to quantify. My gut feel is that it will account for about 25% of the cost difference between the small vs large packs.
in countries like Japan most of the solar PV is non domestic, ALL those are required to have battery. The supply market is already quite large and scaled for these products�
1/1/2015
guest on the lighter side
Peabody, SunEdison and Chesapeake walked into a bar....�
1/1/2015
guest Into 3 horizontal bars that is...
What about closing the Tesla circle with SolarCity and this new NY utility cooperation deal. If you own a Tesla car AND a SolarCity connection to the grid you can also rent part of your car battery, say after dark or via scheduling your calendar syncing back to the grid as another value add service.�
1/1/2015
guest U.S. Senate Passes Stalled Energy Bill Without Solar NEM Amendment :: Solar Industry
I am pissed off that congress did not stand up for Amendment 3120. Regulatory capture continues to define our political system. Bernie Sanders just earned my vote.�
1/1/2015
guest King Introduces Bill to Promote Personal Energy Independence | Angus King | U.S. Senator for Maine
Personal-Energy-Independence should be a right.�
1/1/2015
guest Lets hope Obama can throw some weight around and get this cleaned up with veto threat and ninja-like quiet effectiveness.
http://www.nytimes.com/2016/04/21/opinion/mixed-signals-on-energy.html?&moduleDetail=section-news-2&action=click&contentCollection=Energy%20%26%20Environment%20®ion=Footer&module=MoreInSection&version=WhatsNext&contentID=WhatsNext&pgtype=article
�
1/1/2015
guest This sucks, lets hope Barry O vetoes. With NY moving forward and many states likely to follow, all SCTY needs is for grandfathering of net metering rates. I'm not an expert, but I think that's absolutely crucial to taking the next step where these ABS offerings can happen more regularly and at a lower cost.�
1/1/2015
guest Can N.Y. solar-electric deal recharge U.S. green-energy effort?
Things to know on a ballot measure to end NV Energy monopoly
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1/1/2015
guest FSLR reports on Wednesday, SCTY next Tuesday. Should be an interesting stretch!�
1/1/2015
guest You're telling me. I'm curious to see what ends up in the Energy Omnibus package regarding NEM since it seems like the country is paying attention to the election politics and not this legislation.
Apparently there are some unexpected new features to these new Silevo designed panels.
D.C. Public Housing Buildings Will Get Solar Panels as Part of Sustainability Project
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1/1/2015
guest Was there any news bringing SCTY down today?�
1/1/2015
guest Bloomberg: "YINGLI aims for 2017 start of 6GW solar cell project". (Stock ticker YGE?)
Currently, largest solar cell plant in world is listed at 0.85GW in Wikipedia. But that doesn't mean much: there's so much planned for installation right now, that what is planned vs. what is installed is totally lopsided, and so far, most of the plans I've seen have fallen through.�
1/1/2015
guest Ooh, good article. I find this telling, and relevant to my pro-long-term-Tesla stance regarding morality and war, making USA more solvent by not having to spend as much on war:
So, in other words, reducing dirty energy use (primarily oil with respect to Saudi Arabia) not only removes the heavy hand of demand to those states (which has caused a lot of war) but also brings in industry that isn't as comfortable with dirty morality. Tesla benefits the world in many ways, including clean air, clean morality, and solvency for countries that used to spend a lot on dirty morality (I'm thinking USA mostly). These effects are found in the high demand for Model 3, since people know, whether consciously or not, that these are intertwined. Unfortunately, I think most of these effects are already baked into the stock price of Tesla, but perhaps a little more happiness from USA government debt toward Tesla is unrealized due to these effects. Probably in a couple of years that might happen, and about a year from now the smart people will see whether it is coming.
What does this have to do with Solar? Well, solar is part of the solution, of course. But, everyone sees that now, and SCTY has stiff competition. Someone with better insight into SCTY can tell me how these interact.�
1/1/2015
guest Investing in 21st century energy infrastructure
�
1/1/2015
guest Tesla will install more energy storage with Solarcity in 2016 than the USA installed in 2015
I wonder if the master supply agreement includes special pricing for SolarCity.�
1/1/2015
guest I see potential for good terms. And that's a severe understatement.�
1/1/2015
guest I think sometime early last year Elon said no special terms for SCTY. However they probably will get volume discounts which, given their volume, will give them the best price.
There are a whole set of SEC rules with regards to self-dealing (since Elon owns a substantial amount of both companies) that would be invoked if SCTY gets anything but standard pricing. This would be included in the accounting notes, so something to watch for.�
1/1/2015
guest Right, thanks. So within compliance for related companies, it seems SolarCity could have locked in the $25k for Powerpacks prior to price increase to $47k. It would have been a fair deal at the time it was struck.
As this market gets going, high volume deals could become fairly common. A company like Encor who could use several GWH per year (if they get past the regulatory hoops).�
1/1/2015
guest Very nice price recovery from yesterday. Up 7%.�
1/1/2015
guest Perhaps some are realizing SCTY ? SUNE (er,... SUNEQ)�
1/1/2015
guest I've been into SCTY since the IPO. Seems like every ER, I hold my shares expecting that "maybe this time" the stock price will go up with the ER, but as long as I can remember, it always dips. Thoughts anyone?�
1/1/2015
guest Patience is a virtue.
Patience is bitter but its fruit is sweet.
Patience is the companion of wisdom.
Anyone can hold the helm when the sea is calm.�
1/1/2015
guest Looks like we might see how badly they want a deal for their LNG exports as Obama is still threatening veto if they reduce clean energy funding.
Senate votes to increase wind energy funding
�
1/1/2015
guest This is my hope. That ITC extension was absolutely HUGE relative to the meager loss of allowing oil exports. Not a fan of LNG exports, especially since Philadelphia is trying to be the "Energy Hub" for this nonsense, but if it means a meaningful step in the transition to a renewable nation I'm all for it.
What I'm seeing in the bill thus far is insufficient.�
1/1/2015
guest I think there will be one more quarter of post-ER downswing. The current main role of SCTY stock is being a vehicle for price manipulation. "Solar" is still such an unclear concept to the wider consumer/investor that any small jolt can take the sector or a stock sharply downward, yet it holds such obvious growth potential that it will naturally drift up most days. This is prime territory for price manipulation via misinformation and that's what we see right now.
When that changes to a more rational means of valuation is anyone's guess. It could be May 9th, 2016 or as far out as late 2017. Greater regulatory certainty would definitely help people paint a clearer value picture in their minds. It's my opinion that once "the market" chooses to realize SCTY's future revenue streams from booked contracts as fully valid and collectable, it will zoom to a fair valuation very rapidly.
Edit to add: Not to mention that oil is about $6-10 higher than it should be right now. That alone could be the cause of the recent drift-up, and a drop back down for oil could bring major downward pressure for SCTY.�
1/1/2015
guest Compared to this energy hub. Shouldn't SolarCity revise guidance to include some new growth models with upcoming market certainty?
New York City launches Solarize program 350 MW of new distributed solar by 2025
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1/1/2015
guest Funny you should bring up Solarize programs. I actually sat on the phone bitching out a SCTY service rep for about 20 minutes on this about a month or so ago. There's a Solarize going on in the Philly suburbs as well and SolarCity for some reason declined to participate, even at full retail price. This program will see a good 100 installs of semi-early adopters and not one of them will have heard squat directly from SCTY regarding their PPA value proposition.
I was at well-attended community meetings where the Soalrize presenters brought up zero-down PPAs in a transparent manner and folks really perked up at the notion, but the project had no PPA option(SCTY or otherwise) within this particular offering so it was just glossed over in the presentation. Grrrrrrrrr
Horrendous slip-up in my opinion and one of the major downsides of having a sales entity functioning out on an island. SCTY has some kind of online component attached to their ambassador program from community-based initiatives that I assume is trying to simulate Solarize within their world, but that's not gonna fly in the end. People want info presented from an independent 3rd party like a friend, neighbor or non-profit Solarize group.
It'll be interesting to see how SCTY wedges themselves into this Solarize NYC project. Considering how involved they are with NY state, I assume they will have a central role as main PPA option provider. I would HOPE so anyway.�
1/1/2015
guest Anyone have any thoughts about Solar City's chart? The range is getting fairly tight. The only thing that seems to be keeping SolarCity below $35 is the gap from $35 to $56.�
1/1/2015
guest FSLR down 6% after posting what I assume is mediocre earnings. If the past is any indication, perhaps this is a good indication for SCTY's reactions to earnings on May 9. Every quarter these guys seem to move in opposite directions for very rational reasons.�
1/1/2015
guest Excellent analysis of distributed solar grades by state and recommendations for policy changes to encourage greater adoption of rooftop solar. Good read.
http://www.biologicaldiversity.org/programs/population_and_sustainability/energy/pdfs/ThrowingShade.pdf�
1/1/2015
guest Short interest pretty much unchanged from two weeks ago - still 23M.
SolarCity Corporation (SCTY) Short Interest�
1/1/2015
guest Earnings Release and Conference Call Scheduled for May 9�
1/1/2015
guest What Are Analysts� Ratings for SolarCity?
Expectations???�
1/1/2015
guest Wasn't it earlier planned for May 2nd, the day before Tesla's ER? Hmmm....I wonder why they have decided to save it for after Tesla's ER?�
1/1/2015
guest I think the May 2nd date is an estimate that some sites "calculate". If SCTY officially said May 2nd but then moved it to May 9th I agree there could be some backstory.�
1/1/2015
guest I'm hopeful we get some visibility into Tesla Energy products. SolarCity needs to start reporting on how much storage they install, along with cost info.
So there could be disclosures that have significance for Tesla investors as well.�
1/1/2015
guest Seems like there is a large chunk of money for solar plus storage in the defense bill as well.
Republicans blast Pentagon energy programs
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1/1/2015
guest The Latest: Deal between solar firm, utility ends fight
A deal between the nation�s largest solar company and Arizona�s biggest utility means competing measures asking voters about how to treat rooftop solar power are being withdrawn.
The agreement announced late Thursday between SolarCity and Arizona Public Service puts an end to an increasingly public fight pitting the utility against solar companies for now.
The two sides agreed to mediation over how solar customers are paid for the power they produce on their rooftops. Gov. Doug Ducey and lawmakers negotiated with the two sides and the governor�s office will participate in the talks.�
1/1/2015
guest Tesla already announced they expect to generate $44M revenue this year from SolarCity.�
1/1/2015
guest Futurist Ray Kurzweil predicts solar industry dominance in 12 years
Ray is an interesting guy.�
1/1/2015
guest I would like to see SolarCity focus their efforts on improving the looks of residential solar.
After conducting nearly 400 inspections, most seemed as though they were dabbed on to the roof as an afterthought. Only a handful were architecturally beautiful.
The company that builds good looking solar systems will dominate the market.�
1/1/2015
guest Kurzweil has definately been correct before with some "bold" predictions:
�
1/1/2015
guest ExxonMobil profits crash to lowest level since 1999
BAHAHAHAHA�
1/1/2015
guest Wow, this is amazing news. Going to spend my morning reading up on the details.
If this arbiter is at all fair, this is an easy "win" for SCTY and solar in general. Seems we are very rapidly bypassing these corrupt PUCs and having deals negotiated directly with the utilities at the behest of legislators and governors.
This is HUGE for SCTY's ability to kick out regular and massive ABS offerings. The more certainty we can build, the cheaper the cost to SCTY. If this can be handled positively in Arizona of all places, then it's the last piece of the puzzle and we can zoom to fair valuation this year with a proper growth premium.
Edit to add: Should jhm start a "Shorting American Utilities" thread? I vote yes.�
1/1/2015
guest Interestingly the Arizona Utility/SolarCity news has yet to find its way to the Yahoo News Stream.
Just things that make me say HHMMM�
1/1/2015
guest I agree with 2027 being the year more than half of electricity is generated from solar. By about 2019, utility solar capacity (cumulative GW installed) could overtake wind capacity. This year we may even see new utility solar exceed new wind installations.
By 2019 we should see all fossil generation enter perpetual decline. I suspect that Coal is already past its global consumption peak.
So I think solar might just gain a little respect by 2020.
PS: I've been trying to figure out when natural gas will peak globally. It's complicated because it depends on how much market share it can take from coal. In 2014, consumption natural gas and coal grew at the same low rate, just 0.4%. I have a hunch that going forward parity pricing will imply that both fuels decline at the same rate, and this would imply 2018 as the peak for natural gas (short of simple volatility).�
1/1/2015
guest I thought this was a great article on many different levels. I again love the spirit in David Crane and hope he can help us move into a more renewable energy society. BUT, for those still not sure about SolarCity as a business, this section right here attempts to answer this imporant question. It reiterates how well thought out the Musk's family goals are. They thought about the solar sector more than a decade ago and it seems are just about the last major player standing. If you listen to Lyndon talk, he knows exactly what to do with the utilities and how the future should be shaped.
A Conversation With David Crane on Getting Fired From NRG and What�s Next for His Energy Plans
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1/1/2015
guest Click here: Save Net Metering
Let�s Give All Californians Access to Rooftop Solar!
Currently, the community you happen to live in determines whether or not you have access to affordable rooftop solar. A bill currently in the state legislature (AB 2339-Irwin/Low) would help solve this by making rooftop solar � and, specifically a critical program called net energy metering- accessible in all communities across the state.
Let�s give millions of Californians real access to rooftop solar�let�s pass AB 2339.
AB 2339 is being considered by the state legislature at a critical time. Many municipal utilities, including Palo Alto, Burbank, Modesto, Imperial and Redding, are threatening to take net energy metering away from their consumers. Net energy metering is the program that makes solar accessible and affordable. Without it, the market dies and along with it the jobs and clean air. Now is not the time to slow down on our commitments to clean energy. Now is not the time to take solar out of the hands of consumers.
The bill is up for vote at the CA State Assembly this week! Send an email to your local assembly member today! Pass AB 2339.�
1/1/2015
guest Gene,
Sent my email.�
1/1/2015
guest Perfect Symmetry on the monthly:
�
1/1/2015
guest Classic boob pattern.�
1/1/2015
guest Done. Appreciate the heads-up!�
1/1/2015
guest I'm kind of anticipating the BEARs will attack between now and ER. Just visceral, no data.�
1/1/2015
guest I'm looking for a dip between now and 2Q announcement to grab a chunk of 2018 LEAPs. Absolutely no clue what to expect for a market reaction to next week's call. Just going to sit back and watch long, way out of money call prices for a cheap opportunity.�
1/1/2015
guest Buffett vs. Musk: The clash of old and new energy titans
�
1/1/2015
guest DB lowers from the $80s to $62. SCTY down to $29 early going. Nomnomnomnom�
1/1/2015
guest Indication that SolarCity beat expectations? SolarCity site exceeds hiring quotas�
1/1/2015
guest As a part time resident of WA state, been following this for a while
Shout out to these kids and the supporting law team for a creative approach that is getting some legal traction
Kids In Washington State Were Just Handed A Major Climate Victory - ThinkProgress.org
Judge Sides With Kids Suing The Government Over Climate Inaction: �These Kids Can�t Wait��
1/1/2015
guest "Indication that SolarCity beat expectations?"
That headline is a bit misleading. Without reading, one assumes SCTY has hired more workers than required, but this story is actually saying SCTY exceeded the requirements for hiring minorities as a % of the workforce. So it's not saying anything about the size of the workforce, only the demographics of it.�
1/1/2015
guest This should spread to every state in the country. It is a sound legal precedent.�
1/1/2015
guest SolarCity and John Hancock Announce $227 Million Cash Equity Financing
I haven't had time to digest this bit of finance, any comments?�
1/1/2015
guest $3.24 worth of financing for each residential Watt installed sounds pretty good. I wish the SRECs weren't monetized in case their value skyrockets as they likely will in PA.�
1/1/2015
guest And the stock plummets. Borrowing cost?�
1/1/2015
guest Nasdaq is down, oil is down, dollar is down... And it's raining here.�
1/1/2015
guest Update from Assemblymember Mark Stone (I bolded the key part):
Thank you for your strong letter of support regarding Assembly Bill 2339 authored by Assemblymembers Irwin and Low. This bill would define the �aggregate customer peak demand� for the purposes of calculating the net energy metering program limit for electric utilities and would dictate the manner of calculating aggregate customer peak demand.
Under AB 2339, some 40 municipal utility-served districts will be able to offer net metering under far more favorable rules. In January, the California Public Utilities Commission voted to protect net metering for consumers living in investor-owned utility territories around central, coastal and southern California. The bill is regarded as a significant continuation to solar progress in the state.
You will be happy to know that with my support and vote, AB 2339 passed out of the Assembly Committee on Utilities & Commerce on April 19th, returned to the Assembly floor and has been referred to the Committee on Appropriations. Regardless of location, California state customers should have more net metering equal access for rooftop solar. This is potentially achievable by evening out the net metering policies across areas which are being serviced by investor-owned utilities and municipal utilities alike.
You can track the progress of this bill and other legislation here: Search Bills
Thank you again for taking the time to write, and please continue to let me know about this or any other state concern.
Sincerely,
Mark Stone
Assemblymember
Twenty Ninth District?�
![[?IMG]](https://blogger.googleusercontent.com/img/proxy/AVvXsEhVNgopguugREkZwzaufF-tTlL43cnm5Gzqh1kd37FoHuOHDXiC7y30lcSmAjuNpQYMCxF922ELMYqHpIJv3onz9vbtJTdiz5xRkp0167LRd3fVNvSyQ2TeHzD0nocpjCrmMWv4FnTvcx4DzXGHOFtOt8uRMaJClADlNBKjzTczPnQkbYcbMW6pU3e_=s0-d-e1-ft)
1/1/2015
guest I am having a hard time comparing this deal with the latest ABS.
That ABS (based on info from Kroll) was for 35.6 MWs and raised $49.6mln. That's $1.39/Watt.
This Hancock deal on surface appears much worse. It raised $227mln on 201MWs. That's $1.13/Watt. Even worse this includes SRECs...
Having said that, the Hancock deal has a mix of commercial and residential here. While the ABS was pure residential. Ideally we should see residential in isolation. Using a little bit of algebra I am able to tell that 147MWs off of the 201MWs seem to be residential, which is 73%. However, I can't tell what the amount raised for residential alone is on a per-watt basis (that 3.24 is inclusive of cashflows before the deal, that's not what we are looking for). In any case, the commerical was supposed to have same economics as residential, as promised by Lyndon/management, so maybe it's a moot point anyway.
Yet another way to look at it, the new deal allowed for overall cashflows of 3.24/watt residential (including srecs), while the latest ABS generated $3.13/watt (excluding srecs). Does anyone know if the srec value of 11cents/watt is on par with expectations or if it is too low?�
1/1/2015
guest It's like a drinking game where you replace "cost shifting", "lining their pockets" and what is "only fair" to the hard working people of Arizona and replace them with a threatened monopoly worried only about protecting their dwindling guaranteed profits....and drink.
Inside the deal that averted a net metering ballot showdown in Arizona
�
1/1/2015
guest If my memory is correct (which it usually isn't) doesn't SCTY ER generally happen before TSLA ER? This time it is flipped with SCTY ER after TSLA. If so, might there be something special in TSLA ER in regard to SCTY? We might have some interesting action the week before SCTY ER.�
1/1/2015
guest I should add, the latest ABS was only securitising a portion of the cashflows, while this new Hancock deal sells away almost all of the contracted cashflows. To boot, SolarCity is on the hook to provide all maintenance at it's own cost. This looks like a really bad deal for SolarCity shareholders.
Did solarcity ever provide a figure for Operations & Maintenance (o&m) costs? Looking at last quarter material, I can't find any.�
1/1/2015
guest Can you expand on this a bit? To me, if they're splitting out the residential and theoretically pulling in $3.24/W on the front end, what is my concern if it's from Hancock, a separate tax exuity offering, state up front incentive, cash prepayments, etc?�
1/1/2015
guest I don't see any indication of the portion of payments securitized? How are we comparing that to past ABS offerings?�
1/1/2015
guest Yes, that's a more straightforward way of looking at it. Lets look at it closely:
Cash coming in: +$3.24/W
Cost of the system: -$2.71/W (from Q4 slide deck)
O&M: -$0.02/w/year * 20 years (from analyst day presentation) = -$0.40/W
Profit Margin: $0.13/W or 4%
If you were to amortize other left out costs like R&D, CapeX and other hidden stuff. The margin is effectively negative.
So all that is left for the company (as in, shareholders) is a hope and a prayer that homeowners will renew their leases and that is the cash-flow that is left. and nothing else.
Note, all the math above is based on SolarCity's own numbers. They have proven themselves as masters of accounting gimmickry over time. The reality may be much worse.
All this is when much of the developed world is swimming in negative interest rates and there is abundant money in the financial system. Imagine what will happen as rates rise.
It didn't look this bad in the past when ABS deals came out because nobody knew what amount of cashflows are given out. If you look at the chart in slide-10 of Q4 presentation, you see that the debt financing goes down over time. In other words, the out years are not mortgaged out. Also, looking at Kroll report, it seems like only about 13years of cashflows will go out to ABS investors in an amortizing manner. But in this new Hancock deal it appears that ALL of the contracted cashflows go away (and the default risk is taken up by Hancock). I'm no expert at this, we can leave this comparison aside, but the math above is pretty straight forward, all coming from SolarCity directly.�
1/1/2015
guest --
Per Q42015 Shareholder letter their total install costs were $2.71/W which includes G&A costs of $0.25/W. The Hancock deal was for
As I see it the deal brought in $0.29/W more than total costs per watt, not a huge profit but setting them on the path for cash flow positive if they keep doing deals like this. I assume maintenance is included in G&A which is more than covered by the deal. I'm not sure why you think they are "on the hook" when it is already factored into overall cost per watt.
- The transaction raised $3.00 of financing per watt of solar generation capacity for SolarCity including tax equity investments, upfront rebates and prepayments; a blend of $3.24/watt for residential projects and $2.35/watt for commercial projects.
Edited - oops read a chart wrong. Same conclusion though.�
1/1/2015
guest I don't think O&M is included in G&A. O&M is 2cents/watt/year per analyst day presentation. That translates to 40cents/watt for the contracted portion. Given that G&A is shown as 25cents it can't possibly be under G&A.�
1/1/2015
guest Three issues with this analysis:
1) The O&M shouldn't be 40 cents because that's not the net present cost. You have to discount it for the fact that's in the future, so the current O&M liability per watt is perhaps 20-30 cents.
2) SCTY still owns some of the cash flow. It's a "minority" for the first 20 years and then 99% of any renewal. We don't know how much this "minority" is so we can't do an analysis on the profitability. Your analysis assumes it's 0. My guess is they've retained enough of the cash flow to cover O&M.
3) SCTY's cost per watt is dropping while the value of the system is not. In a year from now they should be able to sell the cash flows for a similar price while incurring costs down around $2.40 or so. Thus even if they are negative they will improve over time. How much is tough to say.�
1/1/2015
guest Mixed up my terms. You are probably right. I am obviously not an accountant. The more I read their quarterly reports the more confused I am.�
1/1/2015
guest Here are some quotes from the analyst day presentation:
"So those $0.22 a watt that the company gets - the system gets, we pay some O&M expenses on that of about $0.02, and so the net value - the net cash coming in from the system is $0.20 a watt."
"So when you layer on the ITC on the Q3 economics on top of the cash flows, you still get the same $0.20 of cash flow to $0.22, less the $0.02 of O&M."
It does look like they are talking in present-value terms (not nominal terms). Seperately, that 22cents includes the comsumer 13cents plus srecs.�
1/1/2015
guest This deal mentions "majority" as the only indication(that I can see) of how much cashflow goes toward Hancock. From your description it does feels like there's a pivot in strategy from "selling off" only the front years of the deal vs all 20, but that could just as easily be an indication of strong investor appetite rather than a concern. A willingness to go out 20 years and take less than 100% of the cut is stronger, no? I'd like to see how much SCTY is holding on to. I think in an ideal world(maybe very soon) they would be gaining most finance through ABS and tax equity. I'd love to see them hold on to potential windfall variable assets like SRECs.
This picture can be painted as a concern or absolutely amazing. All well and good to take the 3Q15 install cost since these are I believe past installs being securitized, however we all know install costs are drifting down toward $2.30/W, not the $2.71 in your calculations. Let's hope Radford has a large role in explaining all this in the earnings call.
These guys are losing money on every install in southeast PA right now, but in 6 months they'll be raking it in when they're up to scale and costs are limited. Hell, even the $2.50/W install cost we're at today includes an absolutely obscene customer acquisition line that will rapidly dwindle to nearly nothing.
Swap out yesterday's numbers for September's and your negligible margin balloons like crazy. Not to mention the amount "financed" is still increasing with each ABS.
Cash coming in: +$3.24/W
Cost of the system: -$2.35/W (revised 2016 goal)
O&M: -$0.02/w/year * 20 years (from analyst day presentation) = -$0.40/W (included in cost)
Profit Margin: $0.89/W or 37.9%�
1/1/2015
guest Question: how did you arrive at the conclusion that O&M is included in the cost? I see no indication of it.�
1/1/2015
guest I ASS-uMEd it since there is no other indication of any other expenses anywhere else. So either it is buried in there somewhere or they are being deceptive as you keep saying.�
1/1/2015
guest I heard it on a Tesla message board.
Sounds like we now don't think it's included? Regardless this is a solar install and solar upkeep, we are all relatively familiar with the past/current/future costs of all components of the equation. I think we can agree that residual value of hardware(Silveo) will more than offset the average O&M costs for the duration. Perhaps not, but if they don't then energy is free and the entire capitalist structure is likely breaking down and I'll have greater concerns. Or perhaps less concerns?�
1/1/2015
guest The circuit breaker should have just tripped. I can't see any good reason for this drop besides perhaps the MM wanting the stock where it was before the last earnings call, this quarter. It either rips above $35, or re-tests $18. This is basically the mid point.�
1/1/2015
guest SBenson just illustrated it perfectly for us. The inputs sitting in all the algorithms right now point to negative profits, therefore every expansion of the business is an even greater negative. If you take everything as a static data point, you'd be nuts to think this model is a good bet. In my mind I can see with relative certainty that costs are rapidly shrinking, income per install is increasing, the vlaue proposition has broad appeal, and marketshare is being maintained. Dominance of the US energy market is more of a certainty every day.
A computer doesn't care about that. What we need to predict is the date when the cost and profit lines pass quietly in the night, because the next morning those algos will go nuts.�
1/1/2015
guest Right, isn't it supposed to trip at 10% drop? Fail.�
1/1/2015
guest (SCTY) - SolarCity's $227M Financing Is A 'Major Catalyst'; Avondale Says Buy The Stock�
1/1/2015
guest Thanks for the link! I have been scouring the internet daily, I havent seen a shred of credible bad news for SCTY. Any thoughts on the steep swing down?�
1/1/2015
guest Admittedly I don't fully understand the financials - I don't think anyone really does - but I'm bullish on where SCTY is headed. I think things will turn positive in a big way later this year or early next.
I sold a 1/4 of my shares at $34 last week expecting the usual post-earnings tank. If the stock keeps dropping between now and then it's going to be hard to hold off buying back in.�
1/1/2015
guest Well, oil looks to be tanking soon...again. I think market sentiment may be turning sour. Earning season puts investors on edge. Dollar getting stronger. Blah, blah, blah.
Regarding this cash equity deal, I expect that it's a good thing. SolarCity has been trying to move in this direction. So this could be a break through for them. We just don't have the details to do the kind analysis that Benson envisions. I suspect this is mostly commercial, and I've never seen good financials on commercial. It's got to be a lot lower cost that residential just to compete in that space. So we'll just have to wait to see what details will be forthcoming, if any.
I am hopeful that SolarCity is cracking the nut on how to grow in the small to medium business segment. It's quite underpenetrated by the whole solar industry.
The main thing that is promising about the cash equity deal is that it maximizes the cash upfront. They main problem with SolarCity's business model was that the cashflow was so excruciatingly slow, an average duration of 15 to 20 years. To have positive cashflow while growing in excess of 40% per year, you need an average duration less than a couple of years. The beauty of a solar installer having a yeildco is selling the assets and getting cash in return. The problem with a yeildco as a subsidiary is that the two entities are still related. A failure in one compromises the other. Just consider the interconnected mess of SunEdison and its two yieldcos. So SolarCity does much better to find totally independent investors to cut cash equity deals.�
1/1/2015
guest Once the model is somewhat "up on plane", then it's just ticking off expansion opportunities as the markets open up. Install costs of <$2.35/W and monetizations of $3.25/W means they can grow as much as they like and this high yield debt will be a non-issue. A few billion dollars in expansion debt means nothing when you're clearing $.90/W on installs, maintaining 35% marketshare, and most importantly.....having zero true competition in the PPA arena. That's the only thing that will allow an entity to clear 30% in solar, total dominance of an entire sector.
I'm sure I'm missing something and they won't have this easy of a time maintaining PPA dominance, but as of now I don't see how anyone can remotely catch up nationwide. At least nit until 2020 at the very earliest. It's just way to complex to expect to snap your fingers and say you're a true PPA competitor.
I think institutional algorithms will actually agree with the sentiment above, but need to see the inputs at those levels first. Fair enough. As long as install costs and installs hit their 2016 projections, we'll see a fair valuation after the election.�
1/1/2015
guest I just sat down and read the entire SolarCity annual report, all 200-some pages of it.
SolarCity's business is banking (more accurately, consumer finance). They lend people money, and then either (a) borrow money to finance that lending, or (b) sell the loans to a third party while acting as servicer. (The fact that the money is lent to buy solar panels makes very little difference to the business model, although it does help fight global warming.) They're trying every structured finance product under the sun, and I read descriptions of at least a dozen in the annual report.
They were clearly losing money on *some* of them, since they deliberately unwound some of the older ones to refinance them, even though it required paying extra fees. They're presumably making money on others.
I can't extract the interest rate spread from the annual report; the accounting is far too convoluted. The interest rate spread is the key factor determining whether a finance business is profitable. It's clear that they make very little money off of direct sales, but I can't work out what their expected return on those is either. (All the evidence is that they are not competitively priced in the direct-sales business in most areas and as a result their main business is financing.)
Because of the overly convoluted accounting, I can't model what the effect of a change in default rate would be. With a financing operation, I want to be able to say "They lend out $1 billion at 5% interest; they finance it by borrowing $1 billion at 3% interest; they can afford a 2% default rate before losing money". With SCTY, I simply can't *tell* from their published documents.
They are even more like a bank in one way: a lot of their financing is much shorter-term than their lending. Solar Bonds for 1 year financing 20-year installs. This is the basic business model of banks, but banks are subject to *bank runs*. SolarCity could collapse due to a short-term refinancing problem even if the underlying business has great interest rate spreads and is highly profitable.
The only possible interest rate spread I've managed to find is 5-year "solar bonds" at 5.75% and MyPower loans at 4.5%. Uh-oh -- that's loss-making.
That's why I'm invested in Tesla, which has quite nearly the most straightforward financial statements of any company I've ever looked at, and I'm not invested in SolarCity, which has some of the most opaque financial statements I've ever seen.
Tesla's risk factors are clear -- can they sell enough cars? Will they manage to have high enough quality or will warranty costs eat up profits? Will they have supply chain restrictions (shortage of lithium or whatever)? Will they manage to get Model 3 out ahead of the competition? Will they solve their communications problems? Are the competitors ever going to make a car which is a serious competitor, and if so, when? Staying on top of the latest information regarding these is easy enough.
There are some financing questions, but Tesla's not very leveraged and nearly all their borrowings are convertibles, which are going to turn into equity. The latest secured loans are at super-low interest rates.
SolarCity's risk factors are also clear -- can they keep rolling over their short-term financing? Can they get financing with a large enough spread over the cost they're charging customers? Can they continue to charge customers so much, given that they're reported to be consistently more expensive than local installers if you're paying cash? Can they compete successfully with local banks in the market for lending money to finance solar panels? Almost all the questions are financing questions and the business is much, much more highly leveraged than Tesla -- which makes sense, since their business is finance. Unfortunately, I think staying on top of information regarding these is much, much harder to do.
I've evaluated banks before, and they're really quite tricky businesses; they have a habit of looking great until they implode. If SolarCity implodes due to financing, Silevo and Zep and the installation business would still be worth some money, but the massive borrow-and-lend operation would overwhelm it, the way GE Capital nearly overwhelmed GE a few years back.
Contrast this statement in the Tesla Motors annual report:
"During the periods presented, we did not have relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes."
With over 200 pages of the SolarCity annual report devoted to special purpose entities (albeit many consolidated).
I actually think the Rive brothers are trying to present SolarCity accounting in an honest way, but the result is a completely incomprehensible balance sheet. I'm not saying it's a bad company, I'm saying it's an indecipherable company. I personally would want to dig through a lot more interest rate details of their contracts before I concluded that they had a money-making (or money-losing) business model. If someone has actually got those interest rate details, I'd love to hear them, but I'd understand if you considered it confidential investment information!�
1/1/2015
guest Thanks for your thoughts.
SCTY certainly does a lot of bank type stuff but I think they're more than that. Whether this is true depends on whether they're actually better at installing solar panel systems than anyone else. Anecdotal testimonies say that local installers are cheaper but I don't see how this could be true because SCTY buys in far higher volumes than local installers, they have stuff like Zep hardware to make installation easier and they have crews that install a boatload of solar with techniques that are probably as refined as they can be. I don't see any advantages that make a local installer cheaper other than maybe trying less hard for sales (lower sales costs). I suspect that a lot of the anecdotes saying local installers are cheaper come from mistakes like comparing panel cost per watt vs. the whole system cost per watt, or having one quote include maintenance/warranty while the other does not. I just don't see how a local manufacturer could make money selling systems for a price where SCTY loses money.
Then again, maybe local installers are somehow cheaper. I haven't really looked into it. If local installers are cheaper, then anyone with deep pockets could start selling PPA's and just contract local installers for the system rather than bother getting involved with manufacturing panels, training install staff etc. If this was true though, I think we'd see SCTY getting less vertically integrated rather than more. Why bother expanding capabilities that you aren't good at? Clearly SCTY thinks they have an advantage here because they are pursuing more vertical integration.
In terms of the stock price, if SCTY starts selling all their installs as asset backed securities then the profit margin is the rate they can afford to grow at without sinking deeper in debt. So if they install for $2.50/watt and sell that for $3.25/watt (30% margin) then they can grow at 30% for each cycling period without sinking deeper in debt. We can't full do the math on this yet because we don't have all the numbers, but I doubt they're there yet. In another year or two they might be making 30% margin with a 30% growth rate and then debt will stabilize.�
1/1/2015
guest Lots and lots of people get lower quotes from local installers than from SolarCity. Given what I know about the installation market, I'm certain this is mostly about markup, not about actual cost-of-labor or cost-of-materials. SolarCity is charging higher markups to cover its enormous advertising / marketing / sales costs, and its high overhead due to total geographic coverage, and quite possibly the overhead costs of the complex financing, and so on. There are actually *diseconomies* of scale in being a national installer: there are reasons why there are no national plumbing companies, no national electrician companies, no national construction companies, and so forth.
In markets where there aren't any local installers, SolarCity seems quite well-respected. And there are a surprisingly large number of those. So there's that on the upside.
Ah, but who has deep pockets? Also, if such a person went for national scale, he would probably end up having a bunch of the costs SolarCity has... But in certain local markets I suspect local people with deep pockets *are* doing exactly that. It would be worth looking for.
Banks, however, already have the overhead costs for the financing schemes. They seem averse to PPAs but there's some evidence that traditional loans and leases are gaining market share on PPAs. And the banks have an advantage over SolarCity in those.
Owning a "captive" manufacturer could be highly profitable for SolarCity, but we don't know yet. The panel manufacturing business is *highly* competitive. SolarCity will, when Silevo gets up to speed, be gaining the "manufacturer's margin" in with the "installer's margin"; it's likely that this is better than not being vertically integrated.
Certainly. The trouble is that it is absolutely opaque (a) what their actual installation costs are, (b) what the homeowner's payments actually look like, (b) what they're selling it to the financiers for, and (c) the residual risk retained by SCTY, (d) the residual upside retained by SCTY, and (e) the residual maintenance costs SCTY is on the hook for. This is different in each deal, and I can't extract enough of it from the financial statements to really see what's going on, or to model changes in the business environment.
As examples of changes which are worth modeling: For instance, if SCTY's installation costs remain the same, but competition drives the prices they charge to homeowners down, the amount the investors will pay for new asset-backed securities will drop. Suppose grid electricity prices drop due to massive utility-scale solar installation, and homeowners with old deals find they're paying way more to SCTY than the going rate for power; these old-deal homeowners may decide to default on their panels, or demand renegotiation -- SCTY may be on the hook to give the financiers their guaranteed rate regardless, and how much impact would that have? Suppose interest rates go way up and financiers are demanding higher returns on investment? I'd like to run a number of stress-test scenarios and there just is not enough information available to tell what would happen in these scenarios.
By contrast, I've run all the equivalent scenarios for Tesla, because the information is out there.�
1/1/2015
guest Excellent interview, debate, Q&A with Lydon Rive and President of PG&E:
"The Impact of Policy and Market Forces on Renewable Energy: SIEPR Summit 2016"
�
1/1/2015
guest You have to look at the SCTY value proposition and work backwards.
If their competitive advantage is based on the ability to create a convoluted financing scheme that removes all the hassle and up-front money from the process of "going solar", would they want to hand the blueprint to SUNE? It's 2016, folks like SBenson and institutional investors can take the data available and create their own simplified model that loosely represents the inputs/outputs of the SCTY model to gauge approximate profitability. We know install costs, we know the amounts "financed", we can back out installs from total expense and see how much debt is being built up to expand.
But that's not even the most important part of their product, anyone can finance and banks are now working with local installers to provide a million different near-zero-down products for purchases. What SCTY provides is truly full service solar at a price that's lower than what your utility charges. As we move through this transition period people are going to need a full service energy provider to guide them through the various stages. We are making our won power now, a third party having your back with things like storage solutions will be a vital for keeping costs down.
As for cheaper grid prices.....Utilities are quietly divesting from production in the US just like they did in Germany once distributed solar gained any traction, there is simply no money in fossil production once distributed solar is in place. Does that sound like a scenario where grid rates will ever go down? Once an open market is created a few years down the line, solar homeowners will likely see some insanely cheap juice on offer from the new grid, but with transmission charges that's unlikely to be a compelling purchase options. Especially since they'll have all the juice they want at the very same time.
SCTY can and will be able to charge a massive premium to local installers because they provide considerably more value than simply installed solar panels(Keeping in mind that SCTY installs at a loss in newer markets like southeast PA). With the trajectory of installation costs and the rapid spread of solar knowledge throughout the customer base, this will all shake out in a matter of a few quarters. The PPA model will either remain compelling or will be trimmed by super low cost installs, that's for the individual investor to decide. I see the market as 50/50 PPA/purchase today and in the future. As things gets more complex over the next couple years, it may even shift more toward full service PPA.�
1/1/2015
guest These things are being explained in a way that only makes sense to people who would read a Tesla Motors Club SCTY Investors Thread every day. That's not helping.
Take a listen at 57:30 when Lyndon gives his 2 cents about the logic of grids requiring access to distributed storage. He gets his point out, but not in a way that any normal person could easily absorb. Not to mention he positions the role of a homeowner's battery pack as a tool of the utility rather than something they "rent out" to the utility. No emphasis whatsoever on the benefit to the customer, just the system. How does he not see that the average potential customer will find that positioning completely unpalatable?
I know he's the CEO and head architect, but engineers with his type of brain have no place in these conversations. They should be building things, not marketing or explaining these them to the average consumer.�
1/1/2015
guest
Pat Hogan from PG&E is a smooth talker, she is doing good job on avoiding any direct confrontation.
I agree, he needs to figure out what his message is and drive it especially when ignored (as Pat is skillfully doing).�
1/1/2015
guest HUGE volume today @ 7M and down 9%. Has the earnings call info leaked?�
1/1/2015
guest Ah, it's Chanos. LOL!
Amazing that people still listen to this guy.
Chanos Still Short SolarCity, Sees `Financial Trouble' in 2016�
1/1/2015
guest We're down ~ 10% two days in a row. Where's the circuit breaker? In the past one week, we've lost ~ 30% of the share value with no negative news, just overall market being down in May so far.�
1/1/2015
guest To buy now or after the ER is the hardest short term question at this point.�
1/1/2015
guest The drop today was due entirely to Chanos, and broad market weakness. Once the stock broke below an important technical level, the rest of the drop was probably algo selling, and stop losses being triggered.�
1/1/2015
guest 4:30pm EST today Lyndon Rive, and Nancy Pfund spoke at the World Energy Innovation Forum at the Tesla Factory.
World Energy Innovation Forum
Additionally, this was announced a few hours ago.
RESAAS Services Inc. (via Public) / SolarCity Joins the RESAAS Marketplace�
1/1/2015
guest SolarCity Launches Utility and Grid Services
SolarCity now begins to offer the complete package of energy solutions.�
1/1/2015
guest How is the SP not going up because of this?! Bought some near open and now banging head against well because it keeps going down.... Seems like last 5 trading days where it'll just keep slipping *sighs�
1/1/2015
guest Anything below $50 is a bargain, just pick your spots.�
1/1/2015
guest ER should have a positive effect, right?�
1/1/2015
guest cool gif of SolarCity referrals in this article: One reason for rooftop solar�s rapid growth? It�s contagious.�
1/1/2015
guest Can the House and Senate turn two energy bills into one law?
�
1/1/2015
guest Looks the "minority share" of ownership that SCTY retained was 5% over the first 20 years in the recent Hancock deal:
With Jim Chanos Short, Is SolarCity The Next SunEdison? The Full Bear Case | Zero Hedge�
1/1/2015
guest We don't know SCTYs actual performance and even if we did, we don't know how well it will be communicate/interpreted/understood. I think it's probably more likely to go negative and maybe re-test $18 but that's just a WAG.�
1/1/2015
guest LOL....read the comments section, these are the folks voting for a certain toupee'd casino mogul. ZH broke a couple good stories prior to the recession and now just feeds it's simpleton base what they want to hear.
I will reiterate that this level of shorting is necessary if we want to get the kind of price action that TSLA saw in 2013. Once this model is validated by the algos at some point this year, these folks will get squozen at a peak in short interest. I'm predicting early August after the 2Q call.�
1/1/2015
guest I guess I'm just a total socialist when it comes to power. To me, the whole point of a load balancing battery is to serve as a benefit to the grid (to offset the negative of intermittent generation). If the utility thinks it will serve them better for them to control the way in which it balances, I don't have a problem with that. The benefit to me as a customer is less opposition to renewable power and potentially lower prices to everyone for grid power as the utility will have fewer problems with demand peaks and valleys.�
1/1/2015
guest Everything he said was absolutely true, however he needs to be more aware of how he represents this new energy dynamic. Having a battery in your basement and selling juice to the grid via SCTY is a wonderful thing, but it's not being portrayed in a way that's palatable to the average consumer(let alone appealing). Lyndon talks as if he's making a case in front of a utility commission, even when there are cameras rolling and he's talking to reporters. That's not good when we're looking for consumer sentiment to drive policy and tech adoption.
At the 57:30 mark that I noted above he tries to articulate the benefits of a distributed model for smoothing, but it comes out as "You gotta give control of that storage to the grid, you gotta have the utility be able to use that so they can load balance everything..." That is not a consumer-centric portrayal of the new energy dynamic we advocate, it's closer to a sound-bite for a Heritage Foundation attack ad. So the very thing that will set consumers free can be portrayed as shackles if you're not crafting and articulating your message properly.�
1/1/2015
guest One man who knows very little about the SCTY model just moved the stock downward 30%, so I don't think the results of the historically uninspiring 1st quarter will be able to move the needle much. The inputs into the algorithms need to be rosier before attacks like this bounce off the stock and allow it to move higher.
Here's a chart from the Bloomberg Chanos article. This is the data that's in every algorithm right now, that either needs to drift in the other direction or(most importantly) sentiment needs to wake up and realize the value of the SCTY model. If a few comments from Chanos have this much effect, the average analyst is unlikely to finally gain clarity on May 10th. That being said my predictions for price movement have been wrong pretty much every quarter, maybe that's a good sign.
![[?IMG]](https://assets.bwbx.io/images/i9VUGhaxS2t0/v2/-1x-1.jpg)
�
1/1/2015
guest This is getting ridiculous.
Down 10% per day over three days, about 30% down since Monday's close and still no circuit breaker kicking in? Also, no specific bad news recently, just some overall market decline and this Chanos BS this week. Effectively, any actual bad news for this ER is already well priced in.�
1/1/2015
guest So, has SEC also been privatized? (By whom?)�
1/1/2015
guest Trumped, pumped, and dumped�
1/1/2015
guest Makes sense - but already?
Did you all see that clip of Ted Cruz turning his wife's other cheek? It was tweeted by the New York Daily News: https://t.co/m3zu9k5j5J�
1/1/2015
guest Chanos knows what he's doing, if he can get some downward action the algos will do the rest for him as the stock ticks below certain levels. It's absurd the amount of money he made this week on a self-fulfilling set of disinformation, but that's just part of market dynamics.
Waiting for the 2018 calls to get cheap.....�
1/1/2015
guest Saw that yeah
His kids knew what was coming and how to deflect apparently - experience
�
1/1/2015
guest FWIW
a brief note on one of my favorite financial types, Philip Falcone, in the 90's he helped kick start the Iron Ore powerhouse known as FMG.
anyway he had some colourful interaction with the SEC after winning a short squeeze against Goldman Sachs
SEC hits real short squeeze | OtcShortReport Blog
SEC.gov | Philip Falcone and Harbinger Capital Agree to Settlement
something different seems to have with SCTY recently, the interest rate that the Financial companies charged for shorting shares skyrocked, but the interest paid by Financial companies for those same shares did not skyrocket, effectively it seems that the Financial companies this time simply made off like bandits, and weaker shorts transferred their wealth to the stronger shorts. The Longs were mostly on the sidelines for all of this activity (some got a nice 'dividend' but nothing like what they deserved).�
1/1/2015
guest correction - Philip Falcone, in the 00's he helped kick start the Iron Ore powerhouse known as FMG.�
1/1/2015
guest Did analysts and investors forget the only reason SolarCity lowered guidance last quarter was to provide conservative guidance, due to the uncertainty about if the ITC would get renewed? SolarCity emphasized that if the ITC was extended, the guidance would end up being far too conservative.
Although completely unscientific, I've seen 5 SolarCity vehicles in the past week, on the East Coast. I'll take this as a good sign.�
1/1/2015
guest I don't think that is or will be a major concern, it should be easy to crush their projected +18% yoy 1Q install guidance. I would hope so anyway.
The bigger concerns are cash flow, trajectory of costs and ease/cost of finance. It's gonna be interesting for sure, this should be the last wild quarterly call then it's onward and upward.�
1/1/2015
guest SolarCity was very clear that if the ITC was extended, installations in 2016 would be significantly higher than the revised guidance.
Additionally, this has been completely missed by the media. This partnership will significantly reduce customer acquisition costs.
RESAAS Services Inc. (via Public) / SolarCity Joins the RESAAS Marketplace
For more info on RESAAS Services Inc.
http://m.marketwired.com/press-release/resaas-surpasses-300000-verified-real-estate-professionals-cnsx-rss-1974693.htm�
1/1/2015
guest I believe overall 2016 guidance was maintained at 1.25GW installed, but 1Q was revised down to something tiny due to the impact of ITC uncertainty. Did the math when it was announced and I think it penciled out to an 18% increase over installs from 1Q last year.
So in effect....overall guidance was maintained, but pushed back later in the year.�
1/1/2015
guest Correct. However SolarCity emphasized that if the ITC was extended, SolarCity's guidance would almost certainly be far too low. I vaguely recall Lyndon laughing when asked about that, then saying something like they were preparing for the storm, to be full prepared for a scenario where the ITC wasn't extended.�
1/1/2015
guest Nice to see green for the first time in a long while.
The announcement of utility scale solar seems like a positive:
SolarCity Launches Utility and Grid Services (NASDAQ:SCTY)�
1/1/2015
guest All I can say is the stock price has a lot more room to go up, than down.�
1/1/2015
guest What's the deal with the put to call ratio? There looks to be crazy high bias for puts. Thoughts?
There is an 8-10:1 premium for puts. And 100-300% IV. No wonder the stock is acting strange.
Even though I'm still not convinced he's short more than a handful of shares, Chanos is crazy if he doesn't cover today.�
1/1/2015
guest I thought IVs main input is recent stock price volatility? In which case these high numbers are justified, no?�
1/1/2015
guest Sort of. Yahoo published some article saying someone places a large bullish bet. I think the opposite is true and someone might simply be hedging since the June put:call ratio is very high.
Look at the price for $40 calls vs. $20 puts. $40 calls are .30 and $20 puts are $3. This only makes sense if the market is pricing in the probability of a $10 being equal to the probability of a $10 move down.
Or it could simply be that the 30% drop in one week caused by noise from Chanos has caused calls to be irregularly priced, making it possible for Chanos to buy calls and cover his short.�
1/1/2015
guest Not really. That is the historical volatility. IV is the implied volatility, meaning the option premium agreed upon between the buyers and sellers on the date of the transaction reflects the current uncertainty of the market about the likelihood that the stock will be in the money on the expiry date. IOW, the input for the IV is the current option price (hence the name), and is therefore forward-looking.
Edit: I dug up and old post of mine about IV that contains more detail.�
1/1/2015
guest You are quite correct, of course. It is quite possible that they have a supremely profitable financing scheme and have managed to keep it opaque enough that nobody else can clone it. If you're right, then it's a great investment. I am not comfortable say8ing that they're right.
But not the rates.
That's the lack of competitive advantage which I worry about.
So basically you're saying they're going to be able to charge a premium because people are lazy, won't do their homework, and will want a "turnkey" solution. OK; that makes sense. I don't see why that can't be cloned by, well, anyone, including local installers. The financing is harder to clone.
Um.... yes?
I live in New York. Our utilities were already required to divest from production, years ago. All the power plants are "merchant plants". Utility-scale wind and solar can sell into this market with great success, as you might expect.
Transmission charges have already been raised to cover transmission costs where I live. Transmission costs are at 4 cents -- it might go up to 7, maybe, but probably won't go up at all. There's also a flat service charge per month of $15/month for having a grid connection at *all*, and *this* actually is fairly likely to go up.
Add 4 cents for transmission to future utility solar at 4 cents or less, and you have 8 cents/kwh. Good luck beating that with rooftop solar. Rooftop solar has some value due to grid-independence, but it's actually going to be quite tough for rooftop solar to compete with the grid on price.
Now, if you can go completely off grid and cut the monthly "grid access fee", you have a better value proposision. But *here*, to go off grid you need to be able to ride out a snowstorm: SCTY is simply not selling a system which will do off-grid in the Northeast, and has no plans to do so, as far as I can tell.
In territories like NY where the transmission operator has completely divested from generation, I see residential retail-level PPAs dying completely because they will be more expensive than grid power. Perhaps looking at different utility territories is giving us different perspectives. I think of the NY model as being the future, but it's possible that stupidity will reign in other states...
The battery business is another matter entirely; I see the battery business as competing with the cost of *upgrading your electrical service*. Most people's heavy electrical loads don't last long. A big enough battery could be an alternative to upgrading to 400 amp service, and for *that'* a battery is quite competitively priced. But Tesla owns the value in the batteries, not SCTY...�
1/1/2015
guest Service doesn't need to be upgraded for momentary loads. The reason to upgrade service would be a large continuous load such as running two central ACs while charging two EVs.
It is interesting that Tesla Energy has apparently started selling batteries directly to consumers. I didn't expect this approach, and I'm not sure what this change in strategy indicates.�
1/1/2015
guest Maybe momentary is the wrong word. Not long-term.
Been there, done that.
I'm talking *big* short-term loads like the startup of a geothermal pump. It uses rather little power in steady state, but the startup load is massive, and it was blowing my parents' main breaker until they upgraded. There's a surprisingly large number of things like that, often associated with heating and cooling. Many of them are probably reschedulable (which helps with making sure they don't *all happen at once*) but most of them are not actually set up to be rescheduled. Adding a battery is a way to do it which requires less work than replacing all the heating and cooling equipment with "smart" equipment.�
1/1/2015
guest Whether SolarCity's earnings report contains positive or negative data I fully expect it to be spun negatively by the media. To this end Chanos and other shorts will aggressively attack in a full out effort to collapse the share price. I'm not complaining, only solidifying my long term view. Optimism, pessimism, f$&k that, as god is my witness I'm hell bent on seeing this happen......�
1/1/2015
guest I am 90% certain it will plunge yet again. If not for some stupid amateurish Doha panic trades I would have been sitting pretty right now, but I'm out of ammo. I'm going to ride it down into the teens like I always do but I am just as confident things will turn around in the next year or 2. or 3 or 4.�
1/1/2015
guest Joe Stack (Analyst - RBC) said:
And are you willing to provide an update to those initial targets?
Elon Musk (Chairman and CEO) said:
Not yet. Maybe in one or two earning calls from now I think we'll be able to shed more light on that. But yes, as JB was saying, we're going to make sure Tesla Energy is not constrained by vehicle needs. The growth rate of Tesla Energy is, on a [too soft to hear] basis, going to be far greater than the growth rate in cars.
2017 LEAPs?�
1/1/2015
guest Maybe it is just wishful thinking, but Elon mentioned little to nothing at the TSLA ER call last week about Tesla Energy and batteries. Then SCTY ER was moved out a week later than usual. I'm wondering (or hoping) if there will be some positive battery news that has been saved for tonight's er?�
1/1/2015
guest There is no other entity operating in all viable markets who can touch the SCTY value proposition. Their only real PPA competition is slowly dying or has already died. Turns out there were no short cuts.
I would say the truth is a lot closer to the exact opposite, within a couple years anyone will be able to negate all the up front cost components and take tax credits at POS. What they won't be able to insert into a business model is the stability of being the front-runner since the beginning. Thanks to Elon as a spiritual and financial backstop, SCTY isn't going anywhere. Could that be said about other PPA operators? Why would I choose Vivint or SUNE or a local installer over SCTY for my PPA needs? Half the boxes aren't checked with the other guy's offerings.
Standing relatively alone in the PPA marketplace for 2017-18 will be invaluable to future revenue streams.�
1/1/2015
guest SCTY ER: Like Christmas four times a year.
I hope the boys can keep this ship afloat. Since SCTY financial reporting has reached ludicrous mode there may be no where to go.�
1/1/2015
guest Leaving the snippiness aside, I agree with this bit
- "SCTY financial reporting has reached ludicrous mode"
and this bit
- "there may be no where to go".
Regardless of what happens in the ER, anyone having even a passing interest in SCTY should take a close look at Hancock deal and all info around it.
For the longest times, the belief has been that SCTY does make very fat profits, it just so happens the profits are stuck in very long term future cash flows. This is really the basis for a multi-billion dollar valuation.
For the first time ever Hancock deal actually exposes that the long/bull premise is fundamentally flawed. SolarCity doesn't make any profits even after accounting for all of the future contracted cashflows. The stock slide of more than 30% around the Hancock deal announcement is not fluke. It is simply more people realizing what's going on.
The bolded part, I thought would be the circumstance if ITC deal wasn't reached. It's shocking to find that SCTY is in that predicament today.
Chanos' recent comment is "The problem with SolarCity is they�re losing money on every installation". I believe he is actually correct. And I also believe he is doing a full cashflow analysis (of the contracted portions), not just upfront cashflows. Don't brush off Chanos lightly. He is very highly regarded as a financial/accounting genius. He apparently cracked Enron before it imploded. That does take a genius. After all SolarCity is primarily a financial firm with a gazillion SPEs and SPVs. It is sort of a bank, without any banking regulations, and the management going amok with whatever they want.
On the contrary I believe Chanos is getting Tesla wrong. Yes, he may have a point or two with respect to finances. But Tesla's core strength is not financing. It is the product, the technology, the leadership and such. Chanos hasn't built a reputation for himself in analyzing such traits. So I'm not sold on his thesis with respect to Tesla. But I do feel that he got SolarCity right. He will stay short until it goes to low single digits and eventually gets taken private (to save Musk from an embarrassing public bankruptcy).�
1/1/2015
guest Want to add, generally SCTY short-interest goes down when stock goes down (as traders cover at lower prices). But this time around since Hancock deal came out, as stock went down, the short interest went UP. So essentially shorts are emboldened by that new piece of info.
Hancock deal was either a distressed trade because SCTY badly needed money -or- it is what the true value of these cashflows is. Either case, it doesn't bode well for SCTY.�
1/1/2015
guest I'm most interested in reestablishing customer acquisition cost trends. The financial fallout from Arizona has obscured those numbers.
As a solar construction company they have plenty of opportunity to bid jobs. If the PPA decline continues, the question is whether SCTY can morph into a different kind of company.
I don't expect much from today's ER except obfuscation.�
1/1/2015
guest The Hancock deal does shed quite a bit of light on potential profitability. The residential(70%) portion of the offering was essentially financed at $3.24/W after most everything has been sold or otherwise monetized. Installing at $2.60/W including absolutely absurd customer acquisition costs therefore becomes a fairly clear indication of today's profit off each install and what tomorrow will look like. Yes, these guys are installing in a mature California market at scale, but every other market might as well be in it's infancy. The costs to install will only remain so fat until some major markets getup to scale.
The 2016 install cost goal of $2.35/W(mixed I believe) paints a more pleasant picture when overlayed with the revenue/W they've been able to generate within this most recent offering. In basic terms, if you can maintain something like $3.25/W as the output of your model, how is that anything other than an accelerating cash machine as costs quickly plummet from $2.67 to $2/W?
That being said, I agree that this quarter will be nothing more than worsening inputs for the algos and should cause a dip. This pattern has repeated so many times now that the dip might be mostly priced in, who knows. I'll be interested to see how all the new grid/Tesla Energy products are positioned.�
1/1/2015
guest Mule, The $2Bil market cap and $5.4Bil enterprise-value is not based on future profits.
It is very much rooted in the assumption that SC is making big margins "today" AND the assumption that it has already bankrolled piles of these profits with all the installs they made so far in what used to be called Retained Value.
If word gets out adequately that they are not making profits nor they ever made them, the stock will be sub-$5 or worse, they are already insolvent.
A month or two ago, in exchanges with jhm I said, I believe SC is solvent but has liquidity issue. But now it's becoming clear that they may not be solvent at all. This is a far worse realization.�
1/1/2015
guest It'll all work itself out within this calendar year no doubt. Pretty clear to me that if you can generate $3.24/W on residential installs as the #1 player and no one is able to drive down your premiums over the medium term.....you got something pretty sweet.
As long as they maintain their model and differentiation at all cost, they'll make a killing when cost and revenue finally cross paths. Who's going to jump into this market and displace SCTY? Certainly not the no-sales SUNE model or the all-sales Vivint model.
On an install basis they should show a profit this year right? $3.24/W - X = Y provides more than enough room to work and should be pretty clear to investors.�
1/1/2015
guest I may be proven wrong, but I'm very bullish going into earnings. GL everyone.�
1/1/2015
guest Human sentiment will show signs of coming around, but the algos will easily overpower to the downside on increased debt.�
1/1/2015
guest So how long is normal to wait? I thought it'd be up at 1:01pm PST?�
1/1/2015
guest 214MW installed vs much lower guidance +40% y-o-y�
1/1/2015
guest I was wrong, I purchased a truckload of short term calls. /sigh Glad for those of you who called it correctly.�
1/1/2015
guest Lowered 2016 guidance from 1.25GW to 1-1.1GW.
Not sure why this wasn't revised last quarter when 1Q16 was revised downward.�
1/1/2015
guest Sales costs up to $.87/W, that's a LOT and very surprising. Building out these new markets is expensive.
Edit: Pardon me. NINETY-SEVEN cents. Eating the cost of Nevada I assume? Would have liked to see sales cost without the NV shutdown.�
1/1/2015
guest New zero-down loan options from SCTY, 10yr 3%, 20yr 5% with all the tax credit retained by the customer. Might have to peak at that if rates are <$3/W as mentioned on here previously, but I doubt they'll beat out my local installer.�
1/1/2015
guest Looks like I called the sales cost rise a few weeks ago. I guess they're not all on pure commission.
Overall there looks like a lot of positive stuff so the -20% seems a bit surprising. I like to read the ER, guess the move and then check the after hours quote. Until the reduced guidance I thought it was going to be a big move up despite the sales costs.
My take aways are:
- Exceeded 180MW target by a lot but whole year installs will be under 1.25GWh
- Costs up a shocking 19% per watt but due to temporary sales costs spike and should drop fast later this year
- PPA contracts can be sold for $3.24 minimum + SCTY retains ~$.33 worth of extension and 5% ownership to cover maintenance, so they're profitable now.
- In the future contracts will likely be sold for more while costs decline to $2.25 by year end.
- State by state regulations are still a huge unknown
Unless SCTY is tricking me with their complex math, it looks like there is growing evidence their business model works. If they really get close to $2.25/watt costs by years end that seems quite profitable.
I'd like to hear SBenson's take.�
1/1/2015
guest Most important thing from the conference call.
1) SolarCity does not have a cash problem.
2) Once Tesla Energy is fully online, and the Powerwall is being mass produced, Solarcity will resume hyper growth mode.
3) Chanos is wrong.�
1/1/2015
guest The price action is very un-surprising. The slide desk is dense. I only took a cursory look and couldn't tell anything. In good old times there was just one metric to look at - RV and how that is progressing. Now we all know that it was just a lie. oh well, here I go again... In any case, the issue is - as an investor (or a potential investor) I don't even know what to look at or how to validate or value the business model anymore. In every single report Raymond James used to put a phrase like "Valuing SCTY is more of an art than science". It actually slowly progressed into becoming Abstract Art... Just as a pure academic exercise I will spend a day or two on it late this week. Will post if I find anything interesting.�
1/1/2015
guest I could do without the guidance yo-yo'ing.
Feb16: Revise 1Q16 down to 180MW and maintain 2016 at 1.25GW
May16: Install 214MW in 1Q16 and revise 2016 down to 1-1.1GW
What good did the under-guiding 1Q16 do? None. They will easily hit the 1.25GW mark for 2016 and I'm pretty sure they know it. The more guidance transparency the better IMO.
Chanos will continue to be "correct" until he's not. He made a boatload of money, will cover at some point and then dive back in if he feels it's profitable. His commentary on fundamentals means nothing, he's sowing uncertainty and reaping the harvest each quarter. If you can't overcome a little bit of disinformation then either your valuation is fair based on execution or you're not expressing your value proposition properly.
I'll continue to bet on the Musk/solar combo obviously, but timing this thing for profit will continue to be a challenge. 1/3 of install costs are customer acquisition. Eating all the NV costs is a fair excuse, but a change of sales tactic is overdue. I have some thoughts on this, but will save them for next week.�
1/1/2015
guest Wonder if Musk open up his check book again.�
1/1/2015
guest I believe/hope you are absolutely correct. Unfortunately, Chanos is still correct on his short position for today and made crap load of $ right now. Hope he decides to let it ride and give it all back eventually. Either way, he gets to pound his chest and tell the world how credible he is for now... Chanos can have my scty calls that I lost today and suck it..... It's so funny I'm more mad about him making $ on his short scty than me losing 5 figures on my scty call options...�
1/1/2015
guest In my view, if Chanos doesn't cover his short tomorrow he's 100% crazy. The sentiment on TMC has never been more bearish. I'll be shocked if this end down anywhere near the after hours low. All this proves is that too many simple minded investors don't understand SolarCity's long term business strategy.�
1/1/2015
guest Additionally, Chanos is a pathetic and disgusting parasite, who is worse than Donald Trump. He exists to boast on TV, and to cause harm to companies by misrepresenting the truth. If he was struck by lightning tomorrow, I would throw a party.�
1/1/2015
guest Agreed. This week's calls are toast for me, but I'm buying back in... but a little longer term options though, lol.�
1/1/2015
guest Don't be so soft on him.�
1/1/2015
guest There's plenty to fret about this quarter, but install costs continue to drop year over year. A big drop for install costs on the November call would make me feel much better about my 2017/18 calls, we should see it continue to drift down this summer.
Don't worry about sales cost, most everyone is feeling that pinch in the US. 98% of consumers have completely incorrect information in their heads regarding the economic value of solar, all it takes is time to eat away at that. People aren't going to need 30 hours of hand holding to go solar a year from now.
Once logic and connection overpowers the disinformation machine the vast majority of that sales cost disappears. That's about $.60/W that SCTY can mine for profits. Then the gigafactory comes online.... Then these second tier markets get up to scale.....
Interested to see the Elon purchases next week and perhaps hear someone address the weird guidance numbers.�
1/1/2015
guest I despise Chanos, and all that he stands for. That said, today he bested me. Got to give the Devil his due.
But, a big Kim Kardashian But, I'm in for the long haul.
I'll be back.�
1/1/2015
guest I'm right there next to you, except...
But, a big Jay Lo But...
I won't be buying weekly calls for a while though... Just leaps mam, just the leaps...�
1/1/2015
guest I'll gladly take it a step further. If Chanos's gasoline vehicle got into a horrible accident and exploded with him in it, I'd throw an even bigger party. He's a cancer.
If I was a screenwriter, perhaps I would use him as the inspiration for a story about a parasite analyst who wakes up one morning as a giant cockroach. The story would end with the entire city running him out of town. Or perhaps him being hit by a passing freight train while being run out of town? The final scene would be a person in a Tesla driving by the incident and laughing.
Just for fun, this comes to mind. Obviously nothing borrowed from Kafka.
�
1/1/2015
guest I was similarly destroyed. I think I'll be sticking to LEAPS for a while. I am not looking forward to the red in my account from my weeklys once the opening bell rings.�
1/1/2015
guest I'm happy to see that SolarCity is righting the ship. They have made solid progress toward becoming cash positive. They are now monetizing 98% of cost. It was a disappointment to see sales cost climb to $0.97/W. Management believes this is transitory and will be rectified by Q3. So sales cost is about $0.50/W too high. As that is resolved, the monetization level will easily be above 100% and retained value will be a driver of cash.
Further it will be exciting to see grid services evolve. This has the potential to add 15 to 30 percent to existing customer derived revenue. This will substantially change the investment thesis for SolarCity. Full cost monetization moves the company to cash positive growth with long-term retained value. That's workable, but grid services will add near term profits to sweeten the whole deal for investors.
So my outlook is that SolarCity continues to have a few more difficult quarters as these pieces come together. It may be worth accumulating at very low prices through the summer, but early fall buying may be the best timing. No doubt this stock will be very sensitive to the election cycle. So be careful about bidding up the price anytime before election day.�
1/1/2015
guest SCTY drop continues pre-market, 52-week low and even lowest point since IP in sight....Will shorts cover?�
1/1/2015
guest SCTY opens at 1776, very appropriate.�
1/1/2015
guest Agree- this is the early stage of the transition I've been watching to see (disclosure: I have a very small, long stock position in SCTY). The earliest monetization the better from my perspective. They still hyperbole the belief that better monetization prices should come later- I disagree in general. Solar-Storage is a self competing economic over the 20 year term of these contracts. There' nothing but lower prices for contracts of today imo. [Also not a fan of YieldCos for the same reason)- Now that they are making this transition- I'll be accumulating slowly over the next months if they continue this transition- My investment will be inversely proportional to the contracts they hold instead of sell�
1/1/2015
guest Insane volume this morning.�
1/1/2015
guest 666 would be more approriate�
1/1/2015
guest So SCTY is taking its quarterly beating. Look at a one year chart. Same thing happened right after the last two ERs. It is now back to the level it was at in February. If the price holds at this level, it could indicate that things have bottomed out.
I for one am more optimistic about SolarCity today than three months ago. I see that the company is responding to challenges and setting a new course.
Even short-term traders should be able to see the potential for the price to return to the $30s within a few months. Even shorts may want this price to return so that they can short into next ER all over again.�
1/1/2015
guest At some point customer acquisition cost can either drown the organization or destroy the business model from within. Monetizing all the way out to 20 years is an amazing step and a huge positive, but sales cost is going to come down industry-wide some day soon and SCTY needs to be ready for it.
It's all well and good to pay a sales force $.55/W when you have no other choice, but Germans pay about $.02/W in sales cost. Some day very soon local US installers are going to have that level of demand and if SCTY is still quoting prices with $.55/W in sales cost.....well that's just not good. We can't have a scenario where $2/W installs with a 30% credit are being sold to people who would be much happier under a PPA if it were leaner.
I'm sure SCTY has a solution to this and can just eat the sales cost as they wind down their door-to-door model in late 2017, but it worries me. Sales cost(at least as it's included in new pricing) MUST be less than half of the 2015 average in relatively short order. Relative to the work these guys have already done to get the business model where it is today, these concerns may seem minuscule. But these are my concerns.
Anyone have thoughts on price points for 2018 LEAPS? $60's, $70's, $80's, $90's? I just want to put in a $.12 order on something and let it sit a few weeks. $70's at $.12 perhaps?�
1/1/2015
guest This is clearly the number you identify with. You must be delighted today, in your deep and abiding hatred of everything SolarCity. Congrats Mr. 60606 (666) your short position must have paid off handsomely today. Did you close it or are you expecting another 25% drop in short order? What is your prediction for when SCTY goes to zero? 1year? Two months?�
1/1/2015
guest I just got Jan18 20s at 5.25. Kind of feels like stealing.�
1/1/2015
guest Is anyone willing to provide a short summary from the conference call or does anyone have a link to the transcript?�
1/1/2015
guest Completely agree- In fact I don't believe acquisition costs will even take the same form 10 years from now; 'Panels' will be sheets, sub-layered with super-capacitive integrated storage. I'm a fundamental believer that Solar-Storage will enter self-destructive accelerated stages (ala semi-conductor). It will soon (a few years) be it's own (and only) competitor- and unlike fossil based power has virtually no bottom to it's cost. Power will be a near-free commodity in 20 years imo.
The entire profile of the business will modify over that time frame. SCTY will have to be very nimble. I'll stay acutely and cautiously invested.�
1/1/2015
guest I like that buy. On way to play scty is to assume that Musk can only let it get so bad before intervening. One way to look at solarcity strategically is that they will spend a few years right sizing the company. Once they turn cash flow positive it may be possible to put an accurate value on the contracts they hold.�
1/1/2015
guest More SCTY for me this morning at a cheap price�
1/1/2015
guest Averaging down has worked well for many here. Cough.�
1/1/2015
guest Me too, though sadly not that many shares. I helped my girlfriend set up at a brokerage acct so she should profit as well. Now I REALLY need them to do well.�
1/1/2015
guest Bought some shares here, probably from Chanos. Oh well, time will tell.
Thank you kindly.�
1/1/2015
guest I agree that SolarCity absolutely must get a grip on sales cost. Consider that they were just about $10M short of being cash positive (on their metric that allows for project financing). Now consider the impact has sales cost just been $.10/W lower. On 214 MW, that would have saved $21.4M in cash outflows. So $0.97/W on sales cost totally screwed up what could have been an amazing turn around. Had they kept sales cost below just $0.45/W, they would have been cash positive to the tune of about $90M. And with that kind of turn around, we could have seen the share price launch back up.
Long-term, I don't know where sales cost should go. That depends a lot on what competitors are willing to spend to grab market share. But short-term, whatever they can trim off of sales costs will make big difference for cash and share price.�
1/1/2015
guest Edit: Sorry, wrong company
SolarCity (SCTY) Lyndon Rive on Q4 2015 Results - Earnings Call Transcript�
1/1/2015
guest I don't know too much about what their operational plan was for Nevada, but having to drop shovels and walk out was clearly a punch in the financial nuts. Perhaps that was to be a vital piece in the shift to more efficient sales process.
Taking the long view I applaud them for taking the hit and just leaving the state entirely. I some ways I wish more public companies would make such principled decisions that maybe aren't the best thing for stock prices. As an investor waiting for profits.........
So long as they stay on par with local installer's sales costs they are fine, and as of today they are fine. As I've said a bunch of times, that dynamic is going change at some point and when it does it will happen overnight. When the time comes, SCTY better be ready to pivot away from giving sales guys $100k in commissions.�
1/1/2015
guest Buying a ton here. Should clarify, bought a ton at $16.60. It might go lower, but far to many people are comparing SolarCity to SunEdison, and ViventSolar and are failing to mention any of the factors that make SolarCity unique. Even the analysts didn't seem to understand why SolarCity is fundamentally different from other "solar companies". Solacity is more than a solar company! Also, SolarCity has access to close to unlimited capital.
SolarCity isn't borrowing money to burn through cash and doesn't lose money on every PPA. SolarCity is investing the cash it received into solar ASSETS. There is a very low chance that a large number of Salacity customers will default, and there is a very high probability that many of them will renew. Additionally, once battery storage enters the equation, every SolarCity customer will buy one. This will force the utilities to work with SolarCity on net metering, or something like it, that provides reasonable compensation to people with solar for energy. SolarPanel installation offsets utility infrastructure costs.
As Lyndon put it, unless the utilities ignore the existence of Solar, and continue to expand the current infrastructure without calculating for Solar, the utilities are responsible for any added costs to customers. If utilities include solar in the equation, it results in a reduced costs of energy to customers.
Once the Solar Panels have been fully paid for, customers with PPAs can renew at a significantly reduced rate. Almost all the money SolarCity will bring in from these customers will be profit, and SolarCity's margins will be extremely high. This will provide SolarCity will a lot of flexibility when it comes to charging less than the utilities.
100% certain we hear from Lyndon or Elon any day now. Also, the Gigafactory event is in 2-3 weeks. Anyone know the date?�
1/1/2015
guest I bought today at $16.88. There's a good chance there will be more opportunities this low this year, but there could also be some spikes up to $25-$30 that could be an opportunities for profit.�
1/1/2015
guest I'm torn on strategy, but am going to be patient for a couple weeks. LEAP prices are always slow to adjust to these mega-drops in share price. Looking for a dip down to $17-18ish in about 3 weeks if the share price floats back up. Gonna buy my last chunk of 2018 LEAPs and move on to other things for the summer. Been following this waaaay too close for the last 6 months.�
1/1/2015
guest Chanos is a horrible, disgusting, piece of garbage that isn't worthy of anyone' time. He deserves to get eaten by a pack of wolves, pooped out, then fed through a wood chipper. Despicable lying parasite.�
1/1/2015
guest I'm torn short term as well. Chanos will probably be out calling for single digits soon I imagine on the squawk box circuit. Energy bill should progress on Wednesday after they vote down the Iran amendment according to this. With my luck I would buy a strangle and the SP will linger until expiration.
Overnight Energy: Senate Dems block energy, water bill a third time
�
1/1/2015
guest The Jan18 30s @ 3.30 look like a deal right now, they were trading @11 as recently as April 21st�
1/1/2015
guest Today was accumulation, not short covering. Maybe a little short covering, but I'm fairly sure most of it was accumulation. Short covering doesn't usually create a straight line throughout the entire day.
My thoughts, the drop to $18 was due to the "miss". The rest of the drop was panic selling, and margin calls.
1) Liquidity concerns are BS.
2) Chanos is a chad who enjoys receiving credit for misrepresenting facts.
3) Every time Solar City has fallen to ~$17 it has seen plenty of buyers. I'll remind you that many analysts had price targets of $80-$100 6 months ago. The only thing that has changed is the market sentiment, and the price of oil.�
1/1/2015
guest I agree, aside from the last 15 minutes of the day. That definitely looked like covering for that little recovery.�
1/1/2015
guest I have ser
I'm not convinced. Usually flat movement after a very big drop with significant volume indicates accumulation. I think the last 10 minutes was short covering, and traders who were short exiting stage left, after making 30-50% in 3 weeks. Seriously, every headline today was basically saying SolarCity is doomed, and Elon is a liar. Manipulation?
Either SolarCity will go bankrupt or it won't. I trust Elon and Lyndon 10000% more than I trust Chanos.
If SolarCity succeeds, it is worth $100-300 long term. If SolarCity goes bankrupt, SolarCity's assets and portfolio are likely worth $1-2 billion. At $1.5 the market is basically not pricing in anything.
Chanos = The Gary The Rat of financial Analysts
�
1/1/2015
guest But he does provide for good buying opportunities; but your description sounds better�
1/1/2015
guest Not that it matters, but I think we are saying the same thing.
Me: I agree it was accumulation today aside from the last 15 minutes, which looked like short covering.
You: I'm not convinced. It looked like accumulation until the last 10 minutes, which looked like short covering.
Maybe there's just vehement disagreement re: 3:45-3:50PM today?�
1/1/2015
guest I have so many shares and LEAPS... I am hyperventilating for sure. Any chance this sees 90 before Jan of 2018? LOL.
Drinker of Koolaid, you cannot fault Chanos for anything. If SCTY is a real company with a bright future and big profits as so many of us believe, none of this will matter.
If not and he is right... well then he is right.�
1/1/2015
guest I would rather live a single day as Elon Musk, today included, than a lifetime as Jim Chanos.
Traxila, 8 months is a long time, especially the next 8 months. President Clinton and progress at SolarCity's Riverbend project could change the stock's outlook.�
1/1/2015
guest I would say $90 in Jan2018 is a near certainty and up until this quarter I would have said Jan2017 would be 50/50. After this abysmal quarter I'll still say 30/70 for $90 by Jan2017 due to the near lock for Clinton and a more desperate fossil industry forcing Congress into give and take on energy legislation.
"Solar" is going to change a LOT this summer as consumers become more educated.�
1/1/2015
guest ![[?IMG]](http://www.eia.gov/todayinenergy/images/2016.03.01/main.png)
'Solar. Planned utility-scale solar additions total 9.5 GW in 2016, the most of any single energy source. This level of additions is substantially higher than the 3.1 GW of solar added in 2015 and would be more than the total solar installations for the past three years combined (9.4 GW during 2013-15). The top five states where solar capacity is being added are California (3.9 GW), North Carolina (1.1 GW), Nevada (0.9 GW), Texas (0.7 GW), and Georgia (0.7 GW). These values reflect utility-scale solar capacity additions, and do not include any distributed generation (i.e., rooftop solar)'
Kinda cute isn't it, Nevada is now 3rd in the country for solar additions, I wonder why.
on a separate note '3.676 cents per kWh' is the new industry benchmark for California utility solar
http://www.cityofpaloalto.org/civicax/filebank/documents/50920�
1/1/2015
guest If the company goes bankrupt the shares will be worthless. There are a lot of hyper bulls in this thread that also says things that imply limited understanding of the investing world. I know my post will be disliked in this bullish echo chamber and I have said it before here, but I urge anyone reading not to bet the farm on SCTY, it's a risky investment there is no doubt about that. It's a bet on residential solar which is a business model with no guarantee of ever gaining significant traction (it does compete against utility scale which is 1/3rd the price).
Like traxila said let's wind down the comments about Chanos. I know you are angry about losing money but repeatedly talking about how you would be happy if he died, come on now (also are there no mods watching this thread?). Even at this point the bulls in this thread are as bullish as ever, try to be realistic. The growth is slowing down quickly and the costs are rising, even in spite of the massive rise in customer acquisition spending the growth is slowing, this is a huge warning sign. It looks like the low hanging fruit has dried up and their growth is about to peak and turn south, which makes sense as there is a huge difference in viability of residential solar in the US due to both sun hours and regulation.
My point is that it is easy to fall in love with a stock, that is just how the human mind works. Confirmation bias is not our friend when it comes to investing so be careful and don't martingale.�
1/1/2015
guest I have often made the same statement in the TSLA related threads. The temptation of easy money can draw people into short-term trading and options, both of which are extremely dangerous for the retail investor.
I've strongly advised people NOT to invest retirement funds in individual stocks. A mix of stock and bond index-based mutual funds is generally the wisest path for money that will be needed in the future.
Either SCTY succeeds or it doesn't. What has yet to come into play is the effect of Tesla Energy products combined with SolarCity arrays. It is entirely possible that residential solar won't be as big a play as some thought, but that doesn't preclude SolarCity from transitioning its business more to the commercial sector, especially if corporate customers see big savings from a Solar & PowerPack setup. So: stay calm, don't bet the farm, and plan on holding shares for a long time rather than trying to make $ off trades and options.�
1/1/2015
guest The thing with the Powerwall is though that it will only make it more expensive for the customer. The only reason why residential solar is viable right now is that in some states you can just use the grid as a free battery, all you pay for is the electricity from the panels. The only reason for a SCTY customer to get a Powerwall with the solar panels is if the utility starts to demand it because of the loss they are currently taking. If that were to happen SCTY wouldn't be able to compete at all, the current price from SCTY is something like 13 cents/kwh right? If you added a Powerwall to the deal the total price would exceed 20c/kwh, noone would pay that.�
1/1/2015
guest This will be a huge year for solar. Utility solar had declined last year, so there does seem to be a little catch up to do.
It's very exciting to see how low cost of solar is going. Internationally, Dubai has seen a utility scale PPA go for 2.99 c/kWh. Fossil fuels are getting priced out of the market all over the globe.
While I am impressed with utility solar, I remain convinced that distributed solar will play a huge role in the future. As the cost of generation comes down, the costs of transmission and distribution stick out as irreducible. So even with utility solar at 2 c/kWh, why should all grid participants put up with an additional 8 c/kWh for T&D to deliver that power. Properly valuing distributed energy assets can drive that T&D cost down to 4 c/kWh or less. This is the direction the whole system needs to go and it depends on integrating the expertise of distributed installers such as SolarCity.
The difficulty is that the utilities do not really want to embrace this change just yet. They still want an exclusive 10% rent on a system capable of 12 c/kWh average.
But the utilities will have to change. Just by loading up on GWs of solar, the utilities are committing themselves to making changes in how they manage the generation, transmission and distribution of power. They must make investments that integrate solar and wind into the mix. If they don't, then their costs get pushed onto ratepayers and rooftop solar becomes more compelling. If they do make these invesents, then it becomes more difficult to argue that distributed solar imposes incremental costs upon that system while utility solar does not. And finally, those costs are largely T&D costs. SolarCity is offering services to the grid that reduce those costs and the cost of balancing consumption and production.
So it is well and good, if utilities can acquire solar as cheap as 2 c/kWh. What SolarCity is offering are solutions to minimize the cost of distributing solar and other energy wherever it may originate. The first step to minimizing T&D costs is to reduce the distance from generation to consumption. Distributed solar does that. The second step is the minimize the peak load the transmission system must carry and reduce congestion. Distributed batteries help in many ways. The third is to improve stability and reliability while cutting redundancies. The combination of smart inverters, solar and batteries help in this direction. SolarCity is extremely well positioned to offer these solutions from behind-the-meter. Utilities simply are not allowed to do that. Thus, there is regulatory arbitrage to be had by utilities and SolarCity working together, exchanging value they are distinctly positioned to create. Moreover, this is value that distributed solar can create which utility solar cannot. Utility solar can compete on the price of remote wholesale generation, while SolarCity can compete on value created in distribution. These are two very distinct niches, so there is no a priori reason why one would exclude the other.
So longer-term this ecosystem and SolarCity's place in it will take shape, but the friction of present situation obscures this future. SolarCity has had to fight just to find a way into the market. The problem is no with SolarCity's business model; rather it is with a regulatory environment that is rigid and uncompetitive. SolarCity is quite capable of adapting its business to whatever it takes to break in. They are like the weed that finds a crack in the pavement to take root. What is needed is a more open ecosystem, and SolarCity is actually a big part of what is changing the system. They are the weeds that break up the whole parking lot, so that all sorts of new things can take root as well.�
1/1/2015
guest I agree that distributed solar will play a huge role in the future, I come from a state where 25% of residences have rooftop solar. But the cost savings to the grid are basically a mirage, (except for reduction of peak aircon load, which could've been supplied by utility solar anyway). Until a home actually disconnects from the grid, it is adding costs to the grid, one way or another, due to that cost burden, the payment for rooftop solar will be reduced to trend towards either wholesale price of solar or the TOU midday rate (these are effectively closely related, to a large extent (but not complete extent) they are same thing)). Think of solar as an alternate form of energy efficiency, not as a power source itself.
I've bought 2 solar PV systems, one about 8 years ago, one recently. Pre subsidy, the first was around US $5 per watt?, the second was around US $1 per watt. After-subsidy it was much better than that. Solar is great, but to me Solarcity is quite reprehensible when they sell PPA to the asset rich, income poor (ie the elderly), if there is an escalation clause. Its also why I think of SCTY as having a terrible business plan, they have high FICO grade customers, but seriously sub prime backing assets. Overtime, USA retail customers will trend towards what business customers pay, fixed + variable + demand charge. with big blocks of midday solar causing the midday to the cheapest time of day. Its also demonstrates the most probity. (Ie business customers pay that way because it is the most cost defensible way to apportion the electricity bull)
Solar power is co-ordinated by an extraterrestrial energy source called the sun. In the USA $1 of utility solar buys about 3x as much solar energy as a $1 of SCTY solar. Its really quite a simple and somewhat binary proposition.�
1/1/2015
guest look at today's net demand, California ISO - Todays Outlook and consider what would've happened if California had a nice breeze occurring while the sun was shining.
next year solar = this years solar + wind�
1/1/2015
guest I think the goal is to pair 100% of the PV systems with batteries, let the utilities optimize the battery loads in this new era of cooperation...assuming they want to ultimately keep those customers connected to their grids. More home batteries to the party.
Nissan and Eaton develop home energy storage solution
�
1/1/2015
guest I'm looking for another large stock purchase by Elon here. Last time I bought he did so I'm fully expecting him to do the same now�
1/1/2015
guest On May 2nd and 3rd, when SCTY came back down from the mid 30 to 30, I sold Puts with 25 strike and 5/13 expiration. $25 was well below the 200 day, and if I remember right, the 50 day, and at or below the bottom BB. I thought I was safe. I'm glad to see some recovery this morning. I just hope we reclaim $25 soon so I can get out and just stick to TSLA....�
1/1/2015
guest You chastise people for not understanding the investment world, then turn around and deny the reality already playing out in front of us? Residential solar(distributed geneneration) is clearly the future to anyone with a decent understanding of energy markets and human nature. The future of energy is in the consumer's hands, not the utility. From here on out utilities will be.....a utility.�
1/1/2015
guest Senate votes down Iran amendment to energy spending bill
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1/1/2015
guest Holy crap these are in the money already. That didn't take long. These could be quite valuable in a year or so.�
1/1/2015
guest To me, rooftop solar isn't about supporting a distributed generation business model or trying to get ROI. It's just about the failure of federal policy, state policy, and the utilities to build and offer clean energy solutions. In the absence of those solutions, my only option is to go rooftop solar, which I wouldn't do if I could buy clean energy from the utility.
In the past, I have stated that I like the idea of installing load balancing batteries with rooftop solar as I can understand how the utility doesn't like the idea of having to balance solar with net metering. However, on the other hand, if you think of clean energy as a necessary part of our future, a rooftop solar install can be looked at almost as a subsidy to the utility as the installer is committing 10's of thousands of dollars to install solar capacity that the utility should have been installing for us in the first place. So maybe I shouldn't be so kind (to the utilities) as to expect consumers to pay for their own load balancing.
Anyway, it would be interesting to see a breakdown of reasons for why people install rooftop solar. Might give some insight for investors.�
1/1/2015
guest We're rebounding off the $16.50 low of the post-ER drop (-25%) yesterday after stabilizing. The +13% today looks like a combination of long-term investors scooping up more shares at an attractive price and possible short covering. Shorts would be smart to lock in profits now (I'm looking at you, Chanos), as SCTY is oversold and should not have gone down this low. We were down ~30% the week prior to ER and any bad ER results should've been priced in already (instead of an additional -25% slide).�
1/1/2015
guest Residential solar is still a very small part of the energy mix, and it is only viable if you can use the grid as a free battery there is no way around that. I believe I have written this before in this thread but I might as well write it again as it is pretty simple why residential solar just isn't viable today. The cost of electricity consists of 3 things, the generation of the power itself, balancing the supply and demand and the distribution. The 2 last parts actually make up more than 50% of the total cost and it all adds up to around 12c/kwh today for the utility.
For residential solar to be viable it has to compete against this cost, that is around 12c/kwh. That is simply not possible when generating the power alone from residential solar is the same cost (12c/kwh) as the total cost from utilites. It is true that if you went completely off grid the distributing part of the cost structure would go away, but even talking about this scenario makes no sense unless battery costs fall to something like 1/3rd of todays cost because it would add a huge amount of cost the balancing your production and consumption. Because if you wanted to go off grid you would need a large battery and probably a diesel backup generator for the winter months.
So residential solar under the current model has a cost structure of 12c/kwh for generation + around the same amount for distribution as you need to use the grid for it to work and an even higher cost in balancing the load as solar is more clumpy in output. That means that if everyone were to switch to residential solar tomorrow the cost would end up at least 8c/kwh higher (the added cost of generation), probably more than 10c/kwh higher. The gap to make residential solar viable in a level playing field environment is just massive.�
1/1/2015
guest I talked about Elon buying half jokingly half seriously. We'll see soon enough as he would have to file with the SEC.�
1/1/2015
guest I suggested to my wife (as she handles the stock in the family) to buy when it had dropped to about $21. Not sure if she did or not. I don't see SolarCity going out of business. They could be a good long term investment, IMO. They've got the right pieces in play.�
1/1/2015
guest Just FYI, most companies impose a trading blackout lasting until 2-3 business days following ER. Then the company has 2 business days to file the Form 4 to cover the transaction, so we may not have an answer until Friday or next week.�
1/1/2015
guest The legacy grid was not optimized to integrate intermittent renewables. There is plenty of friction as the system converges to something optimized for renewables. A lot of legacy cost is being shifted to ratepayers, but utilities like to blame the renewables.
In the long run, the grid will be managed around maintaining a suitable state of charge in batteries widely distributed across the grid. So transmission and centralized generation will mostly be about keeping the batteries charged at the lowest cost, rather than real-time supply-demand management as is currently the case. When the grid mostly exists to keep batteries charged at lowest cost capacity requirements are much lower. An analogy here is that of milkmen making daily deliveries of milk before the days of refrigeration. This was an expensive distribution system. Deliveries had to be made daily. But once electric refrigerators became common place, the milkman did not need to come as frequently. Eventually, the whole distribution system disappeared as families could get milk with their weekly groceries and keep it fresh all week. To be sure, electricity is at much higher frequency than milk delivery, but the same principle holds. Storage changes how inventory is managed. It's hard for people to imagine what this grid would look like because it does not yet exist. But try to imagine what the food supply was like before refrigeration. Try to imagine any commodity without the ability to store or stockpile it. Matching real-time production to real-time consumption is very costly. Matching real-time production to what is needed to restock inventory over the next 36 hours allows for huge logistical efficiency gains. Even just 1 hour of system wide storage would radically change the economics of production and delivery. It would pretty much eliminate the need for peaking plants for anything but occasional back-up, not regular daily use. It would substantially compress the spread between daily max and min spot prices.�
1/1/2015
guest -
Case in point: Germany had so much renewable energy on Sunday that it had to pay people to use electricity.
According to this article, last year in Germany the average renewable mix was 33%.�
1/1/2015
guest San Francisco is requiring new homes have solar pre-installed...today. Wait until the costs are roughly the same as any modern appliance like furnace, water heater, air conditioning or having a refrigerator as jhm illustrated above.
Looks like the Energy bill is back on track...plus a picture of Kate.
�
1/1/2015
guest You make some good points, but I think it's an overly pessimistic analysis. First, I think the aspect of self generation and energy safety is perceived as a major benefit of home solar plus storage. Especially in the next decade I believe this will become a standard feature of new homes in many affluent countries. If climate change becomes noticeably more pronounced people with disposable incomes will increasingly choose safety.
Second, solar and wind are going to be the main path to decarbonize. Home solar plus some battery may just need to be close to the cost of utility solar/wind plus transmission. Denmark may be largely decarbonized with nuclear, but most of the world isn't going that route. The process of decarbonization in the U.S will probably continue to provide incentives for home solar, even if the approach isn't entirely rational.�
1/1/2015
guest Yes, and national companies can not profitably install home appliances. This is one of my primary arguments for solarcity as a stupid business model.�
1/1/2015
guest Yes, you've made this point a thousand times. My apologies if I offend, but that's quite a linear outlook on a system that is literally changing by the month. You talk as if the cost variables of today are set in stone yet the whole industry is in it's infancy for 90% of consumers. You talk about cost as if Germans haven't been installing residential solar at $2/W for three years now, we have a full dollar per Watt to shave yet and that just at the cost levels of maybe 2 years ago. At scale, we should be installing at $1.90/W right now with all parties making enough profit. That is certainly more likely to become reality than for the whole country to insist on keeping the entire energy supply on the other side of a meter just to save $.45/W.
Having purely utility-owned energy production is done. Once your energy source turns to something that can't be hoarded this becomes an inescapable reality.
A utility will be just that moving forward....a utility. It's already happened in Germany and multiple states in the US are following their lead. Now community solar at what we consider "utility scale" will certainly seen quite a bit, but it won't be run by a utility. Third party renewable energy companies like SolarCity will run the production operation and the utility can balance the load.
We're breaking up monopolies here and the savings will be massive.�
1/1/2015
guest First of all Denmark doesn't get any power from nuclear, at all. We do get a lot of our power from wind, the highest percentage in the world I believe, and we have the largest wind turbine producer Vestas. You are implying that we need residential solar to move away from fossil fuels but that makes no sense. Utility scale solar is 1/3rd the cost of residential solar, the choice is obvious. While residential solar is more than 50% more expensive than status quo, utility scale solar has become as cheap as fossil fuels, and in some places even cheaper which is why most of new planned production capacity this year is solar. The solution to move away from fossil fuels and save money in the progress is here today and it is utility scale solar and wind.�
1/1/2015
guest I apologize if I offend but you make zero sense. Even at $2/watt residential solar isn't viable as you would still need the grid so the only difference would be the generated electricity would be twice as expensive compared to utility scale solar. Residential solar would have to become cheaper than utility scale for it to make sense, or trashing the grid completely and let everyone handle their own system and this just isn't realistic even 10 years from now (to do cheaper than a grid solution).
It really is simple math and it just doesn't add up in favor of residential solar. But please try to explain how residential solar will become viable using math.�
1/1/2015
guest As noted earlier, math is not always required, so long as the cost is tolerable. Sometimes it comes down to politics and ideologies.
Utility doesn't install solar --> I install my own solar�
1/1/2015
guest Utilities do install solar, more than half the planned capacity additions this year is solar. Utilities chooses the lowest cost solution, pretty sure they are also required to do that. As utility scale solar becomes cheaper and cheaper, the utlities will install more and more.�
1/1/2015
guest I'm not seeing it in my neck of the woods. I need to do more research to try to figure out what's planned in the future, but right now it looks like this:
http://www.kcpl.com/~/media/Images/Kcpl/About_KCPL/Company_Overview/GenerationMix.jpg
Also, lowest cost solution is often not the best metric when choosing solutions that impact people's safety and security.�
![[?IMG]](http://www.kcpl.com/~/media/Images/Kcpl/About_KCPL/Company_Overview/GenerationMix.jpg)
1/1/2015
guest Fun to watch. The forecasted peak demand is about 30 GW. Net demand at 11AM is down to 18GW, a little lower than early morning.
The peak tomorrow is forecasted at 32 GW. So imagine if this ISO had 32 GWh of battery capacity under its influence. The peak of 32 GW (after sundown) could be reduced by 8 GW from storage and the bulk of 32GWh spread out around this peak. So net demand gets capped at 24GW. It seems this would go a long ways towards minimizing the use of peak power plants. Moveover, these batteries can be charged when there is least need for baseload power, so base load or intermediate load plants do not need to ramp down or suffer low demand. This supports the price for baseload and maximizes its utilization. So the whole duck curve problem is resolved with about 1 hour of storage (1 hour times peak demand 32 GW).
So much of our hand wringing is brushed aside once storage gets to the 1 hour scale and beyond. Of course, it will take more than a couple of Gigafactories to build this out globally, but there are plenty of battery makers willing to step up as this market cracks open. But then there are all the legacy issues about what to do with some 8 GW of peaking capacity that only gets used a couple of hours each year if that. The basic answer is that we stop adding new peaking capacity and stop replacing at retirement. It's the same problem facing coal plants. It may take a decade just to build up 1 or 2 hours of storage, so that allows for a decade or so of depreciation. I think in five year's time, we'll have a very different view of how a grid should function, what's needed and what's no longer needed.�
1/1/2015
guest Here's what the German energy picture looked like on Sunday. Ask yourself how the very rational German regulatory bodies will handle this.
Germany had so much renewable energy on Sunday that it had to pay people to use electricity
�
1/1/2015
guest I don't think critics have been completely proven wrong here. I think it's highly likely that we will need a massive infusion of energy storage for everyone to get primarily on solar. However, I am bullish on the future prospects for battery storage, especially with Tesla's work on the Gigafactory. Pumped storage can help in certain places too where the environment allows; any utilities doing that yet?�
1/1/2015
guest I don't view SolarCity as merely installers. If you are talking about their new New York business model they are a solar utility, selling electricity directly to consumers cheaper than the utility. They will be design, manufacture, install, manage and maintain and bill clients in an end to end chain. I think of them as having an agile business model capable of adapting to a chaotic market and scale will benefit their operation with the regulatory clarity they mentioned.�
1/1/2015
guest Holy cow, that's a lot of coal, even for 2013! Keeping the Koch brothers in politics, is this? No wonder you want out of a system you never chose to be a part of.�
1/1/2015
guest This article was posted in another thread, but thought this statement was relevant with the current discussion going on in here right now:
Tesla Supplier Sees `Extreme Growth' Making Utilities Smarter
�
1/1/2015
guest
For this stock to still have upside solarcity needs a competitive advantage. What the barrier to entry in any of solarcity's businesses? The primary reason investment in renewable companies generally suck is the commodity nature of the business. Revenue is easy in business - just buy a lot of gas stations. The hard part is ROI. Good ROI needs IP or other barriers to entry.
Storage will likely be commodity-like too. I don't see why it would be different than making or installing PV.�
1/1/2015
guest Oil and gas are commodities. Yet Exxon is a pretty impressive company and does alright by their investors.�
1/1/2015
guest Electricity generation capacity has a lifetime of something like 40 years, only recently has the transition to solar and wind begun as it is only recently renewables has become competetive on price. The transition to 100% solar and wind won't happen overnight, that is just impossible. It will probably happen in 15-20 years.�
1/1/2015
guest Over the last decade in the US, massive coal capacity has been shut down and largely replaced with natural gas. This trend was already in place by 2013. Natural gas is extremely cheap in the US, ~$2/MMBtu.�
1/1/2015
guest I know, but even here at this historical low price it still translates to 3-4c/kwh I believe, which is comparable to current solar prices in top US locations. Someone in this thread linked to a project in California at something like 3.7c/kwh I believe it was.�
1/1/2015
guest Exxon has created many barriers to entry and also established IP.
I have never worked in solar or similar. Yet today I could sell and install solar systems.
What would be my odds of success if starting a deep water drilling business? Fracking also sounds interesting. I'll start by digging some holes in the backyard. Anyone know what I put in the hole to force oil out?�
1/1/2015
guest Any thoughts on the price action today? Maybe some large buyers (funds, elon?) picking up shares in the morning driving the price up and then a gradual return the more normal boost we'd expect based on oil going up?
We might see morning boosts the next fews mornings if parties are establishing positions.�
1/1/2015
guest Why don't you write some battery aggregation code and go into business as a DER aggregator? That ought to be pretty easy, don't ya think?�
1/1/2015
guest Yes I do, as application programming is my primary technical skill. There are literally hundreds of firms, big and small, in this space. If SCTY has some success in this space it will be due to the right strategy, not their ability to implement tightly defined specifications.
There is an enormous difference in the challenge of implementing DER aggregation compared to something like autonomous car. Not only is DER aggregation straightforward, but doesn't produce defensible IP.
Since I have never fracked or drilled in the arctic, these areas seem like a pretty big deal.�
1/1/2015
guest Fracking and drilling are pretty straight forward, which is why we see everyone fracking today and not just the one or two companies who developed the technology. The barrier to entry isn't the IP, it's the vast capitol requirements, which incidentally are also the biggest challenge for companies like SCTY.�
1/1/2015
guest Is this the end of the centralised energy network?
This is a nice illustration of grid economics. Western Australia is very spread out with lots of remote, sparsely populated areas. Most of the network is unprofitable to operate and the WA government must subsidize the network to the tune of $500 per family (per year, I suspect).
![[?IMG]](http://reneweconomy.com.au/wp-content/uploads/2016/04/sean-mc-goldrick-western-power-developing-a-microgrid-solution-to-support-the-kalbarri-community-in-wa-3-638.jpg)
So the network operator is experimenting with microgrid and thinly connected modular grid concepts. Some communities will be completely islanded.
So it's always been an unprofitable idea to operate a grid here, but distributed generation and storage technologies are bringing to light alternatives that may prove more economical.
This is one reason why it is very important to consider the locational value of distributed energy. Certainly a state like Nevada faces the same challenges as Western Australia. There are lots of remote little communities more than 60 miles from the nearest grocery store. (I've actually visited several of these communities.) Maintaining 60 miles of power lines to serve a dozen families just cannot make economic sense. So NV Energy stands to reduce costs spread out to all customers encouraging solar and batteries and working toward detached or thinly connected microgrid solutions.�
1/1/2015
guest Western Australia is about 2.646 million km�
Nevada is about 286,367 km�, so Nevada is about 10x smaller than WA.
Both have a similar population, Nevada is just marginally more populous
A lot of WA is beyond the electricity grid & a lot of WA is on the edge of the grid, I once lived in a town south of Kalgoorlie, back then the company had its own natural gas turbines, so I doubt that, that town was even connected to the WA power grid back then. For WA, a significant amount of grid defection would reduce grid costs for those remaining.�
1/1/2015
guest I haven't seem much interest by utilities in my area to even think about installing renewable/clean energy. The only effort they have put forth is due to mandates by law, and even the laws have been under attack.
Five years later, Missouri still grappling with renewable law
The sole law in question is the Renewable Energy Standard (RES). Lets take a peek at the Kansas City Power and Light (KCP&L) RES compliance plan for 2016. (note: KCP&L is actually KCP&L Greater Missouri Operations Company and is referred to as "GMO" in the plan)
2.1.2 SOLAR COMPLIANCE
GMO anticipates that the acquisition of Solar Renewable Energy Credits (SRECs),principally from GMO retail customers that have received rebates for solar facility installations, will be sufficient for compliance with the Missouri solar energy requirements for the 2016 to 2018 RES Compliance Plan period. The SRECs will be transferred to GMO from qualified customer-generator�s operational solar electric systems as a condition of receiving the solar rebate, a change institutedwith Missouri House Bill 142 becoming law on August 28, 2013.SRECs produced from these solar electric systems will be transferred to GMO for a period of 10 years.?
Tell me I'm reading this wrong -- but it sounds like KCP&L is using solar installed by 3rd parties to meet their own solar energy requirements. In other words, they are doing nothing, and intend to continue doing nothing for the foreseeable future.
http://psc.mo.gov/CMSInternetData/Electric/Renewable%20Energy/2015%20Reports/2016%20KCPL%20Greater%20Missouri%20Operations%20Renewable%20Energy%20Standard%20Compliance%20Plan%20EO-2016-0283.pdf�
1/1/2015
guest Solar competes at the retail level. Utilities cannot compete without "regulatory capture".
Regulatory capture is a form of government failure that occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or political concerns of special interest groups that dominate the industry or sector it is charged with regulating.[1] When regulatory capture occurs the interests of firms or political groups are prioritised over the interests of the public, leading to a net loss to society as a whole. Government agencies suffering regulatory capture are called "captured agencies".�
1/1/2015
guest Seems like there are better environments for renewable energy outside Missouri so they import it, which I don't see the problem in, beside of course it being a negative for the Missouri economy.�
1/1/2015
guest Residential solar is wholesale energy production on the roof of someones home as long as they still rely on the grid. Try going off grid and see how the rooftop solar model holds up against the utility rate.�
1/1/2015
guest I doubt it has little to do with the physical environment. It's pretty flat, mostly crop land. Lots of wind and sun. I suspect the political environment is inhibiting renewables.
I would add that Missouri is not a big coal producer, less than 0.04% of total US production. So they are importing coal from other states when they could be creating new jobs within the state to install and maintain wind and solar assets.�
1/1/2015
guest Customers make retail decisions.
When utilities are held accountable for environmental impact we will have a level playing field.�
1/1/2015
guest And when utilities give up state protected monopoly status...�
1/1/2015
guest
Yeah, I don't see anything wrong with refined sugar besides of course that it can rot kid's teeth, lead to obesity and generally just isn't good for a person's health.�
1/1/2015
guest It doesn't matter where the solar energy is produced as long as it is used. You are saying that even if the US had 100% of its electricity covered by solar panels in New Mexico that would be bad. You guys really have it out for the utilities huh.
@Jack
The thing is that utility scale solar fits directly into the current system with the same low cost as we have now. The benefit of no greenhouse gases without the huge added cost of going with residential solar.�
1/1/2015
guest Ask the residents of Ontario, Canada how they feel about what Hydro One has done and is doing.
In principle (and theory) it doesn't matter where the solar energy in produced. In practical it matters very much. So yeah, it's bad for *many* but New Mexico given how the world works today. If we were all one big, happy family then it's a different story. Perhaps those going to Mars will be able to show the rest of us how to live as a cooperative rather than how we tend to live today, until then the ability for individuals to get out from under utilities (not to be forgotten - run by people) is important.�
1/1/2015
guest I would agree that how ever we get to 100% reneweable adoption is the end game, but looking at the long term vision, distributed generation across the US with battery storage looks to be the BEST way once we are mostly on renewable energy. So why not set out for that path from the start?�
1/1/2015
guest Read the Missouri Solar thread in the Energy forum and you will see why it's more expensive there. The hardware is $1.20 everywhere, at scale residential solar is competitive at retail in every region.�
1/1/2015
guest And yet one of the "smartest" businessman of our times Warren Buffet owns a utility that is paying almost a billion dollars to build a fossil fuel plant in the dessert, which would be the ideal place to put in utility solar.�
1/1/2015
guest This fundamentally wrong. You are ignoring the cost of transmission. Presently the transmission grid cannot support moving power from New Mexico to all the other lower 48 states. Huge transmission lines would have to be added just to make this feasible. And all these lines would need to be maintained. Also, transmission losses are around 1% per 100 miles. So 25% percent of this power is lost just transmitting it to the northeast.
Theoretical work has been done to model the possibility of 100% renewable grid for the lower 48 using just transmission and no storage. Theoretically it is possible, but it requires an enormous and costly grid far beyond what currently exists and it requires very careful positioning of wind and solar generation locations.�
1/1/2015
guest So you would rather pay 20c/kwh and have solar panels on your roof than 12c/kwh and have the solar panels somewhere else? I doubt many would agree. And yes ofcourse in the future the total cost for the residential system would go down, but those same cost reductions would make the grid option cheaper (cheaper solar panels and cheaper batteries help both systems). Why would you pay significantly more to have the solar panels on your roof than somewhere else? If you are concerned about power outtages it would be cheaper to get a battery or a diesel generator for that rare occasion.
@giggle
I'm pretty sure Buffet also owns a large stake in one of the largest utility scale solar plants in the US too, he owns a lot of things.�
1/1/2015
guest Look, I didn't say that planting all the solar panels in New Mexico is the cheapest way to manage the grid, I used that example to proof a point that from an environmental standpoint it doesn't matter much where the renewable energy is produced.
I'm not ignoring anything, you are ignoring the fact that transmission is still a cost with residential solar as long as you use the grid. Transmission cost doesn't have to be huge with utility scale plants, in most of the US there are decent locations relatively close. That added cost of perhaps 1 or 2 cents at most doesn't even come close to the added cost of 8 cents / kwh for rooftop solar compared to utility scale.�
1/1/2015
guest From an environmental standpoint it does matter, hugely, where the energy is produced. I have worked with desert tortoise research for years. I can tell you the solar farms in the California desert are decimating wildlife. The land is scraped bare, and huge fences surround the thousands and thousands of destroyed acres. This sickens me. I have a 3500 square foot house and drive my Tesla 1500 miles per month. All of this powered (with reserve) by less than 400 sq ft. of solar on my roof. No dead tortoises, coyotes, bobcats. No transmission lines.
Simply stated; if you use electricity, you have a roof. Use it!�
1/1/2015
guest I'm sure the huge savings with a grid system could improve the environment for wildlife 10 times as much if used efficiently where it matters the most. I would also argue that betting hard on the utility scale solar with grid system would be much better for the environment as it is actually realistic to go away from burning fossil fuels quickly with this system as it is competetive on cost. Very few people would actually choose residential solar today if they had to pay the real price (practically noone was installing panels on their roof 5 years ago when it was much more expensive).�
1/1/2015
guest This is the SolarCity thread, no one is "paying" anything for rooftop solar here. Every SCTY PPA market is priced 10-15% below local grid prices. What's the problem?
Clearly the best solution it to move hassle-free production as close to consumption as possible so long as it lowers cost, is what the consumer wants and retains flexibility for whatever setup the future may hold.
If you told suburban Philadelphia people 5 years ago that they'd be able to sign a contract and have panels on their roof at negative cost with no maintenance they'd say you're nuts. Yet here we are.�
1/1/2015
guest Slightly below current utility price but with an escalator so on average over the contract more expensive than current utility rates.
Yes, as long as it lowers the cost, but it doesn't, residential solar is much more expensive.
I think this is a good time for me to take a break from the thread again before I start insulting peoples intelligence. I have a feeling I will be back at some point.�
1/1/2015
guest One of the issues with buying renewable energy credits under the idea that it doesn't matter where the renewable energy is generated is this: besides the fact that it's just a lazy way to achieve the overall bare minimum, folks on both sides of the environmental argument regularly divide up all the areas of the country by their generating mix, and use that in their arguments. How often does someone chime in to counter those arguments because of the sale of renewable energy credits? Never. So apparently it matters, whether it should or not.�
1/1/2015
guest Actually, the fight is over keeping the monopoly intact for NV Energy and nothing to do with solar technology as the casinos would rather install their own and keep the savings for themselves. Future problem for all "legacy" utilities in full view... I believe.
Las Vegas casinos seek to power their bright lights with renewable energy
�
1/1/2015
guest This is why a 2% escalator will never(in the short term) be an issue. On the first ~10 years of a 20 year contract signed today with SCTY in southeastern PA, you will NEVER see grid prices go down. As the customer(revenue) base is eroded by solar, the fossil/nuclear utility will need to raise rates in order to cover the static overall cost. This is precisely what happened in Germany and will happen in any location where the energy market is regulated in a remotely free and fair manner.
NV Energy will make another $750M in profit this year because solar has been effectively shut out of the market by corrupt regulators. However if solar, or any form of production, were allowed to compete on a level playing field they would make nothing. Their revenue at current rates would be nowhere near enough to cover their costs.
Clearly the US(or at least Nevada) handles this situation very differently that Germany. In Germany the utility can say this sudden loss of revenue is unfair, but the answer from regulators is "tough beans". We needed X amount of production yesterday and today we need Y which is far less than X. The luxurious benefit of being a regulated monopoly is inversely proportional to the horrendous downside of technological advancement.
If we were capable of acting like adults in this country we could sit down and pencil out a fair plan in weeks, but that's how Germans operate not us.�
1/1/2015
guest http://seekingalpha.com/article/3973101-sunpower-growing-dominance-distributed-generation
The author argues that SunPower could rise to challenge SolarCity in the residential solar segment. They are guiding 350 to 450 MW in US residential for 2016. Good to watch.�
1/1/2015
guest Chanos is speaking today at SALT conference. I fully expect him to bash SCTY as usual.
Agenda
Will be interesting to see what he has to say after Q1 ER.
About SALT conference�
1/1/2015
guest He is been busy bashing Cheniere for last 10mins non stop. About its debt, how the LNG spot market is bad etc. etc.
So we know he has nothing to do with clean energy, fossil fuels and such religious debates. He is simply a financial guy. Where he sees mispricing, he goes short and tells the world.
Here is a reference to his Cheniere short from about a week ago:
Chanos Calls Gas Exporter Cheniere `Excessively Expensive Bet'�
1/1/2015
guest I wouldn't expect him to say one word about SCTY, the job is already done for this quarter. He needs the stock price to go back up in order to spread uncertainty next time around.�
1/1/2015
guest The panel is done. He didn't say one word about SCTY.
Mule got into his head and came out with the news already.�
1/1/2015
guest I'm not ignoring anything. The grids of the world have the opportunity to retreat to those high density areas where the grid service is most profitable and spend less money where grid service is marginally unprofitable.
Historically, the legal framework for monopoly utilities was a bargain to assure that service would be extended to areas where it is marginally unprofitable to provide service. The whole idea was to use profitable high density populations to cross-subsidize service to remote populations. This is legal rationale for a monopoly. Without a protected monopoly, natural competition would offer lower rates in high density areas and charge more or neglect low density areas.
This sort of framework very well may have been necessary 100 years ago as governments struggled to assure that whole countries would be electrified. But it is also a framework which has failed to bring electricity even today to about 1.2 billion inhabitants on this planet. Communities that are too poor and too remote have been bypassed by the grids of the world.
But now cost effective distributed energy technologies are opening up new opportunities for the grids and those at the margin. The political bargain that established legal monopolies is no longer needed. Moreover, that legal monopoly status has been perverted to protect the utilities from competition that would allow all participants to enjoy electricity at lower cost. The utilities have been so worried about protecting their revenue stream from competition that they have failed to see many of the opportunities to cut costs using DG technologies. They now have the opportunities to undo the cross-subsidization implied in the monopoly utility model. Remote communities can be better served by microgrids.
Having a microgrid connection is nice for a customer with rooftop solar because they get some back-up service and opportunities to sell surplus power and trade storage capacity. Whether the microgrid is interconnected with a large transmission grid makes little difference and can be determined purely on the economic cost/benefit of building and maintaining that specific interconnection. To say that a rooftop owner must bear the cost of transmission of power to other customers 1000 km away is at best a moral or legal argument for forced cross-subsidization, but it is not an economic one. To be able to trade power with others within 1 km is quite sufficient for the rooftop solar owner to enjoy nearly all the benefits of large grids. Even at the microgrid scale, utility scale solar pricing can be approached. A 1 MW solar system can easily serve a 100 family microgrid without interconnection to a transmission grid. So all these opportunities are becoming available at a local scale. Only urban centers really need centralized, i.e., remote, power generation and transmission, but urban centers have the economic density to make this cost effective.�
1/1/2015
guest Chanos now on Bloomberg TV (live). He is asked about SolarCity and he carefully evades the question and switches the topic. Umm.. wonder why
OT: Interestingly, he says he has been short LendingClub and refuses to say if he has covered yet.�
1/1/2015
guest Senate passes $37.5B energy and water bill after ending Iran fight
�
1/1/2015
guest I've been telling folks that LNG is a bad bet for quite a while. Wind and solar at PPAs around $40/MWh price combined cycle natural gas plants out of the market. With NG at $5/MMBtu, the fuel cost alone is $40/MWh. The cost of liquefying NG in in Texas and shipping to Asia is about $5/MMBtu. So that leaves no room for buying NG in Texas at $2/MMBtu or making a profit on sell in Asia. LNG is only useful as a back-up and peak generation fuel, not for baseload generation.
The first part of this argument also helps explain why almost no new natgas generation capacity is being added in the US this year. According to FERC Energy Infrastructure Update, 16 MW of NG was added this year through March. The balance of 1308 MW of new capacity was all renewable, including 707 MW of wind and 522 MW of utility solar. (Small scale solar is not reported.) Last year at this time 458 MW of gas had been added. So natural gas looks to be falling out of the new capacity market. Natural gas prices really should go back up above $3/MMBtu for gas producers to turn a modest profit. So with wind and solar hammering PPA prices below $40/MWh, there really is no way for new natgas generation to pencil out as baseload in the US. And upcoming batteries kill the economics for gas peakers. So about the only new gas capacity that might make sense is retrofitting an existing coal plant to run on gas instead.
So it actually is quite helpful for shorts to attack LNG. Traditional energy investors are resistant to facing the decline of fossil fuels, and there is huge potential for a lot of capital to get misallocated. This is a key issue for solar and other clean tech stocks. Capital needs to shift from fossils into renewables. This will accelerate renewables.
So I'll keep a watch out for new gas generation capacity. I suspect more gas will be added later in the year, but it will be at a steep decline from last year. In fact, I have the notion that September 2015 will prove to be the peak operating capacity year for gas in the US. Utility solar is supposed to hit something like 12 GW this year, so it will massively blow past wind for a first time. As this comes out it could attract media attention and serve as a catalyst for solar stocks. Wouldn't that be nice for a change?�
1/1/2015
guest Chanos is an infinitely better stock trader than I am to be sure. I need to remember to pay attention the next time he's chiming in on SCTY or even TSLA as he does seem to be correct, regarding the price action at least. I didn't expect this latest dip at all after the ITC extension and Gigafactory producing packs already. I assumed the bright outlook for SolarCity would be quite apparent. I welcome some positive catalyst! I'm also a bit curious to see how popular the end NV Energy monopoly referendum will be.
Things to know on a ballot measure to end NV Energy monopoly�
1/1/2015
guest You don't need to be a great trader to do what Chanos does. You just need to know how to work the media. I'm sure Trump could do a much better job doing this than Chanos.
Anyhoo... the ballot measure is quite interesting. It's curious to see NV Energy so low key about it. I get the impression that they know now that they over stepped their political welcome and are at risk of getting evicted by voters. If they try to fight this, they risk generating controversy and igniting passions against them.�
1/1/2015
guest Sunrun is up 14% aftermarket due to ER. Maybe it will bode well for the solar sector tomorrow.�
1/1/2015
guest [QUOTE="doggusfluffy, post: 1531035, member: 25523"... I'm also a bit curious to see how popular the end NV Energy monopoly referendum will be.....[/QUOTE]
Things to know on a ballot measure to end NV Energy monopoly[/QUOTE]
A market where the energy retailers are separated from T&D which is also separated from energy producers (3 separate independent business) accelerates the end of net metering because the energy retailer only saves on costs avoided in buying the energy from the independent energy producer. Ending a vertical electricity monopoly ends the regulatory capture that net metered residential solar customers enjoy.
Its simple to have multiple energy retailers, in my country there is about a 20% annual churn rate on electricity retailers. But the T&D, that is naturally a monopoly, in the early days of electricity multiple power poles owned by multiple companies would service the same area, and other areas were unserviced. Very cost ineffective, very un egalitarian. Areas with a single provider could be charged extremely excessive rates....
Its a similar problem to rail, physically it is a monopoly, because of the level of co-ordination & interaction.�
1/1/2015
guest Bonds Detail
personally these seem like a bargain to me, guaranteed 20%-25% annual return, unless SCTY goes to zero.
But be aware, BTU, Peabody had similar bargain bonds in the not too distant past too.
The core issue is that as costs of solar decline, the value of solar assets decline. Its real simple. The faster the decline of solar costs, the faster the decline of solar asset value. TOU is coming, even to California. Any home owner with their own solar on their roofs knows the replacement are (a, lower cost & b, greater capacity). Perhaps PV leasees may not care, but people looking to purchase the house, and their financiers do.�
1/1/2015
guest The remarkable reason that solar is going viral in these 10 American cities
This is pretty cool. I like the dynamic graphics.�
1/1/2015
guest Chanos is doing all that he can to destroy Tesla and SolarCity. The goal of these companies is building sustainable energy and transportation to solve the global warming crisis. With malice and forethought he is profiting from the destruction of our children's future.
I hope he rots in hell. Too strong? I think not.�
1/1/2015
guest I've got to object to the idea that the value of a PPA or lease is linked to the value of the solar system. This is not collateral lending like a mortgage, where the borrower has a kind of put option on the value of the collateral in the form of a default. (I work in mortgage finance.) In practice, very few mortgage investors would every default strategically to excise this option even when their home is severely below the remaining balance. Rather, even in the recent housing crisis. Defaults were driven by financial distress, especially the loss of employment, rather than decline in home value. The difference that negative equity makes is that in financial distress the borrower may be unable to find a buyer who will pay more than owed on the home. Hence, lenders will work out short sales and loan modification options. But this stuff does not really apply to a solar lease, loan or PPA.
The key risks for SolarCity are financial distress coupled with decline in the value of the home, not decline in the value of the solar system itself. So basically, it is the next mortgage/home price crisis like we saw 8 years ago that SolarCity needs to worry about. First, SolarCity customers are obligated to pay their lease or loan in full regardless the value of the systems (unless SolarCity fails to keep it in working order). Failure to do this is default and will have serious credit implications for the borrower. So it is extraordinarily unlikely that anyone would strategically default just to get a cheaper solar system. The almost necessary condition for someone to default is financial distress, in which case mortgage payments and other financial obligations are also at risk. A home owner in serious financial distress with positive equity in their home has the sale of their home as recourse. So if the housing market is in fair condition, this way out resolves the problem for SolarCity. The obligation to SolarCity is transfered to the new homeowner or embedded in the purchase price of the home. So the key issue here is home equity inclusive of the value of the solar system. The same would be true if a home owner had financed any other sort of home improvement like a new roof or HVAC system. If there is sufficient equity in the home, the destressed homeowner walks away with cash in pocket and seeks a more affordable living situation. They have their dignity and creditworthiness intact, which is a much better way to start over. So finally, the situation that gives the borrower the fewest option is when their home value has declined such that the have negative equity. At that point options depend on what the mortgage lender is willing to work out. A loan modification would work well for SolarCity because loan modifications make allowance for paying utilities which would include a SolarCity payment. Here the objective of the bank is to determine what the borrow is reasonably capable of paying for total homeownership and adjust the terms of the loan to meet the budget. The budget will include SolarCity payments, so in principle the bank is satified that the borrower has the means to make those payments. When it comes to a short sale or foreclosure, it become more difficult to say where SolarCity stands. In foreclosure, the bank takes possession of the property and is in no obligation to SolarCity. However, SolarCity may have the right to remove the solar system. Thus, whatever value that system may have can be withdrawn from the total value of the home. The bank will understand this and will likely want the system to remain. My guess is that most banks will agree to allow the system to be transfered to the next owner or pay some nominal amount for it when it is sold. A bank may even be willing to assume payments while it is bank owned if there is a need to keep power on in the property, otherwise, the bank will try to minimize all costs to carry. So this is all very messy stuff and very rare.
Keep in mind that some of the major investors in SolarCity are themselves sofisticated mortgage lending banks such as Bank of America. Such institutions are keenly aware of the complexities and risks of home and home equity lending. So personally, I have great confidence that they have the ability to undestand and quantify the credit risk facing SolarCity, risks that they are immediately exposed to by financing SolarCity.
So if you got lost through all that, the key risk is total home value decline coupled with customer financial distress. It's about another boom-bust cycle in housing, not the positive advance of solar. A nice proxy for this real risk, then, would be MBSs (Mortgage Backed Securities). When MBS investors become worried about a mortgage crisis, then it would be time to worry about SolarCity and its ABS instruments.�
1/1/2015
guest That may be a bit strong. But if we are going to invoke divine judgment in the afterlife, perhaps we can invoke divine assistance to move investors and consumers to make the right investments in this life. I remain eternally optimistic. Most people really do want to believe that a better future for this world is possible. Hope matters. The merchants of FUD are just petty pickpockets. They have no hope in this life or the next.�
1/1/2015
guest If you take the variables and twist them until they fit your argument, then yes buying from the utility is cheaper. Perfect logic.
If you sign a contract for electricity 13% cheaper than the grid with a 2% escalator and your grid has an average annual price increase of 4%, well then you're probably in good shape. And that's before solar has even had a chance to destroy the utility's profit scheme, in which case grid prices go up much more than 4%.
Most of the world has accepted this as fact by now and that may be the reason you find yourself repeating the same concept over and over to people who simply believe you are wrong.�
1/1/2015
guest Living well is the best revenge. Let's use these dips to accumulate and burn him eventually when a short squeeze happens.�
1/1/2015
guest I am of the opinion that FUD is a shortcut to investor capitulation(if you can survive the volatility). All investor concerns must be satisfied before major positive sentiment will be showered upon SCTY. All Chanos is doing is forcing SCTY to make that happen. He's drawing a straight line that he and all the rest of us know is not reality, but it's a valid conversation piece. If that's the way he chooses to make his money, then so be it. Nobody likes gonorrhea, but I'm sure it plays a vital role in evolutionary biology.�
1/1/2015
guest This article was from back in March, my apologies if it's been discussed. This just blew my mind and makes be excited to hear the outcome of the
Arizona Study Claims Solar Leasing Companies Can Afford to Make Net Metering Changes
As part of the UNS proceeding, APS recently released the results of a study that seeks to shift the thinking on net metering. The report, conducted by Navigant Consulting, estimates that solar companies earn a 40 percent project return on rooftop solar leases in UNS territory, which undermines claims that rate reform will cripple the industry and kill jobs.
"We conclude that solar TPO [third-party-owned] providers have headroom to adjust to some changes in rate structures while maintaining project returns,� the report states.
Jeff Guldner, senior vice president for public policy at APS, said the report is designed to end the gridlock on solar policy discussions.?
These guys are so stuck in the monopoly mindset they don't even realize consumers can do whatever they like. We are under no obligation to provide zombie profits utility tasks that have become obsolete. A regulated utility is there to perform tasks that cannot be handled efficiently by a marketplace and they are given a nice chunk of profit for the job, end of story.
If this is the logic they're bringing to arbitration it's going to be a delicious victory for solar. I believe it's happening very soon and will only last two weeks.�
1/1/2015
guest Tesla Confirms Details of Powerwall Improvements
2500 units sold.�
1/1/2015
guest Well that is more in line with my comments of appreciation around shorting LNG. That is, shorts can play an important roll in overcoming over-investment in a given company or industry. The over investment in LNG also perpetuates over investment in natural gas and under investment in renewable energy. So I am happy to see short provoke traditional energy investors to recalibrate their expectations of return, but it is best to do this on the basis of facts and sound reasoning. FUD, as I understand it, is emotional manipulation that plays very loose with the facts and often deploys deceptive reasoning. If an investor shorts where there is truly over-investment, that is an economic good, and there is little need to use disingenuous media tactics.
In the case of SolarCity, I do not believe there is any real over investment going on. Still some benefit is derived simply by challenging SolarCity to do a better job articulating their business model and providing meaningful metrics with which to gauge progress. This is important because this industry is fairly novel in how they create value, so transparency and robustness are very important to securing ongoing capital. That is, a poor job in communicating business model and financial results would lead to under investment in this industry, and that under investment would have negative economic impact. Incumbent industries like utilities and oil & gas have the advantage that business models and performance metrics have long been worked out and investors pretty much buy into them at face value. For example, the oil industry measures "demand" in barrels, not dollars. This fosters the illusion that "demand" is still increasing even though aggregate dollar amount that the world is willing to pay for crude is in serious decline. So in a proper economic sense demand is already well into decline. And yet the industry moves along with very unreliable metrics, and investors have great confidence that if "demand" keeps growing at 1.2 mb/d each year, that the price will eventually recover to $80/b or more. So this kind of conventional thinking needs to get shaken up. Where are the shorts harassing oil investors that they're following the wrong business model and using the wrong metrics? Well, I guess I'm doing my part.�
1/1/2015
guest �
1/1/2015
guest Besides the rise of EV's, this could be another big demand driver as water becomes more expensive and scarce.
To Make Fresh Water without Warming the Planet, Countries Eye Solar Power
�
1/1/2015
guest SolarCity recommits to 1,460 Buffalo jobs, but more will be R&D and sales - The Buffalo News
�
1/1/2015
guest nice theory, why are solarcity bonds at 20-25% yield?
the PPA's are bundled and sold off as an asset backed security. whats left is something akin to credit card fiance based upon good FICO scores but no collateral, thus the junk yield rates.
Is this a problem, perhaps yes, perhaps no.
trying to raise capital with a 20%-25% yield is a problem.
there are 2 debts here, the ABSs and the solarcity bonds. The ABS should continue to be mostly OK, but if ABS bonds have even a little bit of hurt, its the solarcity bonds that seem to carry that pain.�
1/1/2015
guest Sounds to me that they don't intend to fully build out the factory. That could be due to 1) Lack of capital 2) Lack of panel performance/value, or 3) A projected oversupply of panels in the next few years.
It seems they have a minimum factory employment number of 500 and have built a story from that number. Of COURSE it's a complicated and confusing story. That is how solacity rolls.�
1/1/2015
guest The bond market often looks at stock prices as a basis to price bonds. The low stock price drives high yield on the convertible bonds. And yes, this is a way that shorts can drive up the cost of capital for target companies.�
1/1/2015
guest Just a thought: how low would SCTY have to go before Elon made a bid to take the whole thingamojang private? Below $10? That would be $1 billion, give or take a few millions. I was kind of disappointed he didn't buy the other day around $16.�
1/1/2015
guest I doubt Musk would take SCTY private for valuation reasons. Musk has said that SCTY's providers of capital want it to be a public company so that it faces increased scrutiny of its books.�
1/1/2015
guest I don't know why Elon would want to buy a(nother?) doomed, failing company with an incoherent and unsustainable business model.
What SolarCity's new portfolio of grid services can do for utilities
�
1/1/2015
guest Hey, this is very cool. I like that they can deploy quickly in areas like SoCal where the gas leak has disrupted gas power generation. They need these opportunities to get beyond the demonstration stage.�
1/1/2015
guest Going after bigger game: Why Jim Chanos is Shorting the Oil Majors | OilPrice.com
I'd prefer to discuss this in the Shorting Oil thread.�
1/1/2015
guest Agreed. Also it's looking like there will be plenty of opportunities from the SunEdison fallout. Chanos shorting oil now is a strange twist but he seems far more market dynamics motivated than ideologically to me...although I doubt he's a SolarCity ambassador today.
Solar bankruptcy forces Palm Springs to change course
�
1/1/2015
guest Who is Jim Heaney and why is he being paid to write BS about Solar City? He's either very stupid or a very weak troll. This article is 100% on target. http://seekingalpha.com/article/3975292-solarcity-pulling-fast-�
1/1/2015
guest Chanos looks to short companies that seem to require additional capital to pay pre-existing 'outgoing payments'
be it SCTY, Shell, Pertrobas, Cheneire, coal stocks, (CNX). Its all the same to him.
He particularly looks for entities with a strong reputation or leadership aura. So again
SCTY, Shell, Cheneire, are all leaders in their fields.
He is also particularly sensitive to a Chinese slowdown, so oil prices, for longer.
Companies he avoids short display the following traits
- Predictable, consistent cash flow
- Defensive and/or defensible business
- Not dependent on superior management
- Low/reasonable valuation
- Margin of safety using many metrics
- Reliable, transparent financial statements
Companies that attract Chanos like a moth to a flame
- Cyclical and/or overly dependent on one product
- Hindsight drives expectations
- Marquis management and/or famous investor(s)
- Appears cheap using management�s metric
- Accounting issues
�
1/1/2015
guest How long have they been working on this facility now?
Why did they only announce these delays for 2017 by 2/2016?
SolarCity delaying Buffalo factory production - The Buffalo News�
1/1/2015
guest
Where will they get the $5 billion??? [/sarcasm] Haha some things never change, huh? The delay receiving manufacturing equipment has been known for some time now. Just because somebody writes an article about it now doesn't mean you just broke some new news.�
1/1/2015
guest Yeah, this SunEdison bankruptcy looks like an opening for SolarCity, particularly C&I.�
1/1/2015
guest TFTF, nice use of big font. Use the crayon font next time for even more impact.�
1/1/2015
guest To be fair I think it's the same font size as the headline, so probably an artifact of cut and paste.
There is a separate article on Elektrek out now about charges of corruption surrounding choice of contractor at Riverbend, finger pointing towards the governor rather than Solarcity, but also talking about delaying the project. Seems like a concerted FUD effort to me. Interesting our old friend TFTF shows up at the same time.�
1/1/2015
guest This new article indeed points to additional/new delays (in addition to the ones reported in February):
Is the SolarCity Gigafactory at risk? State funding on hold as lobbying connections investigated�
1/1/2015
guest Energy Storage 4.0: The Plug-and-Play Grid Is Not That Far Off
�
1/1/2015
guest Is Brian Kolb behind the nonsense getting reported about Solar City? He's the only NY representative who has re-tweeted any of the FUD articles.�
1/1/2015
guest UNSW solar team achieves huge leap in solar cell efficiency
This is pretty impressive, 34.5% cell efficiency for unfocused light, decades ahead of 24% efficiency.
Manufacturing efficiencies are needed to bring it to market, but if this works out, this is a big advance for rooftop solar especially.�
1/1/2015
guest http://www.azleg.gov/legtext/52leg/1r/bills/sb1465p.pdf
apologies for the capitalized below, its just a cut and past from the legislation.
....
2. BE IN AT LEAST TEN-POINT TYPE
....
'THE AGREEMENT MUST ALSO CONTAIN A FULL AND ACCURATE
ESTIMATE OF THE BUYER'S OR LESSEE'S ESTIMATED UTILITY CHARGES DURING THE SAME
PERIOD AS IMPACTED BY POTENTIAL UTILITY RATE CHANGES RANGING FROM A FIVE
PERCENT ANNUAL DECREASE TO A FIVE PERCENT ANNUAL INCREASE FROM CURRENT
UTILITY COSTS. THE COMPARATIVE ESTIMATES MUST BE CALCULATED BASED ON THE
SAME UTILITY RATES'
....�
1/1/2015
guest So electracity, what's your position on SCTY, are you long, short, out entirely. What are your thoughts on the near term prospects?
I sort of fell off this thread after the redesign, and I've only read the last 5 pages or so so far to catch back up. Looking for the cliff notes�
1/1/2015
guest I'm long with leaps and shares. I'm not exactly brilliant though, I rode it all the way down from 36. I've purchased a few more leaps recently.�
1/1/2015
guest I am holding a substantial position, though I do think that the stock is temporarily underpriced.
I am waiting to see SolarCity complete righting the ship. Here are my priorities for what I'd like to see:
I think if SolarCity can achieve these goals it will be well positioned for sane growth. Selling grid services would be the cherry on top.
- Become cash positive. (FCF + ProjectFinancingCF)
- Reduce sales cost/Watt below $0.45/W, achieve total cost below $2.75/W.
- 900 MW installed in 2016.
�
1/1/2015
guest Sure, but you could use the crayon font just for grins.�
1/1/2015
guest From my IB newsfeed:
�
1/1/2015
guest Why isn't SCTY number one? What does MGT have?�
1/1/2015
guest Assembly leader describes SolarCity as �worthwhile project,� likely to get funding - The Buffalo News
�
1/1/2015
guest FWIW, I recently bought 24 of the 265W panels, there are about 276 panels in a 20' container and 588 in a 40' container. http://seweb.azurewebsites.net/Files\Products\PANEL\DATESHEET\DATESHEET--TOPSOLA TSM60-156P.jpg If a small crew can do 2 sites per day, at about 20 panels per sites, then that 40 panels per day, so they can fully deplete a 20' container in 7 work days, or a 40' container in 15 work days.
So the hurdle to get bulk logistic scale (1 x 40' container regularly each month) is within reach of a family business. If the family business has a handful of subbies working for them, they can use a 1 x 40' container regularly each week. If the family business can also supply others, they can use a 1 x 40' container regularly each day.
All the ladies I spoke to at that electrician I recently used seem to have a Nonya accent, it felt all in the family, so to speak, easy to imagine them supplying other electricians also.
What this suggested to me is that small electricians can scale to basically the same cost basis as SCTY, but without the overhead burden of SCTY. Akin to Dell vs IBM in the 90's. I need to think more about this,
It also suggests that productivity of rooftop solar is woeful compared to utility guys who can get a small team to install a sea container of panels in the time it takes a rooftop installer to install a trailer load of panels.
I could go further, but this is starting to feel like initially a gold rush type business, but where long term, the profits trend to be similar to general local, domestic electrician levels.�
1/1/2015
guest More lies?
�
1/1/2015
guest California PUC proposes storage buy to deal with Aliso Canyon gas shortage
�
1/1/2015
guest I wonder who besides Tesla would be in a position to offer sufficient storage in that timeframe.�
1/1/2015
guest SCTY up 5.35% for apparently no reason. Short squeeze ?�
1/1/2015
guest That's what I was thinking.�
1/1/2015
guest I don't think enough shorts are underwater at this price level for a significant squeeze.�
1/1/2015
guest Perhaps Musk could put his 600 million to use before making his quarterly tax payment.�
1/1/2015
guest Man, the literal inventor of the PPA visits the thread, and the SCTY bulls don't even notice.
Are retained earnings now out of fashion? Did you guys move on to a new value proposition for SCTY and I didn't notice?�
1/1/2015
guest Say what?�
1/1/2015
guest I'm also confused by that post.�
1/1/2015
guest Jigar was co-founder and the first CEO of Sunedison (assuming the Jigar above is that Jigar, which is likely) and did/does a lot of the first innovative clean energy financing including PPA.
Since I mostly don't like the effect of PPA on residential solar, I say "burn the witch"
Jigar is good to follow for his clean energy perspectives.�
1/1/2015
guest Sorry to disappoint. I am not Jigar Shah.�
1/1/2015
guest Sorry. But you could substitute. Just criticize utilities a lot.�
1/1/2015
guest Ok, not really Solar City, but since NV Energy's PUC decision put the squeeze on solar in Nevada.
MGM Resorts to leave Nevada Power, pay $86.9M exit fee�
1/1/2015
guest Congrats to the MGM. Great decision. I hope this is the tip of the iceberg.�
1/1/2015
guest That is hugely relevant to SCTY. They may very well replace NV Energy as MGM's energy provider. Bold move, really highlights the hot mess Nevada has become.�
1/1/2015
guest Brand value hypothesis. I buy that for Tesla, but solar panels are perceived differently; they're becoming such a commodity I don't believe SCTY has much brand value. SunPower has some brand value due to their many-year record of "most efficient commercially available panels".
After customers don't need to be "educated" about solar and sales costs drop industry-wide... does SCTY have a cost advantage on installs? I actually can't tell. Maybe, maybe not. Their panels are not currently the cheapest per watt in the industry, though the theory is that the Silevo factory is supposed to change that... but of course it isn't actually running yet. Their racking costs are totally obscured at this point, and I see no way of identifying them any more. They have no known advantages in installation procedure or design (maybe they have an advantage but I don't know of one) and they have a disadvantage in permitting (local installers have an advantage in permitting).
This is where I am. SCTY could be undervalued by a factor of 100 or overvalued by a factor of 100 and I really do not believe that I can tell from the information available to the public.
That tells you where sales costs have to end up. Germany has higher labor costs than the US -- and worse sunlight, so the inherent value of the panels is lower. Arguably the feed-in tarriff made panels more of a "no brainer" there than here, but dropping module prices will make panels a no-brainer here too soon enough. There's absolutely no reason for the US sales costs to be higher than they are in Germany, long term.
Can SCTY compete in that environment?
It's worth remembering that SolarCity is immediately monetizing all its future cash flows. This means they don't have much tangible book value. This is not like Tesla, where the huge factories have an inherent value. Theoretically the Silevo factory will have such value if it ever gets going.
SolarCity is not just a bet on residential solar. Residential solar does compete directly with utility solar, and tends to be more expensive. But residential solar adds the extra value of self-control, ownership, etc., and people pay a premium for that. A huge premium. People want some grid-independence, even if it's not perfect, and will pay a lot for it.
Unfortunately, SolarCity's PPA model *removes* all those benefits; anyone paying the premium for a certain amount of grid-independence does not want a PPA, they want outright ownership. SolarCity seems to be a bet on very specific financing models. I do not think those financing models are sustainable. A residential PPA will turn out to be more expensive than buying your power from a utility solar farm (which is actually pretty close to what I am *already doing*), and contains none of the "I control it myself" features.
The other motivation for the PPAs is monetizing the ITC for those who can't use it directly, but this is a temporary phenomenon driven by the tax code and will become irrelevant in a few years.
When you eliminate the PPAs, I don't think SolarCity has an advantage in the straight-up sales market; it looks like they lose money there, actually.
No, they're not. Obviously they have to advertise numbers below the current local grid price... but those are first-year prices SolarCity includes a 2.9% annual escalator in their PPAs, so it's very likely they'll end up being higher than utility prices within a couple of years. There's no reason to expect utility rates to escalate that fast given the installation of utility-scale solar, and in fact my utility rates haven't gone up in 7 years. You can get a non-escalator PPA but they'll quote you more than the local grid price, as least in the parts of the country with fairly low grid prices (California and Hawaii are another matter).�
1/1/2015
guest We separated generation from distribution in NY over ten years ago. So this is not what happens here. Grid prices have stayed constant, because the grid charges for transmission, and I can buy my generation from whatever utility solar farm I like.
You're describing a situation in PA where *utility solar* has been artificially hobbled by a vertically integrated utility which is cross-subsidizing its old fossil and nuclear plants out of the amounts customers are paying for grid access (transmission & distribution). I think the utility solar lobby is strong enough that this situation is not going to persist, especially since we've already gotten rid of it in several states.
Residential solar will be competing with utility solar.
Now, I think there's a strong and permanent market for "own your own" residential solar, particularly with batteries -- the product being demanded here is grid-independence, resilience against the regular blackouts, a way to say "go to hell" to the utility company. People will pay huge premiums for that, and it can be twice as expensive as utility solar and still sell very well. But SolarCity has no competitive edge in that, at least not yet.
While this is true, a rash of stories of customers who are locked into way-above-market prices for years would certainly put some hurt on SolarCity's reputation and make it hard for them to get new customers.
Yes, customers are likely to continue paying their PPAs -- just like they pay their mortgages -- even if they're underwater. But they'll be *bitter* about it.
Meanwhile, SolarCity has already monetized all those future income streams from the existing PPAs by securitization. So that income is already accounted for and spent. Sure, the investors in the Special Purpose Vehicles backed by the PPAs will get their money from the bitter and angry customers.
But what happens to SolarCity at that point? With a reputation as the "price-gouging" company which saddled all these people with overpriced electricity while promising zero down... do they really get more customers, or do customers go to the competition?
Obviously, if the Silevo factory in Buffalo is churning out solar panels which are significantly cheaper per-watt than all of the competition while being very efficient, none of this will matter. But if it's not, I don't see SolarCity having an advantage in the *highly competitive* solar market.�
1/1/2015
guest MGM Resorts, Wynn planning to leave NV Energy
Both the MGM and Wynn to leave NV Energy.
Industries become disrupted when their business models are disrupted. This could happen much quicker than many expect.�
1/1/2015
guest Who is/are the third party/ies providing them with energy?�
1/1/2015
guest The solar battle on Nevada rooftops
�
1/1/2015
guest So true-
'the grid of the future' is photonic from that big Fusion reactor in the sky
Translation- "the utility needs to adapt"- but it won't�
1/1/2015
guest Exactly. I have yet to see any major vested fossil interest merge into the renewables world in a way that moves them away from the past. Technically the German utilities are now focused on managing the grid and renewables, but they were dragged kicking and screaming and forced into this new dynamic.
NV Energy has proven they will maintain their monopoly position by any means necessary, they are among the least likely to adapt. They will fight this battle to the death and inevitably die.�
1/1/2015
guest Hot new solar cell
I don't read all posts on this thread, but you might be interested in this development at MIT.�
1/1/2015
guest You brought up a lot of interesting questions that I will definitely go back and address in time, but this one is my personal focus. SCTY reported $.91 in sales cost for 1Q......which is absurd. They did get stuck with a lot of stranded expense related to pulling out of Nevada, but they must turn the corner on sales within a year or so IMO. Fortunately this is the same burden on normal installers right now as well.
Once sales cost is mostly stripped and solar is up to scale in major markets, it's all over. $2.20/W costs and $2.45/W prices are right around the corner and then each can drop another $.30 from there with the market at full blast. In that scenario it's really all about service preference because the ITC takes another 30% off the top and we're quickly talking about something very affordable.
Once service is the main deciding factor, why would most people not want the SCTY PPA? I'm mean, I'm owning because I'm wildly interested in every facet of the process(and I'm cheap), but most people just want sustainable energy as an ultra-simplified service at a reasonable price.�
1/1/2015
guest Wow, SCTY up 10%. Is this because of news about the Kuai project going online or some other news that have passed me by???�
1/1/2015
guest I believe its because of ReneSola. Their earnings were significantly better than expected as a result major solar stocks are getting a lift.�
1/1/2015
guest The entire "self-sufficiency" crowd ("to hell with the grid") will want to own. The non-self-sufficiency crowd who are looking strictly at price will buy utility-scale renewables ("inject it into the grid for me") which will be way cheaper than SolarCity PPAs. That's the scenario I see as most likely.
This would restrict SolarCity PPAs to the remaining "non-deregulated" markets where the utility still controls generation and transmission, and lock them completely out of markets like NY where generation is separated from transmission. The trend is to separate generation from transmission.
Convince me that SolarCity has got a way to compete with buying electricity from the nearby solar farm for the "non-self-sufficiency" crowd. Or that they have a competitive advantage over other installers for the "self-sufficiency" crowd (Zep or Silevo could provide that advantage, but none of their numbers are broken out and I see no way to tell whether they have an advantage.) Because I think if SolarCity ends up restricted to the underegulated markets, their addressable market will shrink every year.�
1/1/2015
guest I shouldn't have replied today because I don't have the time and your points are very interesting. I will say this for now....
1) People have an inherent desire to be free from the guy on the other side of the meter and a dollar amount can be applied to that desire. Especially if that dollar amount keeps the consumer below existing costs and requires no effort.
2) Today's cost of "utility solar" over point-of-use solar is being accepted as permanent. $1.75 vs $3.25 will not last much longer plus transmission is not free(and grows as a % as install costs drop). When we're at $2/W residential and $1.50/W utility like Germany, I don't see a real cost difference there once tyranny and transmission costs are added in.�
1/1/2015
guest Actually utility is just above $1/watt, so 1/3rd the cost of residential. I'm sure this small difference will even out in no time though.�
1/1/2015
guest I absolutely agree, but SolarCity just subsitutes themselves as the guy on the other side of the meter.
Interesting point. This would be great for retail-scale solar installers, but again, I'm not sure it benefits SolarCity *in particular*.�
1/1/2015
guest Hard to say what time may bring, but around here "utility-scale renewables" is laughable at best. There is no such thing. If there was, I would buy it. But I can't, because it's like a myth. So I'll go solar myself, happily tied to the grid, and a SolarCity PPA would be fine. Am I arguing against what you are saying? Actually, no, because I still won't buy SolarCity PPA because SolarCity doesn't do business in my state. So SolarCity still loses my business.
How can SolarCity get my business? I don't care that much about ROI. I just care about advancing sustainable energy for the benefit of future generations. Can there be no profit from this? Surely they can find a way. Tesla found a way. Tesla has my business.�
1/1/2015
guest I'm actually a big fan of SolarCity as a *project*.
But remember: Musk will consider it a success if all cars are electric and Tesla goes bankrupt.
Likewise, Rive will consider it a success if there are solar panels on every rooftop and SolarCity goes bankrupt.
This is something investors have to watch out for! Now, I have very specific reasons to believe that Tesla is not going to go bankrupt, largely due to the utter and total lack of competition. I tried to prove the same about SolarCity, but there *is* competition and lots of it.�
1/1/2015
guest drinkerofkoolaid is apparently hacking TMC accounts
There has never been the slightest suggestion by any research organization that the presence of absence of any solar provider affects total solar installs in the slightest. It is a very competitive market. If solarcity was actually differentiated like Tesla it would not be the crap business that it is.�
1/1/2015
guest My uncle was a Republican committeeman in Missouri.
I'm surprised women are allowed to be employed outside the home.�
1/1/2015
guest Sometimes I forget this thread is supposed to focus on SolarCity as an investor discussion. A quick touch on that. My philosophy is that investing in a better future is never a bad investment. Moving to sustainable clean energy will lead to a better future. My research for that is called science. I don't care so much about making money. Money is an imaginary construct. It's deemed only to have value because people say it does. The future, however, is very real. Money is a video game. The future is real life. The video game can't exist with out real life to support it. The video game may be all about wealth, but pull away that facade and you find that the advanced technologies we cultivate and the condition of the planet in the future will be what really dictates the wealth of the people.�
1/1/2015
guest If our main concern is SCTY as the solar leader not making enough profit between now and the point where solar/wind/storage has shifted the entire energy dynamic of the country sustainable.......I think we're going to be OK.�
1/1/2015
guest Watch now: Ralston Live | Jon Wellinghoff 5-23-16 | KNPB Channel 5 Video
Looks like potentially regulatory changes coming in Nevada (and other states)soon. Big net metering reports out now and tomorrow demonstrating 11 value adds to the grid from distributed solar customers.
The multiple new peer reviewed data reports showing a significant benefit to the grid with DG.
Solarcity Press conference tomorrow.�
1/1/2015
guest Networks discover that rooftop solar is no longer the enemy
I like to watch energy developments in Australia because I think they are a few years ahead of the US. This is mostly dictated by the larger price gap between grid power and rooftop solar which led to earlier adoption in Australia. But the utilities have followed a similar play book of responses to distributed solar.
First, there is denial. The utilities see rooftop solar as triffling, but are willing to follow some of the regulatory obligations to accommodate customers with solar. This is the time of easy net metering. Then, solar becomes economical and adoption rates soar. Soon it becomes clear that solar is a threat, and the utilities enter the second phase, anger. Here the utilities lash out against solar and try to undermine it's economics with punitive policies and rates. Utilities in Australia tries every trick in the book a few years before the NEM battles in the US.
Now, utilities in Australia seem to be entering the third stage, bargaining. They recognize that the customer is central. This is an intellectual breakthrough for entities thar never really had to think about what customers want. But a prerequisite for being in the business that customers will choose is respecting that the customer choice is real. This prepares utilities to bargain with customers. Their business models are up in the air because they really do not know what bargain can be struck with customers. Moreover, the anger stage really abused alot of customers, especially first movers and the best informed. Will these customers trust anything the utilities tries to offer them?
But at least in Australia utilities are coming to recognize that they need to put customers first and strike a new deal. The question is whether this comes too late. Have the utilities so abused customer trust with ridiculous and punitive policies that these customers can never be won back? I suspect some have indeed gone too far. For example, in the US, I think NV Energy has done permanent damage to their reputation and customer trust. So this sets the utilities up for the fouth stage, depression. Particularly those utility that have destroyed too much customer trust will find it very hard to strike a new bargain with customers. There abused ratepayers will simply prefer to do business with just about any other company. This is, in fact, a key advantage for players like SolarCity. They have a name and track record that customers can trust. But it will be very hard for many utilities to win back basic trust. So customer response will be cool, and attempts to offer what customers really want will underperform expectations. So the utilities may find themselves in a depression. The new opportunities in the market will largely pass them by. What is left is the final stage, acceptance. They utilities will simply come to accept that they will play a much smaller role in meeting customer's electrical needs. Some may even go out of business.
The key lesson here is that utilities really need to be very careful not to lash out against solar in anger. The reputational damage can be deep and irreversible. Even before the bargaining stage utilities need to put customers first and respect the customer's desire to choose. This means every policy change around accomodating solar needs to be evaluated from a customer viewpoint. Adding punitive fees and cutting net metering needs to be framed in such a way that solar customers know that they are valued customers and are being treated fairly. Anything less than that destroys trust and damages reputation. At a minimum utilities need to do focus group research on solar customers before proposing any rate changes. Any sign that customers are simply biding their time until batteries or other technologies become cheaper should be taken as a serious warning sign, because eventually these price barriers will come down. As that happens, all that will be left for the utility is the quality of the customer relationship.�
1/1/2015
guest Good write-up- thanks. Part of the antagonistic angry phase comes from an odd paradox. Normally it would just be adding emphasis on customer acquisition and relationship. But in this case the customer suddenly becomes a competitor. A Bridge Too Far perhaps-
In this case, it's literal- 'Power to the People'�
1/1/2015
guest Wow, someone just shorted the daylights out of SCTY. Intense drop.�
1/1/2015
guest ![[?IMG]](https://i.imgflip.com/14okdi.jpg)
�
1/1/2015
guest It may just be market makers, a dozen of my stocks that were climbing simultaneously moved sharply down at the same time. Gotta love how the game is played.�
1/1/2015
guest Seemed like a giant sell order + stops being triggered to me. 400k volume in 2 minutes coinciding with a ~$1.50 drop. That's huge for a $24 stock.�
1/1/2015
guest Ok, so with resorts/casinos leaving this means they'll pay what exactly? And who exactly? Will they employ more people to oversee these processes as well as have to maintain their connectivity? While I thought I followed NV closely, I didn't realize this move was possible. Are there other big businesses that manage themselves on the open wholesale market in NV? Are there case studies available to read?
I find this move fascinating and have a great many more questions like
What is the pie chart of available energy look like in NV? What % from NV energy, wholesale and others?
How much is the typical price paid for wholesale on a daily, weekly, monthly, quarterly or base load basis?
Is the wholesale market typically "greener" or is a very green and does it depend on who or when you buy the load?
Again, very fascinating and I'll be looking for articles today to help answer some of these questions.�
1/1/2015
guest SolarCity: Nevada rooftop solar delivers 1.6�/kWh in net benefits to grid
+add linky to official release:
http://www.solarcity.com/sites/default/files/SolarCity-Distributed_Energy_Resources_in_Nevada.pdf�
1/1/2015
guest Fairly obvious that these will be the conclusions of any logical study done on residential rooftop solar in the southwest markets. So the question is......
Does SCTY push for more than net metering as part of it's arbitration hearing with the Arizona PUC?
If we all know net metering is more than fair in these markets and we all know that the Arizona PUC will come to the table with a position that is wildly unfair, why not bring to the table a net metering +.01% option out of principle? SCTY should easily be able to prove their option has greater benefit at less total cost.
Things are progressing nicely.�
1/1/2015
guest I think it is more like a parent who overreacts to a teenager who is just starting to express a little independence. The parent is threatened by the child's desire for independence, viewing it as rebellion, and escalates conflict. The paternalism of utilities can be overbearing and downright condescending. Utilities generally do not treat industrial customers this way and should not treat residential customers that way either. So the advantage that SolarCity has is that it can approach residential customers as adults and offer a spectrum of alternatives.
We have a perennial debate here about PPAs, but I think that PPAs strikes a balance between ruggedly independent do-it-yourself off-grid solar and father-knows-best utility power. The key issue along that spectrum is the primacy of customer choice. Many customer will value the convenience and simplicity of utility power. Just pay your bill and the power company will handle everything else. And many customers are willing to pay a premium for that level of service. Another segment wants much more independence and does not trust the patronizing advances of utilities, but one has to work much harder for that sort of independence and the financial advantages that come with it. So in the middle, there is a segment that wants a little independence and savings, but also convenience and service. I think this is middle market that SolarCity excels with. I think the problem we have in discussing this as investors is that our personal biases pull us to either extreme of fiercely independent solar or the utility knows best. In my view, both poles are valid and will remain forever attractive to certain segments. What is harder for some to accept is that consumers will ultimately decide, and there is enormous value in a balanced business model that caters to a middle market.
From either pole, one can try to deconstruct this middle ground, and plenty on this list have tried. But offering a well rounded bundle of product, pricing, service, and financing is a winning strategy in just about every consumer category. If you pick apart the components, you miss the value of a well rounded package. You want the best product? Hire a high-end contractor to build out the system as you exactly specify with the best components. You want the best pricing? Hire a cheap contractor who pinches pennies on everything. You want the best service? Just keep paying your power bill and let the utility handle everything. You want the best financing? Just use all that cash you have just sitting around, or refinance your mortgage. All these are valid objectives with valid solutions. But if you want a quality system, a little savings, with responsive service and convenient, flexible financing options, then SolarCity puts all these pieces together for you with a name that can be trusted. This is really the essence of retailing. Most consumers opt for the middle market solutions that balance a whole lot of competing objectives, capably handle the details, and minimize complexity for the customer. It's about delivering the whole package.
Think about that the next time you go to restaurant. Most of the time we are looking for restaurant that has a good combination of good food and ambiance, good service, low prices and convenience of location and to pay with the means of our choice. Sometimes we are willing to put up with lousy service for really good food, or modest fare for really low prices, etc., but most of the time we are looking for a satisfying combination of all those elements. This is called the customer value proposition. And multiple retailers are able to sustainably compete within the same markets by delivering different, but compelling, customer value propositions. Starbucks has not put independent cafes out of business, nor have independent cafes pushed Starbucks out of business. Rather each caf� delivers on a different customer value proposition.
So SolarCity is a retailer, and they are delivering on a customer value proposition that is winning a third of the residential solar market. For all the nitpicking we can do, that is a damn good position for any retailer to be in. It's all about customer choice, and SolarCity is serving it up. No matter where the technology goes, somebody will need to bundle it into a compelling package, and this is what SolarCity as a retailer does.�
1/1/2015
guest Wow, this is a total slam on PUCN for rushing to judgment without a complete analysis and NVE for lacking a "modern planning process." It's great that this is peer reviewed.
I think the larger stakes here for SolarCity is to sell grid services both to regulatory bodies and utilities and grid operators. So they may be making an example of Nevada as some backward state where the PUC and utilities are clueless. But they still have grid services to sell, even in Nevada. So they need to be careful not to upset key players.
The deeper question is not about the proper use of a spreadsheet from the PUCN. I suspect that many assumptions in this model fail to capture the full range of benefits that SolarCity could deliver if utilities were properly motivated to leverage these benefits. That is, there is a difference between accommodating DERs within the existing grid status quo and redesigning the grid to optimize the value of DERs. The grid contains many legacy assets that may well be worth maintaining and even extending, but would no longer be worth building out new in light of DER alternatives. For example, a 10 mile line connecting a small community to the grid may well be worth maintaining. But if that line did not already exist, it would be far better to set up an off-grid microgrid to serve the community at lower capex and opex cost and with higher reliability. So the DERs in the that microgrid avoid some really substantial system costs, but if the line already exists, it may be cheaper to maintain than to replace with a microgrid solution. So in the one case, DERs have very high value, but in the other case the marginal value is more limited. I suspect that the PUCN spreadsheet model is far too simplistic to capture this sort of distinction, and this is why one needs a modern planning process. Should that 10-mile power line need a costly repair, say after a natural disaster, it may be cheaper to replace it with a microgrid, but you want a modern planning process that can make that determination precisely and quickly.�
1/1/2015
guest http://www.solarcity.com/sites/default/files/SolarCity-Distributed_Energy_Resources_in_Nevada.pdf
I would encourage all investors to read this report. Section III is particularly helpful. Note that there is even a discussion of the distributed versus utility-scale solar debate that is particularly helpful. I will go ahead and quote this. SolarCity is clearly staking a position that both are needed and offer different benefits to the grid. It is particularly important to understand that small scale solutions derisk the planning process, speed deployment, minimize capital requirements and reduce the risk of stranded assets. This infrastructural flexibility seems prudent at a time of such great transition in the energy markets.
�
1/1/2015
guest Good stuff. Nice to see this report getting some news attention.�
1/1/2015
guest I think this report also reveals a lot about SolarCity's strategy. They are obviously thinking a lot about how their installations create grid value. This is obviously helpful defensively to avoid policy problems, but also it opens up incremental revenue opportunities.
I liked the bit on voltage regulation in distribution. The utilities have to up the voltage a bit to make sure that recipients at the end of the line get high enough voltage, but smart inverters are able make these voltage adjustments along the line and are dispatchable. This gives the operator the ability to assure proper voltage all along the line without having to boost voltage at the beginning of the line. So it saves energy and improves power quality for all customers. This alone created a 0.9 c/kWh benefit even without batteries, but adding batteries improves this as well.
There was also some discussion of using batteries to minimize peak load on transformers so as to reduce degradation of the asset. I think this leads to SolarCity offering a kind of peak shaving service. Batteries that are behind a given transformer could be aggregated to shave peak load off the transformer. This would generally provide power at times of system wide peak load, but it would do so in a way that has specific local benefit to distribution hardware and in aggregate benefit to transmission hardware as well. So as an alternative to peaking power plants, this sort of approach would reduce T&D costs in addition to providing power.
I suspect this sort of setup also shows how utility solar and distributed solar can work together. The lowest net demand will be in the late morning (8-12 AM). At this time, homes with rooftop solar and batters could be sending all their own solar into batteries for use in the evening (5-10 PM). But the home would actually run on utility solar in the morning, while it is storing its own local solar. This takes advantage of not needing to invert local DC solar to store in batteries. Then in the afternoon (12-5 PM), the home runs on a combination of utility solar and local solar, perhaps storing a little more. This may seem a little strange from the viewpoint of a single home, but for the system as a whole what it is doing is optimizing the rooftop solar + battery system to function as a peak power plant for the neighborhood and optimizing the T&D costs at the same time. So this is creating much more value to the grid than what a centralized gas peaker could ever do, as such a plant only strains T&D resources when used in stead of alleviating them.�
1/1/2015
guest Nice to see the stock has indeed rebounded off the post ER low (+40% in 2 weeks), presumably from shorts taking profit and value buyers jumping in since the actual news has been pretty minor. I'm reducing back to my core holdings.
I suspect we're going to sit in the $22-$26 range now until we get some substantial news of some type. Given the negativity priced into the stock, I think it's more likely to be positive news.�
1/1/2015
guest A whole 129 people viewed the panel SolarCity streamed. What gives? Nevada PUC concedes Solar City was right about everything and that existing customers should be grandfathered into the existing system based on the new data! This video should have 10,000 + views!
SolarCity TV�
1/1/2015
guest Can you provide a bit more detail on the video? Was the PUC really there and agreed?
The video is probably great but it's over 2 hours long and most people - myself included - don't have time for that, which probably explains the view count (now up to 163).�
1/1/2015
guest I'm at a loss for words. You don't have the time to watch it and you want me to summarize everything for you? I guess this explains why most analysts aren't bothering to comment in detail on recent developments.�
1/1/2015
guest SCTY's report http://www.solarcity.com/sites/default/files/SolarCity-Distributed_Energy_Resources_in_Nevada.pdf reminds me of another piece of fantasy Comparative Environmental Life Cycle Assessment of Conventional and Electric Vehicles - Hawkins - 2012 - Journal of Industrial Ecology - Wiley Online Library
even a brief cursory view of their methodology would result in extremely generous valuations for the value of utility solar as well.
![[?IMG]](http://i66.tinypic.com/167162u.jpg)
there is a simple 'sanity check' that easily comes to those in jurisdictions without an integrated electricity monopoly, what would an energy retailer pay for this electricity? Unfortunately for SCTY or NVenergy, its the type question whose answers doesn't match their business plans.�
1/1/2015
guest I value renewable energy from an environmental perspective. Acting to better the environment is a fine example to my family, friends and neighbors. This has real measurable value to me.
Companies like Apple, Walmart, Costco, and Google the (list goes on and on) place value in branding themselves as green environmentally sound organizations.
Individuals and companies have a right to act environmentally responsible. Utility regulatory agencies have a responsibility to act for the greater good.�
1/1/2015
guest Solar in the desert is simply cheaper than forms of production involving a turbine. End of story. The fact that casinos are willing to pay $100M+ to disconnect from NVEnergy clearly illustrates that. All customers benefit when total costs go down.
If consumers want to meet their own power needs with solar, the utility as a regulated monopoly is required(within reason) to adapt to that dynamic. Sabotaging competition is not an option.�
1/1/2015
guest Why Lease When You Can Own? The Tough Question Facing SolarCity�
1/1/2015
guest Well, this is the methodology that the PUCN has elected to use, so I won't try to defend it beyond that regulatory function. However, it is worthwhile to consider how utility scale solar would fare under the same cost/benefit methodology.
Utility and rooftop solar share in the same benefits (per kWh) of Energy 3.7c, Generation Capacity 2.6c, and CO2 Regulatory Price 0.9c. But utility solar does not provide the benefits of Line Losses (0.4c for distributed solar), Ancillary Services (0.1), Transmission & Distribution Capacity (2.8c) or Voltage Support (0.9c). Thus, utility solar has a total benefit of 7.2 c/kWh while distributed solar yields 11.4 c/kWh.
On the cost side, distributed solar has 0.3c/kWh for Program and Integration costs. Utility solar would have the same Integration cost plus specific transmission cost depending on specific siting of the plant. Thus, utility solar could have integration and transmission costs in range of 1.3c/kWh.
Thus the net value of utility solar is about 5.9 c/kWh, while distributed solar is worth 11.1 c/kWh. Under NEM, the participant is saving 9.5 c/kWh on their power bill, which is counted as a cost, so the net benefit to the system is 1.6 c/kWh. A utility solar PPA would need to come in at about 4.3 c/kWh to provide the same net benefit, and fortunately PPAs under this mark are possible. Thus, both utility and NEM distributed solar are cost effective and worth adding to the grid, under this PUCN valuation tool.
But what this analysis makes clear is that one cannot simply compare the cost of utility solar to distributed and conclude that either one wins hands down. Distributed solar adds a lot of benefit to transmission and distribution networks that utility solar simply cannot provide.�
1/1/2015
guest From this article: A grid of DERs: DOE program aims for 100% solar penetration on the distribution system
Isn't this exactly what SolarCity is offering now to utilities? They have already thought about all of this and are way ahead of the game.�
1/1/2015
guest I don't understand why local installers are able to offer lower prices than SolarCity for buying a system. It seems like a switch from buying to leasing shouldn't be a issue for SolarCity and could actually be a positive as it provides more upfront cash flow.
In terms of hardware costs, SCTY with it's higher purchase volume should be able to match or better the cost of the system - and hopefully soon with Buffalo they'll have a real panel cost advantage. Plus they should be at least as good if not better at install costs since they have high volume crews, established training programs and refined mounting hardware (Zep).
Has SCTY just not been aggressive with their pricing for purchases? Or is there some real reason why they can't match local installers. I can see the argument they have more bureaucracy/overhead but that doesn't seem like a major thing. Or maybe it's because SCTY is including extras (maintenance, warranty, inverter replacement) in their pricing?�
1/1/2015
guest It is not SolarCity's strategy or customer value proposition to be the low price leader. Thus far, there is no low price competitor that has reached significant scale. When you buy a SolarCity system the company stands behind it for decades. You have service, performance guarantees and warranties. So you are buying a turn-key system, not just the installation of panels and inverters. Consumers who do not value this kind of premium service can certainly go with lower cost installers, but they may also be incurring greater risks. Anyone who has ever hired a contractor to do work around the house knows that there is a very real risk of contracting with someone who does a bad job. So reputation is very important. One of the supreme advantages of a PPA over cash is that if the system does not deliver the kWh output as planned, the PPA provider takes the economic hit. The PPA provider only makes money as actual energy is delivered. But if you paid cash to a sloppy installer, you bear all the risk. If that system underperforms, you eat the loss. This is also one of the reasons why utilities will buy power under a PPA. It's not because they lack the means to own and finance a power plant directly. They simply want to buy the power without risking the equity of ownership. Now SolarCity is quite willing to sell a system outright for cash, but as a PPA provider it does have a reputation to uphold. So the same care that goes into builing and maintaining a system under a PPA needs to be applies to all systems sold. To provide cut rate systems just to compete on price with no-name local installers would expose SolarCity to serious reputational risk. It's got to stand behind every system it builds. That is why this is a strategic choice.�
1/1/2015
guest Fair enough. Thanks.�
1/1/2015
guest look at from the other side
2015 project price for solar is 4.5c/kWh
2016 project price for solar is about 4.0c/kWh
lets start with the 4.0 c/kWh, and subtract generation capacity of 2.6 c/kWh, that leads to an effective cost of 1.4c/kWh. At that price, natural gas plants simply turn off during the day, because solar is cheaper than the cost of the gas. pretty quickly the scenario becomes one where the wholesale price of midday electricity becomes negative, similar to wind power in texas, except more reliably negative prices.
then subtract 0.9ckWh regulatory price, solar utility becomes 1.4-0.9 = 0.5c/kwh wow
at that price pretty much every non rainy day in Nevada is negative wholesale price for electricity from 9am to 4pm.
then realise that Nevada like to co-locate utility solar near users, for example
First solar at coppermountain Copper Mountain Solar 1 | First Solar
First solar at pumpkin hollow mine NV Energy to study solar on Nevada Copper land to power Hollow copper mine in US
MGM solar Mandalay Bay Opens Convention Center�s 350,000-Square-Foot Expansion & Welcomes First Group | Mandalay Bay Resort and Casino
of course the gigafactory, and neighboring sites.
do we start to subtract the Line Losses (0.4c for distributed solar), Ancillary Services (0.1), Transmission & Distribution Capacity (2.8c) or Voltage Support (0.9c) for the solar farms that are located adjacent to large facilities in Nevada. Because in Nevada, utility solar farms/distributed solar can both describe the same physical location.
so from 0.5c/kWh - 0.4c/kWh for distributed solar gives a cost of 0.1c/kWh
0.1c/kWh - 0.1 c/kWh Ancillary Services gives a resultant cost of zero.
zero - 2.8c/kWh for Transmission & Distribution Capacity because its colocated at a mine or casino or industrial park gives a resultant cost of -2.8c/kWh
-2.8c/kWh - 0.9c/kWh for Voltage support gives a resultant cost of -3.8c/kWh
its ludicrous, but imagine how these phantasic benefits really are, from the perspective of a utility solar developer in Nevada.
I could go on, but its kinda silly. But I would point once again, even adding the value of 'generation capacity' to solar is such a cost benefit that day time wholesale electricity prices turn negative.�
1/1/2015
guest I'm very much in favor of collocation large scale solar with industrial load. This too is distributed solar, so no argument there.
I think however that you are abusing this valuation tool. What you are doing is supposing that you can dump so much solar in a given program onto the system at once so as to push whole prices to negative values. This is not how such a tool would be used. For each incremental project you would need a new analysis that looks at the current state of the system and make sensible assumptions going forward. Look at how the Energy assumption was developed in this report. It was based on making assumptions about future wholesale prices at the time that distributed solar would be producing power. This is the 3.7c/kWh benefit. Now, if the state of the system under your proposal were to drive future wholesale prices to 0c/kWh, then this benefit goes to 0c/kWh. Similarly, you'd need to reconsider the Capacity benefit, as a full 2.6c/kWh benefit may no longer be justified when the system is so heavily oversupplied under your proposal. So maybe this comes down to 1.6c. So along with CO2 regulatory benefits of 0.9c, we are looking at a total benefit around 2.5c/kWh.
This is actually quite interesting to contemplate because these are the kinds of barriers that utility solar will eventually face. How do you actually justify adding yet more solar into an oversupplied market? Indeed this must be done to move to a 100% renewable system. So the solution, I think, is that more needs to be offered than just wholesale power with zero emmisions. So collocation delivering T&D becomes one such path. Another would be to include storage with the solar. Suppose you've got a utility solar system with enough storage to timeshift all the power produced. Then you'd be able to value the Energy benefit at the highest daily wholesale price. So maybe this is 8c/kWh. And the capacity benefit is even larger than 2.7c because this is fully dispatchable power. So let's say 4 c/kWh. Also the battery can be used to reduce integration cost for other non dispatchable power and reduce T&D costs. So another 3c, say. And CO2. So you get to a total benefit around 16c/kWh. (This should be comparable to the benefit of a gas peaker.) So proceeding with this sort of project has much greater potential to add significant net benefit, far more than just adding straight utility solar to an oversupplied market. Moreover, if the project has positive net benefit and gets approval, then it actually works in a direction against wholesale prices going too close to zero or below. Specifically, with sufficient storage, such a plant will never sell into the market below a certain price. Ultimately, it is storage that puts a floor on wholesale prices.
I'd also point out that in a free market solar will never take the spot price below zero. Solar can curtail at zero. It is baseload thermal power that has need to pay to feed power into the market so as to avoid a more costly ramp down. Solar, of course, can take the price to zero, but incurs no marginal cost with curtailment. The exception, of course, is when the market is not free and there are government incentives for wind or solar to keep feeding into a negative price market. But in practice, even where the US PTC has done this for wind, these negative markets have also been oversupplied with thermal baseload as well. The reason why I point this out is that as we try to envision what a 100% renewable market may look like, negative spot prices should only exist due to the continued presence of thermal generation. When there is sufficient storage to get rid of fossil peaking plants, then storage will set a lower bound on spot prices, and once the batteries are all charged up, everything else curtails.
So if I am correct in this, what we will see is that utility solar ultimately must get bundled with storage to be a net benefit to the grid. Meanwhile, distributed solar at all scales will become increasingly sophisticated about providing T&D and other grid benefits. These added benefits will be the only way to justify adding more solar to oversupplied markets. I do think this is a tall order for remote utility solar even with storage. The reason why is that distributed solar will be able to add storage at quite near the same cost. So it offers all the benefits of remote solar with storage plus locational benefits to distribution and transmission infrastructure. For example, transmitting battery stored power at a time of peak load adds stress all along the T&D system, but discharging at the point of consumption avoids all this stress. So once cost of wholesale power gets low enough, remote utility solar loses its key advantage over distributed solar, specifically it's low levelized cost per kWh. But before we get to this point, I think we are talking a grid that has over 6 hours of storage at average load. So I think we are looking out at least ten years from now but probably 20 years from now. Right now there is so much opportunity to displace fossil generation, that it just does not matter much. But we can definitely see that SolarCity recognizes the growing importance of properly address all opportunities for DERs to add benefits of location to the grid. Now they are documenting those benefits, and soon they will be optimizing and monetizing those benefits. This is taking the game to the next level.
(Notice that SolarCity will soon make it hard for any new gas peaker to get approval. Is it clear how this is the case?)�
1/1/2015
guest Another Voice: SolarCity has raised its statewide job commitment - The Buffalo News
Strange bedfellows: How solar and utilities struck a net metering compromise in New York
�
1/1/2015
guest Short shares drop 8% from 23.6M to 21.7M - so a reduction from ~4.5 days to ~4 days to cover.
Solarcity Corporation (NASDAQ:SCTY) Shorted Shares Decreased By 8.16% - Franklin Independent�
1/1/2015
guest It's looking like the Energy bill is getting bogged down with partisan political theater.
This looks promising from the DOE:
Orange Button: A New Data Standard for Cheaper Solar?�
1/1/2015
guest Its my understanding that California has a requirement for Investor owned Utilities to obtain 50% of their energy from renewable (RPS) by 2030. (This seems to exclude both full size hydro and PV self consumption).
Just a cursory glance at CAISO daily demand suggests to me that solar will need to supply nearly 100% of 9am-4pm electricity. With a massively steep ramp following that can only be achieved via battery. Followed by mostly gas power at night. I would suggest that sunny day time wholesale price of electricity will be very cheap, and the cost of night time power will be correspondingly expensive as it now needs to support a lot of asset depreciation.
50% of power is not a big deal for solar
50% of energy is a big deal for solar
look for TOU is California, and batteries, lots of batteries.
Is this good for SCTY, I don't think so,
but it is great for TSLA.
Plenty of room for Buffet to export PV to California, its at the expense of thermal power stations.�
1/1/2015
guest I agree, but it was based on the documents 2017-2019 forecast, its their abuse of the tool.
yeah, but it still needs to deal with repeating but irregular major weather events. a domestic PV system with 100% net capacity is nowhere near sufficient for 'outlier' weather events, and thats approximately the limit that can placed on a residential house. Even a 200% net capacity system is quite insufficient for 'outlier' weather events.
its from a wet summer 2010/2011, I still remember it because it broke a drought, and caused floods (a semiregular occurrence here, the day the flood hit, the weather had turned fine again) Batteries are great for daily cycling, but for big weather events, they need to be powered by an energy source not in deficit. so not solar. going from 95% renewable to 100% renewable is really hard unless there is reliably dispatchable sources (hydro or geothermal).
Perhaps the US equivalent is what happens when every house has PV, but a polar vortex happens? does the US then just rely on the solar in hot dry areas? In Australia, Tasmania's recent issues suggest that funding new gas power stations would've been wise, compared to decommissioning and offering for sale old gas power stations that are surplus.
What I'm getting at is that an annual 1/2 hour black out, or 1/2 day black out is not that bad
but what if it becomes a once in 6 years, a 6 day contiguous black out instead? to many that won't be acceptable.�
1/1/2015
guest #6211renim, Today at 6:17 PM
Last edited: Today at 6:48 PM
NewIts my understanding that California has a requirement for Investor owned Utilities to obtain 50% of their energy from renewable (RPS) by 2030. (This seems to exclude both full size hydro and PV self consumption).
Just a cursory glance at CAISO daily demand suggests to me that solar will need to supply nearly 100% of 9am-4pm electricity. With a massively steep ramp following that can only be achieved via battery. Followed by mostly gas power at night. I would suggest that sunny day time wholesale price of electricity will be very cheap, and the cost of night time power will be correspondingly expensive as it now needs to support a lot of asset depreciation.
50% of power is not a big deal for solar
50% of energy is a big deal for solar
look for TOU is California, and batteries, lots of batteries.
Is this good for SCTY, I don't think so,
but it is great for TSLA.
Plenty of room for Buffet to export PV to California, its at the expense of thermal power stations.
REPORT
? QUOTE REPLY
In my view, you are underestimating the business relationship and "branding" of Elon Musk/Tesla/SolarCity.�
1/1/2015
guest I think California is going to need alot more wind power. This will cover evening through morning and not need nearly as much smoothing from batteries.
BTW I've started playing with hourly data from CAISO. I've been trying to size up how much battery capacity could be used to smooth out supply and demand. The basic metric that I am developing is based on the sum of absolute deviations from a 24-hour average to hourly demand or net demand. This gives you twice as many GWh of discharge needed, but you need about this much capacity to deal with variability and to keep the depth charge between say 35% and 85% most of the time. So California supplies about 24.5GW average. For daily balacing about 2 hour, 50 GWh of batteries, would suffice, and for weekly balacing 9.3 hours, 225 GWh, would suffice. It turns out that there is a lot of weekly periodicity to balance. Tapping into EV fleet charging would substantially reduce need for grid storage, just 1% of autos (250,000) in a fleet charging program could reduce the daily battery requirement by about 2 GWh. Charging on the weekend would also help with weekly load balancing. Adding more wind power has little impact on the daily battery requirement, but solar requires substantially more battery time shifting. So this is the main reason I think the state should pursue much more wind power.
So my analysis is not at all looking at extreme weather events. I think that once California has enough storage for daily balancing, 2 hours, it will be in a good position to use baseload thermal generators to handle variation from day to day. Most coal and CC NG generators are utilized about 45% to 60%. So there is substantial capacity to swing this load from day to day. Peaking plants are really only intended to be used for 1 to 2 hours a day, but just 1 hour of battery capacity will pretty much eliminate that market for short bursts of power. Less flexible but more efficient combined cycle gas plants will be quite adequate for maintaining a sufficient state of charge in grid batteries. So I did take my analysis out to measuring batteries need to balance a whole week. It may take the state more than five years just to 25 GWh of batteries, but the weekly level of 225 GWh may take longer than 15 years. This will no happen over night. But looking out to sufficient storage capacity for weekly balancing gets us to a place where only the most efficient base load plants are needed to make week by week adjustments to the energy inventory in storage. We are talking about a multidecade transition to get to 100% renewables. There will be a glut of thermal capacity over that transition period. So I'm not really worried about building out extra capacity just to handle extreme weather events, and California is not an island like Tasmania. It currently imports about 25% of its power and will continue to use and maintain those transmission assets for quite a long time. I am confident that wind and solar can continue to scale up. The sticky issues are how to scale up battery production, how best to balance the grid with less than 1 hour of storage but lots of solar, and how to manage stakeholders with potentially stranded assets. For battery maker, the key thing is to focus on applications with the very best economics. Once the utilities figure out how to save money and improve service with batteries the market will be quite deep. Consider that the global power consumption is around 2.5 TW. So just getting to a 1 hour storage capacity globally would take ten gigafactories five years of production at 50 GWH/year/factory. It is hard to see a pathway to 2500 GWh of grid storage in the next ten years. So as much as I'd love to see California get 250 GWh by 2030, it's probably not fair that one state would soak up such a large share of the global supply of batteries.�
1/1/2015
guest What Factors Have Driven Downstream Solar Stocks So Far in 2016? - Market Realist
This is a nice comparative analysis. I think it lends credibility to this industry just to have Market Realist give this sort of treatment to it. Sunrun looks like the hot company, Vivint comes out very troubled, and SolarCity is a clear market leader. I invest in SolarCity and SunPower, which comes across as underwhelming in this line up. I certainly hope that Sunrun can catch up in market share, so it needs to grow at a faster rate. Even so, this horse race is good for attracting investors.�
1/1/2015
guest In the second half of May short shares skyrocketed to 28.0M from 21.7M. Wow.
Solarcity Corporation (NASDAQ:SCTY) Shorted Shares Decreased By 8.16% - Franklin Independent�
1/1/2015
guest @dandurston In the second half of May short shares skyrocketed to 28.0M from 21.7M.Wow.
Any positive or negative catalysts on the horizon?�
1/1/2015
guest Something like this could spur a rush to go off grid but it would be an incredible boon to Tesla Energy for batteries on every level for backup.
Why a power grid attack is a nightmare scenario
Also another panel efficiency breakthrough or two wouldn't hurt...
Hot new solar cell
Probably it will take some regulatory or political event to provide catalyst...as if I'm any sort of prediction expert.�
1/1/2015
guest I'm no expert, but I think the main thing holding SCTY back is the lack of an obvious difference between the cost and value of the watts they are installing. Last quarter costs were $3.18/watt and they argued for a value of $3.46, but no one really believes that value (e.g. because customers might default, maintenance costs, they recently sold some to Hancock for $3.24 etc.) and even this only leaves 8.8% to cover all the other costs of running a business. So a lot of people think SCTY is breaking even or losing money on the systems they install and their true retained value likely doesn't exceed their debt.
So when SCTY can clearly demonstrate they are making good margin then the stock will go way up. To do this SCTY could:
1) Start selling a lot more systems (instead of PPA) for a price meaningfully higher than costs (they do have a new loan product that started this quarter). Reducing the uncertainty of 20 year cash flows would be huge.
2) Offload their PPAs for higher pricing ($3.50 may be possible).
3) Make real progress in cutting costs towards $2.25 - their 2017 goal. This could occur by getting a handle on sales costs 2016 and by getting their factory scaled up and working cheaply in 2017.
Catalysts like state laws affect the size of the addressable market, but new beneficial laws still aren't going to help much if everyone thinks SCTY is losing money on each system.
Once SCTY can demonstrate a spread >$0.50 per watt on their systems I think the stock will rise above $50. Once they get close to $2.25 we might see $75 and if they also get favourable legislation then it might crack $100. Conversely, if the credit markets tighten or debt piles too high before SCTY can increase their margin then they could be in real trouble.
So in the short term I see new securitization deals and legislation as a potential positives and the ongoing short selling frenzy as a negative. It's actually impressive the stock has risen ~30% with the 6 million new shares sold short.
I think the next ER will probably be a big drop again unless SCTY shows strong bookings and much reduced sales costs.�
1/1/2015
guest By this methodology, it adds about 4.2 cents / kwh of benefit.
Unfortunately the current premium for rooftop solar over utility solar in the US is higher than that. It needs to come down. This premium doesn't seem to be for fundamental reasons -- it's overhead, marketing, profit margin.�
1/1/2015
guest I'd generally agree, but I'd add that their prices charged to the consumer *also* have to be competitive with the competition. If they have a solid positive margin but everyone is undercutting them on price, then nobody will believe that they'll retain volume.
Right now, it's not clear that they've got a significant positive margin, *and* it's not clear that they are competitive on price! Clear up those two questions and the stock will jump and stay up.
This would be what would prove they could be highly profitable.
If this can be done while their sales price is comparable to other installers *worldwide*. With a $2.25/watt all-in cost they could probably do this.... though the utility scale sector is delivering for $1.33/watt, or $1.54/watt with tracking, so there's still room for more efficient rooftop installers to undercut that price.�
1/1/2015
guest I think it's weird how the financial news/stock markets are so bi-polar regarding solar:
Solar is great and a benefit to us all!
Californians Just Saved $192 Million Thanks to Efficiency and Rooftop Solar
Solar is doomed...especially SolarCity!
Solar Panel Leasing Decreases as More Customers Look to Buy�
1/1/2015
guest It's in their interest to create volatility. Getting our solar information from hedge fund backed news blogs is about as logical as getting political news from Facebook.�
1/1/2015
guest A guy at the Tesla shareholder annual meeting just accused SolarCity of stealing 30,000 $US worth of carbon fibre and titanium frames from his barn.�
1/1/2015
guest Stolen bike guy that they're talking about on the short term thread?�
1/1/2015
guest Yeah. Elon's responses was basically: (1) I don't run Solar City and (2) Ask SCTY questions at the Solar City shareholder meeting.�
1/1/2015
guest Here are 2 vastly different approaches juxtaposed:
South Australia Launches Largest Trial Of Rooftop Solar & Energy Storage
Escalator charges anyone?
Arizona Public Service pushes residential demand charges in new rate case
�
1/1/2015
guest Stolen bike guy looked like a bizarre plant, or maybe a comedian hired to confuse short sellers.
Who let that guy into the building?
From a distance, the person almost looked like Trump from this skit he did years ago.
http://www.taxjusticeblog.org/images/trumpfarmer.jpg
�
1/1/2015
guest <S>With their fraudulent accounting practices and sneaky PPAs I wouldn't be surprised if they steal lots of bicycles too </s>�
1/1/2015
guest Lower demand means higher prices are needed to fill the profit gap. Good luck with that.
The idea that anyone will be "stuck" with SolarCity PPA rates in 5 years is preposterous. APS is here begging for an 8% increase in residential rates to keep their racket afloat.
This is gonna be fun to watch. Any word on when the actual APS vs. SCTY arbitration hearing will take place? Or is it ongoing?�
1/1/2015
guest Demand charges *for everyone* actually work out very well financially for solar + battery. If you're at home during the day, solar peak-shaves. If your peak is early evening, your battery peak-shaves.
Demand charges applied *only* to people with solar panels are just a scam and an attack on solar, of course.�
1/1/2015
guest More BS by APS attempting to hold back progress, and maintain business as usual. If the utilities don't get with the picture, the utilities will run into big problems once battery storage is everywhere. It's not the fault of customers with Solar Power that the utilities are unwilling to cut back on appropriations and funds set aside for additional generation facilities that will be obsolete and redundant before they ever goes online.
BREAKING: Arizona Public Service attempts to weaken net metering - again�
1/1/2015
guest Couldn't Tesla and SolarCity counter with an off-grid battery and solar package directly competing with the utility by financing their own monthly fee? Why bother paying their demand charge if you already have a cheaper alternative utility available since you're only subsidizing the increasingly expensive fossil fuel assets?
APS seeks $11 monthly rate hike, demand charges
�
1/1/2015
guest Published today SolarCity Launches Solar Loan Program in 14 States
It would be great if someone can verify the pricing claims by actually getting them to price your home (and even better compare with local installers). Mule, up for it?�
1/1/2015
guest This article a little more substance: SolarCity launches new rooftop loan product to replace MyPower offering�
1/1/2015
guest People have posted SCTY quotes in the Energy Forum and I've been pleasantly surprised by the /W price. Not that I want SCTY doing straight installs or anything.........�
1/1/2015
guest Sounds good. Why don't you like straight installs TTMule?�
1/1/2015
guest That can't work where central air conditioning is a requirement.�
1/1/2015
guest Residential solar is a massive untapped market, I don't want SCTY doing anything that isn't unique and commands a high premium. Their PPA has unique value that commands a high premium, installs can be done by anyone.
I'm fine with them doing profitable installs just to keep the gears churning in new markets, but I don't want the brand diluted. Not that anyone has a good image of the brand in the first place.........�
1/1/2015
guest Off-grid no, but a moderately sized battery coupled with solar could be a successful move to counter demand charges and other tactics in the chess game against utility greed.
Another instance where SCTY as an energy provider is a better option than a local solar installer. When the utility makes a rate change to screw over solar customers, SCTY can swoop in with a simple solution as long as battery costs decline at the projected rate.�
1/1/2015
guest I'll admit I don't require AC in Seattle so I didn't account for that. Aren't batteries still the more efficient solution as the new GF1 50% stationary output projections would indicate? Maybe they could still figure out a creative way to get enough juice and stay Chile?
Chile Has So Much Solar Energy It�s Giving It Away for Free
�
1/1/2015
guest Fannie Mae�s financing for solar: a game changer for solar industry
This is the next logical step for GSEs like FammieMae. It's about time. The opportunity here is to finance 1 to 2 million residential solar installations per year. This can greatly accelerate rooftop solar in the US.�
1/1/2015
guest Xcel couldn't handle a little bit of competition.
Size limit upheld for Xcel community solar gardens�
1/1/2015
guest Finally in Sight, $1-a-Watt Solar Milestone Shows Long Road Ahead
This half of the quote seems wrong, as end user demand for increasingly cheap solar will actually increase, In my opinion. I guess they are referring to utility solar perhaps?
http://www.nytimes.com/2016/06/04/business/energy-environment/solar-power-energy-efficient-net-zero.html
�
1/1/2015
guest Plenty of perfectly intelligent economist and scientists are having a very difficult time seeing what the energy dynamic will look like in 5-10 years. The idea that solar will get to 1%, come to scale nationwide and then for some vague reason SLOW is economically laughable.
About to FINALLY shake hands on my rooftop array in Philadelphia(if the installer will stop pushing the roof inspection back). Could not be more excited and am eagerly awaiting an attack on my right to power myself and have a flexible grid in the background providing services at a reasonable price.�
1/1/2015
guest LEAP-watch update..... far out of money 2018's are getting down to a buy-able level. $80-90's are going for $.30-.35
Almost time to load up before the 2Q earnings report. A few more weeks perhaps.
I'm setting my sights on $80's at $.15 and hoping for a dip prior to August.�
1/1/2015
guest What are you thinking for Q2 earnings? My sense was they've been lowering expectations over the last few months, to the point of major doom and gloom. And the game plan of focused growth rather than uncontrolled growth should work fine, but I don't really know how long it will take for that to become evident and make the doom and gloom seem overdone.�
1/1/2015
guest I was given a call today by an old friend that knows I actively invest in renewables. I think we are about to hear of SCTYs new strategy (very new to me at least) for penetrating new markets without the massive penetration and acquisition costs. SCTY has partnered with an MLM. www.powur.com.�
1/1/2015
guest Yes, someone posted that link maybe a month ago and I looked it up. Seems like a classic MLM scheme (or is that spelled scam?) so I pulled my ears in again. Doubtless it will make some people some money and a few a lot of it, but to me the whole idea is fundamentally unsound and builds on losses for masses. So, no thanks. YMMV.
Plus, it serves up a Big Bear argument on a silver platter.�
1/1/2015
guest While I have never had any interest in MLMs. I think they are perceived as scammy because the majority of people who join don't succeed. While I'm certain there are bad MLM operators as with any industry, I don't think thats a fair argument to discredit MLMs as a whole. Businesses in general fail the majority of the time because people are not very competent financially.
Given that the bears in SCTY and TSLA turn everything into a negative it wouldn't surprise me. But as a practical matter, how would this be a negative for us? We get a free workforce that that feeds us leads. Should some of those leads convert we pay them a nominal fee and very likely a marginal residual which (hopefully) our already thin margins can handle. Just seems like a low cost way to penetrate new markets.�
1/1/2015
guest You're right that if you identify a MLM operation early on that is going to be successful and get in early in the scheme you will experience success. But it's based on an immoral business idea: taking money from the suckers who got in last.�
1/1/2015
guest Admittedly, I was suspicious from the start and not very interested, but I think the plan went something like this:
To participate, you pay the guy who gave you the link say $100 for material etc. When/if you score a sale (the buyer says you recommended the product) you get a cut from the company, the guy who recruited you gets a cut and his boss too, so on. So the more people under you, the more you make. That's the multilevel idea of geometric growth.
As long as business rolls along and sales get made, fine. A low-cost sales force, spreading like wildfire.
But then there's the part where you pay to get in. OK, everyone needs a ticket to ride, and I guess we need incentives too. I'm just a little paranoid when prospects of unbounded wealth are waved around.
And how many sob stories will it take to soil a company's good image? In my youth the big craze was Holiday Magic, a series of cleaning products sold via MLM -- where the real product was the marketing itself. People would buy heaps of the stuff hoping to sell it on to the next hopeful for much more, rising in rank and being able to treat themselves to that Magic Holiday. Only, maybe someone had already sold five years' worth on everybody you pitched it to? Well, then you were out the cash and the next level took the holiday.
Sorry about the long rant. Johan's shorter one is more effective. Plus, he got in before me so I lose.�
1/1/2015
guest If Solar City goes the MLM route, I'll be first in line to sell my shares. I find MLM repulsive and predatory.�
1/1/2015
guest I certainly see how it can be perceived this way. In MLMs selling snake oil where the primary product is monetizing recruitment I would agree. However, with a quality product such as Solar I believe its a business you could be successful in by just selling the product should you be so inclined. Anyway, I just thought this was interesting, I don't mean to derail the SCTY thread with a long debate on MLMs. For the sake of our holdings, I hope the MLM does well and compensates its members accordingly.�
1/1/2015
guest Why are you being so subtle? Say what you really feel!�
1/1/2015
guest I've been looking to refinance and also add solar. This seems like a good match. Would I just ask my lender if they know about this program?�
1/1/2015
guest MLM is a valid marketing strategy where a lot of education is required to sell the product. For example selling water filters that are common in Japan to US customers required MLM to educate people on the benefits of having one. Of course this usually deteriorates into extremely pushy repulsive strategies and obscene markups due to greed. Essentially MLM can be a way to educate and sell a product or a way to exploit greed and sell a product.�
1/1/2015
guest An MLM organization direct selling a product with demonstrated environmental and financial value, and the brand association of Elon Musk is a tremendous opportunity,
How many Model 3s have been reserved without a dime of advertising? If I were a salesman, I jump at the opportunity to pitch an Elon Musk backed product,�
1/1/2015
guest I just realized that whenever the Tesla referral program is in effect then Tesla are basically using MLM to some extent. And that doesn't feel wrong to me.
So it's all about the product I suppose. We've just come to conflate MLM methods with sub par products. But MLM selling solar or EVs isn't about the sucker who got in last, but that in all situations with huge growth potential the ones who get in early are going to profit, more so if the growth can be accelerated, even if that means sharing profits with others in the layers below you.�
1/1/2015
guest It doesn't feel like MLM to me, since when it ends there's no one (or thousands) who put money in and can't make any money left holding the (empty) bag. I'd consider the Tesla referral program "peer-to-peer" marketing.�
1/1/2015
guest Good lord!
I always wondered if SCTY can get any worse. The answer always seems to be - yes, it can!�
1/1/2015
guest If not for Musk's success in rocket business, I seriously would have wondered if TSLA is some sort of scam too, all because of SCTY.�
1/1/2015
guest If *everyone* is charged a demand charge, then yes, this is exactly what happens: solar + battery becomes a compelling offering and people buy it.
If *only people with solar panels* are hit with a demand charge, then the situtation is that the people with large electricity demand and no solar panels are being subsidized by the utility company. These are the people who are the best market for solar + battery, and the utility company subsidy prevents them from switching.�
1/1/2015
guest
I cannot say this appears good. In fact regardless if you think this is a good strategy...or a giant pyramid scheme, I wonder about the following.
With the world obviously needing solar for every reason that those perusing this board know, (and those inhabitants of low lying islands know) why are solar stocks declining? Is the whole game so severely rigged?
With this twist in plot, maybe the demand issue discussion will shift away from Tesla to Solarcity. Something does not add up. This to me is anything but 'organic' growth.�
1/1/2015
guest I don't claim to have all the answers, but I believe many of you are seeing a very different picture than I am. If I'm wrong I'd love to be corrected, as my current investment thesis is encouraged by the idea of the MLM, not disheartened.
SCTY stock has been suffering as we were forced to leave Nevada unexpectedly. We are currently also suffering by the overly high delivered cost of each installed KW. The greatest contributor of this elevated cost is due to expanding awareness in new markets. Once the initial cost of penetrating a new market is overcome, the ongoing cost decreases significantly. The MLM effectively operates as an independent and comparatively low cost, risk free source of leads. We pay for leads delivered and converted, thus making the ongoing acquisition cost fixed.�
1/1/2015
guest I suppose you have to wonder if being associated with this new MLM firm if there is potential to damage or enhance your reputation. Being more expensive than local installers means reputation is a big thing. I suspect it won't do any harm.�
1/1/2015
guest Can't figure out why anyone would want to join the powur MLM when they could just be an Ambassador.
Let's see - with powur I pay $499 and for each referral that goes solar I get $200. Or I could become a SolarCity Ambassador at no cost and for each referral that goes solar I get $200.�
1/1/2015
guest Is there a reason why this Powur thing has just popped up? As far as I can tell SCTY ended the expensive route to leads after 3Q earnings were announced. I almost like the idea of an independent marketing arm that can be effectively laid off as each market comes up to scale, but this seems expensive and unnecessary.
Can someone confirm that this is actually being used in certain markets?�
1/1/2015
guest As a solar power inspector, one driving trend I noticed was that when a homeowner bought a solar system, his neighbors would soon follow. I realize that my experience is anecdotal, however, the data substantiates this trend.
It seems to me, this would dovetail perfectly with a well-executed MLM direct selling effort.
I'm imagining explaining the proven values of solar, to a group of neighbors with a working model as a demonstration. Watching a net meter run backwards is a compelling argument.�
1/1/2015
guest Well for one, most people are likely unaware of the ambassador program. Outside of that, MLMs typically sell the idea of earning revenue on your "downline," also, I believe there is a residual component where converted leads give a very small 20 year residual. I am very bullish on the MLM, if someone has a coherent argument for me to be otherwise I'd love to hear it.
I've never done an MLM personally, but given the number of referrals I've already sent to SCTY, I'm almost debating it.�
1/1/2015
guest I wonder how Musk feels about his image being plastered all over the Powur site. He doesn't let solarcity use him directly in marketing.�
1/1/2015
guest I have to believe that Elon is aware of and actively participated in the powur marketing effort.�
1/1/2015
guest SolarCity (SCTY) Gains as Analysts Sing Praises of New Loan Program
This may be a strong transition in SolarCity's business model.�
1/1/2015
guest Can you cite something that shows this to be true?�
1/1/2015
guest Tomorrow should be very interesting. A bit confused by the lack of volume. My only guess is that shorts are not expecting the stock to make the next leg up. However, tomorrow is the shareholders meeting, and almost no-one is expecting anything to get announced at it. Also, the shareholders meeting hasn't been mentioned by anyone, aside from the strange fellow from the Tesla shareholders meeting
On top of all of that, this thread has been abnormally quiet for the past few months. Even today, this thread only received 10 posts (from 7 people). Interesting measure of what people are and are not paying attention to.
Maybe we should make a thread specifically for questions for the Solar City shareholders meeting?�
1/1/2015
guest You think that guy with the stolen bikes is going to show up? Or maybe he only has TSLA shares.�
1/1/2015
guest Sure:
www.solarcity.com�
1/1/2015
guest If the guy doesn't show up, maybe he'll request time with Lyndon, and say he couldn't make the meeting because he was abducted by aliens? Makes about as much sense as him showing up to the Tesla shareholder meeting and saying Solar City stole his bicycles.�
1/1/2015
guest Sales cost needs to be solved industry-wide and that's about it. There's nothing else to talk about.
Even these utility roadblocks seem to be winning battles here and there, but the war is over.
When costs(mostly sales) come down for SCTY all revenue will hit the algos and it'll skyrocket. Until then.......the beach.�
1/1/2015
guest I don't know why I even bother to engage. That would be like citing Teslas home page and claiming Elon doesn't allow the company to use him to sell cars. Just to waste more time, here is Elon on SCTYs page. Meet the SolarCity Team and Learn About the Company�
1/1/2015
guest There isn't much really to discuss. The stock seems to drift along up or down at random on no news. At least with TSLA we can track X/3 reservations, track deliveries around the world, see the supercharger network build out progress, hear about a cool new feature or update, get an occasional tweet from Elon, etc. An informed reader of this forum can make a pretty good guess as to how the earnings call will go. With SCTY we have basically nothing to go on but pure speculation. There's nothing really on the horizon to get excited about either way. Every post is either why SCTY is doomed or why they will be a huge success. Why one expert says oil is about to plunge and another one says maybe shoot up. I tried "catching a falling knife" as you guys say and played around with options but haven't been able to make consistent returns. I'm working on my career at the moment so just going to hold onto my shares for a few years and spend less time worrying about the day to day noise.�
1/1/2015
guest Giggle, this is definitely the best strategy with SCTY. I'd highly recommend loaning your shares, you can often get between 20-40% in return. Makes waiting quite lucrative.�
1/1/2015
guest I would absolutely do that, but my discount broker (Capital One) doesn't allow me to do that.�
1/1/2015
guest Maybe today's action is related to Arizona? I've heard no news, but the arbitration hearing that was announced more than a month ago should be progressing, right?�
1/1/2015
guest I think today's nice move upwards is because of growing publicity and realization of the value for SCTYs new loan product. A few analysts came out saying how great it is. And it does look great. I believe it's all run by another company that's taking the default risk in exchange for the interest, so SCTY is basically able to get full money up front for their systems. If this goes to 50% of their sales (maybe 2018) their finances should look great. For consumers it looks good with shorter terms, low interest and the ability to retain tax credits. It could be the solution to 1 of the 3 big problems facing SCTY: slow cash flows (the other 2 being regulations and sales costs).�
1/1/2015
guest This is precisely why you don't want to be in this line though. In the long run, anyone can approach these third party lending facilitators and provide a similar product.
I'm perfectly fine with doing profitable installs on an interim basis if the market demands it, but solar-based energy-as-a-service is where the gravy's at moving forward. Do not diminish the brand!�
1/1/2015
guest I'm not an industry insider but to me it looks like "rooftop installations as commodity" view is oversimplifying things. Anyone can cobble together a desktop computer or laptop from parts but there's a lot more to it when it comes to making a product that consumers want. To continue the analogy the way I see the market evolving is we're at the stage where just having a working PC cobbled together from whatever the cost effective parts are available is what folks think they want.
But as the market evolves two things will happen. First, these systems will have to become quite a bit more integrated and sophisticated in managing energy production and consumption, and second consumers would start being more sophisticated and picky about what they get. Sure yes commodity view would still be relevant for a substantial part of the market that is super price sensitive. There's also going to be an opportunity to offer value on top of that which will require scale, regulatory compliance, integration, etc. that a small installer can't offer (unless we're talking about really high end stuff, analogous of a custom built PC). There's all these super thin margin PC makers out there but there's also Apple and Lenovo that make stuff that people pay a very good premium for.
All this time I was trying to answer the question about why is it so quiet here and to me I think until SCTY can clearly demonstrate that the market allows for an "Apple" niche and that SCTY will be there to take that position it'll all be the ups and downs of short term regulatory and execution details which people are burned out from following.�
1/1/2015
guest Carter to meet privately with Elon Musk
The military has expressed tremendous interest in renewable energy technology. Could it be that this meeting covers more than rocket science?�
1/1/2015
guest My hunch is they want to roll out the solar loans together with storage. With both receiving the tax credit it makes sense to bundle a 10 year solar loan with a battery lease. Own the panels, but solarcity controls the arbitrage. The electron production is still just a commodity as it has been.�
1/1/2015
guest Giggle, if you don't mind spending a few minutes, try switching to Interactive Brokers. They are among the cheapest, .70 a contract for options and $1 for stock trades. They also allow you to loan your shares.�
1/1/2015
guest @electracity You posted in the past links to various local installer pricing levels. Could you re-post please?�
1/1/2015
guest Truly amazing. The shareholder conference was 1 hour ago and not a single comment about it. Not even a single person asking why the link on Solar City's website for the webcast isn't working. Elon, Lyndon, or anyone with the ability to fix the webcast link - If you can see this message please ask someone to fix the link to the webcast.�
1/1/2015
guest I hope so, it makes so much sense. Not sure how true this is but I recall hearing that many of the deaths/injuries in Afghanistan were not actually from combat, but rather from fuel supply convoys being attacked.�
1/1/2015
guest I was going to ask. I was looking for SolarCity stuff and ended up here by default. Utilities are not exactly front page material but it would be cool if they had a webcast at least.�
1/1/2015
guest Is this like another "Investor's Day"?�
1/1/2015
guest Have you found a working link yet? I'm having trouble, currently on hold with Solar City.�
1/1/2015
guest OK, so I have now spent (wasted?) a fair amount of time following SolarCity. So here's my current assessment for what it's worth. This is not investment advice.
I think SolarCity is throwing business models at the wall and seeing what sticks. I don't think they've found a sustainable business model yet, but they seem to have tried dozens of business models already. I think they're trying "agile development" on business models. This might actually work; if they can iterate business models faster than their competitors, they might stumble across the best business model first. On the other hand, they might not.�
1/1/2015
guest This term is pretty overused, but solarcity is a "disruptor". That basically means that their whole thing is to find a better business model than the existing status quo. So basically they just pick a plan that get's them to the next plan until they are the 800lb gorilla. My understanding is the plan for now is to start picking their markets more carefully rather than just all out growth, and then probably go back to all out growth when they are making their own panels and pairing them with storage. In the short-term that might not look pretty, but in the long-term it sounds pretty smart.�
1/1/2015
guest Did they have a webcast last year?�
1/1/2015
guest I heard back from SCTY, apparently they do not webcast their shareholder meetings. :-/�
1/1/2015
guest If you think this is the case then you haven't done enough time following SCTY. The PPA model is the logical way to integrate a new type of energy provider into the equation, the market has just not absorbed it yet. Purchasing outright is perfectly fine, but I still don't see the wider population wanting to handle the in's and out's of power generation. Keep in mind we're still working primarily with early adopters here, people like me WANT to be involved in this every day. I believe most folks do not.
Keep an eye on sales cost and when it starts to drift back toward $.50/W with a clear believable plan for $.25/W......BUY!�
1/1/2015
guest What Does a 5 kW Solar System Cost? | EnergySage�
1/1/2015
guest That's pretty informative. Thanks�
1/1/2015
guest Back to the Future: What Role Will Electric Utilities Play in 2030?
�
1/1/2015
guest Because who knows what happens there�
1/1/2015
guest SolarCity CEO Lyndon Rive�s Salary Is $77 Million. Mark Zuckerberg�s Is $5 Million
SolarCity has new global sales head
�
1/1/2015
guest Another interesting step
Apple establishes Apple Energy LLC subsidiary
Apple establishes 'Apple Energy' to resell green energy back to providers
"Apple has meanwhile told the U.S. Federal Energy Regulatory Commission it should meet the criteria for selling power at market rates rather than wholesale, since it doesn't have major influence in the energy industry and can't impact prices. Should it get permission, it could start reselling power within 60 days of June 6."�
1/1/2015
guest I'm actually quite sure personally that the PPA model is no good, because rooftop solar PPAs routinely have worse TCO compared to buying outright, buying with a bank loan, or even leasing, *and* they actually lower the value of your house. If you have a different opinion on PPAs, I won't argue with you any further.�
1/1/2015
guest Probably stripping down titanium bikes and selling the parts on the black market. Just a guess.�
1/1/2015
guest PPA = utility with price of power known in advance for 20 years. So however bad a PPA is, it is still ahead of the utility, right?�
1/1/2015
guest Saying some form of managed non-ownership model has much greater cost of ownership is as silly as the folks pointing to $1.70/W "utility scale" installs vs. $3.30/W residential installs as if it's going to last forever. The vast majority of the cost difference is due to market immaturity in the residential world and will level out very quickly once solar is mainstream in most markets.
"Utility scale" projects don't have to pay for sales effort, period. That's a 1/3 savings right off the top. The only true advantage is efficiency due to scale, which is obviously not insignificant.
But how long can this insane dynamic possibly last? Is the internet going to stop working?�
1/1/2015
guest http://azdailysun.com/news/local/mediation-between-solar-firm-arizona-utility-suspended/article_9ffe022d-c6a2-5740-86b6-1d77740070b2.html
SolarCity adamant about Buffalo job creation
�
1/1/2015
guest SCTY needs to scrap this mediation if it's clear that the utility has no intention of following through. They're just trying to stall their way through election season so the voter initiative doesn't make the ballot.�
1/1/2015
guest Yep, looks like the stalling worked unless they have a boatload of signatures already...
Solar Settlement Talks Brokered by Governor Ducey Have Been 'Suspended'
�
1/1/2015
guest Well the *sugar* has hit the fan in AZ. Everyone from the AG down to the utility regulators got a little visit from the FBI yesterday.�
1/1/2015
guest Wow. More detail, or a link, or something please! Solar stocks in general took a real hit yesterday, and I have no idea why.�
1/1/2015
guest FBI questions former utility regulator, APS, Corporation Commission
FBI interviews former Arizona utility regulator over election issues
They seem to trying to "follow the money." If they don't get shut down by a Trump win this could get interesting.�
1/1/2015
guest Not actually true. It's a different sort of sales, but they have to prepare a huge flurry of paperwork to make an auction bid to get their electricity attached to the grid and bought by the wholesale markets. And they have to prepare presentations to secure financing. This is pretty much what the residential sales people are doing, if you think about it... trying to get a homeowner to finance a solar system by convincing them that the electricity is cheaper than the alternatives.
The utility scale guys have the advantage that they're pitching to a much shorter list of customers, but it's still basically sales costs!
I'd love to know the answer to that. I'm waiting until the elevated sales & overhead costs of US rooftop solar drop to German / Australian levels before buying a solar system.�
1/1/2015
guest Tesla, SolarCity and SpaceX are pulling "regulatory capture" into the light of public scrutiny. The widespread corruption that exists within these industries will wither under the spotlight.................probably not.�
1/1/2015
guest No, a PPA is not ahead of the utility, it may be ahead of the utility.
Or alternatively, why go PPA when a owned system is 30% more solar PV for the same price.
then there is the whole home resale issue.
leased items are not assets, they belong to the lessor
owned items are assets, they are part of house
so when buying or selling a house, unencumbered PV panels add to the value of the house and easily go into the mortage.
but buying or selling a house with leased panels, is difficult, they generally cannot go into the mortage, and are another deduction that the financier must take into consideration.
so perhaps owned panels add to the house what a percentage of what a new replacement cost would be. But leased panels subtract from the house what the outstanding purchase price is.
Solar can raise home values � if you own the system�
1/1/2015
guest For being super-complex in the background, PPA is super-simple on the front-end. If you want to own a system you should do it. If that's not your thing you can bundle up all the work effort involved in solar ownership and dump it on a PPA provider for a price premium.
I like to picture my 35-45 year old friends in suburban Philadelphia making solar buying decisions over the next 1-5 years(as many of them will). I can't see half of them ever being interested in buying and maintain an array no matter how simple it becomes. Energy costs are just not a concern for them and the "premium" of still paying less than current cost will logically be where they land.
I really think the full service PPA model will take an even larger majority of installs after we're to scale nationwide. 2 years? 6 years? Who knows. In the mean time I guess I have no problem with SCTY doing installs with simplified loans. Something to help keep the lights on in new markets as we get up to speed.�
1/1/2015
guest Greater than the sum: How aggregation is making storage into a software business
Energy Bill quagmire:
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1/1/2015
guest 1) I think the problem with the prior breakout was the 100dma being too big of a jump 200dma. If the situation in Arizona hadn't occurred,I think Solar City would have stayed around $24, until the moving averages caught up with the upper BB.
2) The US government won't allow states to kill the residential Solar industry.
3) It's very interesting FBI questioning the APS and a a former member of the ACC about an investigation involving the use of Dark money hasn't received more attention. The story broke less than 24 hours after it was announced that Solar City had ceased attempts to work with the APS after one meeting. Maybe this is because SolarCity knows the APS is about to be subject to major scrutiny? Maybe SolarCity doesn't think it wise to negotiate a deal with people who are who are currently being investigated by the FBI for corruption?
http://www.bizjournals.com/phoenix/blog/energy-inc/2016/06/aps-former-acc-member-questioned-by-fbi-in.html
4) Once battery storage enters the equation, any debate over net metering will be irrelevant. Individuals will be able to sell power to anyone. In Germany this is already allowed, and possible. In the USA, I believe this is not currently allowed.�
1/1/2015
guest Truly amazing. Only 1 post in this thread today.
Here is the news of the day that no-one is paying attention to.
SolarCity, Community HousingWorks, & Everyday Energy Partner To Bring Solar To Affordable Housing�
1/1/2015
guest Nothing that happened today is news from an investment perspective.�
1/1/2015
guest I firmly disagree. On top of everything else.
ACC attorney jumps to law firm representing SolarCity, rooftop interests battling APS - Rose Law Group Reporter�
1/1/2015
guest FERC revokes market-based rate authority for Berkshire Hathaway companies
Add 2nd linky:
Berkshire Market-Based Sales Restricted in 4 Western BAAs
Nevada PUC: Upcoming NEM cost-benefit study �won�t win the day�
�
1/1/2015
guest It amazes me that people value operations like NV Energy to the tune of tens of billions and throw around the possibility of SCTY going to zero. I mean, which company is on the wrong side of the tidal wave?
How anyone can possibly believe these profits will be there in 2 years is beyond me. NV Energy made $750M last year and will be far closer to zero for 2017. All it takes is a regulatory environment that is marginally fair, state OR federal.
We keep seeing these operations getting scooped up left and right for high premiums as if the entire populace is going to happily bend over forever. Am I nuts here?�
1/1/2015
guest Thanks for the link. I like this part right here. It explains why I think SolarCity is still going to be the winner and leader of this transition.
�
1/1/2015
guest 
Okay. When journalists overstate Lyndon Rive's salary by around $77 million, and these are the two top stories on Twitter, I'm convinced the stock won't go much lower.
The San Francisco Business Times Got My Salary Wrong, But Only By $77 Million�
1/1/2015
guest I know we're not supposed to push politics into this thread if it can be avoided, but I think we're looking at a very crucial 6 month period for SCTY and a lot of it hinges on political winds.
The Senate energy bill is still floating in limbo with lots of fossil interests pushing for less EPA regulation, etc. A Hillary cakewalk is looking more and more likely with the possibility of a Trump nomination also keeping loads of mainstream Republicans at home on election day. There is serious talk of the GOP losing hold of both houses of Congress. I don't think that's the most likely scenario and I don't want to discuss it's likelihood here, I just want to point out that what was once unthinkable is now a possibility.
With the probability of losing the Senate, having to deal with a Clinton WH and having less than a stranglehold on the House, GOP fossil interests are in a situation where it's in their interest to "overpay" for passage of this bill ASAP. To me that is bigger than any day-to-day market issues that SCTY might have since Congress could likely end these state-by-state net metering battles with simple federal legislation. Pushing more of the state-level conversation back to the feds means it's game over and all the uncertainty around residential solar payback periods is wiped out in one shot.
Considering the boatload of concessions the "green" folks got when oil exports we're legislated, I think we can fairly expect something of that magnitude to come down the pike if this energy bill every gets through the House AND the stamp of approval from Obama. What that would look like specifically is above my knowledge of the utility world, but I think it's easy enough to see a path where someone like NV Energy would no longer be able dictate the energy supply at wholesale. Whatever form that rule takes would likely be obviously fair and very palatable to all but the utility interests. It would also be an easily proved net cost saver.
I had hoped SCTY would have sales cost down to maybe $.45/W by this summer, but we're still at double that due to the whole Nevada debacle. I think legislation that enhances federal power to protect residential solar to any degree effectively has the same impact. Sale costs are only high because of the unreasonable amount of power we give utilities in their own marketplaces. If I see a good bill get passed that curtails this power, that's the same as seeing $.30/W sales costs because that's certainly where it'll be before long.
Just my opinion, not investment advice. Installs should be growing faster than guidance, the rules are being rewritten as we speak. This is a huge 6 months for SCTY.�
1/1/2015
guest Virtual Power Plants Get Around Solar Power�s Intermittency Problem
�
1/1/2015
guest If New York had further delayed the payment, SolarCity would have found a way to obtain the necessary cash. It's helpful to have a number of billionaire execs who care about their customers and would step in if necessary.
New York would have likely had to pay a penalty for any delay. New York, NOT SolarCity would have been 100% responsible for the delay. Anyone more familiar with this care to shed some light on this?
Although not a perfect analogy, the example of the close call of a US government shut down comes to mind. If workers had been laid off, or simply told to not show up as a result of a delay in agreeing on a budget, I'm fairly sure all of those workers would be entitled to back pay for lost income they would have received once a budget was agreed on.
It would be great if more people were involved in this thread. TMC mods, just a suggestion, but something should be done to try and get more people talking about the Solar industry. It's not beneficial for anyone if there are only 3 or 4 people on TMC who discuss the facts about developments at SolarCity.�
1/1/2015
guest @drinkerofkoolaid FYI I'm reading every post in this thread and I'd like to participate in the discussion but I consider the SCTY company and business too complex to add anything meaningful (too much financials for me). I also don't know where to get some good information about the state of solar in the US, except greentechmedia.com.
Perhaps a good starting point would be to move this thread in a new "Solarcity" subforum, in the the General Forums (next to the existing SpaceX). Or in the Energy, Environment, and Policy. Then, we could have various thread to cover short-term stuff, competition, etc. We could also make a list of reliable sources about solar tech, residential demand, supply, competition, politics... @jhm is doing a great coverage of oil-related news in a TSLA thread but he frequently talks about the impact of oil and gaz on solar energy. Outside of TMC, I've recently noticed some solar-tagged posts on electrek.co (a great blog to follow Tesla, by @FredLambert).
In a nutshell, it would be help to re-organize all the energy topics (!= transportation) in one place on TMC, and help other members understand the business.�
1/1/2015
guest Historically, there was opposition to even having a SCTY thread, let alone a whole sub-forum. I'm not going to get into that one.
I confess that I just don't understand what the market thinks about SCTY and solar stocks in general. Yes, the oil glut hurt, but it shouldn't have hurt the industry that much, since oil isn't directly used for very much electricity generation. The problem seems to be that the oil carries natural gas with it, and that is used. But still, we know we have to get off that too. Anyway, I'm fairly heavily invested in Solar, and all of those investments are in the red.
I do see SCTY as more of a financial engine than actually a straight solar energy play.�
1/1/2015
guest If you look at those numbers, the difference in home value between "owned" and "leased" is between 7% and 14% of the value of the home before buying/leasing solar panels. That's a lot.�
1/1/2015
guest There's a lot of skepticism about *particular* solar stocks. Even among those of us who are absolutely certain that solar is going to take over the world energy market (and I am quite certain of that), it's very hard to tell *which* solar companies will survive -- the market leaders in 10 years might be companies which are currently privately held. It's an ultra-competitive market. This may partly account for the persistent weakness in solar stocks, even when news is good for the industry as a whole.�
1/1/2015
guest This is fascinating news. It's interesting that FERC has actual standards for whether a market is a real competitive market or controlled by a monopoly, and BH Energy has just fallen on the wrong side of the standards in several more regions.�
1/1/2015
guest In case anyone is interested (and hasn't already seen it), I'm tracking SCTY's short interest rates at Fidelity in the Tracking short interest thread. I update when there's been a rate change, so if you don't see any new posts for a while, you should take it to mean that the rates are unchanged. (Or maybe I died.)�
1/1/2015
guest FACT SHEET: Obama Administration Announces Federal and Private Sector Actions on Scaling Renewable Energy and Storage with Smart Markets
Are Clinton's solar goals feasible?
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1/1/2015
guest Does solar power have a bright future in Houston? SolarCity thinks so
�
1/1/2015
guest Will Hillary Clinton be elected POTUS?
Will she choose a strong progressive (I.e. Elizabeth Warren) as her running mate to coalesce the Democratic Party?
If she is elected, will her down ballot influence regain Democratic control of the Senate and House of Representative?
All of these potential political events will dramatically impact whether or not Hillary's solar power plan is implemented and to what degree.
Since I believe climate change is the greatest challenge facing mankind, I am campaigning for the Democratic Party.�
1/1/2015
guest Why Hillary Clinton could be the solar industry�s new best friend
Will the stars align?
140 jigawatts, isn't that enough to power an influx capacitor?�
1/1/2015
guest Hillary's "plan" has no details that I can discern and projects out to the same growth rate we are already experiencing. So essentially, if Jay-Z were elected POTUS we would likely eclipse that same 140GW figure by 2020.�
1/1/2015
guest There doesn't seem to be much SolarCity news so far this week so I linked a couple related stories of energy industry doom and gloom...which makes me feel better about their future "green" business model.
http://www.nytimes.com/2016/06/20/us/as-wind-power-lifts-wyomings-fortunes-coal-miners-are-left-in-the-dust.html?ref=energy-environment
Texas facing massive well cleanup costs after oil bust
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1/1/2015
guest Do you mean Jay-Z in contrast to Donald Trump?�
1/1/2015
guest And then there's this.....www.greentechmedia.com/articles/read/Deep-Politics-Dark-Money-And-Fraud-Join-the-Solar-Party
�
1/1/2015
guest PUC general counsel out after tweet under pseudonym
Doubt will change anything, but interesting nonetheless...�
1/1/2015
guest Wow. This is the utility commission charged with protecting the people of Nevada from the effects of this monopoly. The people of Nevada are paying for a bunch of lawyers to spam the internet in support of stealing their money. Hilarious.
How are these things not bigger news? The outrage angle is certainly juicy enough.�
1/1/2015
guest Nest is pushing further into the energy business with SolarCity partnership
Along those lines partnering with national and local building developers as a solar subcontractor seems like it would be an explosive business opportunity with low sales costs.
What It Really Means to Require Solar Panels on All New Buildings
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1/1/2015
guest scty is up against some really defensive industries. looks like its on its way to test the 20.5 support soon. are there any positive catalysts lined up for scty? it looks like areally rough fight so far.�
1/1/2015
guest Tesla offering to buy SolarCity - $26.5 to $28.5
Tesla blog post - Tesla Makes Offer to Acquire SolarCity
8K by SCTY- SolarCity - Other�
1/1/2015
guest Incredible!�
1/1/2015
guest Worst case scenario for me - all underwater LEAPS will be effectively written off. I kinda dread having to understand the tax implications.
Pig picture though I think this is great. There was always a slight lack of cohesion in Tesla Energy and SCTY dealings. They would be synergistic with each other but also have to make their products work with third parties at the company seam. Now there would be no seam and no need to worry about third parties unless there's an actual business need to do so.�
1/1/2015
guest Congrats to all longs. Underwater LEAP holders notwithstanding. Options are always a crap shoot. I wonder if this will happen?
RT�
1/1/2015
guest Asian tesla Auto factory will go up at Solarcity silevo site in China. Already had signed contract option to expand site to a few hundred more MWs of panels, but might be enough room to convert to auto factory instead.�
1/1/2015
guest WTF. I guess I can cancel my pending orders at least. sigh.�
1/1/2015
guest Does anybody have advice for a novice investor that has long positions in both companies. I assume TSLA will be down tomorrow and SCTY will jump up. No intention of selling any of my TSLA stock on this news. Should I sell some of my SCTY stock tomorrow as a hedge in case the deal doesn't go through? Should I sell some SCTY and buy TSLA at depressed price? Should I hold altogether and wait for deal to go through? Any advice/thoughts greatly appreciated?�
1/1/2015
guest Are there any options experts around? Since this deal is a buyout via stock, not cash, this website (link) says things work differently, namely:
All-Stock Offer
With an all-stock merger, the number of shares covered by a call option is changed to adjust for the value of the buyout. The options on the bought-out company will change to options on the buyer stock at the same strike price, but for a different number of shares. Normally, one option is for 100 shares of the underlying stock. For example, company A buys company B, exchanging 1/2 share of A for each share of B. Options purchased on company B stock would change to options on company A, with 50 shares of stock delivered if the option is exercised.?
[I underlined "same strike price" for emphasis.] Can anyone confirm this is true? Same strike price for SCTY->TSLA options? The current offer is each SCTY share becomes .122 to .131 TSLA shares. Let's say I'm holding 10 Jan'18 $25 SCTY call options I paid $10 each for. So instead of losing $9k or so ($10k -> $1k), do I really get 1 Jan'18 TSLA $25 call option? (I assume fractional options are lost?) In that case I make something like $7.5k ($10k -> $17.5k)?
Update: rereading it, clearly I'd end up with 10 J'18 TSLA $25 "call options" where the "options" are somehow for 12 or 13 shares instead of 100? How would that even work?�
1/1/2015
guest Dang. Cost basis over $42
Big picture agreed probably good. Real question is what happens to Chanos?�
1/1/2015
guest Yeah I doubled down on my leverage twice already so I'm almost entirely in underwater LEAPs. Never expected this prolonged dip so I've been waiting it out, but my cost basis was still @ $52 hah. Oh well.�
1/1/2015
guest SCTY up $4 after hours and TSLA down $25! If this holds til open I'll be dumping one to buy the other. If things go all screwy would they have to adjust the offer, or withdraw it?�
1/1/2015
guest Interesting take:
Elon Musk Eats the Shorts�
1/1/2015
guest Uhh.....wow. Didn't see this coming.
I've got equal TSLA and SCTY holdings so this is close to neutral for me.
The big negative after hours move by TSLA might make the actual acquisition less likely to go ahead. If Elon truly is going to abstain in the TSLA vote then it looks like a lot of TSLA shareholders will be against the deal just based on the impact to the share price.
I need to research this more, but if I could sell tomorrow for ~$26 that would be appealing. I first bought SCTY at $77 but have made a number of fortunately timed trades, including doubling down at $16.88, so my cost basis is $20.44.�
1/1/2015
guest Well I have no idea what to do now...only thing I'm already used to is that I'll be thoroughly screwed.�
1/1/2015
guest Do you suppose Elon knows something we don't?�
1/1/2015
guest If he does, he'd better tell us or else this deal won't get approved.�
1/1/2015
guest I'm struck by the fact that we're all small, individual investors, and often emotionally involved in one or both companies. What we think doesn't matter. The institutional investors will determine what happens tomorrow, and they don't trade after hours.�
1/1/2015
guest Anyone want to take a shot at explaining how this deal makes sense for Tesla?�
1/1/2015
guest Hillary�
1/1/2015
guest I think Tesla sees long term value in owning SCTY and would like to buy SCTY in a year or two post Model 3, but they also know that SCTY is really cheap right now and it's likely to rise a lot in late 2016/2017, so the good timing to buy SCTY outweighs the poor timing for TSLA
Lyndon Rive reiterated on the call today that SCTY will be FCF+ in Q4.�
1/1/2015
guest That is actually one of my theses. She's going to be president and solar will rebound heavily.�
1/1/2015
guest That's one heck of a gamble and a president isn't a dictator; odds are she'd have trouble getting anything through Congress.�
1/1/2015
guest Okay, this maybe a noob question but since this is a straight up stock swap, if I hold onto my SCTY shares to the bitter end will they be converted to Tesla shares per the ratio stated in the bid letter or will I just be bought out.�
1/1/2015
guest Converted to TSLA.�
1/1/2015
guest Yeah but markets already starting to call it. Dems going to pick up a ton of seats if Trump keeps declining to fundraise for down-ticket Repub candidates. Trump has 30 ground staff nationwide. Hillary probably has at least 30 in every state. Unless she's indicted and convicted of a heinous crime, she's the president and I will probably bet on it.�
1/1/2015
guest If Hillary's down-ballot influence regains the Senate and House of Representatives for the Democratic Party, the solar industry will explode. The implosion of Donald Trump and the Republican Party will have tremendous consequences for the stock market and energy industry.
I for one think Elon is taking a very calculated risk. He knows what he's doing.�
1/1/2015
guest That a tough one. It obviously makes sense for Musk and his cousin.�
1/1/2015
guest guys, I've been storing my bullets ($$) just for situations like these. Which should I buy? SolarCity or Tesla? Personally, I feel my strategy should be to go in on SCTY first, sell after making a profit and buy TSLA next. The reason I feel for not buying TSLA at the next market opening is because TSLA might not bottom out yet, and may drop further once market opens. What do you think?�
1/1/2015
guest I would buy tsla. If the deal doesn't happen the stock will spike and Scty will drop. If the deal closes you own both. If it'll drop further is your call. I own tsla 4 to 1 with Scty. Tomorrow will be a rough day for me�
1/1/2015
guest http://nymag.com/daily/intelligencer/2016/06/trumps-campaign-still-a-garbage-fire.html
Some very telling data points in this article. I used to do this for a living and if I was a Republican running in 2016 in a weak Congressional district who was counting on a national party ad spend to lift me to victory, I'd be crapping my pants right now.
I mean, it's definitely the long game, but if someone told you they could guarantee Hillary wins and carries enough Dem seats on her coattails to make serious renewable policy strides all but certain, you might think now is a great time to invest in the beat-down solar sector.�
1/1/2015
guest Don't know what you mean, I think that would cinch it for her.
She'd get all the Trump votes...
I'd vote no currently on the SCTY from a timing standpoint (selfishly given my current investment). However, this is a very long term play by Elon. The technology coupling integrates all of this using SuperCapacitance layered solutions. And integrates technological, manufacturing, product solution set, and customer acquisition (I agree with Bonnie on this front- it's a total back ending of the dealership model- I suspect they are bending over backward trying to figure out a way around this move- but they might as well bend over forward to receive what's about to happen to them).
I think Elon's been positioning Tesla for this with the personnel and research associations we've seen. There is no long term profit in Solar as a utility (and he knows it), nor as a stand-alone product or industry (imo). The utility of power is under sever disruption and is entering a permanent self-destruction (including Solar based utility, as the cost of energy is headed to near zero).
I'll be increasing my TSLA position on this as a long term investment.
For the forum, good news bad news as well. We already have a SCTY thread, that's good; but Tesla will have less to do with the Motor part of the Tesla Motor Club... We'll need a new name soon
Stay Cool...�
1/1/2015
guest How about this:
The purchase offer fails without Musk's vote. But the Tesla offer gives SCTY owners and lenders more confidence.
Perhaps the point of the offer is that it is beneficial regardless of the outcome.�
1/1/2015
guest This is a bailout. There are no two ways about it.
This is a done deal.�
1/1/2015
guest Oh, that's actually quite simple. If the merger isn't approved, nothing happens.
If it is approved, this is a stock-for-stock merger. Your LEAP for 100 shares of SCTY converts into a LEAP for 12.2x to 13.1x TSLA shares (depending on the final agreed conversion rate), same expiration date. (Just like the shares of SCTY convert to shares of TSLA). There will probably be a funny trading symbol for "TSLA1" options, which will be the converted SCTY options.
Yes, that's exactly what happens. They'd even be for 12.2 shares or 13.1 shares, and they'd be listed as "TSLA1" options.
If you actually proceed to *exercise* your option for 12.2 shares, however, they will give you 12 shares and some cash.�
1/1/2015
guest My leaps are so far underwater they are scraping the bottom of the ocean.
Of course after 2 years of being patient I sold half my SCTY last week. I try and look at the bright side though...even if I held them he stock has not rebounded nearly enough to breakeven...15%.... I need 60!�
1/1/2015
guest Well, technically, he certainly does.
For one thing he has access to the internal financial details of SCTY, which we don't. I would love to know the exact contents of the balance sheet: how many bonds of each interest rate and each duration, the financing details on each and every one of the "special purpose entities", who bears default risk on each of them, etc. SolarCity has been censoring those from published reports based on commercial confidentiality. But Elon as Board Chairman has access to them.�
1/1/2015
guest I'm with you I'm afraid. Personally decimated although I like the merger overall because Tesla Energy was what had lured me in the first place.�
1/1/2015
guest I wonder if the recent secret meeting at pentagon with Elon has anything to do with his SCTY buy over decision�
1/1/2015
guest No. I was just thinking it occurred after the IEX got the go ahead to become a full fledged exchange. If you've read Flash Boys you know it's the only fair exchange that does not cater to high frequency trading predators. This might be the condition necessary to really burn the shorts. Of course that would assume Elon cares about stock price, which I'm not so sure of.�
1/1/2015
guest That will teach them.
Since most shorts certainly borrowed these shares near 52W-lows he can hurt them and get SCTY at a bargain at the same time!
Win-win. Another genius move.
PS: Investors who bought SCTY at $60-90 don't need to worry. Once the merger synergies kick in, Tesla will soar. You will make back your short-term paper losses in no time.�
1/1/2015
guest I am having a very very bad day. I'm getting crushed on my TSLA and SCTY holdings simultaneously. Can anyone tell me what happens to my SCTY Leaps if the merger happens? I feel like throwing up over here.�
1/1/2015
guest Annoyed that this has come at a time when I'm too busy to discuss in detail! Interesting possibilities to say the least and as a holder of many many 2017/2018 LEAPs I'm less than thrilled.
In the big picture:
A) I don't see any way this gets approved by TSLA shareholders if Elon abstains, so it's more likely just another Elon trick to reset the price floor and try to squeeze the shorts. I think SCTY can and will show the positive changes expected by 2Q or 3Q earnings and the stock will jump. Then there's the post-election squeeze. He's just trying to buy time.
B) It would however set up Tesla to follow the path I'd most like to see. Bring it all together under one umbrella then sell off the car business to Apple and put the cash into Tesla Energy(soon the largest energy provider in the US, then world).
Good luck investors!�
1/1/2015
guest Timing wise for external catalyst the Energy deal is in the final battles and FTC intervention:
�
1/1/2015
guest damn... i just bought SCTY shares at 24.38 in pre-opening hours and now it's dropped to 22.++....�
1/1/2015
guest My understanding from a link posted on a previous page is that SCTY LEAPS will be converted to Tesla LEAPS, but for a much smaller number of shares and of course at higher strike prices. That is because this is an all-share transaction instead of a cash transaction.�
1/1/2015
guest I'm surprised the market views the acquisition as very unlikely to occur (as it's only moved about 1/4 of the way from it's price yesterday towards the acquisition price). I'm not selling here. Even if it doesn't happen, I think there will be times when the market thinks it is likely, so I'm not looking to sell under $25.�
1/1/2015
guest Some points to make:
Solarcity has approx. 100 warehouses in 20 states. These sites also will house and distribute powerwalls and powerpacks around the country
They have dozens of patents through silevo, zep, and homegrown. These tech specialties are critical to a fully integrated tesla product unmatched globally by any competitor on the planet.
Solarcity has a massive software IP. This software integrates the entire business from from customer introduction to final installation and account management. And it's already in the field with 100's of thousands of customers and pending customers. This is a massive value to tesla as the model 3 gets into production as well as mass scaling of tesla at that time.
Solarcity also has the grid services software and energy management of aggregated systems software in advanced development. That alone is worth the aquisitiion and Peter rive is the central figure in sheparding this program.
Special note on zep being significant because of its patents and expertise in mounting platforms technologies, but also for its key international relationships with important targeted tesla motors markets in Asia, Australia, and Europe.
Solarcity has a skilled labor force thousands strong. A sales and marketing team on the ground and in neighborhoods thousands strong. (Tesla has no mobile sales force and this would be a massive boon to sales exposure outside the stores)
Solarcity is by far a major steal for tesla and I think it is important to note Elon is a little underselling the current situation and focusing on the future synergies. If he really broke down all that Solarcity has to offer, he would have to significantly raise the offering price and that would surely kill the deal for the tesla shareholders immediately.
Even though I've always loved the idea of a strong relationship between Solarcity and tesla, I think Solarcity shareholders ought to demand a further exploration of value brought to the table.
Its time for Lyndon to take the floor and give a detailed value discussion of what Solarcity brings to the table in person.
I think most analysts (and many shareholders) are ignorant of this true current value... As well as the regulatory realities of the how far in the right the solar net metering and benefits of rooftop solar are to the grid and all electricity consumers.
I think now is the time for Solarcity to develop a major media "roadshow" on selling rooftop solar and the value it brings to all electricity consumers regardless of if you have it on your roof or not.
This "campaign" for a lack of a better term is ripe to take center stage because the interest level is massive right now. People would pay billions to generate this kind of interest. Now is the time for Solarcity to take advantage and sell to the public.�
1/1/2015
guest SCTY 52 week high is $61.
The board voted unanimously in favor of Tesla's offer at less than half the 52 week high.�
1/1/2015
guest nm.�
1/1/2015
guest Hilarious. close price for SCTY at the same level as Monday, while TSLA tanks.
I guess thats one way to **** things up�
1/1/2015
guest I apologize in advance for my amateur hour questions...
So if this merger goes through, would this be considered a forced sale of my shares? For instance.. If I have an average share price for $35 and Tesla buys solar city for $25 a share. I am effectively forced to take a loss on these shares at $10 per share... Can I claim capital loss on my taxes? Would I have to sell my shares before Tesla buys them?�
1/1/2015
guest The shares won't be bought, but simply converted to Tesla shares, so there shouldn't be any loss or gain to report unless you sell first, aside from any small sale of fractional shares that can't be converted.�
1/1/2015
guest So basically I would be way overpaying for Tesla shares? Or, if I sell today I can claim a capital loss then just go ahead an buy Tesla shares or some other company shares?
Edit: I hadn't given much thought to sell strategies. As I am young and have been more concerned with just finding good buying opportunities. This seems to have potentially changed things and I just want to make sure I am not making worse moves than I already have.�
1/1/2015
guest Yes, you just over-paying for Tesla, but not much more than if you had purchased Tesla at a higher price a few months ago. I am not entirely certain about how claiming a capital loss would work if you buy Tesla and Solar City is then converted to Tesla in the near future, but I imagine that what you said may be ok, at least if the deal takes some time to go through.�
1/1/2015
guest Can anyone give some insight on the market for 2018 SCTY call options moving forward? Looks to me like there was some minimal movement at the far-out-of-money range today at very low prices(for obvious reasons).
Does the market for LEAPs adjust to the likelihood of a merger? In other words, is it going to be wildly cheap to buy $80+ 2018 calls on SCTY since there's at least a chance they will be rendered nearly worthless within months?
Just took a look and it appears at least 1 contract $75's were bought at $.01 today. Am I misreading this board? $115's @ $.05 and most others unchanged with no volume.�
1/1/2015
guest I was also just wondering what would happen to SolarCity employee stock options. I was thinking about Lyndon's performance benchmarks like Elon has with Tesla.�
1/1/2015
guest Did anyone else notice that Elon mentioned the integration of the inverters into the power wall? If you have a unified car charger, power wall and panel system tied to the grid I would imagine you have an opertunity to deduplicate some hardware.
Even if they are designed to work together having separate product support chains even if they are subsidiary companies owned by a parent is one of my least favorite things. Having a unified point of contact for support and sales is one of my favorite things when I make purchasing decisions. From a brand perspective this makes tesla more attractive as a one stop shop for your total energy needs. Solar and a mix of other sources replacing combusted old dead things is inevitable at some point. If you don't believe this I can't fathom why you would own either stock. If you accept this and you actually accept the stated goal of accelerating the inevitable future of sustainable transport then the merger makes sense... at least to me.�
1/1/2015
guest A home solar system using major brands can be repaired by any competent solar company. Just like a Camry. A Tesla home solar system will likely need to be repaired by Tesla. Just like a Model S.
A grid attached solar system is the least critical appliance in the home. I am more impacted about my coffee machine not working in the A.M. compared to the solar system.�
1/1/2015
guest I suppose that would be one hell of a lottery ticket if the merger doesn't go through! Hmm I should look at that...
Well the ratios quoted in the announcement indicated SCTY was valued at 26.5 to 28.5 so selling now would be a mistake. When the news was first announced the after hours stock prices went all screwy and I thought about doing exactly what you talked about. By opening yesterday the market had corrected that imbalance and my amateurish back of the envelope math said it no longer made sense - I will wind up with more shares of TSLA if the deal goes through. If the deal doesn't happen I stand to make more money if/when a short squeeze happens when Solarcity gets to cash flow positive.
I'm not an expert, but I think the best course of action right now is to wait and see what happens.�
1/1/2015
guest I'm buying SCTY this morning. The deal is likely to go through. Shorts are driving down both stocks and they are calling it a hedge play, as they believe SCTY is dying and will either go to zero or bring down TSLA if deal goes through.�
1/1/2015
guest as SCTY shareholder do we get to vote? If so, how do we go about it?�
1/1/2015
guest I expect we will get a letter inviting us to vote, in a number of weeks from now. The companies have to do some due diligence, which takes a bit of time, but after that all shareholders of both companies will get to vote on the precise proposal. Note that a significant amount of shares are held by big institutions, in TSLA as well as SCTY, apart from Elon's holding and a few more who will abstain due to conflicting interests.
That's my take.
Edit to add: I hold both scty and tsla, about 3:100. (Just added a few tsla today�
1/1/2015
guest I thought about this again and I'm really torn. I've always thought Solarcity and tesla were synergistic companies that would be hand in glove all the way through maturity decades from now. A combine is a natural move and I expected something like it to happen.
However, this offer is extremely low balled and it insults Solarcity investors most of which Will come out far worse on this deal then ever expected as long term(even medium term) investors.
I feel like when Elon opined about PayPal being forced to sell because they couldn't exist on their own under the ubiquitous overlord EBay. It was "you will be assimilated or die trying to compete" and that was that and the sale went through. At least they got a pretty good value for being assimilated.
How the tables have turned with Elon in this respect, but I dare say far worse. He's saying "you will be assimilated and at the multi year low,worst possible value for you."
This is a terrible exchange of stock. In order to vote yes, Solarcity investors must demand a better deal or wait till they can afford true value exchange.
I can't see a scenario where most medium and long term Solarcity investors aren't losing significantly on this deal if it goes through as is.
Peter rive drops from (rough math)approximately 2,500,000 shares of Solarcity to about 300,000 tesla shares. I can't imagine what the rest of the key management like tanguy Serra and the others are thinking right now other than a massive, massive salary raise into millions a year as compensation.
Again, the terms are terrible for Solarcity investors as is. At a minimum, a doubling of the offer would be negotiable in my opinion. Bottomline, the deal is far from fair and Solarcity investors should pump the brakes on a positive vote until a wildly better offer is served up.
I've concluded I really really like the idea of the aquisition, but I really dislike the deal terms.�
1/1/2015
guest Well we can't have it both ways. If 2016 sales costs were $.35/W as expected, SCTY would have no issues at all. $.91/W sales cost makes the model unsustainable as solar continues to advance toward scale in the US. I mean, I can get a quality install in my immature market for $2.75/W all-in.
IMO taking SCTY operations under the Tesla umbrella will add the scale and branding necessary to negate almost all that sales cost. That makes Tesla PPA immediately the best choice(as it already is) and profitable. SCTY gets to keep moving much more cheaply and TSLA gains the future largest energy provider in the US. When this org splits in 3-5 years, Tesla Energy could very easily be worth more than Tesla Motors.
The other option is to take their foot off the gas even further to cut costs. Elon does not see this as a viable option as it screws with his vision, plus we already saw what cutting out of Nevada did to the balance sheet for 1Q16. It drove sales cost to $.91/W which is the very thing making financing more difficult and expensive. The negative feedback loop from there could be problematic and require a cash infusion. I'm sure none of that is appealing to Elon either.
This the beginning of yet another all-in move by Elon. I'm taking a both on my LEAP options, but I'm not about to complain or bet against Elon's eventual success. I will vote to merge even though it's not in my interest because sticking to Elon's vision is of paramount importance.�
1/1/2015
guest Well, at least a SCTY bull being as unhappy about the offer as a lot of the TSLA bulls suggests to me that it actually is a fair deal for both companies.�
1/1/2015
guest As I understand it (not very much) the deal will not happen today or next week, but due to Elon's special ownership he is obliged to give official and advance warning, as well as recluse himself from the actual deciding vote. Which I guess will happen one or more months or quarters from now. What the two companies' shares are worth on that day is still an open question, to my mind, and that's probably why the exchange rate was given as a range instead of a fix number. It does mean they will trade in tandem for that duration.
But like I said, this is certainly not my field of expertise, I only try to assimilate some wisdom from this forum and other sources. Which I do consider the wise thing to do, if one can't research more directly -- in which case we are very greatful for a crumb or two!�
1/1/2015
guest I *think* SCTY options would be changed into TSLA options with goofy strike prices (based on the conversion factor). Interesting to consider if the offer was a cash offer at 25/share out of the money leaps would be basically garbage (if the deal goes through there is no chance of them ever being in the money). Something to think about for small companies.�
1/1/2015
guest
The only reason s,g&a are up is because of the Nevada debacle. Nevada market was shut down in literally one day and they had something like 40mws-80mws of bookings here at that point. That was a significant blow at the time and also was a significant blow to being able to predict for quarterly projections in addition to the uncertainty California net metering decision had on estimating installed MWs. The costs were spread over the MWs so q1 was an anomaly due to this illegal disruptions in Nevada.
I expect you know this. It is interesting to me so many of us have amnesia when it comes to context of these numbers. The whole point of reducing costs was to be ready for the ITC step down, but the ITC was unexpectedly extended at full 30% thru 2023... The the cost reduction pressure is far less right now as well given the context of of this so a bump up because of an anomalous Nevada decision doesn't change the fact Solarcity is a solidly building out a network of extremely valuable revenue generating assets profitable year one.
I feel if Solarcity had a better media engagement team they could really shutdown all the disinformation/propaganda/trolling that infests the financial news outlets including some mainstream media. When everything you learn about Solarcity comes out of the mouths of Jim chanos and Jim Cramer there is something really wrong in the world.
Bottomline, financials in context are very solid .�
1/1/2015
guest I'm both a scty bull and tsla bull. I own both. I love the aquisition, but hate the terms. Scty is getting shafted. Tsla is getting stroked. Terms have to be changed or scty investors will revolt (since the fix is in on the yes vote already).�
1/1/2015
guest But how much of a premium should they be paying over SCTY's current share price, which is what the market has determined is fair value?�
1/1/2015
guest Will Tesla get a better deal on all the solar panels on the Gigafactory with this deal?�
1/1/2015
guest "Market value" is not the current value which is at multi-year lows right now... Hasn't been in this range since after ipo 3.5 years ago.
Solarcity is suppress after NV Energy/PUCN Debacle in January (which is currently being sued, contested). Over the past 3.5 years, Solarcity has grown at a 80% compounded growth rate while reducing all in costs over 1/3 on installing long term revenue generating assets. I think their 12 trailing production is 1.5 terrawatt hours which is bigger then some traditional fossil fuel utilities in our country already. By 2019, they will have a 5 terrawatt hour trailing production and a customer base of 1,000,000 customers with 20 year reoccurring revenues in excess of $1bln/year... And that's at a flat no growth rate from 2016 levels... In just he next three years alone, let alone what will happen over the coming decades.
I feel the "market value" premium is non existent. The deal terms must be negotiated if this is to even come close to making sense for a scty investor.�
1/1/2015
guest If you have so much faith in SCTY, then why do you believe SCTY management would allow such a deal to go through?
This is like the least non-hostile takeover possible they could do, they'd have to be fully willing to do it, but not only do it now before supposedly big stock price impetus is on the way.�
1/1/2015
guest By definition, market value is the current price people are willing to pay. You may think the market is grossly mispricing it, and I think you're correct, but it is at market value right now. Elon talked about this on the call yesterday, in response to an analyst suggesting the premium TSLA is paying is too high.�
1/1/2015
guest You know Elon owns 23% of Solarcity, and many of the Solarcity boardmembers are tesla centric investors/employees.
Not even the founders Peter or Lyndon have more then about 5% stake in Solarcity, so the majority of big ownership is tesla centric. The deal will naturally tilt in Tesla's favor, but this is obscenely so.
Since ipo Elon has stated it is extremely undervalued on the market, he had bought hundreds of thousands of more shares in the $40 range and above to prove it.
Lyndon rive just came out with his CEO compensation goals and among the first one was hitting $80 within the next year or so based on the stated gws installed projections among other 2016-2018 goals.
Now Tesla's offering $26? This is an extremely low ball offer that any scty investor that has any history with the company stock action as well as knowledge of company expectations on performance, explicitly Elon and the Rive brothers, would flatly reject on the basic of "current market valuation."�
1/1/2015
guest Okay, if it is what the market is willing to pay, then Solarcity ought to shop around. That's what a market is, not reading a number of stock market value that I can buy one share at that price, we're talking about an entire company with thousands of investors in it.
If tesla is offering $2.7bln, then Solarcity should consider what other offers they can get for the company...
Tesla made the offer, doesn't mean Solarcity investors have to accept it.�
1/1/2015
guest I actually agree with you in the sense that I think the market is drastically undervaluing SCTY at the moment. But so what? "The market" is actually the existing and potential shareholders, and they have agreed on a price ($21.98 as I type), and I imagine there are quite a few of the existing shareholders who will agree to take a 20% upside offer.�
1/1/2015
guest You might be correct, and personally I also value SCTY higher.
However if this deal will not happen now it has been agreed and announced, because it is rejected by either the SolarCity or Tesla shareholders, the SCTY SP might take a very big hit, not so sure how SolarCity will come out of that.�
1/1/2015
guest No they haven't. Solarcity is not for sale as a company on the stock market. Tesla made an offer to acquire Solarcity, not buy shares on the open market. The stock market valuation is just but one of many ways to assess the market value in order to develop offers. But that's not the actual market value.
Actual market value is a multiple bid offer among competing bids and thst has not happened. Solarcity was not even for sale in the first place, tesla technically just made an unsolicited bid. It was their desire, not Solarcity's, so if Solarcity is consider of the bid is fair, they must allow other offers to compete.
Like I said before, if Solarcity were a private company, it would fetch a massively higher "market valuation" based on the books and potential growth, as opposed to the "stock market valuation" which has been severely manipulated based on manufactured fears around short term illegal and unethical actions on behalf of buffets nv energy(which are currently in litigation).�
1/1/2015
guest I don't think TSLA is stopping anyone else from coming in with a better offer - there's just no one else making an offer.�
1/1/2015
guest Tesla made an unsolicited offer. Solarcity is/was not for sale. They are not on the market for sale as a company.
If anyone gets an offer to be bought, and they actually are considering it, they must now examine the actual market value with other offers... And this is if they want to be up for sale.
Solarcity did not say it was up for sale. Tesla made an offer to buy it without provocation.
If Solarcity is actually considering sale now that an offer has been put on the table, they have the obligation to seek out other offers, essentially say they are for sale now and compare bids.
That hasn't happened yet.�
1/1/2015
guest They have no such obligation.�
1/1/2015
guest With Jon Wellinghoff, SolarCity looks to resolve net metering disputes in Nevada and elsewhere
�
1/1/2015
guest Soooo... Quick question for admin. After the merger, what happens to this thread?�
1/1/2015
guest As a long time investor in both I see combined value, but separate I see much more value.
Combined, every Tesla owner is a likely customer. Separately, every EV owner is a likely customer.
Combined, Tesla gets the potential 30% ITC on each sale. Separately solarcity manages the debt necessary to extract that value off Teslas books.
Combined, Tesla gets a financial services division similar to Ford's which can capture loan and lease value that otherwise goes to a bank and Solarcity has the warehouses regionalized to handle logistics and installation by their devco.
Today a merger looks like a good pair. 10 years from now it looks like Saudi Aramco with a motorcar/storage tank devision.�
1/1/2015
guest What other measure could be possibly used? Someone can say Tesla is undervalued and some can say Solar City is about to go bankrupt so it's a bailout. Market valuation is the only common ground. Even if Elon and Rive bros agree that it's a lowball offer, there just isn't any other mechanism available to make the acquisition happen.�
1/1/2015
guest Every public company is on the market for sale as a company.
I assume that they didn't engage a banker to actively seek a buyer, so by that measure they weren't promoting to a select group of companies or PE firms that they were for sale.
In this case, we don't know whether or not it was unsolicited. Perhaps the Chairman of Solar City approached the Chairman of Tesla and said "you know that idea we kicked around a couple of months/years ago? Maybe now is a good time".�
1/1/2015
guest Shared partnership on the SolarCity DevCo would be a smart compromise.�
1/1/2015
guest In that case, Elon spoke to Elon and here we are today... He's the chairman of both companies.
I don't doubt Elon spoke with his cousins at one of their family vacations they take together, probably one of their hot tub talks where Elon was allowed back in by not talking about AI and focusing on Solarcity-tesla future.
But legally, Solarcity is not for sale and tesla came to them with an offer.�
1/1/2015
guest Yea, but Elon and other TSLA-SCTY joint holders aren't voting here.
So why would the SCTY-only shareholders vote for this acquisition if it's really as bad as a deal you say, with supposedly such big factors coming up for SCTY's stock price?�
1/1/2015
guest Solarcity just made it through almost a year of major political/regulatory challenges in Nevada, California, New York, Massechusets as well as the sudden ITC extension which made it difficult on predicting how the growth projections and quarterly numbers in my opinion.
This year they are solid with many of their major markets and the regulatory environment and this ought to continue through the next 2-3 year period. This next three year period is where energy storage and smart inverters get deployed in mass so Solarcity will have a massively more diverse portfolio that can make money off of each install in their portfolio. They will have net metering only customers, grid services customers with smart inverter, and grid service with customers that have smart inverters and energy storage... All of which Solarcity will generate revenue from energy sales to the customer itself, revenue for grid services for utilities, and total package micro grid application including management.
Solarcity's primary challenge has been the resistance of incumbent monopolies in the regulatory arena to allow them to compete at scale for consumer business and this has generally revolved around net metering and interconnection speeds/process.
For example you don't need a permit for an oil Derrick in California, but you need many to install solar on your roof. Solarcity said if they had the same permitting/interconnection process as Germany, they could literally meet a customer, design the system, install the system and interconnect within the two days. But that's not the case and you have long backlogs waiting for the permitting process and interconnection sometimes months at a time.
Solarcity is making big strides in getting state commissions to realize the value of solar and as this happens greater volume and market penetration happens at significant growth rates.
Solarcity just entered some regulatory stability and I expect them to take advantage of it after the past whirl wind year... On their own...�
1/1/2015
guest Brexit...
If dollar strong Solarcity wins big buying its Chinese/European panels which is the vast majority of its panels right now.
It important to note Solarcity is an American company with most all its installs happening in the United States (with some commercial happening in Mexico). Not much international business exposure to this event.
If this does affect the us economy, interest rates most likely won't get raised which is a tailwind for cheap finance in the future. Also, consumers may more likely to continue to choose lease/ppa to save on monthly energy bills under favorable net metering arrangements While limiting loan debt and increae home operation savings during austere times.
Strong dollar, low interest rates, stable policy in key markets, and US only business exposure bode well for Solarcity business if this Brexit affects our economy this way.
Now the stock...�
1/1/2015
guest "Tesla Solar"�
1/1/2015
guest From what I've read, the key issue is volume. They'll convert into TSLA1 options, and these TSLA1 options will become *very thinly traded* after a merger. If you were holding to expiration or planning to exercise, no problem.
If you were planning to sell (...or buy back a short options position), you are going to lose out because the bid-ask spreads will be even larger than before and the market makers will make even more money off of you.
A SCTY option to buy 100 shares with a strike price of $80 would convert to a TSLA1 options to buy 12.2 (or 13.1) shares of TSLA for $655 (or $610) per share. Do you think that'll be worthless?�
1/1/2015
guest This looks like a positive development for Solar City as it deals with unfriendly regulators and utilities in Nevada and some other states:
With Jon Wellinghoff, SolarCity looks to resolve net metering disputes in Nevada and elsewhere
GSP�
1/1/2015
guest WTF???
Adding this bunch of backroom paper shufflers to TSLA??
SCTY only functions in (is a creature of) States with legislatively-provided tax breaks etc and then farms out the jobs to installation contractors. Ok, value being added and all that, but nothing *real* here to see. What does this have to do with making cars/batteries/power_devices? I see this as a massive economic misstep.
. . . climbs down off high horse.
--
�
1/1/2015
guest What are you talking about? Solar City installs panels. Kinda ruins your argument.�
1/1/2015
guest One can easily see Tesla as a battery producer that happen to use part of their product in cars. In the absence of net metering it makes _a lot_ of sense to combine the battery business with the home solar business.
The stock price changes clearly deem this a bail out, but there is an additional, technically sound reason for Tesla to take over Solar City. But given the economic strength of the two companies, I think it is safe to say that Elon Musk is up to yet another risky move.�
1/1/2015
guest Solar City installs panels. [JoNo]
Photo or it didn't happen.
--�
1/1/2015
guest @jhm What's your take on the offer?�
1/1/2015
guest I was thinking about Elon's view of the world as it relates to this synergy he sees. Suppose you own this state of the art car factory, happen to prefer vertical integration and you wanted to design, stamp out and possibly even custom paint trim pieces, decorative corners, conduit or control boxes to beautify these new Silevo panel installations. Maybe it's something else, like the machines that make the machines optimization has to be going on also designing at the Riverbend factory...or perhaps he wants to use an engineering team or software design resources on SolarCity products? I can see the operational frustration when trying to allocate resources. I found it most useful to think about from the product oriented or finance perspectives and think like a guy who owns all the tools but can't use them together seamlessly and why it makes perfect sense to Elon from his birds nest.
http://www.nytimes.com/2016/06/24/business/energy-environment/testing-the-clean-energy-logic-of-a-tesla-solarcity-merger.html
�
1/1/2015
guest Obviously the question was meant as part of a wager the merger does not go through.�
1/1/2015
guest �
1/1/2015
guest Again, wellinghoff is a former FERC chairman now working for solatcity. The current incumbent utiltiy regulatory framework is the biggest obstacle to accelerated growth for Solarcity and now they have one of the most respected individuals within that framework on Solarcity's side changing it.�
1/1/2015
guest Not true.
If a majority shareholder of a public company refuses to sell, for any reason, such as keeping it in the family, for sentimental reasons, because they don't like the potential purchaser, etc., etc. (all of which happen) how do you force a sale? Majority shareholders can't be forced to sell shares in publicly traded companies, as you seem to think. Of course, Corporation Acts in most jurisdictions have oppression remedies for minority shareholders but there's no guarantee the Court will conclude that decisions not to sell by the majority are oppressive to minority shareholders.
Also, although a fairly rare occurrence, large investors (such as hedge funds and mutual funds) that are against a buyout have been known to actively reach out to enough investors to gain control of more than 50% of the company's voting stock and thwart a sale, in which case, the subject company is also not for sale.�
1/1/2015
guest I'm Using that " logic", nothing is for sale.
I can go into a store to buy the doggy in the window, but the store owner decides he doesn't want to sell it to me. So the dog was never for sale.
Or I could want to buy a model X and the Ceo decides he doesn't want to sell it to me, so that means the model X is not for sale.
besides, no one said anything about forcing a majority person to sell, the point of the acquisition is to offer a substantial premium to get them to want to sell.�
1/1/2015
guest So we closed just above max pain, then fell down just below after hours. Does after hours stock price on Friday affect whether or not an option is in the money?�
1/1/2015
guest I think tftf could explain this to you real clear�
1/1/2015
guest Hey all,
Quick question. How does the conversion of SCTY stock to TSLA work. Tesla announced that the offer was to convert at 0.122x - 0.131x of Tesla shares. Is this dependent on the fluctuation of TSLA stock price or is that locked in presuming Solar city accepts that bid?
Does that mean that at $22/share coverts into TSLA stock at $181? (assuming 0.122x)
Is that right? Help me out here. (I'm a beginner)�
1/1/2015
guest Potential for conflict of interest here is pretty darn high and it's a fair discussion as to how many of the board members should recuse themselves. If you take out all the connections and overlaps you're basically left with one person on the SCTY board and one person on the TSLA board. Interesting article on Bloomberg today in which they included this graphic:
![[?IMG]](https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iPl0yhPKu2ns/v2/-1x-1.jpg)
�
1/1/2015
guest "Close ties among board members may raise questions with investors"
Very true.
And I suspect, evidenced by the same graphic;
the inevitable answer to those questions (after a lot of contentious opinion),
will be another question;
Why were these entities ever considered to be different companies?
The obvious answer--, they never actually were...�
1/1/2015
guest It means they haven't really decided on the conversion rate yet. It could change before the final offer.�
1/1/2015
guest So JB is going to represent Solarcity's interests in Tesla's buy out of Solarcity... Yeah, these deal terms are going to be fair to Solarcity shareholders. And not too confident in tesla centric investors Nancy and John. Although, Nancy did try to make a public effort to promote Solarcity a few times in the recent past.
Overall, this is a CF for actual representation of Solarcity shareholders interests.
Again, love the merger, hate the deal.�
1/1/2015
guest By the time this completes it may be more merger than acquisition.�
1/1/2015
guest I really want to hear the Solarcity board and the CEO explain to Solarcity shareholders how this is a great deal.
I want them to explain to scty shareholders how this valuation is better then how they see their valuation 2-5 years from now on their own.
It's severely hard to justify in most scty investors minds since there is long standing documented evidence as well as recorded statements of both Elon and Lyndon Rive saying market cap was significantly under valued when it was over double current offer price from 2014-2016.(and even at Ipo 2012 where he considered 18 undervalued in media interview!)
As an example, Go back to q3 conference call and the last question on the conference call asked how frustrating is it that the stock in the 30's was way undervalued and Lyndon replied with frustration I don't know, I wish I knew.
Undervalued has been a constant theme for about two years now, and now that the stock is in a multi year low trading range and all the sudden solacity management says this deal is great for shareholders?
Elon, don't smack down your scty shareholders, give them an actually fair valuation please.
For those long term holders, I think an attractive convertible bond would be widely popular if you want to limit dilution. Work with the scty shareholders who know the long term value of this company.�
1/1/2015
guest Simple. Tesla is going to be a $1 Trillion company when all is said and done. The TSLA shares you get in exchange for your SCTY shares will garner you way more money than your SCTY shares ever would have.�
1/1/2015
guest Maybe WAY long term. The 52 week high for SCTY was roughly triple current sp and arguably a cash flow positive squeeze had some chance of pushing it up higher, but 52 week high for TSLA was only 50% higher than current. Put simply I would stand to make more money in the next couple of years with SCTY than TSLA. Given .122 - .131x conversion TSLA would have to shoot up to $700/share for me to make the returns I was looking at with SCTY to $100. Neither is guaranteed but one is a hell of a lot more likely at least by the time the Model 3 ships.�
1/1/2015
guest I think this is highly relevant to the future of SolarCity (from February 18th)
SolarCity Kills Its MyPower Loan Product
This article implies that SolarCity is already making a pivot away from highly structured finance deals to simpler bank loans. As a Tesla stockholder, this is what I *want* them to do to convince me that the merger is a good idea.
�
1/1/2015
guest This actually was a successful year long loan program just not one that opened the market like they wanted. They tried to make it like the ppa/lease program, but the 30% ITC balloon payment(and the application of the ITC in general) didn't push the "own the equipment" market further. They did successfully do an investment grade rated mypower ABS, but this fund wasn't going to grow big enough fast enough to be sufficient capital raising vehicles as well. Innovative, but complicating and time consuming as well.
They now have a more traditional loan program in 14 states. We'll see how this develops, probably see some numbers in q3 and q4.
The financing generally goes like this:
Revolver debt(like a credit card) and "solar bonds" to pay for projects in construction.
They bundle a large number of installs for investors to own a piece of it in order to take advantage of the 30% ITC, aka Google has a big tax bill, takes 30% ITC from Solarcity installs and applies to said tax bill.
Solarcity takes the tax equity capital from Google and buys more systems.
Once these systems are installed and generating monthly revenue, Solarcity then packages those monthly revenues through asset backed securitizations. since these rates are sub 6%, they use this capital to pay off tax equity(which is 9-12% rates), debt, as well as invest in buying more systems.
As solarcity grows, more installs are installed, and thus bigger tax equity or more frequent tax equity capital is raised, and the process continues to more growth and more installs.
That's pretty much outside any equity raises as well.�
1/1/2015
guest Anybody know what happens to SCTY LEAPS now? I think the merger is probably a good idea for the two in the long run, the Rives have done a great job but I think SCTY has gotten big enough that Musk is probably better suited for the job now. But not sure this is gonna be a good thing for the LEAPS.�
1/1/2015
guest New York utilities and solar companies compromise on price of solar energy sold to utilities - The Buffalo News
�
1/1/2015
guest That's my state! I happen to live in an area with increasing power demands and poor grid interconnects, so they should pay well for solar under the new model....�
1/1/2015
guest There needs to be some kind of nationwide FERC intervention to push the whole nation to a more free market model. Lock in net metering for 1-5 years where appropriate, lock in grandfathering and force the state regulatory bodies to do their job(creating a transition plans).
It's embarrassing how poorly we're handling this as a nation, Germany took all these steps with ease 4 years ago. It cost them nearly nothing, and they've had a mature $2/W install industry ever since. They've more than paid back any net cost with their current net export levels. Obviously their energy market is wildly different than most in the US, but the economic principles are the same.�
1/1/2015
guest Well, I've been on vacation, sipping wine along the Russian River.
My SCTY position is about 10% of the size of my TSLA position, which is in line with the offer. So this makes me indifferent to the valuation of SCTY. That is my allocation is in line with the post-merger combination, so even if SolarCity is undervalued in this deal, I suffer no loss of value in the combined company. Understandably, SolarCity investors who are much more heavily exposed to SolarCity than Tesla will not be so indifferent to a potential undervaluation. I can sympathize with that, but my eyes are more set on the prospects for the combined company than the pricing of the deal.
I think that the combined Tesla - SolarCity company will be a force to be reckoned with, the most important energy company going forward. Naturally, both companies are premised on transforming the energy status quo. They face numerous structural and policy oriented obstacles. This is not about growing out two promising companies in established industries. This is about kicking multiple entrenched industries out of their respective comfort zones and transforming energy infrastructures. Thus, it is enormously beneficial that Tesla be one strong, unified entity with some real economic heft.
Consider the debacle in Nevada. State politicians bent over backwards to attract Tesla's Gigafactory, but allowed utility politics to evict SolarCity from the state. Would this have happened had Tesla and SolarCity been one company? We may never know, but why would Nevada want to ruin its relationship with one of the state's most promising employers? So I think that being a combined entity may matter more than we know.
Clearly SolarCity wants to negotiate deals with utilities to provide grid services. And utilities, like NV Energy, are to work with Tesla to get Powerpacks. Imagine the irony of NV Energy trying to cut a good deal with Tesla after its anti-competitive mistreatment of SolarCity. The combined Tesla-SolarCity company will wield substantial bargaining power in negotiation with utilities. And this may be essential for restructuring the power industry.
On a technical note, as related, but separate companies, Tesla Energy could not favor SolarCity over utilities or other solar competitors. They would have had to offer comparable, competitive terms selling Powerwalls and Powerpacks to all of SolarCity's competitors. However, as a combined entity SolarCity will have access to Tesla Energy products at internal costs. It is striking that Tesla upped the price of Powerpacks from $25k to $47k recently. This is what utilities will have to pay, while as a subsidiary SolarCity will have access to much lower internal prices. Thus, as a combined company, Tesla will not need to accept any offer from utilities that might advantage that utility over rooftop solar within their service area.
I am clearly biased in favor of distributed power. My expectation is that the combined Tesla will emerge at the most powerful player advancing distributed power. The negotiating power that the merger creates is well worth the deal in my view, and it is timely to do this combination before Tesla steps out to negotiate new factories with states and countries.�
1/1/2015
guest Inside the Deal That Shaped San Diego County�s Power Picture | The California Report | KQED News
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1/1/2015
guest Glad to see you back, refreshed after your tonic! Just a minor pit to nick: an order of magnitude off on the Powerpacks.
Apart from that, agree with your analysis.�
1/1/2015
guest Thanks. Not sure what pit you are nicking. Tesla's design tool still has 1 Powerpack at $47,000. Is there something I'm missing?�
1/1/2015
guest No, sorry. I missed the suggested denominator of 100kWh, is all I can say. Retracting the picknit; the rest stands.�
1/1/2015
guest Since when?
What exactly prevents them from offering different deals to different companies?�
1/1/2015
guest I was getting ahead of myself thinking of Regulation W, which applies regulations around banks and their affiliates. So that does not specifically apply outside of banking. Even SEC defines various forms of affiliation that apply to public companies. So there are SEC rules that apply to issues between affiliates. Deals with unrelated parties have less scrutiny. Also the US tax code defines affiliates and applies special tax rule. I am not sure what specific rules presently apply to the relationship between SolarCity, Tesla and significant parties.�
1/1/2015
guest
So nothing then
Partnerships happen all the time in business and to use this as a rationale for the acquisition is silly and harmful in that it raises doubts about other valid reasons like adding,"But with Scty we can also cure male pattern baldness"�
1/1/2015
guest This is another great person for the Ignore feature.
In other news.....Obama/Canada/Mexico talking 50% clean energy by 2025 up from 37% last year? Wild.�
1/1/2015
guest Yeah BMW dealers have partnered with SolarCity to offer EV solar bundles. Have never heard of it before so don't know if it has been a success or flop.
BMW Partners With Solar City To Offer Solar + EV Bundle�
1/1/2015
guest I tend to get overly excited when I see something positive on the horizon and then the markets(and SBenson) slam me back down to reality, BUT..........I'm starting to think this bold Elon plan might work. If this merger becomes truly inevitable AND the market finally gets a realistic picture of what a combined SCTY/Tesla Energy might look like AND there are some decent number from the 2Q report......this purchase offer might spur SCTY on to fair valuation.
I don't know enough about publicly traded company dynamics to guess what that does to the merger, but either way the "threat" of merger may be enough to finally push through a more forward-looking valuation.
For fair valuation the algos MUST cross a tipping point where they recognize revenue realistically and that's probably a long shot in the near term. Execution through 2Q is obviously a MASSIVE question mark here, but the bar is so damn low now that very minor operational manipulation could juice the numbers for the algos. Take on more large-scale commercial jobs, etc.....
Did we decide if the shorts will be prompted to return significant chunks of shares for voting purposes? If that's the case then there's a lot out there to squeeze this stock many times over from now until Thanksgiving.
SolarCity: Merger with Tesla �Inevitable,� Says Avondale; Irrational, Says Axiom
Tesla-SolarCity Merger 'Inevitable,' May Rival Apple, Google, Uber
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1/1/2015
guest I think you miss the point of what affiliate is and why it poses potential conflicts of interest. Suppose Tesla were simply to sell batteries to SolarCity at Tesla's cost. This might be something that Musk and parties deeply connected to both companies might wish to do. However, this poses a conflict of interest against the best interest of Tesla shareholders. It would constitute an unfair transfer of value from Tesla shareholders to SolarCity shareholders based on personal interests of key officers. This is the sort of conflict of interest that the SEC and other regulatory bodies rightly monitor.
But let's step aside from the ethical and regulatory issues, which I will concede are not an essential issue for this transaction. The deeper issue is economic having to do with the value of being vertically integrated. As distinct entities, Tesla can build a battery and sell it to SolarCity at some margin above cost. SolarCity in turn sells the battery at some margin above cost. To separate entities collect separate margins on the same product. There is nothing inherently wrong with this relationship. Is it possible to provide the same product to the end customer if Tesla and SolarCity are a combined entity? Yes, the total cost of delivery can be brought down. This is possible be not necessary. The risk of competition driving down costs either for battery producers or installers is also mitigated. That is, suppose competition among producers became so high the Tesla's margin as a producer is squeezed. As a combine company it may still be able to earn a strong margin as an installer. Alternatively, installer competion could wipe out SolarCity's margin, but as a combined company Tesla still earns a strong margin as a producer. One cannot know well in advance what links in a supply chain will suffer margin compression, but an integrated company has the advantage to make up for this in other segments of the supply chain. So mitigating this risk can be advantageous to shareholders of an integrated company. Moreover, this can also help keep the cost of capital low.
Clearly, Musk is a strong believer in vertical integration. I belive this is the dominant motivation behind this transaction. As a side benefit, combining companies may also avoid any potential conflict of interest arising from affiliation. If Musk really wants to run the two companies as if they are one enterprise, then I think they should be properly combined so that one body of shareholders enjoy the benefits fully.�
1/1/2015
guest I *think* they would run into some regulatory issues for the uneven pricng...perhaps FERC or a wild PUC...just as NV Energy and others already have. I'm not certain if it's illegal but I think for Elon it was bordering on unethical or unseemly even...remember even family pays full price for a Tesla after all.
FERC revokes market-based rate authority for Berkshire Hathaway companies
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1/1/2015
guest Just because someone got ahead of themselves and confused regulations is no reason to ignore them. At least they admitted their mistake.
BTW, other news is for other threads.�
1/1/2015
guest Tesla is not a regulated entity and can have uneven pricing and decide who they sell to at what price. Remember, this is the company that decided not to sell a car to a person because they didn't like them. LOL.
If Tesla wants to sell batteries at cost, or at a loss for "strategic reasons" or "reasons", as an unregulated business they are totally free to do so. It has nothing to do with the SEC or other regulatory agencies. Do you think Panasonic gives the same terms to other companies as they do to Tesla?
However, if the shareholders decide that the CEO and/or the board is breaching their fiduciary responsibility through self-dealing, they are the ones to bring an action. Legally, they are the ones who have standing.
To prevent that, the CEO would do exactly the same thing: disclose to the board all of their interests, present to the board the strategic rationale for providing the batteries at cost, recuse themselves from a vote, have the board approve/disapprove the deal. All that can be done without having to buy the company which has a much larger conflict of interest due to the size of the deal.�
1/1/2015
guest SCTY valuation is suppressed by the insanely complicated number of different types of financial structures they've set up. It's an "informational discount". There are two scenarios after the merge:
(1) Tesla unwinds most of these financial structures and reduces SCTY to one or two financing methods. The valuation of SCTY will go up.
(2) Tesla leaves in place the dozen different financing schemes. Tesla will trade lower by inheriting the "informational discount".
There are, frankly, too many different financing structures at SCTY and too much corporate complexity. It makes it impossible to analyze financially except in the crudest of ways. The crudest of ways says.... they're losing money and they have too much short-term debt which needs refinancing. This might not be correct, but it would be necessary to detangle the accounting to figure this out, and I certainly can't detangle it.
For example, SolarCity has some supposedly-non-recourse bonds backed by assets of "a subsidiary", according to the annual report. Which subsidiary? Whether these are *really* recourse bonds depends on *exactly what* the subsidiary owns, which isn't documented. If they're backed by the Silevo factory, for example, SolarCity is essentially obligated to bail the bonds out.
SolarCity seems to be using all three major schemes for monetizing the ITC (two of which are way too damn complicated; the sale-leaseback is OK), multiple types of joint ventures, and god knows what else.
On the consumer end, the original MyPower loan design was too clever for their own good, and frankly so are their PPA contracts. Leases are complicated enough to analyze! There isn't enough information on lease terms disclosed to investors either....
Merger "infects" TSLA with the "informational discount" on the valuation of SCTY. Only way to fix this is to clean up SCTY's books by unwinding the more complicated transactions, until the company is simple enough to analyze. Only way to do that is to get some simpler, cleaner financing. From the customer side, bank loans financed in advance are good. Leases which are sold as ABS are OK. For monetizing the ITC, sale-leaseback is the simplest and should be the only one used. SCTY has been doing *much more complicated transactions*; this quite rightly creates investor suspicion that there are hidden sources of losses which are not obvious, as there were for the banks in 2008.�
1/1/2015
guest There's a bit of truth in there, though I still think 90% of the problem is sales cost stickiness that was unforeseen and is uncontrollable industry wide(in the US).
Radford Small joined SCTY last year as head of investor relations and was made head of global capital markets 5 months ago. IMO he is the smartest guy in the room when it comes to creating the kind of financing balance you're looking for. This product is going to be convoluted in the short term, but there's no reason it can't be more transparent.
I'll have to dig back for the details, but the investing public seemed more please with the last major round of financing(that I assume he designed). He pushed the monetization out to all 20 years of the contract payback period and took as much off the books as possible. Obviously this needs to be the trend if SCTY is going to keep growing at 50%-80% every year simply because the amounts of cash needed will be astronomical.
As of now the friction in the model due to costs is going to keep them from expanding as much as they'd like, so the TSLA umbrella makes sense. Borrowing costs instantly plummet allowing for expansion to ramp back up and at the same time sales cost can be slashed in half by mandate. No more door-to-door, shift to something like Elon's commissions for Model S referrals and you save millions. Remember, a typical PPA contract takes $4-5k in sales effort. I think we're at a point where $1k can be spread around in commissions to existing customers and sales will only increase while cutting sales cost in half.
Those two changes instantly make the model fluid again and you're cash positive moving forward. My question is, if the merger becomes inevitable where do these new inputs reside in the algo world? Most likely that world sees the merger as a necessity, but what if there's a decent 2Q report and then a straight up good report for 3Q before the merger is official? Surely a jump back up toward $50 nixes the deal?
I don't understand the financing scheme well enough to know if they're limited right now on how many installs they can make. I do know that if they made a plan to juice the numbers say in February when the stock tanked to $17, they could easily destroy their install guidance targets either quarter.�
1/1/2015
guest This is extremely helpful information.�
1/1/2015
guest Does that happen before the merger? Musk wants to finish the merger in *three weeks*!
Maybe your scenario is exactly why Musk wants to finish the merger ASAP, before SolarCity has a chance to jump in price? (It's certainly not a sure thing that it would jump in price -- I certainly can't predict market behavior -- but if it *might*, he might want to close the merger before there's any chance of it.)
This is one of the more frustrating aspects of the overly-complicated financing -- the inability to tell.�
1/1/2015
guest I want to be clear that I'm not implying anything super rosy here. From the start this has seemed to me a step Elon felt was necessary, not some kind of value buy(though it is a huge bargain). SCTY is not functioning properly due mostly to external factors that are pushing them around. Under the TSLA umbrella most of those problems go away and Tesla Energy would be the one doing the pushing.
I don't think Elon anticipated needing to do this or really wanted to do it, some things become necessary to maintain "the vision". Proposing a sale sets a price floor and squeezes the shorts, to me this initially felt like buying time and breathing room for SCTY. All they needed to do is get to Thanksgiving and it's all good. This kind of does that and brings some much needed free publicity.�
1/1/2015
guest From the news coming out Nevada, it looks like grandfathering will be reinstated in 2017, at a bare minimum.
In addition, New York is maintaining net metering into 2020, and California thru 2019. Among a handful of key states that have extended net metering. We've entered a stable net metering period of 3-4 years.
Lyndon rive expects to exceed 2016 CAGR, hinting at a return to the 40% CAGR target in 2017, which would put them at 1.4-1.5Gw/year goal.
Solarcity's new loan program has opened up *three new* additional markets expected in play by fall.
Grid services are anticipated to start up as the wholesale markets have opened to DERs now in California. And as announced at q1, Solarcity now has 100mwhs of energy storage under management now by which to offer these services. I imagine, we should see an interesting product launch of powerwall 2.0 and the public announcement of grid services in action.
Also, important to note, Solarcity was actually cash flow positive for q1 outside of 40mln put into the buffalo factory.
2016 revenues are expected to be around $600mln. 2017, ~$1bln.
The clear trend to watch is if Solarcity recovers bookings momentum. Already reported that they have seen a 25% month over month increase since March, so momentum appears to picking up again post Nevada atrocity.
Solar Bonds don't *start* coming up until next year and revolver debt in December 2017. And convertibles start in 2018.
2016 1Gws $600mln rev
2017 1.4gws $1bln rev
2018 1.96gws 1.5bln rev
Also, all in cost $2.25/watt by YE 2017 which is yields a $1/watt reference the Hancock 3.35/watt valuation of full asset monitizarion as base line.
Overall, most key markets are now stable and the momentum has no indication of not picking up streadily to achieve desired growth. The grid services revenuene stream will be kicking off as well as silevo ramping production and powerwall 2.0 sales/leases/ppa packages into 2017.
As Elon said, Solarcity will get ahead of any net metering issues over the course of the next two years, so much of he Nevada type events will be limited to non existent moving forward.
Under these conditions, Solarcity is moving into a strong post-q1 environment where the probability of meeting a debt covenants while maintaining CAGR is high.
Ps, the regulatory eye is on Arizona right now, however, the ACC is not recommending the dismantling of grandfathering so a repeat of Nevada is extremely low. They are focusing on demand charges and a three part rate...�
1/1/2015
guest All these trends are great and the numbers plan is what needs to happen, but the execution has not been stellar over the last 9 months. The headwinds are absurd, but from an investor's perspective that's no excuse. We can't chalk it all up to Nevada because crap like that should have been foreseen and baked into the plan.
The thing I'm looking at is the projected organic growth of solar for 2016. We're set to install something like 14.5GW in the US this year which is nearly double what was done last year. A LOT of that growth will be utility, but SCTY's guidance has been pushed so low that they should be able to destroy their 2Q and 3Q numbers.
I'm not too confident that priority has been put on doing that, but it's certainly a 50/50 possibility.�
1/1/2015
guest Another tailwind for solar generally is that the price of natural gas is on the rise. It is now quite close to $3/mmbtu, up from below $2/mmbtu earlier this year. Coal consumption is also up 29% from a year ago in response to the increase in natural gas.
So both the economics and environmental advantage of solar look better as the price of natural gas climbs. So this can impact utilities to invest more heavily in solar and wind.
As for behind-the-meter solar, fuel prices generally get pushed out to rate payers. So we should expect retail utility rates to continue to climb. The expectation of ever increasing power bills is very good for PPA-oriented solar installers like SolarCity.
In reality, we should not expect that natural gas can remain at prices as low as $2/mmbtu. This is a price level at which major gas players like Chesapeake go bankrupt. The supply of natural gas is highly dependent on the price of oil, as natural gas is largely a low value byproduct of exploring for oil. So as drilling in the US continues to decline, gas supplies can become tight even before the price of oil fully recovers to $70/b or higher.�
1/1/2015
guest Solar plus storage: With SolarCity deal, Tesla aims to speed clean energy transition
There is a clear emphasis here on offering tightly integrated products. We might do well to consider the possibility that the future for SolarCity is more about product than PPAs. This is a substantially different vision for the company that what most critics have in mind.
This quote highlights my concern that the two companies are already so tightly connected that to operate at an arm's length basis is an impediment to product integration and coordinated marketing.
Note that the combined Tesla-SolarCity company would be extremely well positioned to package Kauai-like plants for utilities. The combined company would have nearly all the hardware produced in-house and tightly integrated. The sale effort would be seamless. This all combines to offer fully dispatchable solar plants at the most competitive prices. I see such a package as competing directly with gas peaking plants. The Kauai plant has a 14.5c/kWh PPA to the local utility. I wonder what an integrated Tesla-SolarCity PPA could come in at. Could they shave an extra cent or two off of this? That would be very compelling in a market where the levelized cost of gas peakers is in excess of 18 c/kWh.
It's all about accelerating sustainable energy.�
1/1/2015
guest
Nevada wasn't foreseen to retroactively change grandfathering contracts with solar customers. If anyone foresaw that, then Solarcity wouldn't never entered the market nor would Nevada would have given millions in incentives to Solarcity to come to Nevada to do business in 2014.
What is clear is that the regulatory and permitting issue are the single greatest area of risk management and over the last 9 months they have become more then tested in that area.
Since then, they've hired Jon wellinghoff, a former chairman of FERC *and* a former Nevada PUC commissioner.
Also, they've sponsored peer reviewed studies on net metering benefits as well as have had supporting net metering benefits studies come out that were non sponsored by them.
They have unnamious support for grandfathering from Harry Reid and the governor of Nevada who didn't expect the PUC to make the grandfathering decision and has commissioned a task force to develop a solution. They've also received the required 100k citizen signatures for the net metering ballot initiative to go to vote in November.
They're also directly involved in developing the grid services policy in California and New York which is turning out to be the standards for how the rest of the nation will proceed with a rooftop integrated grid that compensates utilities for purchasing services from Solarcity, which would eliminate the conflict between utility and Solarcity completely. There would be no policy problems at that point, even permitting and inspections would begin to streamlined(soft costs) to Germany levels
And that would truely put the pedal to metal on compounding growth like we've never seen before.
Let's just see how momentum is returned over the next two quarters, q2&q3. I think that momentum back to booking levels going into q4 should help indicate whether they will compound at 40% and reach target cost reductions going into 2017 or have to maintain 1gw install guidance to in order to cut costs to meet costs targets. Again, regardless of how you see financing health, these installs have tremendous value and are cumulative revenue streams over 20 years. Solarcity has been in business for 10 years with these contracts accumulating over 350k customers and they have a 10 year history of receiving over 99% of their payments on time. Thst is an astounding asset class for any investor out there looking for this type of quality and predictably.�
1/1/2015
guest If the merger goes through then there are instantly no problems, I am 100% confident of that. The concern is if the merger does no go through for some reason.
It feels like this model needs to be fully humming in order for it to operate. Slowing down ahead of a looming ITC stepdown threw the whole thing off kilter and opened the door for something like Nevada to have a real impact. They can get out of this muck outside of the merger, but it'll take a while to build that momentum back up and get costs down.
Initially I hoped this move was a ruse to set a 3 month price floor, now that I see the potential rebranded end-to-end offerings it makes a lot of sense to bring Tesla Energy entirely under one roof and just dominate. I think it actually helps differentiate the car brand as much as it helps solidify the solar brand.
The "whole package" will be wildly popular when the Model 3 is up to scale. One phone call to get a solar PPA(+storage) and brand new 3 for probably less than you were paying in electric bills and car payments. Sick. Imagine the offerings they can make to existing Model 3 reservation holders when there's no real sales cost. Buy a system for $2.45/W with production guarantee and American made high-end panels.
So much for my far-out LEAPs! At least my new TSLA shares should triple in time.
Edit to add:
That's the biggest mystery to me, I assumed these assets would ramp up instantly as the PPA became mainstream and become the next big thing for banks. There's literally almost zero risk here and yet the yields are massive. Today's SCTY PPA is certainly more secure than the average mortgage in some markets, these people are either rich with 740+ credit scores or Musk disciples.�
1/1/2015
guest Again, they are still averaging below 5% on abs across the entire abs offering group, and before the Nevada buffet attack, they were working their way toward 4%.
It's clearly the default risk whether perceived or not, had given leverage to abs investors at that time. To me, institutions can see the numbers and know these are attractive vehicles. It's just a matter of making the most money from them as they are a new asset class and leverage is available in negotiations.
I feel now, those negations will shift as clarity among Solarcity markets related to net metering and grandfathering policy has stability and continued commitment.
In addition, some interesting leverage will materialize for Solarcity as grid services are unveiled since now, one system will have multiple revenue streams and will be contracted woth regulated monopolies of the grid. As this grows, I have a feeling it will get the best yeilds on the market and litterally fall well below mortgage rates for massive abs offerings as well as tax equity investors and others...�
1/1/2015
guest This is what makes me positive about the deal. I'm probably seeing what I want to see, but I found a number of pieces of evidence which indicate that SCTY is moving away from the direct-financing model and towards a product-sales model. The new financing guy; the refinancing of old deals as ABS which are much more comprehensible; the push to do bank loans which are financed in advance; and of course the effort and money going into the Silevo factory and into cutting "hard costs" of installation.�
1/1/2015
guest Is there actually any evidence that that is true?
Complicated structures can also result in an "information premium" being paid due to some variation of "trust" or "it seems right" or "confidence in how they present their numbers and plans".
Obfuscation and complexity are tools as often as they are hinderances.
Ask any Enron, Worldcom or Madoff investor.�
1/1/2015
guest Key events: California will now be without nuclear power. Basically, the end of base load which signals the end of the California grid as we know it. This also lifts any curtailment of solar during peak. Floodgates have been essentially open to renewables to take over.
The End of the Era of Baseload Power Plants
Second, California iso now is allowed to aggregate rooftop solar.
Folsom�s California ISO leading push for distributed energy resources
Solarcity can now get certified to aggregate 500kw worth of rooftops to sell power l on the whole sale market.
Solarcity currently has 100mwh of solar+storage under management and I feel the big announcement coming is they will be the first to offer these services anywhere in the world.
This is big big news as calISO is quoted as saying the first DER aggregation will happen early 2017. This is estimated(along with other grid services) is a $50 bln market and Solarcity is first mover on it.
Now how can this current offer valuation be considered anything but theft is beyond me.�
1/1/2015
guest There has been great solar panel market news coming, and there will continue to be, but it will always be sweatheart deals, as every PG&E deal ever has been, even cashing out the Enron thieves to the tunes of billions of dollars. There's simply too much favoritism volatility to know the outcome for a particular solar panel company. I'd have to see solid documentation that any particular solar panel company actually has the competitive advantage in the future (which of course is impossible) to overcome a huge debt question, if any, and there's a debt question for SCTY (so double layer bad). Since solar panels are still a developing and researching and competitive marketplace (and thank god for that for that is what is making this all possible), then there's automatically a risk of product obsolescence and any particular entities tied to those product lines, and I would call this a success in the further saving of the world and good clean original sunlight energy "production/generation" (conversion, really), because almost every product failure due to competitive advantage of another product line means better products and a better world for all concerned. Yes, there's huge great news for solar panels in the rather anti-environmental decision to close down nuclear power plants (which before windmills and solar panels became competitive were the only way to get ourselves out of the dirty energy and dirty morals power problems with fossil fuels, and I still and always will maintain that we should have gone full-on nuclear power, but since solar and wind harvesting have improved, now that is no longer true). The politics that follow that decision are nothing short of fantastic: politicians could have signed on the dotted line for a bunch more coal and oil plants, but instead, they said they will replace it 100% with doublespeak for fresh clean energy (they called it "renewable"*, but in fact, renewable is generally dirty, so I find their wording bad). This is fantastic. But, like I said, that doesn't mean that that fantasticness reaches all the way into the particular pockets of a particular entity (in this discussion for example, SCTY).
* Like Elon talking about "physics first" principles, I like to use "logic and math first" principles, and fossil fuels are renewed: they were harvested by plants and animals, and we dig them up and renew them using them again, which is very dirty. But solar panels get their energy from original celestial fusion, and aren't renewed at all: they are the direct byproduct of light energy already coming to warm the earth up anyway, so any heat output we perform with that light is OK (I'd like to see the science on this, since I know it can't be 100% right). I hate it when doublespeak is used to contort topics I'm interested in, so I continue to try to fix the use of this word (abandoning it is the easiest fix; I like to call the respective energy sources "clean energy" vs. "dirty energy").
edit: p.s.: almost all of USA's nuclear power plants produced recyclable energy sources, that can be reprocessed to use again and again; the amount of actual nuclear waste in such a marketplace would be very nearly zero. Only the damn commies who did all of the "GreenPeace" movements about nuclear caused very valuable energy sources to be labeled incorrectly as "waste", and turned into a huge political football. They ruined whole generations of success in our country because of it, so they succeeded. But, now we have solar panels, windmills, and batteries, so for expedience, we can let the death of nuclear power be both sad and move on to stuff we can actually politically install.
edit 2: Conclusions:
So, this brings me to some conclusions. First of all, every product line is a risk, and while I liked packaging product lines into companies separate from other companies they can bring down, there may be an opposite approach of creating an entity that has enough product lines under its umbrella that not a single product failure can bring down the whole company (look at movie companies (which make endless duds along with their blockbusters and so-so successes) and drug companies for some examples, and I'm sure there's zillions of other examples). Is SCTY such an approach? They are only building one factory with one product line in it. Furthermore, their financing is very heavy in one approach. If SCTY had ongoing R&D, a war chest to buy other R&D outfits and intelligence, and factories ready to come to action for new product lines, as well as a healthy mix of financing methods, then this would go a long way to the big umbrella theory. But, putting SCTY into TSLA is more of a diversification than a big umbrella; it's more like a falling apart cheap umbrella that's about to fold over in the wind, and you hope you can hold onto the flaps and failing beams to make the fabric do anything. And meanwhile you get soaked. Hey, if you hold onto the cheap umbrella JUST RIGHT, maybe it works out. I really want SCTY to go gangbusters. But there's a huge huge risk. That's my main question.�
1/1/2015
guest Also to note, since Solarcity's propriety control *software* is set to become *the standard* for aggregation with utilties, they essentially will now be able to enter into contracts with other company's rooftop customers, essentially, Solarcity could be making money off *all* rooftop solar installed in the wild regardless if they are Solarcity or not(once they are aggregation capable) since Solarcity controls are the only certified standard by which doing aggregation.
They essentially are setting up to have control over the entire distributed generation grid as soon as they get their hooks into utilty grid services... And soon they may announce this first mover status as they are set to launch in early 2017 in California.
Again, this is a $50 bln dollar market firmly in sight for Elon and Solarcity execs.
Vision is Well beyond rooftop install company... and that is not even near priced into the current offer to Solarcity investors. Not even close. I guess we know why Elon wants to rush this deal before 2017...�
1/1/2015
guest Ignoring the purely commercial and political parts, as well as your conflation of panels to the energy they capture, it's immediately and basically obvious that any contribution from solar panels to Earth heating is fundamentally zero. Ok, there are energy losses at every stage from conversion to transmission to use of the power captured - but the sum total of all of those exactly equal the energy that came from the Source in the first place and would warm up Earth anyway, by an identical amount.
In simple layman physics terms: QED ;-)�
1/1/2015
guest Not so QED. Solar panels are black, but they cover stuff that used to be yellow, or green, or white, or gray. Basically, they do in fact change the earth's albedo. So some energy that used to be reflected back to space will now stay on earth. I will however agree that this effect is completely negligible, since all the energy we need could be obtained by covering something like 0.0001% of the earth's surface (no, I haven't checked that, but it's about what Elon showed when he introduced the PowerWall).�
1/1/2015
guest Yes, you do have a point too.
Elon once showed a map of the US on which an area one pixel worth of solar receptors could serve the entire county's energy needs, maybe that's the presentation you recall. So even if all those panels were the new and beautiful ones due out from Riverbend, their albedo matters not a lot, I agree.
Peace.�
1/1/2015
guest Blue square surface area current panels required to capture US Electrical power needs;
1 Pixel surface area of current batteries for 24 hour/day power utilization
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1/1/2015
guest These absurdities used to only exist in the SCTY thread.�
1/1/2015
guest Hawaiian Electric shares fall 8 percent on Ige�s new PUC appointment
Fidelity OTC fund boosted SolarCity stake by 20 percent in May
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1/1/2015
guest OK, that boosts Fidelity's stake by about 1% of the company's total float vs. the last reported numbers.�
1/1/2015
guest Here's a little math for the Tesla-SolarCity merger.
Tesla has market cap of $28.433B at $212.28/share on 133.94M shares.
SolarCity has market cap of $2.352B at $23.93/share on 98.30M shares.
So the market currently values SolarCity at 0.0827 of Tesla's market cap and a share of SolarCity at 0.1127 shares of Tesla. If an investor holds 1.3627 shares of Tesla for every share of SolarCity, then they own an equal proportion of both companies. It may be desirable to do so as this neutralizes the impact of whatever specific exchange ratio is offered to SolarCity shareholders.
On the other hand, if you believe that Tesla will offer a slight premium for SolarCity relative to the market value of Tesla, then you may want to hold fewer than 1.36 Tesla shares per SolarCity share. It helps to know this ratio of share and that it has nothing to do with the market value of the respective companies. One can decide to be heavy on either company depending on how you see the deal playing out.�
1/1/2015
guest �
1/1/2015
guest The Hawaii PUC change by the governor is significant because the merger decision with NextEra is next week. This deal two years in the making looks like a no go. If a no go, Solarcity is in a fantastic spot to capitalize on grid services as well as potentially a reopening of the net metering policy under smart inverter requirement.
Again, this is another policy tailwind that makes current deal valuation a terrible one for Solarcity investors.�
1/1/2015
guest I honestly don't know why anyone trusts utilities to keep retail costs down.
Minnesota Power tries again for lower industrial electric rates
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1/1/2015
guest I don't -- and I don't have to trust them. I trust many state PUCs -- did you notice that the report you linked mentions the PUC rejecting Minnesota Power's proposal?
My Public Utility Commission, in NY separated generation and distribution rates. Utilities can't get away with anything on the generation side. It's also pretty hard for them to get away with anything on the distribution side, because rooftop solar keeps them honest.
Consider what the PUC in Hawaii is doing, as well. They are rejecting the attempts of HECO to gouge customers.
I expect that other PUCs will eventually copy what NY did. I understand that some PUCs are deeply corrupt, such as Nevada, but I figure this level of corruption at the PUCs is unlikely to last forever in most states.
When the utilty doesn't have a completely corrupt sweetheart deal with the government, the utility starts acting competitive -- and competitive means they try to keep prices low enough that people don't defect.�
1/1/2015
guest Statement from SolarCity Chief Policy Officer Jon Wellinghoff on the Recommendation of the Chair of the Distributed Generation & Storage Technical Advisory Committee of the Nevada New Energy Industry Task Force
Is Nevada going to reinstate net metering soon?
Looks like if they do, this could affect stock price as the Nevada debacle was the overriding reason of market uncertainty for the past 6 months...
Again, this tesla aquisition deal looking short changed for Solarcity investors every passing day...�
1/1/2015
guest http://www.bizjournals.com/buffalo/blog/morning_roundup/2016/06/new-york-state-could-be-negotiating-with-tesla-for.html
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1/1/2015
guest New law makes it easier to finance energy co-ops
Warren Buffet Might Be Interested in HECO If NextEra Acquisition Not Approved
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1/1/2015
guest I guess we know they didn't bother polling one excruciatingly logical soul...
Poll shows majority of Nevadans support rooftop solar � and old rates
NV Energy customers to see another rate drop this week
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1/1/2015
guest I know Solarcity has historically been focused on residential solar. The stated goal for Tesla acquisition of Solarcity is to provide a retail customer with an EV, solar and battery backup shopping solution.
However, one other thought I had was that the synergy of solar and powerwall solutions seems a more obvious fit for commercial purchasers. For example, MGM and NRG now (although no powerwall that we know of, anybody know otherwise?). Also other Casinos (Wynn and Sands) have expressed a desire to separate themselves from NV Energy. It would seem that commercial customers would stand to gain the most from Solar/Powerwall since most are the primary consumers of peak demand power during the day. I do not know if commercial customers can negotiate better rate terms, but since the big casinos want to leave NV Energy, it doesn't seem that way.
I know Musk had met with the Pentagon, and likely discussed energy solutions for the military. That could be a potential large scale buyer of Tesla/Solarcity products. I can only imagine the list would grow exponentially if Tesla can offer larger scale energy solutions.
Just thinking.�
1/1/2015
guest The post-Brexit world is looking pretty nuts, treasuries are paying next to nothing. In this environment isn't the yield on a clearly safe SolarCitry PPA bond highly attractive?
Does the pending(seemingly inevitable if Elon wants it) merger with TSLA provide enough additional "corporate certainty" to allow the cost of financing to shrink considerably right now? In essence, can we get something close to TSLA rates now?�
1/1/2015
guest Interesting article by David Crane.
TeslaCity: Will car company + solar company = shareholder happiness?
I usually like where his head is with our transition to sustainable energy, but not sure he understands the whole energy circle with Tesla. Here are some quotes:
I agree with this - the market never let up on the company's projections after that and seemed to have forgotten why SolarCity did what it did.
Short-sighted opinion since Elon said at the Annual Shareholder Meeting that Tesla's energy business will probably be at least 50%.....market still ignores this.
Short-sighted again. If you have been paying attention to what Tesla is doing, the energy and solar industry, JB interviews over the years, it's a no-brainer.
I think something like this was proposed on here, but I still think Tesla will make it even better than before with their strategic ideas on the future of the grid.
�
1/1/2015
guest It won't happen, but a reverse merger with Tesla Energy and Solarcity would probably make everyone happy.
Tesla motors would its company
Tesla energy(formerly Solarcity) would be its company.�
1/1/2015
guest Indiana regulators approve Duke's $1.4B grid modernization plan
Ruggiero�s green energy plan now law | www.jamestownpress.com | Jamestown Press
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1/1/2015
guest The IB rate to short SCTY just hit 211%. Not a typo! What is going on??�
1/1/2015
guest I've been playing with CAISO hourly data from November to present. The more I work with it, the more I come to the opinion that solar will dominate wind in the longrun. I am looking forward to a time when there is sufficient battery storage to smooth out intradaily mismatch of supply and demand. At this point, thermal power is only needed to address energy shortfall, not load balancing. So here are the limitations of wind.
First, daily wind production is quite variable from day to day. Solar provides a more stable supply of daily energy. So with lots of wind, wider regional transmission networks are needed, and multiple days of battery storage are needed to smooth out the supply. So that is a lot more hardware to make wind stable relative to what solar would need at the same scale of annual production.
Second, in California, spring and fall are more productive seasons for wind, though summer and winter are when demand are highest. By contrast solar production varies smoothly through the season with minimum production in January and maximum in July. The daily average doubles from January to July. So if there is sufficient solar for summer and winter, there is more than enough in spring and fall. So when it comes time to balance seasonal loads, there will be little value in having substantial wind generation.
Third, I suspect that wind in California may be limited geographically, but this is hardly a problem for solar. If wind were dominant in the state, it would mostly be imported from other western and midwestern states, but this is simply reiterating the point of dependency of extensive transmission networks.
So far the advantage that wind has enjoyed is economic. It became price competitive with traditional generation years before solar did, and it is still largely cheaper than solar. It also tends to generate a more even supply of power throughout the day, so it may be a bit easier to integrate with thermal generation. But in this mix day to day variation in production is not a huge problem as thermal generators fill the gap. But in a day when there is very little thermal generation and quite substantial storage capacity (> 10 hours at average consumption), solar will be the more reliable supply of energy and better matched with the seasons, at least for California. The situation may well be different for other states.�
1/1/2015
guest Time to call them in?�
1/1/2015
guest All I know is that the rate was around 70% yesterday. Tripled overnight!�
1/1/2015
guest big funds who lend out their shares to short for interest need to recall those shares for voting purposes.
So a fair dinkum short squeeze must occur.
but, its not due to fundamentals, and the bond market consider SCTY itself to be unviable as an independent entity.
Bonds Detail
I've never seen such conviction that a short squeeze occurs on a company that is so reasonably headed for 'extinction'
(ownership by another is extinction, so when TSLA absorbs SCTY, SCTY will be extinct)
blood is thicker than water�
1/1/2015
guest Fidelity presumably has lent out many of its 14 million shares to short. What happens when they recall these shares to vote? Why have most of the shorts not covered their position based simply on the announced intent of Tesla to purchase SCTY?
The large institutional investors in this game have insider knowledge of both companies. I would like to understand better the strategies of both sides. Sentiments of small investors probably aren't influences prices much at this point.�
1/1/2015
guest MGM Resorts International and NRG Energy Complete the Installation of Nation's Largest Rooftop Solar Array
Reminds me of Clean Coal.
Inside Energy Reads: How �Rooftop Solar� Became �Private Solar�
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1/1/2015
guest Tesla Motors Inc (TSLA) & SolarCity Corp (SCTY) Deal Has Near-Term Synergies Of $156-389 Million
Not sure if this has been posted, but Credit Suisse analyst estimates that near-term SG&A synergies could reduce the cost per watt by 16 to 39 cents.�
1/1/2015
guest This is what I'd like to know. Anyone shorting SCTY at this point is betting very heavily that the merger will not go through, which seems like an extraordinary gamble, given that it's a bet against both companies' management, a bet that "no" voters haven't already sold their stock, and a bet against the single largest independent stockholder (a Fidelity fund) which has already come out in favor of the merger. If you think the merger will go through, and you're totally sour on the business, you would short TSLA instead (much cheaper to borrow and higher priced). Some people are not thinking clearly.
Had I been short SCTY before the merger announcement, I would have immmediately gotten out of SCTY and shorted TSLA instead, just for the arbitrage value. But I don't short stock. I don't know how these short-sellers are thinking, but I can't think of any explanation which makes them rational.�
1/1/2015
guest The only rationale I can come up with for current shorting situation is folks expect a disastrous Q2 from Solar City and are falling all over each other to get in before the drop.�
1/1/2015
guest Good thought. However -- Shorting is almost always a terrible idea because you can usually make a bearish bet with less risk and higher payback using options. So actual shorting is only appropriate if you are being bearish for an *indefinite period* (because options expire). So someone making a bet based on expectations of Q2 numbers should be using options, not shorting -- so shorts are *still* not thinking clearly if your hypothesis is right.�
1/1/2015
guest NV Energy expects purchase of Arizona natural gas plant to bring needed new power
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1/1/2015
guest �
1/1/2015
guest Kinder Morgan to sell 50% of gas pipeline to Southern Natural Gas | OilPrice.com
So Sothern Company has been buying up natural gas infrastructure in the South. What worries me in this report is that an LNG export terminal has been approved for Georgia. Why does this worry me?
Australia has enjoyed natural gas prices under AU$4/mmbtu, but players have also built up LNG export capacity. They have also written long-term LNG export contracts on the Australian supply. As a consequence, domestic NG prices are surging above AU$20/mmbtu. Moreover, this is doubling the price of wholesale power, and utilities are passing this on as 25% to 30% increases in residential power bills. Meanwhile, the global LNG market trades at glut prices of around $5/mmbtu. Basically, power generators and utilities could import LNG at lower prices than domestic natural gas, if they had LNG import capacity. So how does anyone make money off of this backward situation. The gas producers and distributors are able to jack up domestic prices by overcommitting supplies to LNG market. They take a loss in the LNG market, but make out like bandits in the domestic market. Domestic gas and power consumers are made to pay through the nose.
Could this be the sort of play that Southern Company has in sight for the US South? They cant make money in the global LNG market, but they could remove just enough domestic supply to jack up rates on domestic consumers. If this really is there game, then SolarCity may be moving into Georgia sooner than we think.�
1/1/2015
guest Southeastern Electric Utilities Find Their Way to Higher Profits Through Gas Pipelines and Captive Consumers
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1/1/2015
guest Thanks! This is really helpful.�
1/1/2015
guest Senators strike deal to move forward on sweeping energy bill
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1/1/2015
guest SolarCity Launches Residential Service, Expands Hiring in Utah (NASDAQ:SCTY)
SolarCity is expanding into Utah. Last week they announced also that they were expanding into Rhode Island.
Notice in this Utah announcement that there is no indication that they will be offering PPAs or leases, only loans and cash. Does this mean they are actually not offering PPAs in the state? Is there some regulatory reason here that applies specifically to Utah?�
1/1/2015
guest 5 facts about solar power in Utah | KSL.com
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1/1/2015
guest That's very interesting.
Looks to me like leases and PPAs are legal in Utah.
States that allow for Solar Leases and PPAs - Solar Power Rocks
I don't know whether SolarCity is going to offer leases and PPAs in Utah. But they aren't advertising them.
I think this marketing decision is further evidence SolarCity is deliberately moving away from leases and PPAs and trying to move towards loans and cash. Now that banks will finance solar panels with home equity loans at low rates, this makes tremendous sense.�
1/1/2015
guest Certainly consistent with a belief in their funding woes.�
1/1/2015
guest Thanks, Doggus and Neroden. It does at least appear to be a marketing tact. The ownership model may be more appealing to conservative consumers in Utah. Also, SolarCity really needs to move to a cash upfront model. If consumers don't demand PPAs, it's better for SolarCity not to push them.�
1/1/2015
guest So I did a tad more research. SolarCity advertised the introduction of a straight-up loan product in 14 states as of June 2. Adding Utah, this includes all the states they're active in west of the Mississippi, and most of the states in the Northeast, but *not* Pennsylvania, Florida, or Vermont for some reason. If I remember correctly from SCTY's financials, the loan program is prefinanced by banks, so SCTY does not take on any of the financing risk.
They're still advertising leases in other press releases. This press release mentions sales, loans, leases, but *not* PPAs: SolarCity Expands to Houston Area, Launches Popular Solar Service for the First Time (NASDAQ:SCTY) (Leases are much easier than residential PPAs to figure out the accounting for, so as an investor I think they're preferable to PPAs, although they still carry financing risk.)�
1/1/2015
guest Interesting. So the state by state differences could simply be due to the availability of financing partners in those states.�
1/1/2015
guest I would bet there's some regulatory issues in certain states. Pennsylvania has had every single solar roadblock imaginable since our last governor was a Chesapeake Energy plant, but we just last week installed our new forward-thinking PUC head.
Look for Pennsylvania to ramp up like crazy over the next year as pent up demand is released. NJ is a mature market right across the bridge and that market will flood into Philadelphia(the nations 4th largest metro area) like crazy once a few regulatory hurdles are unwound.
We're at a place in time where loan, lease, PPA can all be advertised in detail openly without worrying that one will make the others look less advantageous. If sales cost can be constrained across all offerings, total costs are low enough to simply let the market choose which solution they prefer. Exciting stuff.�
1/1/2015
guest Yeah, the legality of PPAs is still going to be an issue in some states, and this can be a barrier for some consumers. I've always have maintained that it is best for the each consumer to decide what financing is best for their family. So I do hope that SolarCity continues to offer PPAs and leases everywhere they can along with low interest loans.�
1/1/2015
guest Senate votes for energy bill negotiations with House
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1/1/2015
guest Thanks @jhm, @neroden, and @TheTalkingMule for the very helpful information. It always seemed to me that using PPAs as the principal funding mechanism was an artifact of how Solar City grew up and I have been assuming that Tesla Solar would offer more flexibility. Since it sounds like Solar City is already shifting to a menu of funding options for customers it appears that transition may already be happening. Seems like a very positive development.�
1/1/2015
guest I don't have a clue what the market will care about or exactly what is in this bill specifically for SolarCity. I did browse around the CBO estimate relating to s.2012 Energy Bill and found some interesting language which might overrule some PUC decisions...
S. 2012, Energy Policy Modernization Act of 2015
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1/1/2015
guest More developments in NV
Switch sues PUC, NV Energy for $30 million in damages, permission to leave utility�
1/1/2015
guest Good Drones Go To Bat For Low Cost Rooftop Solar
Here's a fun item on using drones to cut the soft costs of rooftop solar installations. I'm wondering in the SolarCity Tesla mash-up if they will work on developing robots to assist in rooftop installations. How about a robotic lift that can take panels from truck to rooftop level in optimal position for workers to take it from there. This could improve saftey and minimize the time spent on ladders.�
1/1/2015
guest Arizona is obviously wiser and more thoughtful than those reckless PG&E rubes who agreed to testing SolarCity utility services...whilst mid bailout and careening towards certain bankruptcy no less.
How Arizona�s Biggest Utility Is Modeling the Customer of the Future in Its �Rate Design Laboratory�
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1/1/2015
guest Pretty sure that APS won't go bankrupt
So in summary, rooftop solar sucks unless it is your local power company doing it. Pretty good validation for SolarCity�
1/1/2015
guest I'd fire my joke writer if he weren't a regulated monopoly and guaranteed a captive audience connected to his decreasingly relevant "ironic amusements".�
1/1/2015
guest Solarcity is starting grid services in September... The "pilot" is actual wholesale market participants in the real world, just a limited number. I expect a massive solar+storage product ramp across California (and all other utility participants at that time) in 2018...�
1/1/2015
guest Bring Back Solar initiative to return net metering to retail rates also won ballot access in November. A recent poll showed 74% of Nevadans want retail net metering to return so it looks like a strong yes vote going into Election Day.
Only issue now is the buffet backed lawsuit to stop it. Those hearings are set for July 29th.
If buffet shot down here, this looks like a mulligan back to retail and solar companies could return by year's end.�
1/1/2015
guest Electric/gas bills to rise in Northern Nevada | NevadaAppeal.com
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1/1/2015
guest Have there been any securitization announcements since Q1 CC? I haven't paid that close attention given my personal life is in shambles, but it seems like all quiet on that front for awhile.�
1/1/2015
guest Then what are Hanford, Yucca Mtn, Savanna River, etc built to store for thousands of years? Have you just found the next line item to remove from the budget?�
1/1/2015
guest from a supply point of view, nuclear energy is extremely close to being renewable, so close that its worth lumping it in as the same as hydro, or even solar, since nuclear energy uses less resources than silicon solar PV tech....
But nuclear does not exist in technology vacuum, its medical and military applications are profound, and must be part of the stakeholders considerations.
So there is the paradox, Nuclear is more renewable than silicon solar PV (compare Canada Candu reactors to Chinese PV) but Nuclear also has military, medical and decommissioning implications.
since Nuclear is basically an inflexible renewable, it, of all power sources is unsuitable for a high intermittent renewable grid. There is no fuel saving, just cost additions. At least coal and gas can cycle off to save fuel costs.�
1/1/2015
guest Silicon isn't a fuel, it's a technology. The sun is forever, as far as we humans are concerned. As is nuclear waste.�
1/1/2015
guest You might want to consider Amory Lovins rebuttal to nuclear claims to relevance.
Closing Diablo Canyon Nuclear Plant Will Save Money And Carbon�
1/1/2015
guest Electric Utilities Prepare for a Grid Dominated by Renewable Energy
"Our monopoly days are coming to an end." -- NV Energy�
1/1/2015
guest Democratizing DERs: What role should utilities play in spreading clean energy to all?
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1/1/2015
guest ooooh, I like this. Thanks!�
1/1/2015
guest No I don't think so. It's a bit concerning.�
1/1/2015
guest Valvoline junk bonds oversubscribed by 12x @ 5.5% this week. That has to be a good sign.
I trust that Radford Small, Lyndon and Elon are scheming as we speak.�
1/1/2015
guest Sadly not in time for the hundreds of @$30 and @$40 options expiring worthless tomorrow. Pour one out for my homies. Peace.�
1/1/2015
guest Maybe there isn't as much in this deal for SolarCity after all. ITC applies to stationary storage if paired with solar already. I suppose it's about federal access and standardization rules for the grid and probably some DOE Clean Energy projects too. It's quite obvious what the GOP wants, for it's part at least.
GOP energy negotiator accuses Senate chair of 'bizarre' promise
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1/1/2015
guest Japan to test 'virtual power plant' for renewables- Nikkei Asian Review
Japan starting a virtual power plant much like Pg&E pilot. Can't put the paste back in the tube now... Rooftop centric grids are coming globally.
Does anyone know the "U.S. company" involved in Japan's virtual power plant as stated in the article?�
1/1/2015
guest APS cutting into solar backlog
Arizona regulators approve APS demand management, efficiency programs
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1/1/2015
guest This is why I'm almost always on the sell side of options trades (except when I'm hedging or building a synthetic): I like having time value in my favor.�
1/1/2015
guest BREAKING: Hawaii PUC rejects NextEra-Hawaiian Electric merger
PUC votes to deny HECO/NextEra merger
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1/1/2015
guest On the Big Island HELCO gets 50% of their power from renewable resources. In my neighborhood about a third of the houses have solar and net metering. Quite a few people have cut the cord out in the country and most I know are doing pretty well. For some solar is cheaper than grid power.�
1/1/2015
guest Governor Signs Bill To Give Duke Flexibility On Coal Ash Cleanups
Trico proposing higher base charge, solar payback cuts
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1/1/2015
guest More financing....
SolarCity Raises $345 Million for New Solar Projects�
1/1/2015
guest Good stuff. Nice to see that some if it occurred in Q2. Would be nice to know the terms.�
1/1/2015
guest That's behind a paywall; I found the original on PRNewswire:
SolarCity Raises $345 Million to Finance New Solar Projects
Could someone explain to me exactly what the "debt aggregation facility" is? In words of less than 20 syllables, please. I am very slow to understand this... I'm trying to figure out if this is increasing SCTY's ability to refinance old panels.
(After looking this up, I think it doesn't. This seems to be the revolving loans for new construction, done prior to securitization. SolarCity Closes $500 Million Aggregation Facility | SolarCity )
Also, I basically get what the SREC financing facility is -- it's banks buying the right to future SRECs, for later resale to utilities. But what do they mean by "hedged" SRECs? Can someone explain in detail what exactly is hedging them?�
1/1/2015
guest Unfortunately there isn't enough detail in the release to tell anyone really what the debt aggregation facility is. From the title and the underlying business model I would guess that it is basically short term financing for new installs that allows solarcity the time to put together a package of installs to sell as an asset backed security. It is debt & allows them to aggregate systems.
Should have nothing to do with old panels. Plus it isn't clear how much of the older systems need refinancing and on what timelines. Most of the later ABS are designed for full payback so there won't be a need to refinance.
Have no idea how or what the SRECs are hedged, so can't really help�
1/1/2015
guest I would venture a guess that the +$70M goes toward expansion and Buffalo.
And maybe "hedged SRECs" refers to monetizaton that retains some portion of the potential upside. For instance, PA SREC's were sabotaged down to like $26 in value by the former governor, but may be worth $200 if allowed to appreciate naturally. You wouldn't want to sell off 100% of that up side.�
1/1/2015
guest Peppermill in Reno latest casino aiming to leave NV Energy
I guess Buffett hasn't gotten the NV Energy monopoly ending memo or the future cost of electricity going to zero...
Texas' billion-dollar power struggle: Warren Buffett, NextEra, Hunts vie for Oncor
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1/1/2015
guest They may have needed to add some protection to sell the SRECs b/c of Nevada & PA. That would also be considered hedged�
1/1/2015
guest Reno casino latest Nevada company to request exit from NV Energy service
The NVExit continues.�
1/1/2015
guest PG&E to Plug Enphase Smart Inverters and SolarCity Storage Systems Into Its Grid Control Platform
Hawaii LNG import boost uncertain after merger of Hawaiian Electric, NextEra blocked - Natural Gas | Platts News Article & Story
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1/1/2015
guest Headed to Ireland for 15 days to unplug, fingers crossed for Q2 results.
Fully expect to be a quadrillionaire upon my return.�
1/1/2015
guest quadrillionaire a bit less Sterling today;
Better take it in $s...
have a good trip�
1/1/2015
guest Thanks. I'll be buying pounds in Derry on Saturday so that's at least 2 extra free beers for me!�
1/1/2015
guest �s may be a better bet still ...�
1/1/2015
guest Anyone have any speculation on the Q2 results?
My guess is that installations will come in under guidance. SCTY has always installed quite a bit less than they booked the previous quarter, so I think they'll install ~150 MW (guidance is 185 MW) and drop full year guidance to 1 GW (from 1 - 1.1).
I do think their new loan product is being well received, so I think bookings will rebound pretty well to ~240 MW with sales cost per watt dropping half way back to normal (e.g .$0.75).
Overall, I think the near term results will be a bit ugly but the share price might not tank because of positive momentum in cost per watt, bookings and claims of FCF positive in Q4.�
1/1/2015
guest Thanks for the link! I really liked this part:
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1/1/2015
guest Well I'm pretty happy with the share price at $27. I think the deal will probably close around $30 but I've reduced my position substantially here to avoid the uncertainty of the Q2 ER.
My plan since the merger was announced was to sell 1/3 then, 1/3 when it reaches near the sale price (now) and then hold the last 1/3 through the deal. It's all nicely in the green for me with by far my biggest SCTY occurring at $16.88 after the last ER.�
1/1/2015
guest Google uses AI to cut data centre energy use by 15%
APS' plans to increase reliance on natural gas draw questions
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1/1/2015
guest Judge�s order prevents ex-Nevada PUC official from deleting social media accounts
Buffett's Berkshire Hathaway protests FERC market-based rate restrictions
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1/1/2015
guest In Texas, MP2 Energy Sees the �Shape� of Rooftop Solar as Value to Substitute for Net Metering
New gas pipelines would make U.S. miss climate target: report
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1/1/2015
guest Los Angeles Times Summit: Powering Forward | Lyndon Rive, SolarCity�
1/1/2015
guest Basic question:
Tesla's offer to Solarcity is "0.122x to 0.131x shares of Tesla common stock for each share of SolarCity common stock" (from the offer letter). Suppose the deal ends up at 0.127 shares of TSLA for each share of SCTY, and also suppose that I own 100 shares of SCTY. 100 Shares SCTY * 0.127 Shares TSLA per Share SCTY = 12.7 shares TSLA.
I get 12 shares of TSLA, but what happens to the 0.7 shares of TSLA, since that's not a whole share?�
1/1/2015
guest Interactive Brokers told me any fraction will convert to cash.�
1/1/2015
guest Yeah, the usual way it works is that they compute for your entire holding, and then if there's a leftover fraction, they automatically sell it -- usually at the closing price on the day of the merger. (That's how it's accounted for for taxes, too. You have to treat it as a capital gain or loss on a fractional number of shares.)
So if I hold 1000 shares SCTY (or exercise 10 options!) I probably get an even number of TSLA shares, unless the exchange ratio is 4 digits.�
1/1/2015
guest I used the last of my available funds (for now) to pick up some SCTY at 6 cents above current low for the day. Max pain is at $28, low volume (which tends to favor movement towards MP, all things being equal), GF1 unveil party tonight, plus recent widening of the JHM TSLA/SCTY premium but with TSLA rising steadily, so I I feel pretty good.
Of no importance to anyone but me, between last year's (lucky fluke) gains and this year's losses I'm just breaking even. With more shares than ever to ride back up and some firm job prospects so I can accumulate even more, I'm feeling pretty optimistic about 2H2016. I only wish the merger would happen when SCTY wasn't so severely undervalued.�
1/1/2015
guest I am realizing that to make the conversions tidy, I should have round multiples-of-ten numbers of options, which I don't. Oops.�
1/1/2015
guest SolarCity Preannounces Q2 2016 Operating Metrics and Updates 2016 Guidance (NASDAQ:SCTY)
�
1/1/2015
guest I think the interesting part is the two product releases, especially #2, which indeed looks like solar shingles might not be a bad idea�
1/1/2015
guest So $25.37 appears to be the end of the line. The third post in this thread had it about right:
sleepyhead,
Mar 24, 2014
For all of those who invest in SCTY, I am still waiting for answer to some very important questions:
How do you value the company? How much is it worth today, how much will it be worth 5 or 10 years from now?
How do you know when it is overvalued or undervalued? When it was pulling back to $30 a few short months ago nobody seemed to be buying. Now that it pulled back to $60, everybody wants in. Not a lot has changed in SCTY since then.
There is a lot of people who invest in SCTY on this board and I can see why, but I would bet that there is less than a handful (most likely 0 or 1) people here that actually can model out their forward looking financials to show how much the company is worth or could be worth. I know that I am not one of those people.
What are SCTY's risks, and how confident are you that they will be able to navigate around all of those risks to avoid seeing the stock crash 90%?
Is $60 a good price to get in? Was $88 a bargain? How come $30 wasn't a great a bargain?
Why do people lease a system from a middle man who gets the vast majority of the benefit from the solar system when instead they can buy the system outright and bypass the middleman? Yes, I know there are reasons such as difficulty obtaining financing to buy a system, but I guarantee you that this is going to change very rapidly over the next few years.
These are all serious questions that I hope all of the SCTY investors here are at least thinking about.
I sincerely wish you all the best of luck, but I prefer to invest in companies that I can build financial models for.�
1/1/2015
guest Thanks for sharing the link. I got excited with this one bit
"MW Booked increased 40% over the first quarter of 2016 to help drive a significant improvement in Sales Cost per watt."
Then I remembered, bookings are all lies anyway. That's what SCTY has always done. They lie.�
1/1/2015
guest There's a strong hint that they are making mhw numbers by large commercial sales.
I do think the new products will be interesting. It will be fun to see some upscale solar products from a major vendor. This sort of new stuff from small companies always suffers a quick death.�
1/1/2015
guest Perhaps he was right, but that only goes to show the unpredictability of the investment game. He was extremely incorrect on another stock pick for which there were extensive models, and in that case then end of the line was $0.�
1/1/2015
guest Remember guys Retained Value was computed off of bookings for a while. Then over time it turned out the gap between bookings and installs was getting progressively wider and they couldn't hide it anymore. Towards the end the cumulative gap turned out to be 2X (installs were half of bookings, cumulative). Then they eventually turned around and just said oops. RV tumbled to about half and they renamed it to something illegible... Bookings is all bull-sh!t which Lyndon Rive personally makes.�
1/1/2015
guest As an ex-shareholder who suffered serious losses because of lies and deception, I consider this justice (but only to some degree)
Elon Musk�s SolarCity Offer Wipes Out His Cousins� Stock Options�
1/1/2015
guest They will become directors of business units within TSLA. They will get new options. They will get paid off (but nothing like the payoffs of Musk). Gave it their best shot. Business chiefs usually pay off their henchmen at least to keep them comfortable. But I doubt the Rive pair last at the firm through 2017.�
1/1/2015
guest Well, it's not a triangle: Tesla/SolarCity: First look at new Silevo solar panel that Musk has been boasting about for its aesthetics features�
1/1/2015
guest Anybody worried that another buyer will acquire SolarCity? I don't think it is likely, but I would really not like to see SolarCity go into other hands. Musk would sell off his position and likely not have any more to do with it. It would take a really high priced deal for me to warm up to it.
At this point, I think of SolarCity as a way to invest in Tesla. So the value of the stock lies in the growth trajectory of the Tesla-SolarCity combination. Another buyer could offer more money, but it would be hard to match the growth trajectory of a combined Tesla.�
1/1/2015
guest No.
There's nothing I could do to stop an alternate acquisition, so I don't worry about it. In any case, I think it is extremely unlikely, as SolarCity has all of the appeal of toxic sludge to the broader business/financial community.�
1/1/2015
guest Interesting that it is referred to as "solar roofing" rather than solar panels. As it stands, it looks like a normal panel. Nothing special.�
1/1/2015
guest Trina Agrees to Management-Led Buyout Offer�
1/1/2015
guest
Well, not too much justice. From the link
"Lyndon and Peter Rive are among 15 top-paid U.S. executives".�
1/1/2015
guest That was including the options which he lost now.
Over last several years Rive's made a measly 300K/annum. That's less than a lowly manager's comp with a small team of 5 to 6 people in Silicon Valley.
The shares they sold in 2014 and the remaining that they continue to carry are from way before, even before ipo.�
1/1/2015
guest What is this, a dumping ground for the two of you now? This company is about to be part of Tesla, so quit your whining. Good day.�
1/1/2015
guest Nope, not really. It's a pumping ground.
We just try to provide a bit of balance. But clearly, it's not working�
1/1/2015
guest They're probably jumping to conclusions. Chances their compensation is renegotiated to have an equivalent in TSLA.�
1/1/2015
guest Updated: Headed for the exits, Nevada PUC Commissioner David Noble lifts lid on net metering fight
This is interesting Nevada PUC commissioner Noble claims that the solar industry never provided any evidence on the benefit of rooftop solar, and yet this was in fact submitted in TASC's testimony. It sounds like Noble did not bother to read solar testimony. So if Noble is wrong on a basic point of fact like whether evidence had be submitted or not, how will the court reviewing this case view the actions of the PUC. It seems some really basic points of process had broken down.�
1/1/2015
guest When does the court hearing plan to finish?�
1/1/2015
guest Commissioner appears to have a misleading name. No further comments, Y H.�
1/1/2015
guest The $47 million in stock he sold in the last three years was almost certainly earned as part of his compensation. Almost all the insiders were dumping stock, likely because 1) They saw real competition entering the market, and 2) The ITC set to expire.�
1/1/2015
guest You can see in the filing here. Rive brothers did not get any stock or options in 13, 14, 15 (the ones they got in 15 are getting cancelled).
I read on Bloomberg somewhere that Rive brothers didn't get an equity or option awards since IPO.
So it can be deduced that the shares they sold in 14 are from their stakes before IPO.
Why all insiders were selling like crazy, I guess we all understand that now. They were exiting out off a sinking ship as fast they can.�
1/1/2015
guest Not sure if they really need justice anyway, considering SCTY was nothing not that long ago and they've followed their mission statement.�
1/1/2015
guest Apple now approved to sell power:
Apple Can Now Sell Power as Tech Giants Boost Energy Investments�
1/1/2015
guest Supreme Court rules against referendum on rooftop solar rates
�
1/1/2015
guest Thanks for the post. So it seems the Nevada Supreme Court has put this to Sandoval to decide. Since he axed Noble (previous PUC chairman) we shall see who he appoints as it will decide how this will go.
From my perspective, this is what he probably has to consider.
NV Energy (Buffet money), status quo with additional (1 billion?) investment by Berkshire Hathaway. Maybe 100-500 jobs for a new plant.
Tesla/Solarcity (Musk money), with new GigaFactory, 10k direct manufacturing jobs projected for now, more likely later. Hmm... Good manufacturing jobs, something this state seriously needs to diversify from Gambling.
We shall see. Guess the (technically unofficial) state motto "Battle Born" rings true here. I will just amend it to:
"Billionaire Battle Born"�
1/1/2015
guest Elon is the biggest solarcity insider and he didn't sell any, right?�
1/1/2015
guest Hampshire College seeks to get all needed energy from solar
HECO Launches Solar Self-Supply Option For Homeowners :: Solar Industry
�
1/1/2015
guest It's working.....for those who are paying attention. And I wouldn't use the term "we", as pretty much every SCTY bear here other than yourself lacked any substance whatsoever in their posting. Hating on something is not the same as having fundamental concerns.
I haven't been following too closely over the last 60 days, but you certainly nailed SCTY at most turns over the last 9-10 months. Kudos to you for not starting an "I was right all along" thread! Personally I find your views a bit too gloomy for an Elon-run company operating in such a sure-thing growth sector, but the concerns were certainly real.
To me, there was never a scenario any worse than the one we're in right now where Elon folds SCTY into TSLA. People WILL be buying(leasing) all-in-one solar/battery/car solutions from TSLA by the boatload, it's just a shame that they couldn't get over the hump in time to make me rich. I somehow underestimated the level of regulatory corruption and over-rated consumer apathy. Shame on me.
I will wait for my residual TSLA shares to hit $320 and break even on my SCTY gamble. A year at most?�
1/1/2015
guest If Q3 is blowout and vote is in Q3/Q4 with shares recall prior to that you may see it still this year�
1/1/2015
guest Thanks for the kind words Mule
For the record, despite my views being largely bearish for a while now, I was never short the stock. After my long exit trade, I used to follow the thread and post merely as intellectual curiosity. With the recent merger talks I became lot more active just like many other TSLA players.�
1/1/2015
guest FWIW, I was earning income on 'loaning' my SCTY shares to the brokerage who then lent them to the shorts. This was really lucrative, as it paid interest at a 40% per year rate.
Apparently the shorts are closing their positions, as they returned the shares this week.�
1/1/2015
guest Carl Paladino's False claim about jobs at SolarCity
�
1/1/2015
guest I guess they're not just mailing it in...but I am weary of these local battles up against the machine. Doesn't this just get ultimately added to their already bloated sales costs?
Arizona regulator hires attorney to investigate rate-case influences
�
1/1/2015
guest http://www.azcentral.com/story/money/business/energy/2016/08/09/solarcity-backing-re-election-utility-regulator-robert-burns-dark-money-critic/88429706/
SolarCity And ComEd Discover Shared Vision For Utilities' Future
�
1/1/2015
guest For us wretched souls, who basically ignored SolarCity because it made their heads spin but are now forced to face the music. Any of the regulars able to give us some insight what to look for in the upcoming earnings report? What to ignore?�
1/1/2015
guest Based on past performance, I believe @SBenson has been the most accurate of oracles.�
1/1/2015
guest I fall into the ignore category too, because Tesla is enough to wrap my head around and SolarCity is arguably even more complicated. However my hunch without diving too deep into the numbers is that there was an overreaction after the Nevada thing and after the last earnings where they revised guidance down. I'm guessing/hoping that they revised guidance low enough that they are now in an under promise/overdeliver position, which lends itself well to the already low expectations and high short-interest. I think there has been a misconception that SCTY is a sinking ship with terrible management, when in reality it's more like they are just passing through heavy waters with pretty above par leadership. I'm not sure the suggestion that Musk is taking over SolarCity because the Rive's have done a bad job is accurate, I think it's more like something he's been planning for a long time and the stars are aligned pretty well for it right now, and I wouldn't be surprised if Rive would welcome some help at the helm. Curious to see how much they talk about the merger and the prospect of the "go shop" provision. That's my 24 cents.�
1/1/2015
guest What I'm looking for are reductions in cost $/W, especially sales cost, nearly full asset financing per Watt and progress toward becoming cash positive. We already know that installed MW are up, though guidance for the year has be dialed back a bit. The growth was wicked fast in past years, but the company has needed to focus more on cash flow and profitability, and less on growth.
It made good progress in righting the ship over Q1, and I'm hoping they are even further along now.�
1/1/2015
guest I told you people Cash will drop like crazy - in the Bailout thread, first post.
Here it is end of Q2 - $146 mil (drop from $362 mil)
The only thing that is holding SolarCity together is the merger offer. Or else, the firm would go bankrupt in 2 weeks max!�
1/1/2015
guest I strongly advise people to forget about the arbitrage and jump to TSLA shares right away. God forbid if the deal falls apart, you will be left with a ZERO.
All f'ing serious.�
1/1/2015
guest I would appreciate your evaluation of these metrics now that the shareholder letter is out. There seems for example some reduction on the cost $/W but cash flow seems dramatic as @SBenson already indicated?�
1/1/2015
guest Maybe we have misinterpreted "cash flow neutral". Perhaps they were referencing having no cash.
But seriously, I expect "project financing delays" is just rewriting the terms to take into account the acquisition by Tesla.�
1/1/2015
guest Then how can SCTY merger do anything good for TSLA? Just because TSLA is a larger boat?�
1/1/2015
guest Merger has nothing to do with financing.�
1/1/2015
guest SCTY is the largest installer and probably the largest solar panel maker, Tesla is the largest electric car maker and battery maker. The big idea is to get all four of those together, the finances are just dust settling.�
1/1/2015
guest I almost wonder if they are deliberately making the finances look iffy so that they don't have to deal with any other takeover bids.�
1/1/2015
guest I think it is at the very least fair to say they have not articulated a vigorous defense of their business model or championed their plans transitioning to a vertically integrated future.�
1/1/2015
guest For example, just like Tesla they could have at least unveiled the new products, promoted the factory and defended the short term position while expanding the vision to get back on track to the ludicrous growth future as the prices keep falling. *shrug*�
1/1/2015
guest There's a lot of meat in this conf call. Didn't expect Musk to be on it, they're talking like the merger is done. Just said they are probably going to bring in a strategic partner for solar manufacturing like Panasonic with batteries.�
1/1/2015
guest I'm surprised Musk is talking so much about 20 year roofs, when so many upscale roofs in the southwest are semi-permanent.
It would be great to finally have a success with integrated solar roof.�
1/1/2015
guest If they make a good product that makes sense... it seems like at some point people are going to do this just to cut out their electric bill regardless of whether they need a new roof.�
1/1/2015
guest @SBenson There is a reason SunPower is down 30% after reporting, and SolarCity is flat-up a little.
SolarCity's costs will drop dramatically in the next 1-2 years, especially once SolarCity products are available at all Tesla showrooms and stores around the world, at very competitive prices.
The Tesla-SolarCity merger is not a bailout. If SolarCity needed cash, SolarCity could very easily obtain cash.�
1/1/2015
guest To me it looks like @SBenson isn't capable of analyzing facts impartially due to losses incurred. I lost my ass on SCTY LEAPs too (well, officially not yet but they're worthless now) so I can relate.�
1/1/2015
guest To say it's not a "bailout" is almost as silly as saying it is. Reality is somewhere in the middle. If SCTY didn't have big brother TSLA to fall back on it could certainly survive until solar is up to speed nationwide. But that not Elon's plan.
SCTY's mandate was to grow residential solar in the US as quickly as humanly possible. In doing so they borrowed literally every dime anyone would give them at a reasonable price. But the possible ITC expiration hiccup and various regulator messes were big speed bumps that shook up their financing model and made it harder to churn installs and financing.
Fact of the matter is, they will grow absurdly fast under the TSLA umbrella because it instantly cuts tons of cost. They'll grow at least twice as fast as they would have on their own. Since SCTY is the leader in residential solar, that means residential solar grows twice as fast. That fits Elon's plan, so that's what's happening.
F***ng LEAPS.�
1/1/2015
guest I don't think cost is the most important piece. Offering a product that fits into the future energy production needs: simple, price competitive with fossils, produced at enough volume, plays nice with regulatory environment. The bet we made was that this would be SCTY's leg up that would produce a breakout. How it will play out is that'd be under Tesla umbrella and probably producing tangible results in 2-3 year time frame. So not an unreasonable bet just not timed well. I can live with that, no problem.
Edit: with a hindsight this would not be such an outlandish thing to predict. There was enough data to envision this scenario as one of the likely outcomes a year ago.�
1/1/2015
guest Oh yea, "bailout" would be relevant in the face of imminent collapse, which there's slim evidence of. What we're really looking at is JHM's blind faith numbers getting better justification with an integrated energy product offering that is likely to be as big if not bigger than automotive one.�
1/1/2015
guest This is the upside (better integrated support of Tesla Energy, turning a current side business into a bigger business than automotive) I see with the Solar City acquisition. And why I'm more in favor than not.
I want to see Solar City move away from the financial engineering, or find a way to make it more understandable. This quarter's letter to shareholders was 17 pages long - I think 4 pages of actual letter and 13 pages of disclosures (*my bad - 5 and 12). That's not a balance I like to see in my investments (too much of both, to explain what the moving parts are and how it's going).�
1/1/2015
guest The reason SolarCity is not moving is because its tied to Tesla. Had it been there without merger talk, you'd see a free fall. The cash issue is well known and was the reason the stock performed so poorly for the past year. Most people looked at installations and forgot about cash generation and super high customer acquisition cost.
Well, Mr. Musk made a call to bailout the existing holders at the expense of TSLA holders. All I can think of now is the $150M synergy they talked about comes to realization. But, SCTY with less than $150M in pocket is going to be a drag in the next few quarters.
Those who made a right call by staying away in too much noise, take positives and gain confidence.�
1/1/2015
guest (a) Yeah, if the deal falls apart it's Big Trouble for SCTY for sure, but personally that seems exceedingly unlikely to me after analyzing who the voters on the deal are. Looks to me like the would-be "no" voters all sold their stock as soon as the deal was announced, while the would-be "yes" voters loaded up on stock. Gotta be wililng to stomach the low-percentage risk, though. I don't see any reason why the SEC would turn the deal down but I suppose it's possible.
(b) Suppose the deal does fall through. SpaceX seems remarkably willing to finance SCTY in the short term, having refinanced $75 million in 'solar bonds' in June. If SCTY can get their house in order and get the cost per watt below the outside finance per watt, which it seems like they're doing, I suspect they'll manage to stagger along without going bankrupt. Certainly the stock would drop by a *lot* though (50%? 75%?) I doctored my effective purchase price way down with options tricks, so I figure if the deal falls through I can probably get out of this with only 25%-30% losses. I wouldn't buy the stock at this price, since the arbitrage is only about 3%, but the arbitrage available in the options was in excess of 30% (it's been shrinking).
SolarCity is only at 19% own-or-loan deals. They've explicitly said they're trying to raise that number to get out of the PPA/lease financing mess. This means an exit from the financial engineering. They can probably get enough cash to get them through the process of that transition. Of course if the Silevo panels are duds it would be a disaster, but the rumors indicate that they're actually pretty decent.�
1/1/2015
guest
This year has everything to do with what happened in Nevada. Period. Buffet utility doing dirty tricks to save his investment. Both Solarcity and buffet entered Nevada in 2013 and you can see the extreme swing against solar from 2014 on. Check the record.
Solarcity is a very strong company with a massive future globally. It's not even a question.
Solar lease/ppa will remain strong into 2020, due to ITC. it baffles me that analyst actually think the "ownership" market is bigger when only a minority of homeowners can actually use the ITC. If people think consumers will chose a large monthly payment on a loan, they are in fantasy land. If given a choice, a consumer won't go solar when monthly bill is high, even if the long term cost is cheaper. The lower then utility monthly payment is the key driver for going solar, loans aren't going to make mass market impact until that happens.
Solarcity solar roofs will be in partnership with home builders in addition to organic installs. They already have dozens of relationships with home builders already so I see a natural extension come next year. It is an amazing synergy with the new home construction market and will be a major value add globally.
Can't forget that Solarcity is already invested in solar+ battery in Africa through off grid electric which has set its sights on 1 million instslls within the next few years itself.
Lastly, I continue to assess this deal as significantly undervalued. The impact of buffets dirty tricks can not be overstated of which only tesla, ironically, has benefited because it has stolen this company from Scty shareholders and Solarcity employees/management with significant options packages.
For those with long term outlooks, a significantly higher value long term bond might alleviate some no votes on the deal.
And for the whinny/rude Ben Kalo on the conference call, don't take out your bad bet on sunpower on Solarcity management... The only management change that needs to happen here is your clients away from you with all your terrible recommendations....
Add:
Tomorrow, UNS solar policy decided in Arizona, so might see further support continue post earnings call...�
1/1/2015
guest This dude has been wrong for years in a row, with his evangelical preachings, sucking as many suckers as possibly can.
Despite how terrible the track record is, yet comes back again with hysterical nonsense.
It's amazing how he writes with no references, no numbers, no nothing with just wild claims. Bizarre stuff.�
1/1/2015
guest God I hate listening to conference calls. Wish transcripts showed up faster.�
1/1/2015
guest Ok, @SBenson, you did call for loads of cash burn, but it did have some objective reasons why it hit Q2:
So in fact their cash position has improved now during Q3 as some of the financing was delayed due to Tesla offer. But yes, at Q2 cash burn rate SCTY would last only 1 more quarter. However their shareholder letter actually expects positive cash flow from Q3, Q4.
�
1/1/2015
guest Even if everything in July came through in June, they'd still have faced a massive cash reduction, right? Anyone who knows what their convenants are with their lending partners? There must be at least something in there about maintaining a minimal cash position? That's the point that is for now really important because it is the point where TSLA is going to pony up for a bridge loan and the future acquisition becomes a cash drag.�
1/1/2015
guest Next solar project maybe?
Chernobyl�s Atomic Wasteland May Be Reborn With Solar Energy�
1/1/2015
guest Great up-to-date charts here for SCTY:
SolarCity's Results Are the Ultimate Pitch Book
All looks good, especially cash and debt over last few quarters. Just a few short-term bumps, not meaningful.
Believe in the vision.
Tesla gets a superb company that will bring amazing synergies to Tesla (and cash-flow) very, very soon.
Go Elon!
I do hope all shareholders approve this merger to form a global cleantech giant asap.�
1/1/2015
guest Exactly right. These cash / debt charts are just minor short-term bumps:
Cash Is (Sin)king
Tesla gets SCTY at a huge discount (remember SCTY had price targets above $100 a few months ago).
However, TSLA needs to be watchful that there are no other competing bids for SCTY. There could be many competing offers for SCTY, the so-called shopping window...
Tesla (TSLA) and SolarCity (SCTY) reportedly about to announce merger agreement with �go-shop provision�
Big Oil could steal SCTY at the last minute with a higher offer.
Great suspense, but Elon will win this one as well. Go Elon!�
1/1/2015
guest Troll fights... Yay!!
Bull troll vs bear troll
yay!!!�
1/1/2015
guest Thanks for your interest.
The cost of $3.05/W is a solid improvement over last quarter, but still too high. Specifically, sales was at $0.71/W, and this should be under $0.55/W. Other cost components are creeping up a bit too. So I'd like to see cost drop below $2.80/W, and management is targeting one of their lowest ever $/W by Q4.
Asset financing was at $2.54/W. This is a disappointment. Management claims that it faced project financing delays owing to disruption from acquisition offer. So they should be financing at least 100% of the cost per Watt to have positive cash flow (allowing for project financing, of course).
The asset financing gap was $0.51/W (= $3.05 - $2.54). On 201 MW installed this exerts a $102.5M strain on cash flow. EOQ cash is $146M is a bit surprising, but due to delays in financing. As of EOD Monday, cash was at $214.6. So apparently they have been able to recover their cash position. I will wait for the auditors to opine on going concern before jumping to conclusions. SolarCity has enormous capacity to cut spending on sales and installations if it were to find itself in a genuine liquidity crisis. Remember that it burns through cash at a rate of $0.5/W just to keep growing the book, but it is under no obligation to keep growing at such a rate. So low cash levels puts growth at risk.
So the key issue for SolarCity is closing the financing gap within two more quarters. This will be done by decreasing the cost per Watt while increasing asset financing per Watt. Recurring cash generation from the PowerCo was $86M. So if the financing gap were under $0.1/W, the PowerCo support 900 to 1000 MW per year. Thus, it is not absolutely essential to eliminate the financing gap, but they do need to shrink the gap quite a bit.
Grid services may open up yet another revenue stream, but utilities move at a glacial pace. It's nice to see some progress, but I don't expect grid services to become a major revenue stream anytime soon.�
1/1/2015
guest I think this is a bit over the top. Yes cash did drop but you don't mention its back up over $200 mil now.
When the Tesla deal was announced a lot of potential buyers of SCTY's cash flows were hesitant to buy because they weren't sure if the deal was going through and they thought SCTY might be in worse shape than they realized. Now that the deal looks certain, the opposite is true: SCTY has TSLA as their backing sugar daddy, so firms will be more willing than ever to buy cash flows from SCTY.
This month and next SCTY are likely selling a lot of cashflows, as they did last month, so even if the TSLA deal surprisingly falls apart I think SCTY will be through the worst of the crunch. Each quarter their new installs comprises a smaller and smaller portion of their total book, and in general the margin value on these installs is improving, so their financing needs are steadily dropping. It sounds like SCTY will be cashflow positive in Q3 and is really lined up to nail Q4 with a really low cost/watt, lots of financing and a nice margin. If things go according to plan through Q4 - even if the TSLA deals falls apart late Q4 - I think SCTY could stand nicely on their own in 2017.
[Usual caveat: I don't fully understand SCTY's books and could be easily be wrong]�
1/1/2015
guest Seriously, who does?
Look at the price targets attached to this company from the likes of Stifel, Morgan Stanley, Raymond James and Deutsche just 6-9 months ago.
Range from about $60 to $105. Buy, Buy, Buy, Overweight, Market Outperfom etc.
What's Tesla paying again for SCTY?
Where are all the competing offers if this is the bargain of the century?
This is a financial black box bleeding cash - trading as a solar company.
And mind you, most stock indices are at all-time highs, interest rates are in historical ZIRP/NIRP territory.
What happens to companies like SCTY in the next severe downturn or a future recession?
But back to the bull echo chamber without any disturbing bear noise. It was fun.�
1/1/2015
guest In fairness to the bulls this is the industry leader in what will clearly be a half trillion dollar market quite quickly. Oh, and it's also chaired by today's Henry Ford to boot.
It amazes me that we are incapable of merging the bull and bear perspectives into one semi-rational picture of reality, but I guess that's indicative of the state of all things in America today.�
1/1/2015
guest SolarCity�s 1GW Buffalo fab to produce complete BIPV residential roofing system
Some nice details here. I like the product strategy, addressing new roof market (5 million annually) in a way that does not cannibalize the panel market. Distinctive products can help lower sales and marketing costs.�
1/1/2015
guest 1) You're wrong.
2) My view is SolarCity. When you look at who owns both companies, SolarCity was always an unofficial part of Tesla. The bargain price of $25 is probably intended to give Tesla a bargain, that in turn will benefit SolarCity because it will make it much easier for Tesla to maximize the value created by SolarCity. It will be almost impossible for SolarCity to realize it's optimal value as a stand alone company. However, when SolarCity becomes part of Tesla, it's not hard to see how SolarCity could be worth $10-$15 billion today.�
1/1/2015
guest This makes zero sense. Are you just making sugar up to defend your position? SCTY value is what it is. Tesla values it 10% more than market because it can be integrated into Tesla's energy branch and it fits well within Tesla's roadmap. It's as simple as that.�
1/1/2015
guest Anybody have the lowdown on the merger timeline? My understanding is the 45 go shop period started Aug 1, then when it's done they pick a date for the vote which will be as soon after assuming they get SEC FTC? approval. Is that right, partially right?
Also, regarding SCTY's status. Musk has a strong tendency for buying things when on sale, even for a very wealthy person, in fact most of his business ideas seem to center around finding a cheap/more economical way of doing something, that's the whole plan for Tesla remember, and that's how they got the Fremont factory. The finances appear to be rat's nest right now, but I'm guessing that in a year or two, maybe sooner, it will look like Tesla "got" a great deal on SCTY.�
1/1/2015
guest @tander that sounds correct to me with SEC deal being a question mark on how long will that take.�
1/1/2015
guest Thanks for explaining. If I may, I'd like to add some more questions. Sorry if they are very basic, as I said, I ignored SCTY till now
The letter seems to suggest that the best way to reduce costs per W (esp sales) is simply to sell more. Yet they guided down on sales volume? Is my basic understanding on these assumptions right? And if so, how does that square with lowest costs per W ever by Q4?
Asset financing is the amount of financing they get measured by how much they have to pay for the costs of goods installed?
But what then with their own gigafactory on NY? If they don't sell anymore and liquidate all their sales channels, can they liquidate their production just as easily?
What is PowerCo? When you say recurring cash generation, that's the cash SolarCity gets from the electricity sold on the panels they installed? They don't need to share this cash with the homeowner who had them install? Or is the number a net number and that part is already subtracted?
What grid services exactly are we talking about? Installing large solar arrays as a utility subcontractor? What's the supposed margin on such activity? What's SCTY's unique advantage in such a market?�
1/1/2015
guest Finally, I understand SCTY is a highly leveraged company. How is it protected from future rate rises? For example should the Fed rises rates in September, is SCTY going to feel the effects of that on its outstanding debts pretty soon or is most of it locking in for the long term?�
1/1/2015
guest About the PowerCo, what I understand is that when SCTY sells PPA-s to customers they basically build the solar installation and sell the power it generates to the customer at a fixed price per kWh. That recurring revenue is what shows up as PowerCo and should grow as a means of install base expansion.
Asset financing is basically securing funding either through tax equity or other means to cover the cost of installations. Tax equity as I understand is a method where company that's due to pay taxes can instead invest said taxes in tax equity qualifying projects i.e. SCTY panel installations. They then get a certain amount of recurring revenue back from it I think. Am not 100% sure on what they get back to be fair, but I have understood that from the assumed 20+ year lifecycle the asset backed part is flipped in ownership on some year (10? 15?) to SCTY ownership. So up to that time the asset is generating revenue to the company who provided the tax equity and then a flip occurs and the revenue goes to SCTY from there onwards. So if a customer renews that's already pure profit because the assets are paid for and running (ok, there is inverter swap priced in at every 10y I think).
That's what I have gathered on the financing of SCTY in the last 1.5 months since the deal was announced and I've tried to figure out what SCTY does�
1/1/2015
guest Cost per Watt is a mixture of overhead and variable expenses. Certainly G&A are fixed, but sales and installations are mostly variable, especially if you allow for workforce reductions. (Note that SunPower is laying off 1500 workers this years, but I've not heard any suggestion that SolarCity is contemplating such a reduction). Simply holding production at 200 MW/quarter should reduce cost pressures associated with trying to grow production, more efficient marketing at low volume, less workforce recruitment and training, fewer new field offices. lower G&A complexity, etc. So basically I think letting off the gas pedal will improve $/W.
Asset financing is on a basis of more than just COGS, but all the elements that go into cost/W, inclusive of SG&A. Additionally, the have the potential to finance more than just the cost/W. In theory, they could finance the full value per W, though partner investors would want SolarCity to retain some of this value anyway as good risk management. That is, for example, SolarCity retains the full value of the optional renewal terms, and this is enough to assure partners that SolarCity will do a good job servicing both customers and solar systems so as not to undermine the renewal value. Altogether SolarCity retains an NPV of $2.2B, and this stake in payment stream is important to all partners offering financing to other parts of that stream.
If SolarCity manufactures more than it can consume, it certainly has the option to sell panels wholesale. Especially as TE/SC produces integrated products, this does open up international markets for SolarCity's manufacturing capacity. I think we are looking at a ramp that reaches full capacity around 2019. I'm pretty confident that global market for solar panels is robust enough in that timeframe.
SolarCity conceptually divides its business into a DevCo, which sales and installs solar systems, and PowerCo, which finances and holds the value of those solar systems for life. (They should also speak of a FabCo too, in my opinion.) So the $2.2B NPV is the value of the book of business the PowerCo holds. As this net cash flows comes in, it is called recurring cash generation. This cash is not distributed to customers nor to any financing partners (that is already netted out). Rather this is net cash flowing to common shareholders. So in principle, SolarCity can reinvest it or use it to pay recourse debt. (As an aside, I'd love to see Tesla issue preferred stock having a dividend based on a portion of the recurring cash generation. Thus, Tesla common shares would be a pure growth play, while dividend investors would be attracted to preferred shares and so generate capital for growth.)
We're still waiting on details about grid services. Generally this is about aggregating distributed solar, battery and power management capacities to help utilities manage their power supply and costs better. For example, if a utility substation is stretched to its transformer capacity limits, it may need to spend tens of millions of dollars to upgrade the transformers. Even at below capacity, peak power demands on transformers stress those assets and cause them to age faster. So a combination of distributed energy resources (DERs) placed downstream of transformers can reduce peak demands and help the utility avoid costly replacement and upgrades. There are utilities that are willing to spend $20M or so to reduce peak substation loads by 1 MW in lieu of even more costly upgrades. It's not hard to see how batteries and solar can do this for a lot less than $20M, but you have to place these assets somewhere. So the advantage that SolarCity has in this space is that it is really good at placing and maintaining these DERs. Regulated utilities are generally barred from providing behind-the-meter solutions to their customers. But this is exactly what SolarCity does. Naturally, Tesla Energy wants to get in on this, but without SolarCity, TE does not have sales and installation capabilities to do this behind-the-meter work. It would have to build up this capability or simply act as a supplier to other installers. So the acquisition of SolarCity is one of the most attractive ways for Tesla to enter this market. Consider also that SolarCity's existing customer base is also a useful asset for TE. If a utility wanted a peak power solution for a substation where SolarCity customers already exist, then TE/SC could easily persuade customers to add Powerwalls and other power management devices to their solar systems. So TE/SC would be able to deploy rapid relief to a utility and build up from there over time. So the existing customer base has option value for grid solutions above and beyond the $2.2B NPV.
The downside to all this, however, is that it depends heavily on the willingness of utilities to seek out lower cost solutions, which TE/SC would be delighted to provide. If utilities want to resist these solutions, they need only convince PUCs and other regulatory bodies to allow them to put higher cost solutions on to ratepayers. So the politics around all of this is pretty sensitive. SolarCity will likely need to soften up on net metering to get utilities to play ball on grid services. But this is exactly what must happen to lower the cost of power for all ratepayers and solar owners. Simply put, SolarCity needs to transform utilities from being competitors to being customers. It's very tricky politically. And SolarCity may even need to back off on aggressive solar growth to avoid antagonizing the utilities. Tesla, with its position in EVs, holds some power here because utilities want to be able to grow revenue on EV power consumption. It is practically the only growth opportunity for utilities in developed countries. So TE/SC could find a stronger seat at the table combined than as separate entities.�
1/1/2015
guest Of course they're leveraged, the entire company is designed to grow at 80%+ year after year if not more. There's no way to do that without taking on tons of debt.
As for the second question....there doesn't seem to be a clear answer. Before the Nevada debacle, SCTY was on it's way to(or already) "financing more than 100%" of total install costs. So on the surface that allows for a somewhat sustainable business model. There are obviously copious other costs outside of install costs, the weight and effect of which is hard to ascertain.
The big thing most people don't seem to get is customer acquisition cost are the only real variable left in the equation. While hardware costs and direct install costs have steadily been minimized, sales cost is all over the place fluctuating from $.55/W to $.67/W back down to $.59/W then up to $.91/W. That has a HUGE impact on the overall sustainability and efficiency of the business model. Not to mention that each degree of sustainability then makes the entire investment more safe and therefore cheaper. In the other direction, uncertainty in the marketplace due to corrupt regulators causes huge customer acquisition cost with in turn causes financial uncertainty and MORE increased cost to finance.
What we've seen over the last year is a war of information between the utility interests and SolarCity. SolarCity clearly lost the battle while fighting valiantly on behalf of the entire industry, but I see absolutely no avenue for Elon Musk(SCTY under the TSLA umbrella) to lose the war. Under TSLA, customer acquisition cost instantly shrinks to $.45/W or so and then dwindles down toward the near zero point where Germany has been for more than 3 years.�
1/1/2015
guest If SolarCity falls any further, I'd be very surprised if Elon doesn't buy an additional $200-$300 million in stock.�
1/1/2015
guest I think that would be a clear no-no. He might want to but it would be ill-advised.�
1/1/2015
guest Why? He's a disinterested party when it comes to the merger. As long as he disclosed it, I can't see any problem with it.�
1/1/2015
guest No, he's recused himself from voting. That doesn't mean he's disinterested. It also doesn't mean that he isn't privy to significant non-public information, being as how he's on both boards.�
1/1/2015
guest Smart sharing: Sun-saturated Hawaii debates first TOU community solar proposal
It looks like SolarCity could have a new opportunity in Hawaii: TOU rates for community solar.
Note that the peak rates in Kaua'i are actually set by SolarCity dispatchable solar-battery facility on the island, 14.5c/kWh. Kaua'i has the lowest rates of all the islands, which is a bad mark of HECO which is the utility for the rest of Hawaii. In any case, SolarCity has the opportunity to compete for all these higher rates than their Kaua'i PPA.�
1/1/2015
guest Central commissions solar array and battery storage�
1/1/2015
guest SolarCity needed to be bailed out because of this
![[?IMG]](http://dqbasmyouzti2.cloudfront.net/content/images/articles/market-tracker.png)
The US Has 10GW of Utility-Scale PV Projects Under Construction
Utilities are choosing lower cost solutions, which at about $1 / watt fully installed is far far below SCTY cost.
Deutsche Bank: U.S. utility-scale solar costs to fall below $1 per watt
and therein lies the problem, SCTY 'acquisition cost' alone is almost as much the complete, fully installed cost of utility solar. Something had to change.
Can Tesla Energy make a profit, absolutely, but first Solarcity needed to be taken out the back and shot.�
1/1/2015
guest The U.S. ITC ensure a substantial residential market, which is independent of the utility market. While this may not be a rational use of taxpayer dollars, it is what it is.
Solarcity's problem is low barriers to entry, lack of sufficient differentiation from competitors, and a too expensive business model. Musk can improve some of these problems, but fundamentally there doesn't seem to be a big problem that Tesla can solve with solarcity.�
1/1/2015
guest The idea that monopoly utilities will be permitted to somehow beat residential customers to the punch on solar is silly. Utilities are granted these extraordinary monopoly rights in order to perform tasks that consumers cannot perform, like build a nuclear power plant.
Yes it may seem like the American consumer is asleep at the wheel, but that will not last long.
You're talking as if SCTY enjoyed paying huge amounts of money to sales people. That's what was required at the time to get these markets up to speed(aka Elon's mission). The market is much more mature now and Tesla's brand name is now up the stratosphere, not really fair to say that TSLA will have an easier time selling due to some sort of different management strategy. It's mostly timing and regulatory issues.�
1/1/2015
guest The truth is, Solarcity is pretty much the majority of all political, legal, and pr for the entire rooftop industry right now and are paying for it.
There has been a significant uptick in political contributions as well as policy focus as of this whole Nevada battle.
They brought in Jon wellinghoff, at a price.
They have also hosted fund raising events, most notably for Hillary Clinton presidential campaign. In general, they are spending more on policy makers and regulators then ever before.
They are contributing to Arizona commissioner burns election bid among other support for local political reps in key states.
They've also had to spend a lot on transferring employees out of Nevada as well as financing the "bring back solar" organization there including costs for legal actions at the same time.
They also have started, financed a new advocacy/trade organization called energy freedom coalition aimed at countering traditional utility attacks.
This has all come within the last year, since the Nevada battle and all of it has been an increased cost to the company.
This specific cost is something Tesla could share, which would significantly change a lot of the cost of installs for Solarcity. The reality is that their operations team is operating at a very high level and is best in class. Their all in cost cutting is purely a policy/regulatory issue that is signifcantly mitigated with a tesla/Solarcity combined policy team effort.
In addition, Elon is also a very good marketer/pr man on conference calls. The entire news cycle after the earnings call was on elon's "solar roof" comments which Lyndon refused to comment on just be fore Elon interjected.
That "teaser" trailer Elon did within a few seconds, made all the difference for the entire post call narrative. And this ability to control the message is what has been lacking from Lyndon. Now if only Lyndon can take note...�
1/1/2015
guest PV Magazine Mobil: China triples H1 solar installations to 20 GW
Wow, China has added 20GW of solar in H1 2016. End of 2015 cumulative was 43 GW. So this is a huge step up. Chinese panel makers have stepped up production 37%, and their profit margins are improving. So clearly global demand for panels is strong.�
1/1/2015
guest These links are really good news. There was a huge utility pipeline owing to the ITC cut off. But with the extension, the end of year pressure is off. So 10 GW utility solar is a really good installment and much needed.
Additionally the point of Chinese solar makers building out production capacity in other parts of Asia is very good for SolarCity and other installers. This enables them to get around punitive tariffs against Chinese solar makers. SolarCity sources panels from China, so this helps cut costs.
Am I worried that utility solar at $1/W might impact residential installers? No. There is no way utilities can cut residential retail rates even 1c/kWh with utility solar or even wind which is even cheaper. The scale is just not there to make a bit of difference.
Honestly we need all the solar and wind we can get. These days I'm much more worried about my utility Georgia Power trying to build up a fleet of new nuclear plants on the backs of ratepayers. Even if you ignore the huge capex and future decommissioning costs, opex on nuclear is around $50/MWh. Meanwhile North Carolina is getting all in solar PPAs under $40/MWh and wind is even cheaper. But the GA PSC has been persuaded that Georgia needs new nukes. So I'm already paying for this crap on my monthly power bill and have been for years, while my utility drags it feet on much cheap, much more rapidly deployable wind and solar. So do tell me this foolishness about how utility solar is going to lower my power bill. I really wish it could, but that is not how the game is played, not in my state.�
1/1/2015
guest I like this integrated energy park idea. Saves money on interconnection costs by sharing the connection. The mix of generation and storage should earn it a high capacity factor.�
1/1/2015
guest I was expecting to hear SCTY re-affirm their previous guidance for cash-flow positive in Q4 of this year, but couldn't find any mention of this in their earnings report or conference call? Nor did I hear any analysts ask about this?
Did I miss something? Or is SCTY not aiming to be cash-flow positive in Q4 anymore?�
1/1/2015
guest As a wild guess, I'd say maybe the outlook has changed when Tesla offered a buy-out? Can't say how, and I doubt many could actually.�
1/1/2015
guest Not sure if this has been posted yet, but watching the Germans is a good indication of what the US market should look like in short order.
Germany sets new solar storage record
"...41 per cent of Germany�s new solar installations in 2015 included battery storage, compared with less than 14 per cent the previous year."
"Since 2013, 43,000 applications for solar systems with battery storage have been approved -- 19,328 last year alone."?�
1/1/2015
guest And none of those installations use a Tesla powerwall. Here is the German equivalent of Consumer Report on batteries for Solar installations. It's in German but it lists 312 competing available solutions. Meanwhile, Tesla's car business as zero (0) competing solutions. Zero. That is in essence why I am not convinced of the value of Tesla Energy as opposed to Tesla Automotive. It is simply not a business where creativity makes a lot of difference, it's not a business that sells products that people take particular pride in (cars as status symbols), it is not a market where Tesla has a first mover advantage and it is not a market where it can protect yourself from Chinese manufacturers selling at loss through unique advantages on the ground like fast charging infrastructure. Between here and 5 year, the battery storage market will be commodity with razor thin margins. Tesla's product may be technically marginally better but Chinese products will simply drop the price to buy market share. That is my prediction and I stand by it, gigafactory or not.�
1/1/2015
guest Tesla Energy's prize is the potential to buy 100kWh in a rack for $25k, however lately if you go here:
Build your Powerpack Energy Storage Solution | Tesla
And for my Solar Powered Delicatessen I want to keep my meat cold during a Zombie Apocalypse.
The pricing of a 100kw - 200 kWh Powerpack sytem, with 2 powerpacks lists out at:
2 Powerpacks $89,000
So, the offering of $25,000 powerpacks appears to be not correct. Looks to be $44,500 now.
- 1 Bi-Directional 250 kW Inverter $52,500 (quite high pricing here - what brand?)
- Cabling & Site Support Hardware $3,600
- TOTAL IS $145,100
Volume pricing up to 10 powerpacks, still $44,500. Same for 20.
What does this nearly doubling of the "advertised price" back in April of 2015 do for demand? Are we hoping that state and federal incentives is the calling card to make people say "oh, we have ITC 30% and SGIP or NYSERDA to pay for it!"
All you need to know about Tesla's big battery announcement�
1/1/2015
guest And here's an example regarding SMA, inverter powerhouse, closing a USA based plant in Denver (280 jobs lost). How strong is this solar industry "really"? I think solar's strength lies in large installations - 1MW or more using large-scale inverters (ABB and others). What do firms do? Get out of "expensive USA" (labor costs, real estate costs, taxes).
SMA Consolidation Means Closure Of Two Manufacturing Plants :: Solar Industry
Anyway - SMA is one company now that I would say "avoid at all costs". (pun intended).�
1/1/2015
guest I think Teslas main advantage will be a software stack that seamlessly links and manages things. And the fact that it's a one-stop solution from one brand meaning that it should eliminate a lot of finger pointing between panel people, inverter people and battery people. An intelligent house that knows how to manage its power, how to do rate arbitrage if there is no solar or the forecast sucks etc and that can also manage and scale the cars usage based on how other elements of the house plan to use power. That's a neat system and if the integrated solution comes to a decent price point, then I think it would be attractive.�
1/1/2015
guest That's certainly somewhere they can make a difference. It's probably also the reason why they decided to make their inverters inhouse. Another interesting fact from @ecarfan : the software inside the SolarEdge inverters currently sold with Powerwalls was written by Tesla!�
1/1/2015
guest Schneider Electric offers a full DC Coupled solution for hybrid battery solutioning today (I just attended a 1-hour training class as an audit). They make J-1772 EV charging solutions. They just don't make batteries. They use telemetry and can tie together V2G eventually. Seems like a company nobody even talks about. And add another company to the mix who is almost the same - ABB. They have Solar inverters (bought PowerOne, which is good stuff) - then they also offer battery subsystems (partners with Panasonic). They also offer DCFC car charging solutions. Those two are name brands and doing much of this work now.�
1/1/2015
guest On August 16, 2016, SolarCity Corporation (the �Company�) adopted and began implementing initiatives to realign the Company�s operating expenses to match the Company�s reduced guidance for Megawatts Installed. The realignment is expected to be completed by the end of 2016. The Company expects to incur restructuring charges ranging from approximately $3 million to $5 million, consisting primarily of severance benefits. A substantial portion of such charges are expected to be incurred in the second half of fiscal 2016. The actual timing and costs of the realignment may differ from the Company�s current expectations and estimates.
To align with the Company�s cost-cutting measures described in Item 2.05 above, Lyndon Rive, our Co-Founder and Chief Executive Officer, and Peter Rive, our Co-Founder and Chief Technology Officer, requested that the Company reduce their annual salary from $275,000 to $1 per year for their services, and, effective as of August 16, 2016, the Compensation Committee of the Board of Directors of the Company reduced the annual salaries of Lyndon Rive and Peter Rive to the minimum amount permitted by law.
SolarCity - Current Report�
1/1/2015
guest In a separate filing, SolarCity said it planned to issue $124 million in bonds. The bonds carry a 6.5 percent interest rate, higher than any of SolarCity's previous offerings, and also have a longer maturity rate of 18 months.
SolarCity slashing costs, including CEO pay
No good and stable company pays 6.5% rate on bonds.�
1/1/2015
guest arbitrage opportunity
current bonds 12% yield
new bonds 6.5% yield
Bonds Detail
even a struggling company tries really hard to buy back bonds when their own bonds have 25% yield. SCTY did not!
why not?�
1/1/2015
guest Mind you, that's with an as-good-as-done take-over deal with Tesla. Last October they raised money at 5.45% with a 15 year maturity rate... Enough said about how severe their cash position is.
My bet is on "they don't have the cash".�
1/1/2015
guest How Storage Could Transform The U.S. Power Grid | OilPrice.com
There's some good information in this to help understand potential uses of batteries within the grid.�
1/1/2015
guest It may be better for Tesla to buy up the bonds at distressed prices. It's in Tesla's interest to allow the market to underprice both equity and debt leading up to the acquisition. So we can pretty much expect all the ugly to be on full display for a while.�
1/1/2015
guest What's the arbitrage opportunity? How does a trader use this fact to make an arb trade?
Oh, and Solarcity isn't and has never paid 25% yield. The bonds you are talking about were issued with low yield, like 1.5%. That is what Solarcity is paying on them. However, people have been selling these bonds at below par value, making their current yield higher, but that has nothing to do with Solarcity directly.�
1/1/2015
guest I think that the idea here, is that you can buy the bonds that are yielding 12% based on what you pay for them, and retire way more than you lend out, when you borrow at 6%.
(Making up an example).. if the bond originally pays 4%, a $1000 bond is paying 4$/year. If it's now paying 12%, then that's because it's selling for $333.
If you can issue new $1000 bonds paying 6%, then you can issue a $1000 bond paying $6/year, and use that $1000 to buy back 3 of the bonds selling for $333, thereby retiring $12/year in payments. For the company, they trade in $12/year in payments for $6/year in payments, while also reducing their outstanding debt from $3000 to $1000.
That's the arbitrage opportunity.
For something to yield 25% today that pays 1.5% on face value, I think it would have to be selling today for 1/20 of it's face value. If Solar City can issue new bonds at 6.5%, that looks like about a 4 for 1 trade in.
Anyway - that's how I understand it.�
1/1/2015
guest No, it isn't that simple. You are forgetting that bonds have a maturity date. The Solarcity bonds that are currently yielding about 12% are selling for about $80 (out of $100 par value) since they still have three years left on them. IIRC, the coupon on them is around 1.75%.
Anyhoo, you were talking about an arb play that Solarcity could undertake, and I thought you were talking about an arb play investors could do.
I very much doubt Solarcity wants to retire debt they are paying 1.75% on regardless of any possible arb play. They want/need more debt, not less.�
1/1/2015
guest yes it was about SCTY's arbitrage
an example was a iron miner called Fortescue, Fortescue buys back bonds in a strong September quarter late 2015/early 2016 they were buying back their bonds at a good discount. Why, because they had confidence in their outlook that the wider bond market did not share. particularly in regards to getting their costs down.
Anyway, it was a smart move, it really set them up�
1/1/2015
guest Ok, but I still don't see an arb play. Fortescue had a debt target they wanted to get down to. They had the cash to buy back debt, and buying it back at 80% of principle made a lot of sense rather than paying 100% principle in three years. If SCTY generated excess cash flow and didn't need more debt, it would make sense for them to do the same thing.
Unless things change, however, both SCTY and TSLA need more cash in the near term, not less.
Thanks for pointing me to that Fortescue article though. Gosh, seems that if a company is buying back its debt like that, and their bonds continue to trade at $80, seems like a screaming deal to me as an investor to buy those bonds.�
1/1/2015
guest $100 million new Solarbond.
Elon Musk buys $65 million worth
Lyndon Rive buys $17.5 million worth
Peter Rive buys $17.5 million worth
Amendment No. 1 to Prospectus Supplement No. 23 Filed Pursuant to Rule 424(b)(5)
Comments?�
1/1/2015
guest Elon doesn't have $65M in cash lying around, and I suspect the same of the Rive brothers. Whenever Elon buys large chunks of stock/bonds, he borrows the money from Goldman Sachs using his shares in Tesla as collateral. If he keeps doing this (and he isn't near the danger point ... yet), he risks creating a leveraged house of cards that will implode if Tesla stock tanks. He is playing with fire when doing things like this, and the market WILL take note if he ever gets close to the danger line.�
1/1/2015
guest That's a pretty bold statement. How do you know how much of SpaceX income does he get to pocket?�
1/1/2015
guest I can guarantee you Elon has not taken out anything close to $65M from SpaceX. I suspect, but don't know, that he is doing the same thing with SpaceX as he has done with Tesla. Ie. Not sell any of his stock and instead borrow against its value. But hey, believe what you want.�
1/1/2015
guest Elon is worth something like 12 billion in current market assets. If he collateralizes 5-10% of that he is hardly at a major risk of being margin called. Even if Tesla lost half its market value, as long as the company stabilized his lenders shouldn't care much. And then of course Spacex is doing well so he could always back up loans with spacex equity as well.�
1/1/2015
guest I think it is more telling that he has to do this. Capital markets for SolarCity are completely shut.�
1/1/2015
guest That's $100 million of the short-term financing needs accounted for. Unfortunately I'm not sure how large the total short-term financing needs are so that makes it hard to put into context.
I have said before that SCTY has substantial short-term refinancing issues. The switch from PPAs and leases to direct sales and loans should substantially reduce the *ongoing new financing* needs, but the old PPAs and leases were mostly not financed for their full duration and are therefore facing refinancing. (The ones which are financed for their full duration, or "fully monetized" in the SCTY report parlance, are not much of an issue from a financing POV, but that's nowhere near all of them.) I'm not sure whether this new Solarbond is refinancing old stuff (I hope so) or financing more new PPAs and leases (I hope not).�
1/1/2015
guest I honestly think this is deliberate "go-away" pricing. Tesla doesn't have the ability to produce in volume at this time, so they set a high price to chase away all but the most desperate customers (and to grab extra money from those customers). Remember the "Signature tax" for those who were desparate to get their Tesla cars earlier?
I expect a lower price to be offered once Tesla is actually producing a reasonable number of batteries at the Gigafactory.�
1/1/2015
guest When they say they were "sold out for 2016" did it mean they would only produce a few dozen and that's it and pretty much mis-guided on their revenue income for Tesla Energy for 2016? It's not a good thing when officers of a company misguide sales using non-transparent phrases like "sold out for..." without a unit scale and then guesswork for revenue ramp.�
1/1/2015
guest Why can't he or any officer hedge their shares with bought Put options or they just sign them as collateral to GS and then they arrange intelligent put-spreads against them? And all the while, can be selling well OTM Calls against them for lunch money?
Be careful of judging SpaceX as "doing well" unless you know their private financing numbers. Also, NASA is moving up the Mars mission to 2021-2022. There could be drama and other things that cause programs to be changed, etc. SpaceX is no "cash cow" other than for satellite launches and cargo to ISS.
They got a billion in general cash in 2015 this way (but what are the terms?):
Financing Round
In all likelihood, the plan will be to IPO SpaceX before the Mars mission(s) occur - perhaps 2018-2019. If financial markets are healthy, they could generate 5 Billion+ because of "coolness". But what is the true value of such things as Mars missions to the general population? Mars cannot be terra-formed but it can be something interesting to do - like the moon missions. We'll learn "something" - but how much more than what we already know? And yes, I know about using Mars as a waypoint for further missions if they can establish a method to manufacture rocket fuels on Mars from water (electrolysis - O and H2). Then using other solids like Cobalt-Uranium type fuels, alter the future of space travel. But jeez - who's going where and why? I'd rather see activity in the area of electrically bending of gravity than new forms of thrust.
http://gizmodo.com/5992441/how-nasas-nuclear-rockets-will-take-us-way-beyond-mars�
1/1/2015
guest All indications are that Tesla Energy is a big dud. Lots of excuses, but bottom line, very few sales.
On the Powerpack front, here's an interesting article about some emergency battery storage projects being implemented right now in California. If you click through to the RFPs, you find that not one of them is using Tesla batteries.
California Utilities Are Fast-Tracking Battery Projects to Manage Aliso Canyon Shortfall�
1/1/2015
guest I can't argue with that point at all. For all of the TE will be bigger, as well as faster and easier to scale than cars...more fallout from a shockingly lackluster 2016 from both companies.
SolarCity to lay off 108 workers in San Mateo, San Francisco
Elon Musk, SolarCity execs to buy most of SolarCity bond offering
�
1/1/2015
guest There are a lot of homeowners who have 4000sq ft homes in California - many million dollars in value. They'd surely want to have a powerpack (not bunch of walls) setup as their standby power. And at $25,000 per unit (well, you need that $55,000 inverter, though as well and labor and other goodies) - why not? Even at $44,500 - not too bad. Except that $55,000 inverter. (I know it is 52,500 but I am throwing sales tax on it for various states). You can energy Arbitrage up to 100 kWh for one box and if the grid goes down, you can have a substantial standby power. Not sure if it will run the pool pumps and pool heater - so get a 2nd one for that.
So, why is it that a Powerwall can go into a home but not a Powerpack and a reasonable 20KW max-power inverter? Could run a house for a few days on that and with solar, for years. You'd think hollywood types would be lining up for "home standby systems with good size to run our 3000-6000 sq ft hillside homes".�
1/1/2015
guest This article stands out for me due to the names that are missing from the discussion.
http://www.nytimes.com/2016/08/24/business/energy-environment/as-energy-use-rises-corporations-turn-to-their-own-green-utility-sources.html?ref=energy-environment&_r=0
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1/1/2015
guest Well, they apparently sold 50 powerpacks in the U.S. in 2015.
But the two big issues is software/inverters not being finished, and Tesla probably deciding not to invest in the "old way" of producing powerpacks.
But Musk's ability to announce guidance, not meet guidance, and never mention explain is extraordinary and unique to Tesla. Major skills displayed here. What happened to cash flow neutral in 2016 for Tesla energy? What probably happened is that they have now actually developed real post merger budgets. So we are now probably expected to forget the assertion that Solarcity would not have a negative effect on Tesla cashflow.
Selling solar ands storage with electric cars is probably a good idea. But more risk and the doubling of Tesla employees is in no way contributing towards a more financially stable Tesla over the next three years.�
1/1/2015
guest Who cares? Has he failed to deliver on any phase of his vision? The reason people don't mind the delivery delays of 6-18 months on various products is because this company is single-handedly changing the energy dynamic of the nation. If you're going to push boundaries, you need to set crazy moonshot timelines to avoid stagnation.
Solarcity was financing PPA installs at over 100% of install cost for the hot minute that the business model was rolling, so with a slimmed down sales approach from Tesla that unit should be wildly profitable in any market that is scaled.
Where is the risk in becoming the energy and personal transportation supplier for the wealthy(and then everyone)? If that's risky, then what is Space X? Elon's entire plan is predicated on massive amounts of calculated risk and pushing through his agenda at all cost. It hasn't failed yet and he's clearly now over the hump and nearing untouchable status, hence the investing world does not get flustered.
Pulling back and trying to pump out millions of Model 3's as profitably as possible is likely not in the gameplan.�
1/1/2015
guest
"Directors of customer service, inside sales, legal operations and recruiting will be laid off, according to the company. "
OK, we can already see that they're transisitoning sales and service to Tesla in anticipation of the merger. I'm a little more disappointed about SCTY firing their "director of legal operations" because it seems to me that Tesla's legal department is awful and SolarCity's was significantly better (so you know what I would have done).�
1/1/2015
guest "In an emailed statement Tuesday night, Lyndon Rive said they invested in SolarCity�s bonds �because it�s a very efficient way for the company to raise capital without paying expensive banking fees.� "
The banking fees *are* expensive. I've been shocked when I've looked at them -- they can amount to 1% or 2% or even 3%. When you look at the overall interest rate being paid, this is a huge overhead cost. I'm actually surprised that any company sells through underwriters given the enormous skimming the underwriters take off the top.�
1/1/2015
guest That's right. This whole lay off story is to push no voters to vote yes on the aquisition.
Now info comes out that it was 108 HQ people out of 15000 employees is a non issue as far as the business health. This is a straight transition-redundancy let go.
The narrative to voters is "vote no at your peril and the peril of Solarcity and Tesla's future in accelerating the advent of a sustainable energy economy." In effect, this whole process has hobbled solarcity's ability to function on its own, so there is no choice but to accept the $25/share offer for those thst own long term positions (still). Still is key now because I'm thinking many long term holders have sold and now many current voters may be holders at sub $25/share. So a yes vote is inevitable, Elon et al know this and are acting accordingly.
As we've learned, Elon is a pitbull when he decides on something and this is no exception. All you have to do is remember the story when he was kid after his mother refused to drive him to see friends, he left the house and walked the 7 miles himself.(paraphrasing from memory).
This trait is both good and bad. As he achieves more influence, this trait requires some wise restraint or he'll just become another self created despot and everything will begin to backfire in the grand scheme.�
1/1/2015
guest It's ... interesting that SolarCity is paying 6.5% interest for an 18 month loan and that insiders will benefit from this. In a way, Elon just siphoned off $6.3M from SolarCity/Tesla in the form of interest payments to himself.
Yes, anyone else in the market can also take advantage of this (you too can buy these solar bonds), but Elon is uniquely positioned to make sure that he comes away whole. If I buy the bonds, there is nothing I can do to make sure they don't default. Elon has a lot of ability to make sure they don't default.
Anyways, speaking from an investor position, maybe these bonds are a good deal given this...�
1/1/2015
guest Wonder if that $6.5M interest payment is included in the $150M promised synergies�
1/1/2015
guest It's also interesting the money the Rive bros are putting in is essentially the ~$40mln they made from their scty stock sale at $50-60 a couple years ago. Now they are making a fantastic rate of return on top of the brilliant stock sale.
All they had to do was forgo 5 months of 275k salary in PR capital for it.�
1/1/2015
guest Perhaps. It's a small market. Tesla would have to engineer a new type of inverter. The one that currently works with Powerpacks is a 3 phase, high power inverter. You'd have to configure a single phase, lower power inverter for the Powerpack. Can be done, but probably not worth it for Tesla.�
1/1/2015
guest Doing well as in Spacex's last equity raise was in such demand that they turned down investors. And Steve Jurvetson kind of mildly complained(early spacex investor/VC) that Elon asked him (and presumably others) to sit out the round to make room for other new investors. They also have a huge contract order backlog and recent flights are going so smoothly the media is starting to show signs of boredom with successful spacex launches and landings.
I doubt Musk will IPO Spacex before Mars mission success unless he has no other option. And if Tesla is successful into 2018-19 Musk will be so wealthy he likely wont need to.�
1/1/2015
guest They already exist. Hundreds of inverter models and companies exist out there that can essentially power a house or at least 10KW-20KW off proper battery banks. This is old hat. Not now, likely, but down the road. Those who have built home-based large scale battery backup systems have spent upwards of a Million to do it. The inventor of the Clif Bar has his house on an off-grid system the size of a tractor trailer. One to two powerpacks could do it and a few inverters. If the powerpack could be wired at 48V, the Schneider Conext XW+ equipment, among others, could do it.
Here is a 35 kWh type system 10 kW solar array, dual 6000 Watt inverters, with a 800Ah 48Volt Iron Edison battery
Equivalent to a 6 PowerWall system - Including the solar panels, but no labor, about $75k. Iron Edison batteries can be abused and will outlast the electronics in this system.
This is the kind of system that could be simplified into one Powerpack, a good charger, a good inverter and simpler installation. 100 kWh through a 6KW-10KW inverter would probably do a great job of off-grid living as long as it could maintain daily recharges. And if not, go parallel with 2. The market for off-grid large homes should be thriving due to everyone being convinced to "get off the nasty power company!" cultural meme going around.�
1/1/2015
guest Thought this might be of interest.
�
1/1/2015
guest First off, Elon has clearly stated that SpaceX will not IPO any time soon. If he can he will keep it fully private until he retires. If he does choose to retire on Mars and the flights are regular and the cash flow is clear he may then IPO the stock, but he doesn't want in a space launch business see any kind of Q-to-Q bullshit from Wall str. Also, precisely the whole Mars plan is not necessarily a financial goldhole and is more of a legacy and future of mankind thing, hence no IPO before that for sure.
With regards to income cash flow that will be easier, the company is launching more stuff to orbit than all other providers combined (stats from this year and this will get even more profound as time passes and launch cadence is upped as it seems to be happening). Add to it booster reuse and the whole competition is in serious trouble as there is no way they can match pricing and will only exist as safety options for launch buyers who don't want to bet everything on one booster in case something happens to it. But make no mistake, 2017 SpaceX is likely to launch 60% of all global launches and 2018 I wouldn't be surprised if it's 70+% etc. They have their own satellite constellation in the works where the reusable boosters will be of huge benefit and they'll start launching weekly some time in 2018 or so.
Add to it BFR that's likely to be introduced in a month or two and it's pretty much game over in the launcher business for all of the competition.
So no, cash flow is not a problem�
1/1/2015
guest Mars is the future of mankind? We can't maintain this planet well, Mars has no magnetic field. It's a science fair and most of the cool kids are hanging out at the playground. Mars is someone's future but most likely it is a field of study for the next few hundred years by a select few. Thrust-based rocket engines burning stuff is not going to make for constant space flight forever. Yes, you can burn baby burn (ie. drill baby drill) rocket engines every week but the real answer is elsewhere, probably in some form of electrogravity augmentation. Electrogravity�
1/1/2015
guest I went and tested that link. First of all I was somewhat repelled by the ads for comics and fantasy movies etc. Then I noticed that a majority of the internal links pointed at "page does not exist", with the exception of some articles and stuff like Nikola Tesla, photoelectric effect and other well-known things. The main thrust (pardon) of research appears, at a casual glance, to have occurred 60 years ago.
Is any of this realistic at all? It sounds a little bit influenced by "Area 51" etc. From one of the linked articles:
�
1/1/2015
guest Cell phones were "magic" in 1960. (though, they are simply radio waves, not energy transfer)
TSLA is constantly compared to AAPL and AMZN in the early days.
Electricity binds the entire universe together.
What's not to believe that electricity plus magnetism can be used to manage gravity/anti-gravity?
It just so happens that scientists have not yet figured out what gravity actually is.
it's 2000 but Netflix has a very interesting video to check out - "Einstein's Biggest Blunder". And I believe that some of the math being done in europe will help solve some energy equations that may take us closer to utilizing the power of molecules and atoms better without splitting them. NASA and SpaceX are already looking into using Cobolt and Uranium for rocketry - mixing new ingredients to create ion-based engines.�
1/1/2015
guest OK, but ion reaction propulsion is absolutely not the in same category as anti-gravity -- be it electrostatic or not -- it's just pushing stuff out at high speed at one end to move the vehicle in the opposite direction; and it actually works, for well understood physical reasons.
As you point out, however, the nature of gravity is not entirely satisfactorily explained, yet. One day it might well be, and then we can have a productive discussion over it. In the mean time I don't think it's very helpful to point out fantastic, unproven hypotheses from last century when physics science has taken such great leaps forward. Even though it may be fascinating as a witness of that era.
Perhaps there is a link to electromagnetism. Or not. Perhaps we will find out in our lifetime. Most probably not on this board, where it is seriously off topic, so I'll just bow out here.�
1/1/2015
guest Yes yes, plain as day I can see how falling panel prices will hurt a vertically integrated company like SolarCity's sales...err Tesla...or is it Rive, Rive and Musk Financiers Inc. now? /s
As manufacturers ramp up production, solar industry could face a panel glut
Solar Industry Braces With Looming Glut Eroding Panel Prices�
1/1/2015
guest On the map, I think we could power the country using the area of just one pixel if we solve zero-point energy. Nikola Tesla was working on it. It is time to start to get serious about energy that is not "reactive" (burnt). Think about the force that holds you in your seat at the desk. 100% of time. Always there. There should be a way to utilize such forces for power generation and/or travel. We'll get there. I think by the year 2200, a plurality of the world's energy production will be based on such technology. I will bet a friend on that one.�
1/1/2015
guest This is the problem with businesses without significant barriers to entry. Large market size and growth doesn't translate to profits.
Tesla will try to re-brand and differentiate solar and storage, but it is a terrible time in the company's growth to try this experiment.�
1/1/2015
guest There is, my friend: hydro.�
1/1/2015
guest This is very true, but not at the scale we all need on the planet without governments allowing far more dam projects. I grew up within walking distance of 4.6 GW of hydro. And I am wondering what happens when Hoover Dam goes TU and can't produce.�
1/1/2015
guest Just to be clear.....the entire planet is with 99% certainty transitioning from combustion-based energy to renewable sources plus storage.....and you think it's a terrible idea to become the Apple of that?�
1/1/2015
guest Ok, let me put my PhD in experimental particle physics hat on (the same one I used when I partook as a member of the huge team who discovered the Higgs boson a few years back ... You can look up the paper and author list).
There are absolutely no viable clues to the origin of gravity beyond it just being an effect of the metric of space time. There is no viable way to extract what you call the zero point energy under which I assume you mean vacuum energy or the energy that supposedly exists in vacuum that is balanced out of all quantum field theory equations as the zero point on top of which all interactions happen as perturbations lest the calculations always return infinity as a result for energy and any other variable.
Yes, this does not mean such a way couldn't be found some time in the future, but this board is about practical and tangible stuff. Hell, we don't even know what gives mass to neutrinos, we don't know what dark matter entirely consists of even (beyond planets, neutrinos and black holes, but those aren't enough) and my specific field has been in those topics.
So no, let's get back to real world stuff. The stuff I work on besides Teslas usually may or may not bring tangible results, but we're talking about tens of decades if not centuries....�
1/1/2015
guest Anyway, I like your handle.�
1/1/2015
guest It's an example of possibilities. Quantum physics. There are a good variety of things to look at in terms of anti-matter and trying to excite matter to alternate between matter/anti-matter to somehow create energy out of zero-point. Possibly the Baryon asymmetry. But until that can be "contained" and the right elements involved, it'll have to wait.
So, given so many things are unknown - how can it be "so certain" about one company or another in the ludicrous, I mean cultural/humanistic chaos, that is our humanity? One day nothing and the next - millions of people are zombies playing Pokemon Go?
The Higgs was a good stepping stone as something to be "found" but we do need to figure out stuff that is truly useful.�
1/1/2015
guest Uncertainty, certainly. But one certain thing is that the Higgs was demonstrated some 50 years after that article on electrostatic flying saucers that I tried to read from your link above. Shall we try to agree that the laws of physics are not actually subject to popular polls? No matter how hard the New Age-ists protest.�
1/1/2015
guest There will be no Apple of renewables any more than there is the could be an Apple of whole wheat bread or corn. Why not promote the idea that Tesla should dominate the corn market? Corn is a fragmented multi billion dollar business. How about garage door replacement? Or maybe water heaters?�
1/1/2015
guest So many bold statements about what can, can not, will or won't be being made by people not in the know. Unless of course we're all friends of Dion?�
1/1/2015
guest ![[?IMG]](https://d2i0sljjkrkazd.cloudfront.net/production/link/image/184270/twenty_by_nine_extra_large_1e68f34f-2a0c-4dfd-9563-5a1e96c74503.jpg)
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1/1/2015
guest SolarCity construction nears completion - The Buffalo News
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1/1/2015
guest Thanks for the informative update! However, in the next para the article ends with:
so I guess it's the new product that takes more time to perfect than the more traditional panels originally planned.�
1/1/2015
guest So, Buffalo is *starting* with roofing and not industry standard modules? isn't that a harder market to serve rather than making industry standard modules that all installers can use - especially if highly efficient? I'd think they should start modules and perfect roofing while doing module runs.�
1/1/2015
guest My guess is no better than yours. Maybe they simply need the factory space for machines making their own, new and unique product, at least to begin with? Maybe they prefer the higher margin of vertical integration to supplying the competition with superior but standard format panels? (They could always continue to buy off the shelf for the traditional business.) Maybe they simply can't satisfy demand anyway (production limited, remember Tesla Motors)
We cannot really know but as investors just have to hope management knows what it's doing during this transition. Me, I'll stay in a while yet. YMMV. Only my idle speculation, not investment advice.�
1/1/2015
guest Very unlikely.
The price of solar is dropping far faster than can work for solarcity. There are people in Socal reporting offers for a little over $2/watt. What we are seeing here is Musk scrambling for a strategy. What may be most important over the next 12 months is that a portion of the investor community believes that Musk has a differentiated solar product that can be sold profitably in volume. But the chance of a truly successful new product is probably 1 in 20 at best.
Tesla is about to double its employee count by taking on a failing business. Tesla is going to have to be damn lucky, or ruthless, for this not to end badly.
I find it unbelievable that they kept growing solarcity into the crapstorm that was obviously coming. I suppose they thought that the ITC extension made them safe for the rest of this decade.�
1/1/2015
guest What I find interesting is the SolarEdge inverters which allow for 5000W of backup power from a Solar Roof (PV modules or otherwise) even without a battery. That product could introduce a combined "power center" into a new home construction to allow 5000W of power circuits set aside from HVAC and allow a house to become "nearly self sufficient" powerwise, withstand grid outage right from day-1. Two inverters can be put together and maybe an east-west stance of panels allows 6000W+ of power from 8am to 7pm or longer (with 10kW mid-day) with enough solar PV up there.
If the roof is cheaper to install at construction time and tie-in with electric work at home construction, they can do thousands per month in installations - if the industry accepts it. Now, are thousands per month capable of sustaining this wing of the company or is it something that only works in California and Austin and maybe Long Island, that is the question. The ITC 30% should apply to such a system and inclusive of the battery too if the solar roof charges the battery in the morning to be used in late afternoon.
The installed price of a "whole home system" is one thing. But TeslaCity needs to make the system priced for distributors and installers and that means far less margin. Perhaps 10% margins to compete with choosing it over GAF and other roofing shingle companies for home-builders. And who gets the ITC - builder? homeowner? How does that work out? I suspect homebuilder and they can buy the product at wholesale prices - price it at "market prices" for a solar system and do pretty well with ITC payback if they are a profitable company. There are a lot of ways to build schemes and homebuilders are always looking for ways to make a buck out of pricing in profits into the input parts.�
1/1/2015
guest google.com�
1/1/2015
guest asdasdasdsa�
1/1/2015
guest google.com�
1/1/2015
guest Correct. Musk's been pretty honest about this; count how many times he said "differentiation" in the recent investor phone calls. If they've (a) got the pricing they originally claimed for the panels for the roofing product, (b) have a roofing solution which is satisfactory to the building trades (I do hope they consulted experienced roofers!), (c) have sufficiently low installation costs, and (d) slash sales costs, I think they'll actually have a decent product at a price where they can sell it. They're aiming hard for the SunPower market and they're going to undercut SunPower substantially on price.
He also said he was expecting to sell bundled batteries with 100% of systems, at least in the longer term. I would not be surprised to see the complete solar roof + battery product released as a single product some time next year.
I'm currently betting on ruthless. It sounded to me like Musk was slavering over the Silevo factory. Which has repeatedly cut its manufacturing employee count, so it's getting more and more automated. It seems absolutely clear that they've written off the PPA and lease business as a bad business. And the repeated statements about "cutting cost of sales" clear mean they're going to fire most of the salespeople.
Which raises an interesting point. They promised New York that they'd employ a certain number of people in upstate NY. With the cut in manufacturing jobs, the replacement plan was sales and installation jobs. But those sales jobs are now going to be cut too. Perhaps after the merger with Tesla they'll open several Tesla service centers in upstate NY and count those as the promised jobs -- I can hope.�
1/1/2015
guest I know I'm interested in the idea of an integrated solar roof / battery / slightly able to go off-grid during power outages type of product. I don't know if it'll be affordable, but plenty interested enough to make some phone calls and price it out when it's available.�
Sep 12, 2016 at 4:35 AM
electracity When I priced an automatic backup generator plus ten years of service it came to about $20K. While I'm sure that price can be beat, there is still a substantial long term opportunity for solar plus battery to compete in that market. In areas with expensive houses and basements almost everyone eventually learns that sump pumps need backup power. Many people on the east coast who went through Sandy would consider such a system rather than a generator.
So I think long term Tesla offering solar plus battery system that can make some money back doing rate arbitrage plus provide backup power will probably become common in better housing. Tesla should eventually be well positioned to address this upscale market. Selling environmental benefit + energy security + cool tech stuff should be a good business model if the product is differentiated from lower cost competitors.
Tesla's problem this year is 14,000 new people on the payroll now who are not currently employed in profitable business activity.�
Sep 12, 2016 at 4:56 AM
MikeC Link for these reports? I just had a system installed and could not find lower than $3/watt. Are you speaking about pre- or post-incentive price?�
Sep 12, 2016 at 7:11 AM
electracity The lowest reasonably credible report I saw last week was $1.80/watt for a 20 year lease with the lessor keeping all incentives:
Solar panel lease @ $1.8/W and no monthly payments � /r/solar�
Sep 12, 2016 at 9:50 AM
MikeC Okay, it was a little confusing because you're quoting a deal for a 20-year lease which includes incentives as if it was a straight cash sale price of $2/watt.�
Sep 12, 2016 at 10:36 AM
TheTalkingMule As opposed to the existing employees?�
Sep 12, 2016 at 11:55 AM
bonaire When computing arbitrage, do consider annual build-up of internal resistance(IR) of batteries in each year. A 6.4kWh battery SOC may degrade to 5 or less after 8 years (when daily cycled). Warranties don't entirely hold up long term and there will be expense in battery replacement roughly at the same time as string inverters (such as the SolarEdge string inveters) - years 10-14 or so in the life of a system. Maybe $3000 will buy a new battery pack replacement of 10kWh to fit into the same casing. Part of the arbitrage earnings should be banked and invested in order to facilitate system maintenance in the mid-term. Companies like Enphase have offered 25 year warranties - and yet have a lot of infant mortality of micro-inverters. It's hard to tell if Enphase will survive - they are also looking at battery systems too and will be interesting to see what they do with that.
I would have liked to see Tesla offer a battery pack for homes larger than a 6.4 kWh battery. It appears that two can be chained to one SolarEdge inverter - and then you need another inverter to add more. A 15 kWh battery pack would have been more appropriate of a size but would of course come with double the price, if not more. Maybe in the next design, they can offer a larger block.�
1/1/2015
guest There are low-salary jobs that can be run out of Buffalo rather than Silicon Valley or CA at all. The DS jobs for handling deliveries, even IT can be moved to Buffalo. Cost of living there is half or less that of California (even with a similar sales tax). Living in Buffalo isn't for everyone but something has to be done to fill chairs in NY State. Buffalo is known for banking and customer service - also collections. Surely they can staff "customer touch" type jobs as DS, OA and others in a lower-cost region like WNY. But people who want to work at Tesla may want to be in the Bay area. Thing is, to live out there, you basically are mortgaging your own future on living expenses.�
1/1/2015
guest This lease is potentially more expensive from the installers perspective. I presume it is offered for buyers who can't use the full ITC.
The finance part of this deal is curious. Obviously the installer is willing to take only a very small profit. But the installer is sophisticated enough to bundle financing.
My overall point is that a national company like solarcity cannot begin to be competitive in this space. A little local company can't build EVs to compete with Tesla, or smart phones to compete with Apple. But they can destroy solarcitys business.�
1/1/2015
guest Do we know how many of SolarCity's 13-14,000 employees are the installation team and how many are sales and marketing?�
1/1/2015
guest I don't know. Anyone else know? It certainly doesn't pop up on a quick Google search.�
1/1/2015
guest Gov. Cuomo Calls for More Private Investments to Help Make Buffalo Great Again
�
1/1/2015
guest The leasing business. The installation business. However, Musk clearly has his eye on the manufacturing business which hasn't even opened yet. A little local company can't compete with that; the question is whether that can compete with cheap Chinese solar panels. Something about which I am not sure.�
1/1/2015
guest Cheap high quality American panels installed by a trustworthy major company will win out over cheap Chinese panels installed by a local company that may disappear in 6 months. Even with the 10-20% premium. To me that's a bargain.�
1/1/2015
guest As America�s Top Utility Regulatory Body Overhauls Rate Design, Solar Players Want More Transparency
�
1/1/2015
guest SolarCity Raises $305 Million in Latest Cash Equity Financing�
1/1/2015
guest So, this is money they don't owe? They said it's non-recourse.
Also:Does that mean $2.1 billion won't have contractual payments? Why not? Where does that expected money come from?�
1/1/2015
guest This is another case of monetizing the payment stream from the PPAs and leases.
As you know, SolarCity has (in the past) leased a lot of panels and sold a lot of PPAs. The problem with these deals for SolarCity is that SolarCity spends all the money up front, but gets the cash very slowly over the course of years. This is why I described SolarCity as having a large banking operation; they were spending money upfront and getting paid back over 20 years, which required constant refinancing.
This deal is basically SolarCity selling the rights to the future payment stream on a basket of leases and/or PPAs in exchange for cash up front. There was a similar deal earlier this year, but at a worse price. These deals consist of SolarCity getting *out* of the banking business. The institutional investors are now providing the upfront cash, so that SolarCity is getting paid for the costs of panels and installation *now*.
As long as SolarCity can do these deals, they won't run out of cash for quite a while.
For this basket, it looks like they now have (a) an "equity" investor who collects the tax breaks and pays SolarCity upfront for slightly less than the value of the tax breaks, and (b) a "lender" who is paid back by the cashflows from the homeowners over 18 years, roughly the same term over which the homeowner is paying SolarCity. They've matched durations of lending and borrowing so they're no longer facing the sort of financing risks which banks have, at least not on this basket.
Since it's "non-recourse", this means SolarCity doesn't legally retain default risk either. (Though in practice I think they'd end up retaining default risk, because every time a packaged securitization deal fails due to default, the sponsor ends up bailing it out for reputational reasons.)�
1/1/2015
guest This is actually the first good news out of SolarCity since the take-over was announced. Derisking is good when you have huge liabilities, but how much of the future revenue stream this will eat is not clear to me. Anyone can clarify?�
1/1/2015
guest I can't do the calculations on that. The cost of capital here is 7.4% which is slightly higher (worse) than the discount rate of 6% which SCTY has been using to "value" its future income streams. But I think most investors were not taking the future income streams seriously, and this is cash in pocket, which is better in many ways.
The improving rates on each subsequent deal are a very good sign; they may get it down below 6% with the next deal if they're lucky.
Regardless, for people looking at cash flow rather than long-term earnings, this is going to make Q3 look much better than expected. They basically moved $305 million in cash flow into Q3 from, well, much of it was from 20 years down the road.�
1/1/2015
guest I don't trust their 7.4% cost of capital figure. That might have many many many assumptions baked into it.
Here is a better way to look at it. They raised $305mln on 230megawatts. That's $1.33/W.
From the latest investor presentation from Q2 ER, they raise $1.65/W in Tax Equity.
Bringing the total receipts to $2.98/W
While the same investor presentation shows the cost to be $3.05/W.
To make matters worse SCTY is additionally on the hook for O&M, which management estimated at one point to be 2cents/watt/year on average over the life of the install.
Essentially this transaction proves once again that SCTY loses money on every install, this is not even including R&D, CAPEX and any other corporate level expenses.
Market is happy that SCTY still has some avenues of liquidity but truth of the matter is that it is a money loser (different from Tesla, where S and X would be profitable standalone).�
Sep 12, 2016 at 12:39 PM
30seconds SCTY has option to increase mgmt cost on the contracts and keeps residual value of the systems once the $305m is paid off.�
Sep 12, 2016 at 12:53 PM
schonelucht Hmm. I really don't know enough of SCTY to argue with you there. But basically if that's true then Soros is just picking up debt in distress for 80 cts on the dollar? I just realise another thing : no word on the relative quality of the underlying contracts. Is Soros acquiring a representative portfolio or is he cherry picking the best customers?�
Sep 12, 2016 at 1:12 PM
Turing Could this combined with other cost reductions give them a chance at being positive FCF for Q3?�
Sep 12, 2016 at 1:43 PM
TMSE In the press release today http://files.shareholder.com/downloads/AMDA-14LQRE/2824162633x0x907735/D31908FA-2F2F-4C1F-BD65-6AE2BEEB144D/SCTY_News_2016_9_12_General_Releases.pdf
Does the 6% discount rate denote debt servicing cost? Is this $3.1 billion cashflow after servicing the corresponding asset-backed debt on SolarCity books? Correct me if I am wrong, but I think it has to be after servicing the debt because original debt issuer must have covenants in place to ensure the servicing of these asset-backed debts from the cashflow before they are appropriated for any other purpose.�
Sep 12, 2016 at 1:53 PM
Lessmog Alert just in:�
Sep 12, 2016 at 2:28 PM
TheTalkingMule How is this any different than Model S&X? Are both entities not attempting to expand exponentially? Is one Gigafactory different than the other?
Sales costs were last reported at $.91/W after the Nevada pullout. Prior to that it was $.57ish on its way downward. If SCTY just sat and churned in their established and most profitable markets they would be simply printing money right now. That's not the plan.
They make money in mature markets and lose boatloads in all new ones while consolidating share and scaling efficiencies.�
Sep 12, 2016 at 2:45 PM
trentxintong Also, keep in mind, SCTY has yet to expand to markets which electricity is much more expensive than the US, e.g. Germany, Australia, etc. I think they will be able to make more $ per installation there.�
Sep 12, 2016 at 4:39 PM
renim
thats funny
one of the core reasons why Germany and Australia have such high rooftop PV is exactly because SCTY is not here.
yes solarcity has some office somewhere is Australia for talking to governments, but humans don't deal with Solarcity, we prefer value.
![[?IMG]](https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/116152/width754/image-20160323-28072-19k2p6b.png)
�
Sep 12, 2016 at 4:53 PM
trentxintong what sort of value do you think solarcity can not offer there ?�
Sep 12, 2016 at 4:54 PM
trils0n Solar City's installation costs are dramatically higher than the local installation costs in Germany and Australia, so they wouldn't be able to compete. Unless the merger with Tesla cuts costs in a huge way, they won't have any presence in markets with low installation costs.�
Sep 12, 2016 at 4:56 PM
trentxintong OK. Are their panels cheaper or they spend less on customer acquistion ? what results in this price difference.�
Sep 12, 2016 at 5:24 PM
TheTalkingMule It's entirely sales cost and combating regulatory corruption. Germans do not(and never did) pay for sales costs, once the legislation making solar financially advantageous went into effect they just jumped on it. Call your lifelong electrician, fill out a one page permit and you're done. You can have rooftop solar in a week in Germany.
People act as if SCTY enjoys paying for all this sales effort, it's universal in the US. Ask the local installers in your market how much their sales cost is, the ones in my area were perfectly happy to share the info and it's absurd.�
Sep 12, 2016 at 6:01 PM
renim Costs,
Solarcity has unnecessary advertising and marketing costs.
Solarcity has unnecessary sales costs.
Solarcity has zero scale advantage in choice of buying solar cells.
Solarcity probably has slight scale advantage in buying invertors, but with a corresponding disadvantage in choice.
Solarcity has significant financing burden compared to owner occupiers.
Solarcity has the margin problem that a further intermediary between the installer and the owner creates.
Understand this, my state is around 30% of dwellings have PV. Up and down my street, PV is clear indicator of home ownership vs home rental. The few exceptions tend to be those who self selected a house with unsuitable tree shading.
Everyone who is interested in having PV will ask their neighbour or a friend who already has it. There is no uniformed market left here for Solarcity to take advantage of. Perhaps 5-8 years ago there was. But not any longer. That opportunity is closed.
Tesla energy has a bright future in Australia (batteries) but not Solarcity.�
Sep 12, 2016 at 6:26 PM
renim Ok, we don't have a subsidy on cost, we have a 'bounty' on solar adjusted capacity. Its called RECS or something like that
Approximately speaking, the federal bounty for PV equals of cost of a panel. So we have local deals here where additional PV is perhaps $200 per kW installed (for using the same invertor)
Once the cost of a panel is zeroed out, what left?
the cost of the invertor
the cost of installation
the cost of marketing
all of which is influenced by the cost of financing.
since installation is now such a massive percentage of the cost, why add a further overhead to it? that would be stupid.
The USA subsidy for solar hides solarcity's model's uncompetitievnes
vs
The Australia subsidy for solar magnifies solarcity's model uncompetitievnes�
Sep 12, 2016 at 11:54 PM
schonelucht Really? I live in the Netherlands and my solar installation (end user cost, no incentives) was a lot cheaper in dollar per Watt than the numbers I hear for SolarCity's cost basis. And I didn't even go for the cheapest offer.�
Sep 13, 2016 at 6:00 AM
kenliles I think the real issue is here in US we barely believe in climate change as a whole country
(i.e. associated policies - funding mechanisms - counters to existing interests - etc).
That's why Elon has to resort to explaining it with references like these (tweet today)
@elonmusk: Climate change explained in comic book form by xkcd
xkcd: Earth Temperature Timeline
- there's Dumb, there's Dumber, and there's massive eco-political interests - we have to deal with all three here unfortunately -
It's changing; but slower than the glacial ice is melting;
as a USAer I sincerely apologize to the rest of the world...
[On the other side of that apology, we have Elon Musk and many more leading the way out with gusto and bravado]�
Sep 13, 2016 at 8:35 AM
30seconds Cost of installation between US and EU countries is not a very good comparison. EU regulations in this area are significantly more streamlined than US, as this is handled at city/ country level in the US. See page 23
https://emp.lbl.gov/sites/all/files/lbnl-188238_2.pdf�
Sep 13, 2016 at 9:20 AM
schonelucht Thanks for the link. Interestingly, one of the other differing factors the study mentions is solar industry business models.�
Sep 13, 2016 at 9:21 AM
TheTalkingMule In the US fossil interests have the ability to dictate policy state-by-state, that is certainly not the case in Germany and I assume is much less of an issue in Australia. In Germany you know exactly how much you'll get paid for excess energy pushed to the grid for 20 years, in some of these southwestern US states solar fees and payback can change at a moment's notice. Hence the absurd sales cost becomes necessary.
If residential solar juice were given nationwide grid priority and a stable locked-in payback as they have in Germany, we would be buying super cheap PPAs from SCTY in the majority of states right now.�
Sep 13, 2016 at 12:25 PM
neroden I look at the "monetization" transactions as SolarCity getting out of a bad business model (PPAs/leases). I don't really care whether they get out of it at a profit or a loss, as long as it's a small loss. Once all the PPAs/leases are monetized, SolarCity will no longer have banking (duration mismatch) risk.
Then SolarCity becomes a bet on the Buffalo factory. Make your own decisions on that; I personally am quite optimistic, because right now nobody else is competing in the SunPower "premium" space. The Buffalo factory looks to me like they can compete directly with SunPower at a lower cost.�
Sep 13, 2016 at 12:35 PM
SBenson @neroden, That is if they are actually getting out of them PPAs/leases. They are getting into them as fast as they are getting out!
When majority of their sales are cash sales (or financed by third parties directly to homeowners) then I would feel comfortable.
Current business model is a suicidal rope. Yet, they have no easy way out or else we would have seen it by now don't you think? are they really this dumb to continue with this while fully realizing that they are choking themselves? Under Tesla I expect a fundamental makeover. There will be massive layoffs and the division will re-start much smaller.�
Sep 13, 2016 at 12:39 PM
neroden Good point, but are they? They have been slashing growth. Maybe they are getting out faster than they are getting in. I'm fine with lease sales if they're *pre-financed*, that is, a fund has already committed to finance them.
Yeah. They have stated that this is their goal, which makes me a lot more comfortable; it says to me that the management knows what the problem is and wants to fix it. If they didn't know what the problem was and weren't trying to fix it, *then* I would be very unhappy with SCTY. (As I was until I found those quotes from management.)
Musk did clearly imply massive layoffs in the sales teams.�
Sep 13, 2016 at 12:58 PM
TheTalkingMule I would be willing to wager that the rebranded Tesla solar offering will be of the PPA variety, especially once battery storage integration is more standard. Perhaps a hybrid of some sort, but certainly full service rather than just "install and walk away".�
Sep 13, 2016 at 1:25 PM
Rarity I wonder how big the premium market is or is expected to become, considering that SunPower is valued at only $1.2 billion.�
Sep 13, 2016 at 1:28 PM
neroden Good point. Hard to estimate. I know SunPower panels are popular around here; it really is a selling point and I can think of four installers who use them for marketing value. Musk doesn't want to compete in the cutthroat cheapo-panels-from-China market.
Given the price of batteries -- even after the Gigafactory cuts battery costs -- I think most people who want a home battery system will be in the premium market. Which may have something to do with Musk's thinking.�
Sep 14, 2016 at 6:14 AM
gene SolarCity, Berkshire's NV Energy settle Nevada rooftop solar dispute
Solar City suit vs. NV Energy is settled.�
Sep 15, 2016 at 11:25 AM
stealthology Stupid question, but if/when the SCTY deal goes through, will the price of the actual contracts change? I know SCTY LEAP's become TSLA 'mini' LEAP's, and the strike prices change. Ie. an SCTY 20 strike will become a ~181.9 strike TSLA contract (181.9 x .11).
I'm mainly curious if I'm in a situation where I'm slightly out of the money when the conversion occurs, if there a good chance I could get a pretty large bump in value overnight.�
Sep 15, 2016 at 3:25 PM
rallykeeper I kind of agree with your point about monetization (not sure entirely, though).
I started to make this point in the TSLA Short-term thread, but backed away.
I think the sale to Soros is a really good indicator about the true economic price Tesla is paying for SCTY.
Optimistically (I'm backing into some numbers), it looks like Tesla may be able to monetize all the older transactions at admittedly less than the current 6% discount rate and still produce $1.5-$2 billion in current cash. That's the no-brainer part of this transaction to me.�
Sep 15, 2016 at 4:51 PM
neroden Right. So here's how it works to my understanding.
You have 1 contract for SCTY $20 strike price. (Put or call doesn't matter.) This is a contract to (buy or sell) 100 shares of SCTY for $20 x 100 = $2000.
Now 100 shares of SCTY become the right to receive 11 shares of TSLA.
This becomes 1 contract for TSLA1... This is a contract to (buy or sell) 11 shares of TSLA for $2000. I *believe* it is still listed as a "$20" strike. ($20 x 100 "multiplier" despite being 11 shares.) I could be wrong about this. We'll see when it happens.
The actual *price* of the contracts -- the premium -- will of course vary day-to-day in the market, but after the merger, you'd expect it to be related to TSLA's price.
If the merger goes through, after the conversion whether you're "in the money" will depend on the TSLA price (SCTY won't have a separate price any more). So this is really entirely about the "discount" on SCTY relative to TSLA prices right now.
I mean, obviously it's possible that the day after the merger takes place, horrible news comes out and TSLA stock crashes.�
Sep 15, 2016 at 7:18 PM
stealthology Thanks neroden, you've been a huge help over these past few weeks.
Just to be sure I understand: Let's say when the merger goes through, there's still a 25% arbitrage/'discount' and I'm just barely out of the money. The next day, assuming Tesla's share price holds steady, I should definitely see the premium increase at the very least by 25%, correct? I understand there's many variables at play, but just in a general sense. Thanks.�
Sep 15, 2016 at 7:38 PM
Nomad What happens to SCTY stock when the merger goes through? Does one get $25.37 of TSLA per share of SCTY with any remainders being converted to cash? ... or is it converted at the 0.110 value based on the rolling average at the time it goes through?
Because if one simply gets $25.37 of TSLA, who wouldn't be buying up SCTY shares right now for a quick and easy gain?�
Sep 15, 2016 at 10:12 PM
dandurston You get .11 shares of TSLA for each share of SCTY if the merger goes through. The rolling average doesn't matter since it's based on a ratio, not a price. You do not get $25.37 worth of TSLA for each SCTY share (e.g. if TSLA were to fall to $25.37/share you would not convert 1 SCTY to 1 TSLA). $25.37 is what .11 shares of TSLA was worth back when the deal was announced, but now both stocks have fallen so .11 of TSLA is worth $22.
The ratio of .11 is actually quite a good deal now, with SCTY trading at .085 (e.g. 30% lower). The fact that SCTY isn't trading at .11 means there's a lot of uncertainty over whether the deal will go through.�
Sep 16, 2016 at 7:21 AM
phigment 52 week low hit today. Pretty high volume. Hopefully the bottom!�
Sep 16, 2016 at 10:00 AM
doggusfluffy According to the short thesis...this is merely the calm before the inevitable fall into bankruptcy due to institutional investor merger revolt...I guess.
From the Morning Energy:
�
Sep 16, 2016 at 10:53 AM
phigment Nevada Regulators Approve Agreement to Grandfather Solar Homes
Looks like it's approved. And that's likely what caused the spike in shares at 1:14 today.�
Sep 16, 2016 at 1:23 PM
drinkerofkoolaid I'd say that seems likely. A 7.2% swing today gives you an idea of what is possible. Also, notice all of the massive buying throughout the day. A lot of 200k-300k lots.�
