1/1/2015
guest Insulting posts end up in the trash.�
1/1/2015
guest This is ridiculous! Elon even says to reason from first principles, whereas you are reasoning by analogy. If you are going to invest based on a specific measure, learn and understand it, and test the information with your own model. If not that's fine, but don't flout something you don't understand on a public forum.
And don't you dare call me a "hater". I have a SCTY holding, just prefer informed discussion.�
1/1/2015
guest Come out with a model for retained value and educate us all. You must have not read my entire post. Until someone comes out with a better one I'm sticking with the companies model, which I completely understand and agree with.
I think they have been conservative with their numbers and I believe they will easily hit 1 million customers by EOY 2018. A forecast of 70% compound growth should not be a problem in this market that has barely been penetrated and I'm sure they will expand into more states by 2018 as well.�
1/1/2015
guest I don't understand the ambiguity in your statement. If you completely understand the companies model than why would all of us need to be educated? Further, can't you do the same task which you suggested I do, which I admittedly don't have the education to do? Add value to this discussion, not propaganda.�
1/1/2015
guest I agree with their model so I'm not about to try to improve it. There are a ton of people who disagree with the retained value model but I think I've only seen one revised model of what they felt was better and it didn't have many numbers supporting it. It's amazing how people feel retained value is smoke and mirrors yet they don't have a model of their own to share.�
1/1/2015
guest Ok, so can you make an annotated copy of the retained value calculations they use to help educate people on the topic. That would be very informative for everyone on the board. Your word can't be trusted with no numbers backing it up.
Edit:I should also say you shouldn't trust my word, or anyones word for the matter, if they don't have evidence.�
1/1/2015
guest Mod Note: robust discussion fine, but let's not get personal please.�
1/1/2015
guest I am not here to recreate SCTY's retained value model. I was asking for someone else who thought they had a better one to show it to everyone. I agree with the way SCTY is calculating their retained value as well as the cost of capital figures they use. Until we are farther into the future no one knows exactly what will happen 20 years from now. All I see is people doubting SCTY's model yet they produce no new model of their own. I've seen one contributor on yahoo who thought they were designing a new model but it had a lot of very negative assumptions about energy prices actually falling, not rising, which is nuts. They were also great disbelievers in the leasing model which we've pretty much summed up that some will buy and some will lease so the leasing model will likely never die. It may be modified to make it more competitive but as prices fall for panels the logical assumption is the leasing price will fall as well.
I already own a lot of SCTY so I'm not too concerned if people short it or not. As the company keeps coming in at/above their targets, the stock will rise and shorts will cover. Selling short a rising stock just briefly slows down the momentum. Earnings and growth of this company will not be changed by the stock price unless they plan to do a lot of secondary offering, which doesn't seem likely with ABS being so robust at the moment. The bonds are as good as mortgages so I don't see ABS drying up.�
1/1/2015
guest Without commenting on the rest of this topic, I will interject here that there are reasonable scenarios where electricity prices fall, at least in some areas of the country. There is a credible case that we are less than ten years out from some major technological breakthroughs in generation, power storage, and systems controls that collectively will drop the market price of electricity. Remember that wholesale energy prices are set by the operating cost of the marginal generator. Renewable generators have a zero or near-zero operating cost, so as more renewable power goes onto the system, the price of wholesale power falls. The capital cost of renewable generation shows up in retail prices through a different charge (a "capacity charge" or similar), but that may or may not be a value that SCTY can capture (depending on regulatory decisions about whether such capacity charges can be bypassed).
In any case, while I wouldn't use a falling electricity price as my base case, it is a relevant scenario for stress-testing SCTY's value.�
1/1/2015
guest New to this thread. Is there any news on the SCTY debt program they announced this past winter? I think they were going to allow normal investors to purchase it's debt. Here's a link to the story from January - http://money.cnn.com/2014/01/15/investing/solarcity-debt/index.html?iid=HP_LN�
1/1/2015
guest Does anyone have any thoughts why SCTY is down 8% today with earnings coming out after the close? I can't find any news that would make me want to sell the stock today?�
1/1/2015
guest Interesting how closely TSLA has followed SCTY!
https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1399492800000&chddm=8211&chls=IntervalBasedLine&cmpto=NASDAQ:SCTY&cmptdms=0&q=NASDAQ:TSLA&ntsp=0&ei=GVJqU7CZHMaOrQHVhoCwAg�
1/1/2015
guest "Tech/momo" market sell-off / Fed. Not much to do with SCTY.�
1/1/2015
guest Down 11% is definitely overblown. I hope this drop in price has nothing to do with the earnings coming out. The shorts are probably just standing tall while the longs sit on the sidelines trying to buy more cheap after ER.�
1/1/2015
guest I think it's lockup expiry�
1/1/2015
guest Are you speculating that the insiders are dumping the stock today? TSLA is only down 3% so I highly doubt that is the case. We'd see both stocks down big if insiders were dumping stock. It would be nice to know the reason the stock is down 11% on no news at all.�
1/1/2015
guest My guess ... "Sell on the (ER) news" + general risk off market sentiment.�
1/1/2015
guest The same would be true with TSLA if that were the case.�
1/1/2015
guest Both TSLA and SCTY report at 4pm so there is no news. I wish there was news cause I hate seeing SCTY down 12% while TSLA is only down 3% and neither company has any news out today. The good news is SCTY filled a gap on the chart for 11/29/2013 at ~$49. The August high of $45.60 was hit too as support. I wish I was one of the fortunate souls who shorted the stock above $70 but I'd surely be covering right about now.
Edit: TAN is only down 4% so SCTY being down 12% must be ER nervousness.�
1/1/2015
guest Sentiment poll: If you had to go long or short 100 shares of SCTY at today's closing price and hold it until the next earnings report release, which direction would you bet?�
1/1/2015
guest It's too bad people don't share useful information on here anymore... but I will give it a try.
Solarcity reported earnings this afternoon and they were great.
I am particularly excited about
1) official 2015 guidance of between 900 MW - 1 GW, that is a great number- in fact, it will continue for the 5th year, their annual growth rate of ~100%. Bravo.
2) Talked about the trade dispute, and their ability to source "Chinese and non Chinese" panels for low $0.7's with relative ease. That should alleviate some of the concerns about that
3) Next round of securitization (which I think is 60+ days away or they couldn't discuss it now), will be between $100-200m and should have a lower effective rate.
Lyndon sounded great, the future is extremely bullish and as the business grows they should become more profitable. I was lucky enough to buy some shares at $46 today, but I also happily bought some last week at $52.�
1/1/2015
guest I wish I was available for the conf call today. Don't forget they raised guidance for the rest of the year as well so no signs of slowing down anytime soon. If anyone could tell from the report what % of revenue came from sales vs. lease that would be great. It looked like 66% roughly was lease but I might be off a bit. I was in a hurry while reading the release.
Did Lyndon happen to comment on his recent sale of 160k shares?
If the next securitization is 60+ days away how do they know the effective rate they will get?
Today's volume was pretty high. Hopefully this is a washout bottom. I was very nervous all day how the stock was down big on no news. I can see how others got washed out. It was a nerve wracking day to say the least.�
1/1/2015
guest they didn't comment specifically on the rate, but implied/ I expect.
They didn't explicity say anything about the timing of the next securitization, but IIRC there is a rule about discussing it publicly for a period before and after (I could be wrong).
SCTY is one of the most volatile stocks in the game, and if you are the type of person to sell on a 12% down day with no news, you should not own this stock (I felt nervous as well, as I was executing my purchases)�
1/1/2015
guest I posted earlier and still agree with my assumption that today was all about short sellers ganging up on the stock during the day while the longs sat back patiently waiting for earnings to hit. Some daredevils bought today and did well. It's going to be interesting to see what type of short covering rally we get over the next week. It would be nice if SCTY rolled out more news over the next few days to fan the fire and get back in the press with good news for a change. The past couple months has been negative mo-mo BS plus the lawsuit news almost daily. A new piece every few days would be a welcomed surprise for the next few weeks.
The shorts are very quiet today vs. most days.�
1/1/2015
guest Rive and Musk typically like to fan the fire
Last time they announced year ahead guidance was the 475-525 MWs for 2014. I believe the previous day they had announced a deal with Direct Energy for a really nice 1-2 punch.
That being said it doesn't seem like that Direct Energy deal has worked out very well at all, they only installed 1MW of commercial in the Q.�
1/1/2015
guest The huge jump today from SCTY helps take some of the sting out of the BS earnings sell off for TSLA. At least I have one bright spot in my portfolio today.�
1/1/2015
guest TSLA hit $180 and bounced higher fast. A lot of people were looking for it to hit $180. I hope they all had their limit orders in place to catch it! Now they will expect $170. I see $200 before $170.�
1/1/2015
guest Cramer is starting to flip flop on his momentum stock recommendations. Now he's calling FSLR a "Deep Value Play". Earlier today he recommended SCTY as a buy.
What is a momentum stock? Can a stock that has fallen 45% in 2 months still be considered a momentum stock that everyone is afraid of?
Ummmm, probably not....�
1/1/2015
guest I thought it was funny when the analyst asked why they chose to go into Nevada because it was a small market, and Rive flatly said that there is more potential business for SCTY in Nevada than they have booked in the entirety of the company. It is just another talking point to the size of the Total Addressable Market for SCTY. There are over 1m households in Nevada. They have 100k installed residences. This 100% growth, although will not continue forever, should stay at an extremely impressive rate.
The 'momentum stocks' are beat up, and it is certainly a tough time for the stocks I focus on in the market, but good news like this will always stop a landslide like we have seen. I called bottom a few times incorrectly a few weeks ago in the mid-low 50's (as I was buying) and I think it is hopefully safe to say the bottom is now in at $46.�
1/1/2015
guest Here is an article that pretty much covers everything that I have been saying: that solar leasing is a rip-off to the taxpayer and to the lessee. They even name SolarCity in the article:
http://cleantechnica.com/2014/05/12/high-cost-solar-middleman/�
1/1/2015
guest Consumers willing to spend more for convenience.�
1/1/2015
guest So, I have SolarCity coming to my house in DC to do a consultation on Thursday. I want solar on my roof and want to see what they have to offer me. I also want to see first-hand how their consultants handle things to see if SCTY investment makes sense for me.
Sleepy, can you or theshadows recommend a purchased alternative that has any kind of financing? Sunpower panels maybe?�
1/1/2015
guest I don't really understand the hate for leasing. You guys would rather less solar out there than more? It's obvious most people still can't afford solar up front, so leasing from a company like SolarCity is the next best step. IT GETS SOLAR DISTRIBUTED. IT GETS PEOPLE USING RENEWABLE ENERGY.�
1/1/2015
guest Have you read the article?
I don't have a problem with leasing at all. I have a problem with companies abusing my tax dollars, so that the execs end up with huge bonuses.
Why does SCTY "estimate" installation costs to be above $4/W when local installers do the same job for less than $3? They (as well as other solar leasing companies) and Goldman Sachs are ripping off the taxpayers by jacking up the system price and then charge the consumer a lot lower fee than what they "estimated" because they already ripped off the government. This is why SCTY is getting sued.
I recommend reading the article.�
1/1/2015
guest I see. I was just giving a generic post from all the leasing negativity. I have not read that specific one yet, but will now.�
1/1/2015
guest So I'm going to compare the Solar City quote I get on Thursday to some non-leased alternatives because it looks like there are some kick-ass incentives I could take advantage of in my "state" which is DC if I purchase a system. I don't understand them all, but I'm sure Solar City does. I was using a cost calculator on this web site that seemed interesting too.
If anyone has other ideas on getting accurate cost comparisons for purchased solar panels (financed but owned) vs. Solar City, let me know. Looking forward to SCTY's visit. I may choose to invest depending on how it goes, and to become a customer, we will see.�
1/1/2015
guest I recommend reading this article. I did not write this article, but share the exact same views:
http://seekingalpha.com/article/2216673-solarcity-leases-and-ppas-counting-on-uninformed-customers-and-investors?source=marketwatch
Regardless of what the customer profile is, we believe that no sane customer is likely to renew the existing PPAs/leases at 90% of the going rate, as SolarCity management claims. The optimistic case for SolarCity management is renewal at a rate that is about 30% initial contract value (i.e. around $0.05 to $0.06 per KWH).Even that may be doubtful. A savvy customer could actually ask SolarCity to pay money to keep the system on the house when the lease expires. It would be cheaper for SolarCity to pay off the customer and leave the system on the roof than incur the expense of removing and transporting what is likely to be a highly inefficient system with very little market value. In other words, the retained value at the end of 20 years could actually turn negative.
Investors who buy a company's story without doing due diligence on the company's retained value shenanigans are in for a rude surprise.
If and when SolarCity makes a more rational set of assumptions in its retained value, the company's financial results will not look pretty, but as a public company, its management needs to make a better set of assumptions for its business plan and share them with the stockholders.�
1/1/2015
guest Study those incentives closely and make sure to ask a bunch of questions to see how the sales representative responds.
I did a rough calculation yesterday for my SunPower system that I bought two months ago, and I estimated (using a flat $0.16/kWh price for retail electricity over the next 25 years) that I will save over $40,000 because I bought my system. Had I leased from SolarCity, my savings would probably be only 25% of that amount.
Some questions you can ask:
1. What panels are they going to use, and what is the stated watt peak per panel. What type of technology does the panel use (thin film, multi-Si, mono-Si, etc)?
2. What is the maximum system size that will fit on the southern facing portion of the roof?
3. Can you get more efficient mono panels to put in a bigger system and how much more it will cost?
4. What happens when you have to replace your roof 10 years from now?
5. Are the panels certified to be PID resistant?
6. Ask for a bunch of other details such as degradation and guaranteed production rates over 20 years etc.
7. What kind of inverter you will get?
One very important thing in this industry is that all watts are not created equal. All chinese panels have ~3% straight out of the box, while SPWR has 0%. SPWR has 0.13% annual degradation, while Chinese guarantee no more than 0.5%. Some panels work a lot better with low lighting, shading, clouds, etc. Some panels work a lot better in high humidity, temperatures, etc.
I have had my SPWR system for 2 months now and compared it to NREL's great solar calculator on what I should be getting:
http://pvwatts.nrel.gov/pvwatts.php
My panels are actually producing 20% more than what the website says that they should. The reason for this is that Chinese panels simply cannot compete with SPWR panels, which give you a lot more production per Watt peak. I also have 1/3 of my panels facing west (slightly northwest), and I put into the calculator that they all face 100% perfectly south. So if all of my panels did face south then I am sure that I would be getting 25%+ higher production than Chinese panels.
I sent you a PM with a link that will get you a discount on a SunPower solar system. Since you are going to invite a bunch of different companies over for solar quotes, I recommend that you give these guys a try as well. I am curious to hear your feedback.
Cheers and it is great to hear that you are going solar.�
1/1/2015
guest I want to be supportive of solar but the first question that came to my mind is that theses leases will likely outlast the roofs in a significant number of homes. Who is responsible for taking system off and reinstalling the system when roof redone and is there any risk to the home owner claiming roof life decreased by mounting the system? Of course I put it in this link but I also own spwr and wonder at all the lease models. Is anyone here aware of answers. Perhaps someone who has a lease already can answer
i have installed solar but did a ground installation. Not comfortable with rooftop�
1/1/2015
guest "roof life decreased by mounting the system"
- generally the thought seems to be that systems increase roof life. Also I don't understand why SCTY would payoff the customer or bother to remove the panels. They could just offer to continue the lease at a very reduced rate or sell the system to the homeowner for a very low price that newer systems at that time couldn't compete with. They could remove the system if the customer leases/buys a newer better system from them. Unless there are people of the opinion that when the lease ends, energy will cheaper or no more expensive than today and a cheaper lease offering will be something that the homeowner doesn't want.�
1/1/2015
guest yes I can see that happening but when redoing roof (asphalt tiles 20 year life and roofs not new at installation) the home owner maybe upset at paying more to take down system and reinstall BEFORE the lease expires. The roof must be penetrated to attach the panels and any leak at attachment site will reduce lifetime of roof.
You would think company has thought about this but as an example I remember buying an emr (electronic medical record) when they first came out around 2007 and 2 years later decided to change to a new system. The first company had no plans or policy in place as to how a change could be done. They had never considered it.�
1/1/2015
guest Panels will not increase roof life, that is a huge fallacy because you are still going to have more than 70% of your roof exposed. Unless you actually cover your whole roof with panels, which no one does because is doesn't make sense to put up northern facing panels.
I asked about this when I installed my system and they said it would cost $500-$1500 to take the panels down and re-install them when I replace my roof.�
1/1/2015
guest Thanks for the answer�
1/1/2015
guest Thanks for this, Sleepy. Going to do my homework before the SCTY rep shows up tomorrow morning.�
1/1/2015
guest I feel sorry for him!�
1/1/2015
guest Hey, about the comparison to pvwatts, I've had my JASO panel system up for just about 2 months and am easily beating the PVWatts estimate. With about 2 days of downtime in both March and April thanks to inverter issues, in March I got exactly PVWatts estimate and April I got way more.
Solar Production Tracker | S1dd.com
How much more did sunpower cost compared to Chinese panels?�
1/1/2015
guest Are you agreeing with the whole article, substantively, or just the Retained Value aspect? I agree that a 20 year old solar panel system isn't worth the money it costs to remove it - a few solar company reps I talked with said that they would remove panels at the end of 20 years if I insisted, but that they'd probably offer to leave the panels up and working for free at the end of 20 years.
But, the article has other points that don't seem right to me. For instance, the escalation clauses all seem reasonable to me in light of past history of electric rates, and having those locked down even in the face of inflation is not a bad thing.�
1/1/2015
guest agree those escalation rates were historically reasonable. The big unknown is what will they do in the face of Solar disruption. They may in fact compress- I don't hold that view, I think most utilities will attempt to raise rates to compensate for fixed cost with less revenue (because they won't adapt quickly enough). But I can see the risk of that being wrong and rate taking a widely different path than historical data leads.�
1/1/2015
guest I agree with almost everything in the article. He does exaggerate a few things, and some of the risks might never materialize; but he makes a great point to bring them up.
I disagree with both you and kenliles on escalation clauses:
I (got a smoking good deal on a SPWR system at $2.50/W, so to answer dalalsid's question I doubt that I could get a better deal on Chinese panels and wouldn't install them unless I could get them installed for $1/W) and calculated that after rebate and tax credit will be producing electricity for the next 25 years at a $0.05/kWh flat rate with no escalation. I think my system will run for 40+ years (with only relatively cheap inverter replacements), so the rate I will pay is a lot lower than $0.05.
SCTY said in their recent presentation that their average rate is $0.141/kWh. So if you have an escalation clause then you might end up paying $0.18 in year 10. Now if you are trying to sell your house, then someone might not want to buy the house to pay $0.18/kWh, when they will be able to get a system for $0.03-$0.07/kWh. So the seller will be stuck pre-paying the rest of the lease and that is a liability.
I also disagree that utilities will be raising rates to compensate for their losses as solar really accelerates and grows. They will not be able to raise rates, because more people will go solar and lead to a utility death spiral. Another reason they cannot raise rates is because utilities sell at LMP's a.k.a. marginal cost. So if utilities get stuck with stranded assets, they will sell energy at cost of production in order to keep them running to pay bills. As load falls off as more people go solar, wholesale electricity prices will plummet and utilities will start going bankrupt, and only those with the most efficient power plants will survive. There is nothing they can do.
So even though I suspect that ulitility prices will continue going up for the next decade or two. As solar picks up, utility rates will actually start going down IMO. Just look at the situation in Germany. Their wholesale electricity prices are crashing due to solar. And utilities are losing money. They will go out of business one by one as solar, wind, biomass, etc. expand.
IMO the expansion of solar will cause lower utility rates and not higher rates...�
1/1/2015
guest well actually given the scenario you painted you actually AGREE with me not disagree. The escalation rates are in fact accurate based on historical escalation. What you're describing is what the disruption of Solar does to that going forward, which was the risk I was pointing out. However, I think we might have different views on current Utilities. Most (not all) current utilities I believe will seek and be granted rate increases to compensate for costs (largely because they will remain on coal/oil/nat gas for essentially forever)- those costs will absolutely increase and govt commissions will be obliged to grant the increases or raise taxes to cover the loss (not likely on that front). I think where our disagreement lies, is I don't believe the current Utilities will implement Solar (with a few exceptions of course) sufficient to lower costs- They will instead take the easy way out and simply request rate hikes to stay even. My opinion is the current utilities (again with a few exceptions) will instead be replaced by new ones formed by the Solar companies themselves (HoldCos) and/or new entities holding these assets. The current crop of utilities will become commoditized pseudo govt entities largely responsible for grid maintenance with some load sink storage for balancing. I think this will happen because Solar disruption will occur much faster than the time constant required for 70% of current Utilities to adapt. If so, that's why rates from current utilities will go up from here, only coming down as they are replaced and not responsible for generation of power but can only justify grid maintenance costs. That's going to take a while of course, but that's the way I see things playing out (I'm probably wrong- I'm just offering my current thinking on the matter). If you do the numbers, it's actually not to long that the total Solar deployments by individuals and businesses exceed the entire demand profile of the US. The current Utilities, built for power generation are simply not equipped to deal with that change- they will become network operators and exact a fee for that. But that transition is what has to occur to bring the the 'Utility' rate in line with Solar production- before that time (I would estimate perhaps 10 years) the Utility rate will go up driving more and more local Solar deployment... going to be a blast watching this play out whatever happens. Maybe I'll be surprised and the Global warming pressures on politicians and regulatory agencies will force the Utilities to adapt faster- but that's what I don't currently have faith in. The decisions will come from bottom up, by individuals and businesses much faster than top down- especially since we have (nearly)reached grid parity costs.�
1/1/2015
guest SolarCity currently does not serve Illinois. Commonwealth Edison (ComEd), which provides electricity to Chicago and the rest of Northern Illinois, will raise rates by an average of 21% on June 1st.
Here�s a link to a related Chicago Tribune article and video: http://www.chicagotribune.com/business/breaking/chi-comed-price-increases-20140507,0,7376954.story
I provided a heads-up to the contact box in the SolarCity website. Here is the response I received:
�Thank you so much for the information. I will be sure to forward your email over to our expansion team to review and look into the great opportunity this presents.�
Addendum: ComEd offers net metering and Illinois provides rebates to people with solar power installations.
�
1/1/2015
guest Wow that's a fantastic deal for Sunpower panels. The only rebate I get is the federal. Paid 1.75/W after rebate. Plus power here is only 11c/kWh but luckily (got into some limited time program) for the 1st 5 years I get paid 15c/kWh for solar power and then after that net metering. Payoff about 10 years.�
1/1/2015
guest ComEd, the electric utility for Chicagoland and the rest of northern Illinois, does offer customers net metering: https://www.comed.com/customer-service/rates-pricing/interconnection/pages/net-metering.aspx�
1/1/2015
guest But are any rebates offered? I clearly wrote that SCTY goes where there are high rebates AND net metering. 43 states in the country have net metering laws in place, and SCTY only operates in 30% of those states.
They only go where the rebates are high, so they can pocket the cash at the customer's cost.
They will get to Illinois eventually, when they start running out of options with high rebate states. They don't care if you are paying $0.18/kWh in Illinois. They will go to certain places in Texas where electricity is offered at $0.12/kWh, because the TDSP offers generous rebates that are meant for the customer; but SCTY pockets them instead.�
1/1/2015
guest Indeed, Illinois gives rebates for erecting solar power systems: http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=IL05F�
1/1/2015
guest Moderator's Note: I've moved my post and a discussion that followed about the general economics of solar over to Alternative Energy Investor Discussions (formerly SCTY thread) . While it's tangentially about SCTY, it's more generally about all solar stocks (all of which rely, to one extent or the other, on subsidies and mis-pricing of electricity in current retail tariffs).
And another tranche of posts have been moved to snippiness.
Folks, let's try to focus on investment opportunities in SCTY here, and in parallel companies in the thread linked above. If it's too challenging to talk about SCTY apart from other solar companies, I'll simply close this thread and we can use the other to talk about all solar investments.
Thanks,
Robert�
1/1/2015
guest I'm agreeing with Robert.B, we've spent more time on moderating this thread than any other in the Investor section so far this year, and the darned thing is less than two months old!
Discussion on SCTY has to be able to include stuff on the competitive environment but it's up to you guys to keep your comments focussed; otherwise there's no point in having yet another solar thread. Oh, and all normal etiquette rules apply.�
1/1/2015
guest If you didn't remember about this today, here is the link to the webinar:
Webinar - Net Energy Metering: Update on Key Distributed Generation Policy
�
1/1/2015
guest Capital One Bank Invests $100 Million in SolarCity Fund
http://www.solarcity.com/pressreleases/241/Capital-One-Bank-Invests-%24100-Million-in-SolarCity-Fund-to-Provide-Solar-Power-To-Thousands-of-U-S--Homeowners.aspx�
1/1/2015
guest This 8-K filing with the SEC dated May 23 was emailed to me this morning by SolarCity:
"The Loan has an initial commitment of up to $125,000,000 and also permits Borrower to increase that commitment in an aggregate amount not to exceed an additional $32,000,000."
http://investors.solarcity.com/secfiling.cfm?filingid=1193125-14-217891&CIK=1408356
- - - Updated - - -
Here is the May 28 press release regarding an arrangement between SolarCity and Groupon:
"Groupon (Nasdaq:GRPN) will work with SolarCity (Nasdaq:SCTY), the nation's largest solar power provider, to offer deals on solar systems in the Groupon marketplace."
SolarCity and Groupon Offer First of Its Kind Deal on Solar Power (NASDAQ:SCTY)�
1/1/2015
guest I'm not a big fan of Groupon and the marketing avenue here doesn't fit well with my concept of Solar implementation and 'deals' - not sure currently what to make of this�
1/1/2015
guest
they have sold 450 so far, not too bad in three days.
SolarCity Deal of the Day | Groupon�
1/1/2015
guest Perhaps unfairly, I associate Groupon offers (and similar) as a sign that demand is lagging for the product. Why else offer discounts? Restaurants might offer discounts to get people in once, looking forward to repeat business. SCTY won't see repeat business (but perhaps they do get some referrals this way). I don't think this reflects well on SCTY trends.�
1/1/2015
guest I guess sales are sales; but I'm in the same camp as Robert on this one. You don't see the sales not happening due to image and marketing channel directions. Maybe it's just an add and no other effect, but I don't view this as a sign of plentiful marketing channel options. I like the Home Depot angle (and anything similar - like builder channels etc.) - This doesn't strike me well. I'm maintaining a small long position as a hedge against China tariff issues (given the module agnostic business position)- but not looking to increase from that without more clarity on market channels to customers in all states (regardless of incentives), and a stronger defense of new REIT status of Solar which provides low cost buy-lease monies that potentially erode SCTY margins.�
1/1/2015
guest I agree with you two, and I would not want my business to be associated with Groupon. People associate Groupon with businesses that are struggling financially, or in desperate need for demand growth. Not saying this is right or wrong, but that is what people think. The stock went down 3% on the day this deal was announced while other solar stocks were slightly in the green. Nothing good will come out of this deal, and I think it is really bad PR for SCTY.
The average person, who doesn't understand solar will not want to buy a system from a solar company that sells on Groupon. The only people taking advantage of this deal are those that already knew SCTY and were going to buy a system from them anyway.�
1/1/2015
guest Starbucks is on groupon too ..�
1/1/2015
guest and maybe that's the best indication SolarCity should not be. There is no further distance I can think of outside MacnDons BurgerWorld�
1/1/2015
guest Macy's, Nordstrom, Target, Toy R Us, Sephora, Best Buy are all on Groupon, I really don't see anything wrong with Solarcity teams up with Groupon.
Besides, if demand is lagging, why did they give out a 100% growth 2015 target?�
1/1/2015
guest Valid question. But equally valid to ask if demand is so good why give out discounts?
My guess would be that the Groupon deal was either a poor marketing decision or a test for the future.�
1/1/2015
guest My country club went on groupon one day, and some people that were considering joining the club dropped out after they saw the groupon add. They immediately assumed that the club is in financial trouble (it isn't) so they did not want to pay a big initiation fee to lose it if the club goes out of business.
Management of the CC wanted to sell 1-day memberships in hopes of increasing membership count. Exactly zero people signed up for a membership after using the groupon.
I am not even sure if management really thought that someone would sign up. I think that they wanted to sell a couple hunder 1-day memberships in order to get an extra $20k in revenue. In the end it probably cost them $100k+ because of the people who wanted to join, but didn't as the groupon ad scared them off.
You should not use groupon to sell luxury, high end, or other expensive items. It will probably do more harm than good.
Best case is SCTY down 3% when they announced deal while other solar stocks were positive.�
1/1/2015
guest I see Groupon as an online Outlet Store for retailers running sales and specials. That conflicts heavily with a long term lease of a 'permanent' attachment to my home of which I need education, options and relationship building. Just doesn't feed well with the market from my seat and works to diminish the brand more than add potential sales. Would be like if they decided to open a Telemarketing center and start calling people or if a home builder started offering Groupon for new home discounts (both extreme examples to make a point I guess). And to your point I don't understand the necessity for it if they are expanding 100% as stated. It gives me pause that this is one of the channels that created that projection and if so, it's validity diminishes in my mind. Residential Solar won't reach 'Groupon commodity' relationships for decades imo. It's my respect for SolarCity management that gives me pause- because I believe they know this too and yet prioritized this for some reason I don't understand. Maybe it's my deficiency, but it concurrently lends credence to 'get-the-customer-anyway-you-can' characterization (something the lease issue will also have to contend with at some point and this doesn't help that). If they can offer a discount through Groupon (as a marketing fee), I'm not getting their best price outside that channel (as a customer), so I'm not attaching a trust relationship when needing they're honest evaluation of my 'permanent' buy-lease and other options. Residential Solar is just not a commodity- by the time it is, I plan to be rich on the stock investments- and I'm not there yet�
1/1/2015
guest $400 is the same amount they used to gave out for referral, so not exactly a discount from Solarcity's perspective. Solarcity on groupon is more like a indication that Solar goes mainstream.�
1/1/2015
guest and maybe that's part of the issue- It's not mainstream. That's what SolarCity wants and needs it to be. But the hard educational work to get it there should be the priority imo. Be branded for that instead- Then the discounts mean something; right now they convey a different message. They need to build the SolarCity trust brand and this is antithetical to that�
1/1/2015
guest DaveT, Very much appreciate your thorough and balanced analysis. Given that the stock is beaten down so much from it's all-time-highs, I suspect it might be a great opportunity to invest now. Could you please share your pricing model(s) and targets? Will truly appreciate it, as you have done a lot of homework I will have quite a bit of respect for what you say. I'm looking in a long term perspective by the way, more in 5+ year time frame (and can potentially wait even 10 or 15 years if this is anything like Tesla). Thanks, Steve
�
1/1/2015
guest I haven't thought about SCTY a lot in recent weeks. Most of my investing focus is on TSLA. But here are some quick thoughts on SCTY stock pricing model for the future.
1. I'd recommend reading the Jan 14 Deutsche Bank report and their pricing model. It's not that intuitive to understand but it gives you an idea of how institutions are viewing SCTY and their business model, revenue, growth, etc.
2. For a 4-5 year pricing model, I personally use something very rough. In contrast, with TSLA I'm able to forecast (personally) the number of units sold, gross margin, expenses, profit, etc and I'm able to attach a multiple to which I think investors might give depending on the mood. For SCTY, I have a much more difficult time with this kind of traditional analysis as SCTY's business model is not a simple "sell a product one-time and make % profit" model. It's more akin to a services/subscription business model where SCTY is selling a monthly subscription to energy and eventually as they have more monthly subscribers they will be able to make more and more profit. However, the tricky part is that most subscription services don't make much money initially because they don't have economies of scale and their expenses are high. This is the case with SCTY. Currently, they're in rapid growth mode (100% growth every year) and their expenses are naturally high since their investments in growth are high. Thus, it's unreasonable to expect SCTY to make a healthy profit right now, while they're still in scaling and high growth mode.
So, if we look out 4-5 years, SCTY has a 1 million customer target. Let's say you're a believer in SCTY reaching that goal. Then, you can ask yourself how much is each customer worth? (ie., present value of future earnings per customer) You can then use that to come up with a rough price target (calculate market cap of company by either calculating net present value of future earnings factoring in growth beyond 1m customers, or by calculating a potential earnings amount with 1m customers and times that by a health multiple depending on what growth rate you assume they'll have then).
I won't give my specific values because I don't have time to defend them here and it's more of a personal exercise for me. But let's say you calculate that each customer is worth $5,000 to SolarCity in earnings (discounted to net present value), then 1 million customers would equal $5b. However, if SCTY reaches 1 million customers in 4 or so years, then that means they would be growing aggressively and you would need to factor in much more than the 1 million customers to figure out a valuation. I'd say you'd have to figure probably 3-5m customers into the valuation, giving SCTY a $15-25b market cap (but that would change depending if you adjust up or down the initial $5k/customer earnings amount).�
1/1/2015
guest SolarCity has signed an agreement to acquire Silevo, a solar panel technology and manufacturing company whose modules have demonstrated a unique combination of high energy output and low cost. Our intent is to combine what we believe is fundamentally the best photovoltaic technology with massive economies of scale to achieve a breakthrough in the cost of solar power. Although no other acquisitions are currently being contemplated, SolarCity may acquire additional photovoltaics companies as needed to ensure clear technology leadership and we plan to grow internal engineering significantly.
We are in discussions with the state of New York to build the initial manufacturing plant, continuing a relationship developed by the Silevo team. At a targeted capacity greater than 1 GW within the next two years, it will be one of the single largest solar panel production plants in the world. This will be followed in subsequent years by one or more significantly larger plants at an order of magnitude greater annual production capacity.
Given that there is excess supplier capacity today, this may seem counter-intuitive to some who follow the solar industry. What we are trying to address is not the lay of the land today, where there are indeed too many suppliers, most of whom are producing relatively low photonic efficiency solar cells at uncompelling costs, but how we see the future developing. Without decisive action to lay the groundwork today, the massive volume of affordable, high efficiency panels needed for unsubsidized solar power to outcompete fossil fuel grid power simply will not be there when it is needed.
SolarCity was founded to accelerate mass adoption of sustainable energy. The sun, that highly convenient and free fusion reactor in the sky, radiates more energy to the Earth in a few hours than the entire human population consumes from all sources in a year. This means that solar panels, paired with batteries to enable power at night, can produce several orders of magnitude more electricity than is consumed by the entirety of human civilization. A cogent assessment of sustainable energy potential from various sources is described well in this Sandia paper:www.sandia.gov/~jytsao/Solar%20FAQs.pdf.
Even if the solar industry were only to generate 40 percent of the world�s electricity with photovoltaics by 2040, that would mean installing more than 400 GW of solar capacity per year for the next 25 years. We absolutely believe that solar power can and will become the world�s predominant source of energy within our lifetimes, but there are obviously a lot of panels that have to be manufactured and installed in order for that to happen. The plans we are announcing today, while substantial compared to current industry, are small in that context.
http://blog.solarcity.com/silevo/
�
1/1/2015
guest Finally a smart move from SCTY. I have been arguing that the model of buying panels from competitors is not a good one since demand is going to outstrip supply in the very near future and probably stay that way for years to come.
I think that this is a great move for SCTY, but don't like how they bash others for producing "relatively low photonic efficiency solar cells at uncompelling costs." Very unprofessional for someone to criticize a whole industry before even making one single product themselves...�
1/1/2015
guest And then I read about the efficiency of the silevo cells and they "may be" able to reach sunpower levels of 24%. This is a good move. Should have called "one of the single largest solar panel production plants in the world" the solar Gigafactory�
1/1/2015
guest The style of the blog post hints strongly of Elon's involvement. It even lists his name first as the author. That may explain the critical comment.
I like this move A LOT. Also, the fact that Elon is actively involved is a good sign for SCTY investors, especially those who are "investing in Elon".�
1/1/2015
guest I like the move a lot too, just not a big fan of the trash talking before they even played one game in the league...
I am sure that they will do a good job of running down costs, but by the time they get up and running the rest of the world will be producing panels a lot cheaper too. Manufacturing in New York will make it tough to compete on price as well.�
1/1/2015
guest "At a targeted capacity greater than 1 GW within the next two years, it will be one of the single largest solar panel production plants in the world. This will be followed in subsequent years by one or more significantly larger plants at an order of magnitude greater annual production capacity."
Holy Moly.
1. Solarcity just acquired a solar panel manufacturing company, Silevo.
2. Elon (and the Rive brothers) claim Silevo's tech is unique - high energy output at low cost.
3. They're making a factory with 1 GW output.
4. In a few years they'll be making on it more plants with 10 GW output.
Guys, this is massive and game-changing.
I'll repeat. This is massive and completely game-changing.�
1/1/2015
guest Wait a minute, where are all those people arguing with me that panel manufacturing is a bad business to be in?
I would also like to point out that when FSLR acquired TetraSun last year, they were making similar claims and nothing has come to fruition yet.
This Silevo sounds like a startup company in the same mold as TetraSun. I am sure that Elon and company will make it work, but lets not get too excited until we see some actual numbers.
The good news is that whatever cost they are able to achieve, it is most certainly going to be a lot lower cost than what they pay to buy panels elsewhere. This is a big deal for SCTY, and one that I was advocating for almost a year. The downside is that they will have to raise more capital to build out manufacturing and a lot more dilution will be in the works over the next few years...�
1/1/2015
guest To be honest, I am floored. I have attended a shareholder meeting but there were indications of this sort of thing happening. The management was optimistic, as expected, but I must admit this news is beyond my expectations. It's bold and aggressive and I like it, too.�
1/1/2015
guest Wow.
SPWR produced 1,2 GW in 2013, Suntech around 2 GW, FSLR 1,8 GW. Worldwide total production in 2013 was just under 40 GW.
So just jumping in with 1 GW and soon expanding to 10 is huge.�
1/1/2015
guest I reiterate - Solar Gigafactory�
1/1/2015
guest I'm excited because it seems like Elon has been involved in this decision to acquire Silevo and to plan to build the massive plants. The blog post sounds Elon.
Also I think Elon is probably the smartest guy out there to evaluate new tech/companies in light of their tech, business model, and also practicality to scale. It's quite obvious he's evaluated Silevo and it's quite obvious that Elon is very excited.
I'll be looking into Silevo later today.
But initially I'm very excited. There's no other company in the world who's talking about making a 10GW solar plant.
This might open up new sectors for Solarcity if they can significantly lower their panel costs. Imagine if they can get into utility-scale power plants but provide the whole package - panels, install, stationary storage, maintenance. If the panels are as good and cheap as Elon and the Rive brothers say they are, then it's totally possible.�
1/1/2015
guest Here's more info on the Silevo acquisition put out by Solarcity:
http://files.shareholder.com/downloads/AMDA-14LQRE/3206410324x0x762403/aa368a6f-c0ba-4164-8068-be869edd4e98/Sunflower%20Investor%20Presentation%20FINAL.pdf
There was apparently a conference call this morning. If anybody has a link to it, please post.�
1/1/2015
guest I agree with you, but just wanted to point at that it will take a lot longer to build out 1GW of manufacturing capacity than some people might expect. 10GW is a long ways down the road 5+ years or maybe even 10+ years.
Panel manufacturing is still very capital intensive and will require a lot of capital raising that quite frankly SCTY does not have. It will be a very dilutive exercise for SCTY shareholderd.
Ironically, SunPower CEO just said in an interview that 5,10,maybe 15 years from now it might not make sense for them to manufacture panels any longer and could license out their technology and have someone else build panels for them. It is too capital intensive and they would rather use capital to do projects.
In the end though SCTY really needs to make its own panels, so this is a good move for them.
- - - Updated - - -
Thanks for the link.
A lot of fluff and no real (important) information in that presentation (like all other companies always do).�
1/1/2015
guest There is a lot of good reasons for this. The Tesla gigafactory will be powered by solar and wind. That means off the bat, SolarCity has a huge order of solar panels to fulfill. And with solar + battery solarcity will now have a full coverage.
Solar manufacturing is a very competitive market but solar + battery is going to belong to only Tesla and SolarCity.�
1/1/2015
guest The GF is a very small order of panels...�
1/1/2015
guest Definitely valid points. SCTY will need a lot of capital to build these plants.�
1/1/2015
guest +1.�
1/1/2015
guest Solar City will be so much more than an installer and supplier of solar panels. Guys. Gigafactory. Solar + battery energy storage. I'm working with the Solar City engineering group right now to put a demo storage battery in at my house (hopefully in time for the TMC Connect bbq, but waiting on permits) that could eventually allow me to be off the grid if I desired.
I believe that the gigafactory is still bigger than we can comprehend right now. And I believe that Solar City plays into that vision. Elon does nothing in a silo. Everything is interconnected.�
1/1/2015
guest Why do you say that? They will probably need at least 50,000 panels if not much more (You have to charge and discharge all those batteries just for testing/QC, so charging 35-50 GWH of batteries multiple times is going to need some power). Plus pretty sure Tesla plans to make multiple gigafactories in the long run.�
1/1/2015
guest I am running another thought experiment. Two points.
Point I: Confrontation / Legal Risk
I realize that there is a long history between utilities and photovoltaic (PV) producers, since 1960's to be exact. So, is there a risk of utility companies fighting back in the same manner as autodealers did against TSLA? After all, companies are "persons" and as such they have a 'right for life'... News or hints of news for legal battle might end up gyrating the stock price, I think.
Here is a set up that I have:
1) GOOD NEWS: There is public sentiment in favor of renewable energy.
2) GOOD NEWS: Some traction with PV sales & retail customer base.
3) GOOD NEWS: Geopolitics and oil price fluctuations.
4) BAD NEWS: There are entrenched interest groups with deep lobbying pockets.
5) BAD NEWS: Utility companies own the grid.
Possible considerations:
a) Declining cost of PV's,
b) Battery storage.
What am I missing? What factors might tilt the balance of power? And what could be possible dynamics / what-if scenarios?
=====
Point II: Housing Design
PV production by itself does not seem sufficient to me. Incremental improvements in consumption even with factories rolling out solar panels en masse would not slow down the rate of CO2 emission fast enough. In the US, housing is re-built at around 2% annually...
Unless we start building new houses & office buildings with embedded PV's within the construction material, e.g. roofs, walls, and windows, I don't see fundamental changes in user lifestyle. Perhaps the next move for SCTY would be to buy one of construction companies and build houses with an entirely new concept in mind?..
Please feel free to make counter-arguments and critique. I would appreciate that. Thanks!�
1/1/2015
guest That is an extremely small order in the grand scheme of things.�
1/1/2015
guest I think the good news has triggered a small short squeeze. There's no reason for the price to have kept going up except people who feel forced to buy.�
1/1/2015
guest Good news. Important points from the presentation:
� Only six core production steps
� Highly automatable
� Off the shelf equipment from the semiconductor and flat panel display industries
� Use of standard n-type wafers
� Lower labor content per module due to higher efficiency and increased automation
Each of top ten solar panel producers already produce more than GW a year. And those top10 do increase market share rapidly at expense of smaller manufacturers. But with SolarCity being one of the biggest solar panel customer around Silevo as part of SolarCity could make into top ten in no time.
�
1/1/2015
guest Responding to:
Short-Term TSLA Price Movements - 2014 - Page 509
Convertible bonds issue should dampen implied vol. on the longer dated options (LEAPS), right?
Also, I think SCTY would issue additional equity to satisfy the convertible bond hedge. -- Typically hedge funds short the stock to hedge against the credit risk on the bond. Since the supply of equity is limited (or hard to borrow), sometimes companies issue additional equity, which helps with overall fund raising. TSLA in particular issued more common shares when it was issuing convertible bonds last spring if I remember correctly. Equity dilution was small.�
1/1/2015
guest Is anyone expecting a capital raise soon with this surge in share price? If they are expecting to produce 1GW within two years, how much will that cost?�
1/1/2015
guest I am. I think that in the presentation it even says that they are in talks to raise capital.
I don't know how much it will cost, because it all depends on what kind of technology they are going to use. SPWR just spent $200m to build a fab for cell only production of up to 350MW/year. The Chinese on the other hand could probably build out close to 1GW of cell capacity with $200m.
I think that SCTY will need to spend about $500m - $1b in order to build out this manufacturing facility. But if they can acquire empty buildings on the cheap then it might be a little less.�
1/1/2015
guest That would be a page from the Elon-Tesla playbook...�
1/1/2015
guest Elon on CNBC: Answering questions about why did SCTY buy Silevo: "trying to think a few years ahead" - i.e. when solar really takes off ("booms") it's important to secure production capability (disregarding the current situation of oversupply). "Important to have high efficiency panels, more generation per surface area, lower installation cost because of less cables, less surface to cover".�
1/1/2015
guest Replay of the Solarcity Conference with Elon Musk, Lyndon Rive and Peter Rive:
http://www.media-server.com/m/p/sfwejz2i�
1/1/2015
guest I had a bunch of SCTY July 19 55 dollar, options which I sold yesterday for 50% loss. If i sold today I would have had 200% gain.�
1/1/2015
guest It's a bad business to be in right now. About a year ago, Elon Musk equated solar panel manufacturing with drywall manufacturing.�
1/1/2015
guest it is a bad business, labor intensive, capital intensive, low margin, high pollution. well .. just as bad as a battery business..
btw, below is what Musk said about solarcity
"Everybody thought that the panel was the problem but actually - it's a problem, but it's not the most important problem. The panel is somewhat commoditized at this point. "Making standard efficiency solar panels is about as hard as making dry wall. It's really easy. In fact, I'd say dry wall's probably harder." What is a thorny problem is trying to figure out how to get solar on tens of thousands, eventually hundreds of thousands, of rooftops. It's kind of like you've got to re-roof millions of buildings and then figure out how the grid interconnects work and then manage all those systems. If you've got hundreds of thousands or maybe millions of systems, eventually, you've got to manage all these distributed systems. You've got this really complex distributed utility, essentially. Which I think actually plays to their prior strength in creating really scalable software for managing hundreds of thousands of computers in a distributed fashion. That's kinda what they did and an awesome job"�
1/1/2015
guest I'd expect a raise as well. As for the cost of the plant, in the conference call Lyndon Rive mentioned a capex cost of $0.35-0.40 per watt excluding building cost. That's about $350-400m plus building costs. So, sleepy's $500-$1b estimate is spot on.�
1/1/2015
guest 1. Great conference call. I highly recommend listening to it.
2. It�s interesting that Elon was very active in the conference call. Seems like he had a lot of input into this decision.
3. Elon is super bullish on SolarCity�s future installations. He said, "We ultimately expect to be installing tens of GWs a year."
Let's take a deeper look at what it means to be "installing tens of GWs a year."
Let's say an average solar system is 7 kW (you can change this number based on your assumptions).
So, with 1 GW of panels/modules a year, SolarCity can install 142k houses per year.
With 10 GW of panels/modules a year, SolarCity can install 1.42m houses per year.
Yet, Elon said they expect to be "installing tens of GWs a year."
So, let's say SolarCity is able to eventually 50 GWs a year (ie., in 15-20 years). That would be 7.14m houses per year. This sounds kind of crazy, but this is what it means to install 50 GW per year of residential solar (of course, SolarCity could install commercial and utility scale as well).
I�ve stated in a previous post that I think SolarCity can reach 50-100 million customers by 2040 (SolarCity (SCTY) - Page 23).
If SolarCity reaches 50 million customers (would be quite likely if they eventually install �tens of GWs a year�), then let�s take a look at revenue.
If each customer pays SolarCity $150/month for electricity, then that�s $1800/year. Times that by 50 million customers. That�s $90 billion in annual revenue. Let�s say $10b in earnings. 15x p/e multiple. $150b market cap.
4. Interesting quotes:
Peter Rive - �We looked at every promising technology company we could find.�
Elon Musk - The key was finding �an advanced technology that was ready to scale�.
Lyndon Rive - �We can hit the point of providing energy at a lower cost than fossil fuels without incentives. If we do that the market is essentially infinite for the next 30-40 years.��
1/1/2015
guest You need to account for larger corporate installs. SCTY also own bid for HP's campus�
1/1/2015
guest interesting comment from VP of YGE,
"Darren Thompson - Vice President, Sales and Managing Director, Yingli EuropeMaybe I will give some comments and I can ask Robert Petrina to give some supplement. So basically in post Q1 and Q2, our shipment to U.S. is very strong and even during the -- before and after the announcement of the CVD -- preliminary CVD in early June, we still see a very strong demand from U.S. customers in the second half of this year.
Our customers are very actively talking with us about different solutions how to reason, fairly solve the issues through commercial solutions and also based on our current assessment and understanding of the background scope and even the potential anti-dumping duty which may announce by the end of July, we believe that such kind of announcement or additional cost that arising from kind of potential tariff will not significantly impair the second half of our U.S. market demand."�
1/1/2015
guest DaveT,
Have you looked into what Silevo is planning on spending in the Buffalo Riverbend site? According to what I have read, "Silevo, also based in Silicon Valley, has also pledged to invest $750 million and create 475 jobs." I don't know if there are any details about how Silveo is planning to raise this money or if it is up to Solar City to raise the capital now.
Also in that article it mentions:
"Cammarata said he expects all the necessary legal work will be completed in the next few weeks.
and
�Needless to say, there�s a lot of interest in closing this deal as quickly as possible,� Cammarata said."
It seems to me that a capital raise is imminent if they plan to close this deal ASAP
link to article: Riverbend details still coming together - Buffalo - Business First�
1/1/2015
guest Thanks for the article link. Here's another from the same website: Silevo sale may place Elon Musk in heart of Buffalo development - Business First�
1/1/2015
guest Excellent video interview from 2012 with Silevo's VP. He gives a good summary of their tech. PV America - Silevo - Chris Beitel VP Solar Energy Technology - YouTube�
1/1/2015
guest A question right out of the blue: I am considering to buy a considerable long-term position in SolarCity. Is there a place, post or other source where I can get a reasonably comprehensive overview of the company's finances and future plans? I get the vibes that this is a company which is really well positioned for big growth in the renewable energy sector, but it's a bit hard to find a comprehensive summary of what is going on.�
1/1/2015
guest Thanks for this post, but I am going to modify your numbers a little bit:
A 7kW system should produce roughly 800kWh per month give or take depending in large part on geography. I am currently producing electricity at about $0.025/kWh wil my solar system. So to get $150/month SCTY would have to sell electricity at close to $0.20/kWH and that is never going to happen. I think that a more reasonable rate in the future will be about $0.05/kWh. So each customer should be paying around $40/month. Then you will need some battery storage since net metering will be going away (remember we are talking several years in the future), so this might be an extra $20/month.
So I would use something like $60/month pre customer instead of $150, which brings the market cap down to $60b (how ever many years down the road you expect this to happen). But such huge growth will lead to huge dilution, so at $60b market cap we might only see a $300 stock price 10-20 years down the road with 20m shares outstanding.
500% return in 10-20 years would be a great return still.
Just want to caution you guys on extrapolating earnings deep into the future in the solar sector. You have to really be cognisant of the fact that the cost of solar drops 50% every 3-5 years and this means that a lot less revenue will be earned per watt,whether you are an installer or manufacturer. You cannot say SCTY is doing $X per Y watts today, so when it does 10Y watts in the future it will be doing $10x of revenue. It will be more like $3-4x revenue for 10Y watts of installations. Same goes for panel manufacturers, but they already suffered the 1x/1y to 3x/10y in the 2011-2013 time frame. So for them going forward, it will be more like $6-7x revenue for 10Y watts...�
1/1/2015
guest Also, in 5-10 years time IMO the leasing model will be dead. Residential systems will be very cheap to buy and there will be mortgage like products out there with low interest rates for those who can't afford to pay up front. There will be no reason to lease a system anymore.
7kW @ $1.50/W = $10k of revenue per system.
10GW per year = $15b in revenue for 1.42m customers.
DaveT on the other hand used $150/month or $1,800 per year per customer over 20 years. If you use these numbers then you are getting $51b in revenue from that same 1.42m customers.
$51b for 1.42m customers vs. $15b (according to my estimate) is a huge difference. So with these numbers you are looking at a $50b market cap and not $150b market cap.
I haven't read many research reports on SCTY, so I don't know how these analysts model out SCTY's earnings 5+ years down the road. But I would bet that they are doing it wrong and using extremely generous $/W assumptions. On the other hand, I would also bet that they are using a lot lower growth levels than SCTY will achieve in terms of watts installed per year. So those two errors will offset each other. I am just speculating here, but I know how analysts do research for other solar stocks and they have been way off over the past two years. Not even close to reality. Which explains the outsized returns that I have been enjoying in the solar sector.�
1/1/2015
guest SCTY is in my portfolio, not because I think they'll experience growth in the leasing part of the business, but because I believe they will become more and more integrated with the larger gigafactory vision. They have a large group of R&D battery engineers (100+) in the local area (some will be at the bbq here at my place next month), are looking way past the future we talk about for SCTY. I'm betting on them the same way I bet on TSLA.
I don't believe the standard way of analysis will work, just like it doesn't work with TSLA. Using that approach is valid ... but if I had, I would have missed out on the TSLA story. And I believe SCTY will have a similar, albeit smaller, story to tell, too.�
1/1/2015
guest Is "They" referring to Solarcity or to Tesla?�
1/1/2015
guest Sorry for the vagueness. Solar City.�
1/1/2015
guest That was good to hear, thanks for sharing the link! So when will SolarCity start using these new panels? Not until they build the plant in NY or will they go ahead and use what's available already from Silevo? I've had a SolarCity quote and est. but haven't jumped on solar for the house yet. Would love to get these new ones from them.�
1/1/2015
guest My guess is that it will take a while before SolarCity is able to use Silevo's panels. It appears that Silevo has a small plant in China that does 32 MW, but they've been planning a much bigger plant in the Buffalo NY area which SolarCity will be spearheading now. They seem to be targeting it to be completed in 2 years.
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Thanks for your thoughts. Going out 20+ years I figure there's a lot of room for error. Electricity cost IMO will be more than $0.05/kWh since SolarCity would be competing with the grid/utilities and I don't there's there's any realistic way where utilities will be able to charge $0.05/kWh.
But I think it's fine to have different numbers. My point being is that if SolarCity installs "tens of GWs a year" then it will be worth a lot more than it is now. I like a company that has a huge vision and a huge addressable market - and SCTY fits this.�
1/1/2015
guest Recent thoughts on Solar PPA/lease vs Purchase
I've thought about this a lot. I personally don't think the leasing model will be dead in 5-10 years. I there's there's a strong likelihood that it will remain indefinitely. I liken it to a subscription model where people are paying for a service. But let me qualify this some.
I understand the appeal to outright purchase a solar system. I've looked into both leasing/ppa and purchasing, and if one has cash to spend the purchasing works out to be the better deal. The thing is the market is so big and while many people will purchase, I think the PPA model might address a larger market than purchasing (as it is currently doing so). But I think the PPA model needs to grow and adapt in order to do so. Perhaps Solarcity's bigger competition might be some companies that offer affordable financing to purchase and are as relentless as SolarCity to drive down the costs of solar. But SolarCity will have plenty of time to adapt and make their PPA program much better than it is now.
I actually had a great idea (at least in my opinion) yesterday when I was talking a walk. I was thinking how can SolarCity scale their PPA model and compete effectively if/when solar becomes much more affordable to outright purchase and there are compelling financing vehicles available to do so. Here were my ideas:
1. SolarCity should adapt their model to allow the customer to scale up or down their system when they want.
The idea is similar to Amazon Web Services (AWS) which allows developers to scale up or down computing power whenever they want. In SolarCity's case, if they can allow a customer to start using their service by installing a very small system (ie., 2kW solar system) just so that the customer can avoid the high tiers their paying (ie., I'm paying $0.33 for tier 3 energy). And then SolarCity could allow the customer to "scale up" the system whenever they want. In other words, if the customer wants to add solar power, SolarCity would come by and install more panels (of course this could be complicated with mounting, permits, install... but this is the magic that SCTY will have to create and solve). So, if I wanted to scale up my 2kW system to 5kW, SCTY would be able to do so seamlessly (they would just come by within a month or so and do it in a few hours). Now, this is going to take some major innovation from SolarCity to be able to do this type of "scaling" or "adding" to an existing solar system in a cost-efficient manner. Perhaps they can make their mounting system more modular (if it isn't already enough so) and they can streamline the permit processes even more.
2. SolarCity should offer customers to remove the solar system at any time at no cost.
So, if I wanted to remove my solar system, I should be able to request that from SolarCity and they do it (ie., within a month) and at no cost. Sure, it will cost SCTY to do so (man-hours, etc) but they could recycle the panels, inverter, mounts, etc.
The reason why I think SolarCity needs to offer this is because there are situations where a customer might want that kind of flexibility to remove the system. One example is I might want to rent out my house but I don't think the tenant will appreciate/use solar (who knows who's out there). Another example, if if I'm selling my house and the next owner doesn't have good credit so it might be difficult to transfer the currently structured PPA over to the new owner. In this case, I could just request SolarCity to remove the system at no cost to me.
3. IMO the ability to scale up/down a solar system and the ability to remove it at no cost would allow expand SolarCity's addressable market.
One example, is I would immediately get started with SolarCity and have them install a 2kW system at my house and get out of any Tier 2/3 usage, so my electricity bill will drop substantially. I'm thinking of perhaps moving in the next year or so, so that's why I wouldn't want to buy/purchase a system outright. And if SolarCity could offer this on-demand scaling service where I could scale up or down my system size at anytime (and remove it at no cost), then I probably would be tempted to forgo purchasing a system completely and just use SolarCity. Sure there will always be people who will outright purchase their system, but if SolarCity's PPA program offered this scalable optionality (with no-cost removal) then it would make it much more appealing to even more people.
Imagine if SolarCity offered this scaling up/down feature, no-cost removal and no-commitment approach. SolarCity could get people started with a small 2kW system to get people off high utility tier usage. And if it was no-commitment (no-cost removal) and free scaling up/down, I would imagine a flood of people (1m+ this year alone) would take SolarCity up on this offer.
Now some people might say that what I'm proposing is impractical or impossible. But as SolarCity scales, their cost improves and their able to improve their product services. What I'm proposing might not happen overnight but it might be where SolarCity is headed. Especially so, since Elon Musk is SolarCity's chairman and he likes to view things with First Principle. And what I'm proposing is what I think solar ought to be:
- no commitment, no initial cost
- can start off with a small 2kW system (or even smaller) to get off high utility tiers
- can scale up my system at anytime for no cost
- can scale down my system at anytime for no cost
- can have my system removed at any time for no cost
Compare this to outright purchasing/financing a solar system. Outright purchasing/financing a solar system might be the better option for those who are confident they're going to be staying in their current house for the next 10 years. But for those who think they could move in 2-5 years, they might want more flexibility and convenience. Also, purchasing/financing could require additional complexity (longer applications, credit checks, etc).
Right now, SolarCity probably doesn't need to focus on offering what I'm proposing since their currently addressable market is so huge that they just need to provide energy for less than what the utility offers it for. As long as they do that they can probably continue to grow rapidly for the next several years. But at some point as solar costs come down, SolarCity will need to make their product/service more compelling (more convenient, more flexible, etc) than what will be offered for those who outright purchase/finance their systems from other companies. I'm fairly confident that SolarCity will be able to do this... especially with Elon as Chairman and SolarCity following the Musk Ethos of relentlessly cutting costs and improving their product/service.�
1/1/2015
guest for what it's worth- in 20 year time frame, given the current trajectory on both panel/battery; I don't see how the Utility (as currently defined) survives as a producer at any price- they'll be more of a grid operator probably sinking more power than producing; the consumer of power will have it available for nearly free grid or no-grid; As opposed to a communication network, the purpose of the power interconnect disappears when the Sun is the distributor - agree with Sleepy on this one and maybe even a step further. I see in 20-30 years a virtual no cost for electrical power as we know it- that's going to become a major disruptor of it's own as the Solar industry essentially eats itself into the same position PC manufactures have created for themselves- precisely because they achieve the mission- making limitless power available to everybody, everywhere for next to nothing�
1/1/2015
guest In a utopian society, energy (and food, eduction, healthcare, housing, etc) is all provided for free-of-charge. But in reality, it's not going to happen. Energy costs money and for the foreseeable future will cost money. There are too many costs associated with harvesting, storing and delivering energy for energy to be free. Somebody has to pay for those costs. Now if you say the government will step in and subsidize energy to make it free, that's a different story (albeit a very, very unlikely one).�
1/1/2015
guest What about using roofing companies to tie in a solar system installation with getting a new roof? The average roof lasts between 20-40 years depending on material. I think a good time for people to consider putting solar on their roof is when they have to get a new roof installed, which if 30 years is the average, means that about 3.3% of 'used' houses will need their roof replaced each year. This is a huge market for potential solar installations and tying in solar installation with the roofing companies somehow (discount if packaged together or something) could be huge. Roof companies could get a 'finder's fee' for every successful referral they make, which would make them motivated to sell the idea of solar to customers. The basic cost savings on electricity could be shown and I am sure lots of people would be willing to chip in more on their roof to get solar installed at the time for huge future cost savings. People would know that the panels won't have to be taken down and replaced (which I am sure has a significant cost to do + potential for damage) with a new roof so they would be more willing to do it. If someone knows their roof will need to be replaced in the next 5 years or so, most would not consider getting solar installed before the change (this is the situation I am in and the reason I thought of this). The goal would be to try to make solar an automatic consideration every time someone needs a new roof. I think now any time a new house is built, solar is at least considered by most builders. If this same consideration could be made every time a new roof is installed, then the demand would be much greater.�
1/1/2015
guest not free- virtually free relative to today;
strongly disagree with "Energy costs money and for the foreseeable future will cost money"; In 30 years, it'll cost so little money, you won't think any more about it's cost than you do a cup of coffee (and not Sbux)- standard issue on every home/apt/office building built into the amortized costs of whatever you live and work in. Similar to WiFi today- in 30 years- cost of electrical power will be a non-issue. Not much more than the cost of sunlight is today- just my opinion of course�
1/1/2015
guest While there are certainly discerning buyers, the vast majority of solar power purchasers consider their electric bill a "monthly bill". SolarCity's PPAs sell to that mindset. Most residential customers will not "burn the calories" to evaluate the differences between purchasing and leasing.
It boils down to "can you lower my monthly payment?"�
1/1/2015
guest First, I don't think energy and WiFi are good comparisons in terms of cost. But even if you do compare them, people still pay similar prices for the internet connection now compared to 15 years ago. And similar prices for their cell phone plans now compared to 15 years ago (in fact, people probably pay even more monthly now). Cable TV, probably people pay the same or even more today.
WiFi, cable/sat TV, cell phone, etc. all have infrastructure and service costs associated, so even though the bandwidth speeds have increased at an impressive rate the companies providing those services still need revenue to pay for their associated expenses.
With energy, for the foreseeable future (ie., next 30 years) there will be required infrastructure needed to harvest, store and deliver energy and those infrastructure and servicing costs are not trivial.
Also, technologies like bandwidth, cpu speed, etc. benefited from tremendous exponential growth in speed (ie., Moore's Law, Nielsen's Law, etc). But with solar the rate of improvement is not as fast (ie., panels aren't doubling in efficiency every 18 months). Also, solar has a lot of associated fixed costs that are unavoidable like the cost of materials for the panel/module, mounting, inverter, permits, etc.
The point being is that I fully expect energy to not be "virtually free" in 30 years. Rather, we'll probably pay less per kW for it but we'll probably use a lot more of it (ie., average 2 electric cars per household, etc) so the average we spend on electricity in 20 years might actually be similar to what we spend now... maybe a bit less but definitely IMO not virtually free.�
1/1/2015
guest I just need to vent. I am short SCTY now after this run up and I can't stop second guessing myself, that I am going to be slaughtered tomorrow as it runs another 5 dollars up.�
1/1/2015
guest Then this is not the game for you. The only way to win is not to play.�
1/1/2015
guest I am going to have to agree with kenliles on this one:
My solar system cost me $1.15/W out of pocket and at that rate it costs 2.5c/kWh to produce electricity assuming that it lasts 30 years (I have a 25 year warranty).
Right now small business installers are installing systems for as little as $2.50-$2.75/W. 5 years from now we will see systems installed at under $1.50/W. 10 years from now at under $1/W.
At $1/W you will be paying about 2c-3c/kWh depending on where you live.
At $1/W the average solar system size (installed by SCTY) of 6kW will cost only $6000. Nobody is going to pay $150/month or $1,800/year or $36,000 over 20 years for a $6,000 system. You can easily finance a $6,000 system over 5 years and pay $100/month (if 0% interest).
The solar industry is really not much different from the semi-conductor/computer industry: it just keeps getting cheaper and cheaper.
20 years from now solar will be a lot cheaper than $1/W. BTW, JKS built its recent power plant at $1.13/W, so we are already there.
I still think that SCTY will grow into a huge company, but that it will require huge dilution (which we have already seen over the past year and will continue). It is also operating in an industry where its revenue per watt will decline by 75% in 5-10 years. Elon Musk IMO does not care about how much money we make on SCTY or TSLA shares. It has become very obvious to me that his only goal is to save humanity and he doesn't care about shareholders at all. The only reason he wants the share price to go up is to be able to raise more capital to grow as fast as possible (for humanity's sake). This strategy will definitely deliver outsized returns for TSLA shareholders going forward. But when it comes to SCTY, there just isn't as much upside as in TSLA. It will probably do better than 10% per year going forward, but I am not sure. I don't think that SCTY will come close to TSLA when it comes to shareholder return from this point in time.
There is a lot of extremely exuberant valuation methodologies applied to SCTY in this thread and I fear that a lot of people are ignoring the economics of the solar industry.
If 10 years from now SCTY is installing 10GW's per year, then that is $10b in revenue. Applying a very generous 10% net profit margin gives them $1b in net income. 15x PE is a $15b market cap. Share count will most likely double, which means that SCTY would still be trading under $100/share 10 years from now, which would be an awful return on investment. I have purposely ignored battery and other potential business opportunities just for illustration purposes to show how much everyone here is overvaluing SCTY's stock price appreciation potential from the solar side of things.�
1/1/2015
guest If I t goes up $5 tomorrow I will join you :smile:�
1/1/2015
guest I'm really confused here. Ken, so can you clarify what you mean by energy being "virtually free" in 30 years? Do you mean people will have a $5 monthly electricity bill in 30 years? I'm trying to clarify into numbers here because I'm having a hard time grasping your reasoning and what is "virtually free".
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1. I doubt that in 10 years the average cost to install solar will be $1/W. If you said $1.5/W in 10 years I might say it's possible, but $1/W is really pushing it.
2. Electricity usage will likely go up in 10 years (i.e.., people having electric cars, etc). It might boost the average size of a system to 10kW. So, $15,000 (for a 10kW system at $1.5/W) is still a hefty amount to finance and while there might be compelling financing vehicles for people to purchase, it doesn't mean that SCTY can't compete with extra convenience and flexibility (like the options I've listed prior like free scaling up/down, free takedown, etc).
3. If SolarCity reaches $10b in revenue within 10 years, the market will likely give them a much higher P/E than 15 since the SolarCity model is a subscription-type model with recurring revenue (ie., Netflix) so future revenues are more secure. Also, if they reach $10b in revenue in 10 years, their growth rate will be very high and it'll warrant a higher P/E multiple, maybe 20-30x.�
1/1/2015
guest 1. The DOE Sunshot Scenario is looking at $1/W by 2020 for power plants and $1.50/W for residential. The avg. residential installation cost was $2.20 in Germany 1 year ago. I have no doubt in my mind that we can get to $1.50/W by the end of this decade, so $1/W 10 years from now is reasonable although high inflation would put a dent of course.
2. 10kW is not possible IMO since SPWR avg. system size is about 8kW and they said that the limiting factor is constrained roofs. New housing will have to be built with solar friendly designs in mind, i.e. lots of southern facing roof space. At $1/W SolarCity will not be able to afford to scale up/down, free takedown, etc. Way too labor intensive, i.e. expensive.
3. PE ratio's in the solar industry are going to fall below 10x PE, since it is a commodity business with small margins. If SCTY can do $10b 10 years from now, and then $15b in year 11, $20b in year 12, then yes it will deserve a high PE ratio, but it will not be able to grow that fast. Chinese solar companies are growing revenues over 50% YoY and they are getting 6x PE ratios right now.
Anyway, my numbers are just hypothetical and for academic purposes to show that the future earnings potential in the solar industry is not that great. I am not talking about $10b from revenue from customers who make monthly payments. I am assuming $10b in revenue from selling systems, since I don't think that leasing is going to make much sense 10 years from now. If they are leasing 10GW 10 years from now then they will only have $1-2b of revenue at best and not $10b. You are misinterpreting my numbers here: I am using a 100% cash sale, while you are applying my numbers to a lease scenario.
Also, as I posted in the other thread: SCTY's SG&A and interest exp. is over $1/W right now (82MW installed last Q and $88m in SG&A+interest exp), and this is going to be a big problem if they can't get it down to $0.10 - $0.20/W (which seems pretty impossible right now). A mom and pop shop would be less than $0.10/W on these unnecessary costs. So if SCTY can't bring the costs down then it could be a huge problem. If they do install 10GW per year, then they will need to keep corporate expenses at under $2b per year. It could be doable, but they are already at $0.5b/year while doing 20x less than 10GW.�
1/1/2015
guest The balance of system costs for residential solar are still very high in the U.S. I've read some case studies on Germany's solar history and it appears they have a much more streamlined permitting process. Also, in Germany after they reached a certain cost per W, the low-hanging fruit to reduce costs was taken so they've been experiencing a much more difficult time to decrease costs. I would imagine a similar thing to happen in the U.S. Once cost per watt falls below $2/W, then it becomes increasingly difficult to reduce costs. Although it will happen, it might not happen as quickly as some people want/expect. Although the drop to $2/W might happen faster than some think. So overall, I think the drop to $2/W is low-hanging fruit but after that it gets tougher. So I definitely wouldn't expect $1/W in 10 years for residential solar in the U.S. Anyway, it's probably semantics we're dealing with in some ways because it's tough to forecast that far out.
In 10 years, it's likely that they can pack more watts in each panel so 10kW might be possible.
If SolarCity offered me an on-demand no-commitment PPA with the ability to scale up/down w/o additional cost and free takedown, then I would definitely pay a premium for that service and probably would choose it over outright purchasing a system (considering I plan to move in the next several years). I'd start with 2kW and scale up from there. And if I ever wanted to move, I would have them take it down for free. The more I think about it, SolarCity will have to more in this direction of offering superior service/flexibility/scaling to customers to make it more attractive than outright purchasing/financing. But for now they have more than enough addressable market competing with utilities.
Thanks for the clarification. I don't think SolarCity will sell many systems in the future. I think they've dropped that business model in favor of a PPA/lease model. In the future I hope they adapt it further into something even more flexible like I've described.
Regarding SolarCity's revenue 10 years out, if they reach 1 million customers in 4 years then it's possible they could reasonably reach 5 million in 10 years. If each customer pays $130/month ($1560/year), then that's $7.8 billion in revenue. I'd give them a 15% operating margin (I know you give them a 10% but I think as a service business they can get fairly high margin of at least 15%). So, $1.17b of profit. Since they'd be growing very fast still and it's a subscription business (future revenue is more or less guaranteed), I'd give them a 30x multiple at that time. $35b market cap (or course there will be some dilution due to secondaries, but still not bad for a market cap 10 years out).
I'm not too worried about SolarCity's expenses. They are growing 100% per year and are bound to have very high expenses. They are scaling out their warehouses, equipment, teams, R&D, etc. However, as they ramp up installations to reach 1 million customers in 4 years, those expenses will drop significantly on a cost per watt basis as they reach greater scale.�
1/1/2015
guest Dave, to get this reference (and I fully admit, not an easy picture to draw from our current context for power), it's important to return to first principles. There is no inherent 'cost of energy'- it's everywhere for the taking by anyone. And it's already distributed. You receive it everyday in the form of heat when the sun's photons hit your face and those molecules convert it to heat- how much do you pay for that heat? the cost of being alive whatever that is- it's virtually free.
Let's try to paint a picture for the image I'm describing:
The transition I believe we are making over the next 30 years, is akin to discovering how to use fire (think Castaway here). Long ago that used to cost a lot- it's now free (I call the current cost of manufacturing and distributing matches free- because it's so small the cost is barely more than breathing). When I say virtually free, I mean so small that, for example, the average person will pay for all their energy use for a year with 2 days labor. The cost will be as low as you consider matches today- or pencils- or perhaps a cell phone if we include storage for overnight usage; The point is not whether it takes 2 or 4 days to pay for your yearly energy use- the point is it's so low, it's no longer considered a human want or even concern, it's considered a given (because frankly it is by the Sun fusion reactor). And inevitably(I'm saying 30 years), except for a tiny cost to manufacture a deck of playing cards, there is no inherent cost required.
This comes about because it's already there- the photons that impend on the space you occupy contains more energy than you can ever use, you won't pay more for it than you pay today to breath and be part of society. We have crossed the threshold now technologically to convert a tiny tiny number of the free photons to electrons as a useable form. It's already there, pre-distributed to every sole for free- with the current trajectory of both technology and cost to manufacture the 'convertors' to produce the 'matches' for everyone to purchase for pennies per day.
I'm trying to form an image here of what I believe is inevitable. The flat panels today are sufficient to make this inevitable, but later they will be micro-mirror concentrating(within the panel) and convert many times more photons per square meter than today- exactly like the semiconductor path- The energy captured in a few square meters will OVERpower everything you'll need for a household. The problem will reverse itself and the issue will be how to safely sink that much power- which likely as not will REQUIRE DETACHMENT from the grid rather than attachment- the sun has already resolved both production and distribution for free. The cost of the convertors(photon>electron) will fall to the equivalent of picking up a couple of plywood panels at home depot- so yeah, there's a cost, it's not free, and yes it's virtually free.
You'll pay more for the plywood roof over your head that today shields that head from getting burned by too many photons slamming on it every day, than you'll pay for panel surface area sufficient to convert some of those photons to electrons for you're own use. In fact, it's will be part of the same cost integrated into the material protecting you from the very energy you used to pay for- you'll now pay more to protect yourself from it than to collect it for use in a different (electrical) form. And I'll go a step further, the technology for this is already known, the scaling of manufacturing and distribution channels for those 'matches' is all that remains- only this time it will happen in compressed time- more like the cell phone did- 30 years or less. It's already done and baked in my opinion there's no way to stop it now.
that's what I mean when I say 'for free'�
1/1/2015
guest I would say that SCTY is also looking beyond installation of residential solar. From the comments by Elon, JB, the cousins it seems that they are looking at what it will take to move the entire grid to renewables (not just solar). This includes batteries and, very importantly, grid level capabilities to generate and shift power. I think this is what Elon was discussing the other day with his comments about software.
Right now SCTY is focusing on leasing and end to end installations at home and business level because it's the easiest money for them. I'm sure, later, they will be happy to sell you batteries, panels and monthly subscriptions to their management software that probably will buy/ sell power for you automatically.
I also disagree that this will all come at massive dilution. There is plenty of profit available and Elon also realizes that he can't do this by himself. He has to show others how to make reasonable margins in order to get other companies to contribute to scale - similar to Tesla.
Just like all all growth companies returning dividends to shareholders isn't the primary goal. It is to grow value in the overall business including using growing cash flows to finance expansion.
in other words when it comes to Elon - think BIGGER!!
after all he seems to have set himself a goal of saving the earth so he can start colonization of Mars.�
1/1/2015
guest SolarCity finally did something to make me interested in them, so I'm going to dive right in with my "expert" opinion after having started my Solar research by reading the last two pages of this thread (because reading just one page wouldn't be very thorough). Though, I suppose that technically I just skimmed the last two pages.
Still, given my vast insights on this subject, and the maybe one word in three that I actually read over the last two pages, I would say that the one statement that I know I agree with is the one I highlighted. I would contend that at no time in the next trillion years will Humanity say "oh hey, this is enough energy, lets call it a day".
And the maximum amount of insolation available to any homeowner probably will be insufficient to that homeowner's needs even in the relative near term. To the extent that there are periods where typical homeowners have excess capacity, there will always be a buyer for the energy.
How SolarCity itself fits into all of that is much more problematic, and one reason why I haven't invested before now. But with this vertical integration into panel manufacturing they are well positioned to be able to control their destiny to an extent they were not before. I always hated how they seemed to be mainly a finance company peddling risky securities based on an untested business model.
With the moves they are announcing to massively ramp up production capacity and their commitment to become the IP leader in the industry they are much better positioned to switch up their business strategy if their leasing model goes south on them.
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Yes, what we've seen over the past 6 months is Elon publicly committing to a program to take over the world, where previously we had just speculated that he was planning to take over the world.
Specifically, he is going to leverage the "Musk Mystique ETF" effect to finance an endless number of battery and solar module plants to vertically integrate the competition into flaming dust bunnies.
He already has the dominant IP (which he just semi-open sourced) in the energy storage side of things, and he has just committed to acquire whatever IP he needs to acquire on the solar generation side, while simultaneously installing one of his signature ultra-R&D/engineering teams into SolarCity so that he can replicate his IP success in Tesla and SpaceX.
In fact, this announcement just constitutes Musk deciding to import Musk Industries "Best Practices" of vertical integration and R&D/Engineering into SolarCity. He is fundamentally changing the nature of SolarCity from some hinky finance and installation company into a technology and manufacturing powerhouse.
I was always fuzzy on what the fundamental identity of SolarCity was going to be moving forward. Not any more. It's going to be just like Tesla or SpaceX, only for solar technology.�
1/1/2015
guest $1/W is unrealistic unless you assume that the solar components are free and labor costs don't go up. In the $2.50/W that an installer charges, 75c/W for panels, 40c/W for inverter, ?c/W for other components. Can't be much less than <1$/W for labor.
Personally, I highly doubt that the pre-rebate price can go much under $2/W. 1$/W for total system components and 1$/W in labor/permits etc. Also comparing JKS building a utility scale project in China at just over $1/W is not comparable to a retail rooftop installation. For the price to hit that kind of low we need to see something radically different like using panels as the roof material in new construction/roof replacement. I say even if total component cost goes down to 50c/W, labor will rise enough to keep the cost around $2/W.�
1/1/2015
guest I think it would be wise for SCTY to think longer term and become a roofing company. If the PV system $/W keeps falling (and SCTY's move to produce is clearly focused on keeping that going through cost-efficient improvements in panel efficiency), and rooftop solar becomes as ubiquitous as I think it will be, then to minimize overall $/W they need to apply Muskian holism and think about the whole issue of roof installation, maintenance and replacement. With that approach, plus their storage arm, they would be able to get in on new construction.
I think that holistic thinking on solar could drop the labor costs significantly. Historically the roof just kept the elements out: with active components there, we just need to start building with the expectation that people will need to be up there. Easy access and a safe environment (railings anyone?) would make labor a lot cheaper. Enclosed ladder and railings, anyone?�
1/1/2015
guest And I disagree with you:
They already diluted shareholders 100% in the past two years alone. And their balance sheet is still really ugly. They have a very capital intensive business, and their cash flows are extremely negative which means a lot more capital raising required.
They issued ~3m additional shares to purchase Silevo and will issue another ~2-3 million in the future. That is an extra 5-7% dilution just to buy the Silevo technology. They will have to dilute another 10-15% just to build out 1GW of manufacturing capacity. Building out 10GW's will dilute a lot more in the future.
SCTY has been diluting shareholders to the extreme over the past 2 years. So now that they are entering panel manufacturing, which is extremely capital intensive, you are saying that there will not be a lot of dilution required? It just doesn't add up to me and sounds like a lot of wishful thinking.
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Completely disagree with this one as well:
SCTY does up to 2 (or even 3) systems per day per crew. Lets assume that a crew is 6 people doing one system in 4 hours. Even if you pay these guys $20/h (which is a huge stretch) then you are only paying $480 for labor. The avg. 6kW system size means that labor costs are $0.08/W.
Then you have inverters already under $0.20/W and panels are already made at under $0.47/W. Roof racking material is cheap.
$1/W is very doable in 10 years!
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Completely agree with you on this one.
But it raises the question in my head of why am I investing in the solar sector if their won't be any profits in it?
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Good discussion DaveT and this is what makes a market.
If you are correct and 10 years from now residential systems still cost almost $2/W or even $1.50/W and SCTY is able to keep its highly profitable leasing model, while doing 5-10GW's or more per year, then the stock will do great and might even be a 3-5 bagger if dilution is kept at bay.
But if I am correct and the world moves away from the leasing model and installation costs are closer to $1/W, then I can see SCTY still trading under or around $100 10 years from now, especially if my heavy dilution scenario comes into play.
One other note I wanted to make is that buying a system on your roof is not a liability if you sell your house. If you pay $6000 for a 6kW system 10 years from now and sell your house within 5 years, then 1. it will add value to your house; and 2. it already paid for itself. Your flexible/scaling lease option does not make much sense in my mind and I don't think that they will ever implement anything like this especially since it is really hard to reuse panels since they already suffered degradation.�
1/1/2015
guest I do not quite understand the comparison. A match can light a tiny fire. To keep a substantial fire burning (enough to cook or keep warm), you would need some sort of fuel or firewood. In that sense, fire today is not free. To keep a fire burning is still a noticeable expense today, isn't it?
You are also assuming demand for energy use will not grow proportional to the ability to supply it.�
1/1/2015
guest Great discussion sleepyhead, DaveT and kenliles. Very interesting to follow. I think sleepy's analysis are the most realistic ones, coupled with ken's where the margins for SCTY will be coming down and where the leasing model will die off. However, it was surprising to many (including my self) to see SCTY aquire a solar panel producer. This means they are agile, forward thinking and hungry for more. If SCTY does become what it looks like it's becoming: a true integrated solar company they will be the first one's to have, within one and the same company 1) R&D 2) Production of panels 3) Sales, installation and maintenance of whole systems 4) Financing. It's hard to gauge the importance of having all of the components integrated in one company - perhaps this gives them possibilities in the market that are difficult to foresee as of today?�
1/1/2015
guest just a metaphor to to paint a comparative picture. It was not meant as a literal regarding the fuel itself.
The cost to start a fire in early days of humanity was high (hence the reference to Castaway movie)- today the cost is zero and freely distributed. Nothing but a visual metaphor for where I see Solar moving in 30 years from today's position. 40 years ago, your PC filled a room and was much less powerful; today it's in the palm of your hand. That's the same 30 years we'll see in Solar imo. Flat panels using nano-structure short focal length parabolic concentrator channels 'manufactured' with 3D printing is one of several paths (think SPWR C7 in a flat panel made using 3D printing)- just one of many paths. that's my story and I'm sticking to it
Invest now and for the next 10-15 years, then get out because it becomes completely commodity with low and shrinking margins imo. It's the transition investment that will make the money- then move to the next one. These types of disruptions now occur in decades, not lifetimes; those are my thoughts...�
1/1/2015
guest This is my same thought process. Wall St. is very short sighted and has a very hard time of seeing the future more than 3 months out anyway.
I plan on investing in solar until exuberance hits and that is when I will slowly begin pulling out of the industry. I aslo think that in the long run there will not be that much money made in the industry, since margins will be wafer (pun intended) thin.
In the mean time though, we are heading towards a supply/demand balance in the industry, which means higher margins and more profitability for solar component manufacturers. Once these prices go up, then those who own the manufacturing will be able to build projects a lot cheaper than those who have to buy panels. This is the reason why I invest in panel manufacturers (SPWR, JASO, CSIQ, JKS, TSL) that are expanding into downstream. SCTY is doing a good move of entering into panel manufacturing but it is a very costly exercise:
I expect us to hit a recession about 2-3 years from now, which will coincide with the time it takes SCTY to get its manufacturing plant running. SCTY (like all other solar stocks) will tank in a recession, and that is when I plan on getting in to SCTY as a longer term investment; hopefully around $30, while letting today's shareholders hold the bag as SCTY continues raising funds to build out manufacturing. If SCTY takes off and goes to $150 before hand then I will be shorting that stock heavily if a recession is looming.
That's my game plan for SCTY and I am sticking to it�
1/1/2015
guest You are really optimistic�
1/1/2015
guest Take away half the time frame and I will meet you in the middle at $1.50/W by 2020�
1/1/2015
guest I agree with low margins in the solar industry and I've said this multiple times before. This is the main reason why I don't hold a long-term position in any Chinese solars or other solars besides SCTY.
Even in low margin industries, a company with stellar management can often find a way to make good margin. Think Apple. While the PC component/manufacturing industry is largely low margin, Apple makes good margin on their PC products (ie., iMac, notebooks, etc). Not only that, but they leveraged their PC/computer experience (think MacOS) and basically ported a computer operating system over to the phone to disrupt the entire cell phone industry and increase their market cap by $350-400b from the iPhone alone.
SCTY has a stellar management team along with one of the greatest business/innovation minds in Elon Musk. Elon sets the tone, strategy, direction for SCTY and he knows how to push a big move when needed (ie., Silevo).
If any company in solar will find a way to make good margin in solar, it will likely be SCTY.
There's a ton of examples of companies coming along and re-inventing a low-margin industry via innovation to make high margin. Even trash cans, Simplehuman came along and recreated the kitchen trash can and charges $200 for it. Their kitchen trash can is the best ever, and to me it's fully worth the $200 I paid for it. Sounds crazy to pay $200 for a kitchen trash can, but they made a product worth it when others gave up on innovating with trash cans. Another example, OXO... they're re-creating every kitchen utensil possible and charging a premium for it, making good margin along the way. Nest re-creates the thermostat and charges $249 for it and people love it.
Point being is that stellar companies focused on innovation will find a way to re-create, innovate, push the envelope and deliver stellar products/services that are significantly better than what's out there, and they will charge a premium for it and make high margin since they deserve it. I fully believe SCTY is in this camp, and a large part of why I think this is because of Elon's influence and involvement. I wouldn't advise betting against Elon or any of his companies.�
1/1/2015
guest The solar industry is about delivering electrons and there is nothing you can do to make it worthwile to pay more for commodity electrons. Trash cans, kitchen utensils, iphones, etc. are all material items and serve different purposes, so there is a market for high end high margin products, as well as low end low margin products.
Electrons are electrons and I don't care how I get them as long as I get them at the cheapest cost possible to me and my AC works when I come home. So unless Elon finds a way to deliver an ice cold beer with every electron there is really nothing he can do to make a "premium" product that delivers high margin electricity.
The only way the SCTY (or anyone else) can make high margins is by being cheaper than everyone else, and I doubt they can get their with their huge overhead.
I invest in Chinese solar companies, because they were in low margin panel manufacturing business, but are now moving into high margin project business while their valuations are extremely cheap. SCTY might do 500MW of 0.14/kWh projects this year and has a $7b market cap. JKS will do over 400MW of $0.18/kWh projects and has a $700m market cap, 10x less than SCTY. JKS cost to build those plants is about $1 - $1.50/W, while SCTY's cost is double.
I will gladly stay with Chinese solar stocks over the next couple of years. Their country is actually serious about figthing pollution and making a big push into solar, while the US keeps fighting solar from taking off.
The battery storage business is the only thing that can make SCTY stand out. But if Tesla fails then so will SCTY. If Tesla succeeds then SCTY will get cheap batteries. Since this is the case, there is no reason to invest in SCTY when TSLA will most certainly outperform it over the next 5, 10, 15 years.
I would not recommend being a buy and hold SCTY investor. Trading in and out of it makes a ton of sense. But if you are going to buy and hold, then buy TSLA instead; much more upside with a ton less risk.�
1/1/2015
guest I think you're grossly overestimating the rate of progress with solar technology. You're largely comparing solar to high-tech products like chips/cpu and internet bandwidth. CPUs were doubling in processing power every 18 months via Moore's Law. Internet bandwidth probably increasing 50% every year. However, solar technology is advancing much slower. I would compare it more to batteries, which is more like a slow but steady improvement where you see the improvement more in decades rather than over a few years. This is important because it's the rate of progress that will determine the speed of the disruption. Your "30 years" projection where energy is "virtually free" is way too optimistic and is based one the false premise that solar tech will mimic the pace/speed of innovation in other high-tech industries like Moore's Law ... it hasn't happened and it's not happening. Solar is innovating but much slower than Moore's Law.
You're also overlooking the fact that just because solar energy exists (via the Sun), that doesn't make it usable by any means. To make that energy usable it needs to be:
1. Harvested
2. Stored
3. Delivered
1. Harvesting energy
In order to harvest the sun's energy, massive amounts of investment in infrastructure (panels/modules, systems, etc) need to be set up. And that infrastructure is far from free. It's very costly and it needs to be paid for. Your premise seems to presume that this infrastructure cost will drop within 30 years to become a trivial amount, thus making energy "virtually free". However, again you're I think you're overestimating the rate of progress in solar technologies. Infrastructure costs will drop but it won't be anything near as dramatic as what you're alluding to when you claim it'll be "virtually free". Another obstacle is the cost of materials which isn't going to zero. Panels, modules, investors, mounts, wiring, etc all cost money and no matter how cheap you make it it still has cost of materials and a markup. Barring a revolutionary breakthrough in energy generation what we have is more of a slow but steady progress in solar innovation that not only includes the panels but also the balance of system costs, and this will lead to a gradual reduction in the costs of solar over time. But no where close to the "virtually free" you're hoping for.
Another caveat is I think that energy usage will go up over time probably to match the efficiencies gained via innovation. In 15 years, people might consume double the energy they do now. Add in two electric cars per household and extra convenience items and a typical household might be consuming double in 15 years. This might offset any reduction in energy prices. Thus, the typical family in 15 years might actually have the same or similar monthly electricity bill as they do today. Fast forward another 15 years, and I can see new products consuming more energy and driving up average household energy consumption (ie., if someone makes a flying car, people will travel more and use more energy). The point being is when energy becomes cheaper there is room for more new products to take advantage of that energy and provide new experiences and value and this drives consumer behavior to consume more energy over time as the cost of energy drops.
2. Storing energy
You also seem to be assuming that the cost to store energy will be negligible. I don't see much evidence to that assumption.
As more houses go solar, there will be a greater need for stationary storage to balance the load of high energy production during the day. If a typical household has a 100 kWh stationary storage battery, that will add significant costs to the cost of energy. Sure, battery costs will go down (ie., 7-8% per year) but still it takes 10 years to halve the cost.
3. Delivering energy
If households have stationary storage coupled with panels, then the delivery mechanism will largely be built into the house. But it will be a long way off before the grid completely disappears and even in 30 years, I still think there's a need for the grid and the grid is very expensive to operate. I don't think you can ignore the cost to deliver energy.
Let me take another angle with this. Just people solar energy exists doesn't mean that in 30 years that the mechanisms will be place to harvest, store and deliver that energy at a negligible price. The reality is that battery improvements and solar improvements are taking time and will continue a slow and steady march to increased efficiency and lowered costs, but I don't see any evidence or clear facts that lead me to think that your time frame is reasonable by any standard.
If anything in 30 years I expect people to be paying a similar monthly bill in energy as they do now but their energy consumption usage will likely be much, much greater (ie., maybe 4x as it is now). Sure, in 30 years energy to charge my laptop might be "virtually free" but if I'm using 4x the energy I do now, I'll likely be spending the same amount on my energy bill as I do now.
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I disagree with this. Creative/innovative companies always seem to find a way to differentiate their products by adding additional high value. I remember when people were saying that Apple was doomed with their PC business because computing was going to be a commodity and laptops were going to cost $100 eventually. But Apple found a way to de-commoditize the computer by adding extra additional high value to the product. SCTY can find ways to do this as well. Whether solar panels are ugly or look amazing is actually important to people and adds high additional value. Whether I can scale up/down my system when I want adds high additional value. Whether I can start with a super small system (ie., 2 kW) at no cost and no hassle adds high additional value. The way I interact with my energy usage and costs (ie., similar to what Nest is doing with their product) also adds high additional value. The list goes on.
My "long-term" perspective is 5-10 years. I think solars overall will probably do well over the next 2-3 years and have no issues with people riding the wave while they can. But I like the have a safety of margin with my long-term investments where I believe the management is stellar, their addressable market is huge, and their business model is strong, so in case of a recession I'm confident that this company will overcome the hard times and emerge as even stronger. I don't have that confidence in any other solar company besides SolarCity.
Regarding TSLA, I think it's an investment in it's own league. That's why my long-term stock position is 90% TSLA and 10% SCTY. I would caution people though against chasing momentum stocks when the mood is exuberant. I like accumulating when the mood is foul and the stock has been hammered (ie., 40%+ drop) but the fundamentals haven't changed. I also think a future recession is always something to keep in mind as all/most-all high-growth stocks will likely be hit hard.
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I wouldn't be surprised to see SolarCity making innovations with how solar is integrated into roofs over time. Stellar companies have a way of surprising people with the innovations they come out with, but it'll take time.
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I largely agree with this. I think it's largely "can you lower my monthly payment" and also "is it super convenient and flexible with no strings attached". On the second point, SolarCity has some work to do.
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I completely agree that Tesla, SolarCity and SpaceX are more similar than most realize. They are/will leverage each other technology, expertise, business models, cost-cutting ethos, etc. I don't think this is a new thing, it's just being progressed at a faster rate and being made more public.
I do also see SolarCity becoming heavily involved in R&D. The mounting company they acquired was best of breed. This solar company they acquired... I've been impressed by with the limited research I've done on them. And SolarCity will add more and more engineering resources to make better panels and equipment. This model of constant innovation at high velocity is something that others will have a difficult time catching up to, especially with the tight vertical integration.
In the conference call (for Silevo's acquisition), it was mentioned briefly that Tesla and SolarCity are cooperating regarding inverter technology. This is the next vertical integration move in my opinion. SolarCity will release a best of breed inverter, or will acquire a company to achieve this.
I also think what some/most skeptics are missing is that momentum that SolarCity is picking up, and with "momentum" I mean they are acquiring and growing their technological portfolio and starting to really focus on engineering. I agree that SolarCity is looking like it'll become a "technology and manufacturing powerhouse" along with a tightly integrated customer experience (from customer acquisition, install, financing, maintenance, etc). IMO, it's by far the sexiest play in solar long-term.
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I agree with both points. Energy ain't cheap... it needs to be generated/harvested, stored and delivered.
Also, demand for energy will grow as greater availability of lower cost energy will drive further innovation in products/services that will increase standard of living. Man's constant drive to improve their lives and live better will lead to new products/services that require more energy as energy costs decrease.
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SolarCity has been acquiring best of breed technology/companies as it expands it's vertical integration. I see this is just early stages of the bigger plan. As SolarCity sets itself up for full vertical integration (ie., with inverter technology coming up next), SolarCity will apply it's religious fervor to drive innovation faster in each of the areas they're involved with (ie., similar to SpaceX driving down the costs of rocket launches by religiously innovating on all aspects of the launch).
Google does this well with their ethos focused on execution and velocity. They focus on quickly iterating products to get them better and they measure the rate at which they're able to do that.
Elon Musk is applying this concept of velocity in innovation to all his companies. This is why I think it's still very early stages for SolarCity in what it is becoming. I can see SolarCity iterating their solar panel technology and manufacturing to the point where they become far ahead of all its competitors. The same will go for inverters, mounting racks, and the rest of the balance of system costs/processes. It'll just take time.
Elon even mentioned in the recent conference call regarding Silevo, that SolarCity is working on making the panels look aesthetically really good. That's the Elon way. Continuously innovate on all aspects of the product/service, and then some.�
1/1/2015
guest Not counting or expecting a moor's law doubling for every 18 months; It's not required for the goal I describe - largely because most of the work is already done;
The more we use, the cheaper and 'freer' it will become- that's a counter argument that will prove the case in my opinion
Regarding the infrastructure required
Here's one of the most recent studies I saw posted, that draws a good visual
We're projected to use 44% more by 2030 and assuming panels don't get any more efficient than the current 20% or so in that time. And forget about electrical power usage - this is for all power used from all sources for all purposes, including you're cars and planes;
Here's the infrastructure needed
Land Art Generator Initiative
Of course you can just as easily install that surface area across the entire country on roofs and other- distribution is already provided.
It's certainly possibly I'm over estimating our ability to reach the point I describe in that time- even if I'm off by a decade, does that really matter to the inevitability of the conclusion. I think not. All power for our uses is destined for commodity food-stuffs
Also, the Apple example you use is nearly a polar opposite. Apple garners high profit margin by appeal of product function and aesthetic- they apply the same scale of software to hardware making that possibly; They are akin to Tesla in that regard. There is NO premium in electrons - they're all the same - the cheaper the better and the cheapest will win the day with the customer of electrons. Other than perhaps an aesthetic of the panel, there are no premiums (beyond the cost per sq foot to produce electrons from photons). I do agree battery storage will delay the goal of my description- but not by much imo.
I guess we'll likely disagree in the end on this- hopefully we'll be around to watch the development play out and see where it goes. I do enjoy the discussion! thanks�
1/1/2015
guest Just because energy becomes cheaper doesn't mean it become "freer" or "virtually free", especially if you consider that energy usage will grow over time (probably much more than 44% by 2030 in my opinion if you just factor in electric cars). It'll probably just mean that people's monthly energy bills remain similar as they are now (more energy used at lower cost per watt). I'm not seeing any precedent or hard data facts that support the notion that energy could by virtually free in 30 years. Doesn't make sense to me at all.
I think you're completely missing the point here. Yes it's true that you don't need that much surface area (compared to world's total surface area) of panels to supply the world's energy, but the problem is even if you create those exact areas filled with solar fields, there still is a huge storage and distribution problem. You need to get that energy stored in massive amounts and then distributed to each person around the world. The cost is enormous and vastly prohibitive. That's why there are no plans to make one massive solar plant field to supply all the U.S. energy needs. It's impractical and vastly cost-prohibitive.
Energy harvesting/generation, storage and distribution needs to happen at a somewhat distributed scale, whether that be on a rooftop or at a local solar plant connected to the grid. The local solar plant is relying on the grid, which is very, very costly to maintain and operate and will continue to cost a lot in the future. Getting solar panels on rooftops is costly and even after you do that, you still need a way to store the energy... thus most are connected to the grid, which again is very costly. You can go stationary storage, but that is very costly.
Whatever way you look at it, we're not going to get to the "virtually free" price of energy you're hoping for in 30 years. No where close.
Further, whatever reduction in energy costs that are realized will likely be completely (ie., 100%) offset by the increased usage in energy consumption driven by new products/services that require more energy (ie., think of how much more people would travel is fuel costs were lower, or how many more products would be shipped if shipping costs were lower, or how many products could be created if cost of creating those products were lower via lower energy costs, etc.), so that the monthly energy bill of a person will likely be similar as it is today. Far from virtually free.
Can you clarify this?
Let's expand on the Apple example. A computer is a computer, made of mostly low-margin commodity components... providing computer power. What Apple did was add value on top of that.
1. Aesthetics
Apple's computers not only look better, but are smaller/lighter etc. In a similar way, SolarCity can eventually make panels/modules/systems that are super sexy and blow away all their competitors. Electrons are electrons, sure just like computing power is computing power. But looks matter on your roof. It affects how your neighbors think of you and your house, and how you look at your house as well.
2. Easy service
Apple provides easy customer service (ie., genius bar, etc). Much better than anybody else in the industry. Other PC manufacturers went cheap (thinking a computer is a computer) even with service but Apple focused on quality. In the same way, sure a solar system might need servicing that often but it is does require occasional servicing (ie., roof might get bunch of leaves or something stuck on panel, or inverter goes bad, etc). SolarCity provides a full-service model. Again, if you add the potential of SolarCity to provide on-demand scaling up/down your system at no cost, this is something that is very difficult but could provide super high value to people. To me as a homeowner, "electrons are electrons" doesn't mean much and it really isn't true. I want convenience - to be able to install a small 2 kW and scale up whenever I want at no cost. I want the ability to get my system removed at any time at no cost. I don't want to put any money down. I don't want to borrow money. I want to give a quick signature and get it done. This is beyond "electrons".
3. Better customer experience
Apple has better advertising, better store experience, better buying experience, better servicing experiencing, better OS updates, etc. Overall, they provide a better customer experience than their competitors. In a similar way, this is what SolarCity is driving at - better marketing, better signup, better/easier financing, better/easier install, better maintenance, etc. The overall customer experience matters a lot. Again, electrons are not just electrons... it's more about my overall experience with energy generation and usage.
Add in stationary storage, and experience matters even more.
It's not just about providing the cheapest electrons or computing power (or etc) possible (that's one part of the puzzle), but it's about the overall customer experience and ensuring that every part of the picture is stellar and better than the rest of the competition.�
1/1/2015
guest I believe that's exactly what it means. There is nearly no bottom to the cost, and concurrently there is no top of availability (I say this with the understanding of practical in mind- yes there will always be a small cost, and yes there is photonics impingement maximum). But there is more radiant energy from the 'free' source, distributed to you for free than you will ever use, almost no matter how much you can engineer into useful purposes. The physics is irrefutable - and the cost of the energy and its distribution to you, wherever you are is free. The only cost is to convert photon to electron and intermediate storage. My supposition is that there is nearly no bottom to the cost of that process. I use examples of other leverages mankind used to make the similar advancements.
It's my supposition those bills (measured in equivalent dollars of course) are due to come down drastically - furthermore, the more energy we use, the more they will reduce. The cost reduction will exceed for example the net reduction in your transportation bill that today's hard evidence shows is imminent between use of fossils-ICE and use of Electricity-EV - even if electricity is generated from fossils, much less that from Solar. -Due to the physics behind efficiency of EV motor vs ICE at the source of use coupled with the leverage of an already in place electrical distribution scaled cost.
The cost reduction we are to experience from Solar will be several times greater than that in my estimation. Because the power generation itself AND its distribution system are both free; This induces a feedback cost loop that (similar to moore's law you quoted) results in a LOWER cost with HIGHER usage- because the only cost is production of the (photon>electron)convertor and storage(which will end up as Super Capacitor cost structure in 30 years). In other words the increased scale of it's production (and technology) more than compensate for the larger number of conversions being done to accommodate your usage increase, precisely because there is no (practical) limit to the number of photons available to convert, nor is there any increased cost in it's distribution to you.
Wouldn't be the first time, but I'll take a shot just in case I didn't
The map and associated article wasn't presuming those specific spots as the only solution- it used those as a way to make the calculations and illustrate a visual on one possible. And this does get to some of the heart of the disagreement- those areas are there to depict what needs to be distributed. The point is, that distribution is (almost) no cost- because the source of the power travels with the panel. Applying the equivalent panels across the country IS the distribution- It distributes the convertors(photon-electron) directly to the source of usage (as does the EV). And it does so for (almost) no additional cost and much less net cost (no grid required with associated losses)- It can do so precisely because the Sun performs the distribution for us. Generation is free - distribution is free; Convert and store at the point of usage.
It's my supposition the physics underlying those costs are gone; manufacturing/scale of the local photon convertors/storage in 20-30 years will be no more costly than a cheap appliance is today. Not free but nearly so when amortized over its useful life. Agree we will use more energy because it's available; that's part of why it will be so cheap to convert and store- the cost is (largely)not a function of amount used because at the site of usage, there is no limit of availability nor cost to distribute - the grid becomes superfluous as it was originally needed to distribute from a concentrated source. If it survives it will be for other purposes such as sinking excess power, local grids in downtown areas and security - supported largely by taxes would be my guess
yes the reference to food-stuffs was a quick metaphor for what we went through in the agricultural age. The cost of food used to be nearly 100% of our daily cost structure - still is in some places of the world. Applying scale of production and leveraging given energies, it's now a small cost in relative terms. I believe Energy via Solar will exceed that transformation by several times, both in magnitude and time compression. Just another example I was pointing to, in an attempt to portray harder facts for a future supposition where hard facts are of course impossible without extrapolation of past facts.
Disagree on that as well. The experience is not with energy generation and usage; it's with the product that uses it. I'll give you an aesthetic for the panels on the roof- that won't be a premium for any company in my view. And I take your points regarding customer service quality etc. But in my view we are talking past each other here. Apple makes and missions making very personal, tactile, and interactive functional devices (ala Tesla for that matter). The vision I'm protracting is a semiconductor based convertor sheet and a super capacitor panel in the garage that requires little or or no service. None of the items you list are value add in the scenario I picture 30 years from now; the maytag-panel man will most assuredly be lonely
Using your description- "the overall customer experience" is best deployed as a non-experience all together. Leave that to the 'living-products' of human interaction.
thanks for the discussion�
1/1/2015
guest Just because an energy source exists doesn't make it virtually free (ie., in 30 years) unless you can extract/harvest that energy, store it and distribute it in a manner that is virtually free. That isn't going to happen in our lifetime and most likely won't happen ever.
It takes a lot to extract/convert energy, store it and deliver it. Taking solar energy and converting it to usable energy takes a lot of equipment/infrastructure cost (think trillions of dollars for the world) and somebody's going to be paying for it - namely, the end consumer/user. No investor is going to invest trillions of dollars over the next 30-40 years as the world's energy generation industry transitions to renewables, only to give away energy for free. Those trillions of dollars invested in solar/renewable infrastructure over the next 30-40 years will need to be paid for. And more tens of trillions of dollars of investment will be required to meet the growing energy consumption of the world as well. It makes no economic sense to me how you're claiming energy will be virtually free.
You state several times that the sun gives free radiant energy. That's true. But everything in this universe holds energy. Even an atom contains/holds vast amounts of energy. The tricky and costly part is extracting the already available energy sources around us. The sun's solar energy is just one form of energy available to us and like all forms of energy it requires vast/immense amounts of infrastructure/cost to harvest that energy, store it and distribute it.
It's also possible, the more energy we use and the more new products/services that are created and made available due to lower energy costs, that our actual monthly energy bills will increase over time.
I think of energy as a huge part of every part of the economy. If you lower the cost of energy, it creates vast incentive for new products/services that weren't possible before and lowers the cost of virtually every existing product/service. Think if energy costs were free, most of the products we have today would cost less than half of what they do today (negligible shipping costs, negligible factory energy costs, etc). This opens up a whole new world of innovation and increase in standard of living.
There's no way if energy costs decrease that energy consumption rises minimally. Energy consumption will increase in proportion to energy costs decreasing, and probably even more. I wouldn't be surprised if the rate of energy consumption actually increases faster over the next 30 years than the rate of energy costs decreasing. It's possible that our monthly energy bills could actually be higher as a proportion of our household spending compared to today.
Power generation is not free. Distribution is not free. Just because solar energy exists in the format of the sun's solar radiant energy doesn't mean it's harvesting, storage or distribution is free. Just like there are atoms everywhere filled with vast amounts of energy, but that doesn't make that energy free. We need to account the costs to harvest, store and distribute that energy. The costs are immense.
The technology to harvest solar energy (ie., solar panels) are not improving at a pace that even can compare with Moore's Law and computing power. The improvements to solar panel efficiency has been much, much slower. Maybe akin to battery tech. And as we know, battery tech (although it improves 7-8% a year) is not where improving at a 50%+ annual rate like cpu's did with Moore's Law.
I think you might be looking at solar innovation and thinking that it's advancing as fast as other high tech innovations in the past have (ie., cpus, internet bandwidth, etc). But that's simply not the case.
Again, using an example of an atom... the energy is already there and we have it all around it. So does that make it's generation and distribution free? Similarly, the sun's energy is all around us but it's not until we harvest/convert, store and distribute that energy does it become useful to us.
You mention all we need to do is "Convert and store at the point of usage." And that's what I'm saying is going to cost the world tens of trillions of dollars over the next 30 years and the investments will likely just expand over time. Converting and storing solar energy (or any energy) is not easy or cheap.
I think the logic you're using might compare to internet bandwidth which you mentioned before. The cost to deliver a 1 mbs internet connection has fallen so dramatically in the past 10 years, that providing a 1 mbs internet connection into a home in 10 years might be a negligible cost (ie., under $10/month). However, that analogy might work if people didn't need/require higher and higher internet speeds as the pace of internet innovation correlates with the increase speed of bandwidth. So, now that I have a 50 mbs connection at my home, I'm actually using all of it and I want a faster connection. When I have a 500 mbs, I'll use all of it (since the Internet will evolve) and I'll want more. in 10-15 years (?) when I have a 10 Gbps connection, I'll still want more since the Internet would have evolved. The end result is that I'm still paying $40-100/month for my home internet connection.
While the cost to deliver 1 mbs of bandwidth falls to negligible, that doesn't mean that savings is passed on to the consumer's monthly internet bill. Rather, the monthly consumer bill largely stays the same, and the drastic drop in cost to deliver 1 mbs of bandwidth is largely translated in a bigger/faster connection.
In a similar way, just as companies innovate to create needs for people to have more and more internet bandwidth, companies will also innovate to create needs for people to consume more and more energy in various forms (ie., conveniences, travel, shipping/delivery, products, services, etc).
There are a lot of assumptions here. You're assuming solar panels (ie., local photo converters and storage) will drop in price to the point where it's negligible (at least when amortized over useful life). I don't see that kind of drastic cost reduction as you. Let's look at battery storage. Improving at 7-8% a year. In 30 years, the stationary storage required to power most households will cost a decent amount of money - definitely not negligible. Also, there are so many surrounding costs to solar (ie., balance of system, permitting, mounting, etc) and there are limitations with solar as well (ie., limited roof space, sun/shade, etc). Also, if you look at the efficiency improvements in solar panels over the past 30 years, it's slowly improving but not at a rate like other high-tech.
My rough guess is that in 30 years, we'll be consuming as an average household 4x the energy we do now, and our monthly energy bill will be roughly the same as it is now.
It seems like you're looking at energy based on how it has been provided in the past by utilities as a commodity, unsexy item with no added value beyond electrons. Just because the utilities provided it like this, doesn't mean that all energy in the future will also be provided like that as well.
Stellar companies have an unusual tact at getting into industries that appear commoditized but adding additional high value via innovation and charging a premium that's well-deserved.�
1/1/2015
guest well we definitely have some fundamental differences. sounds like we have a market!
without quoting all points above; just the heart of the disagreement- I'll choose 2:
1)
"Just because an energy source exists doesn't make it virtually free (ie., in 30 years) unless you can extract/harvest that energy, store it and distribute it in a manner that is virtually free. That isn't going to happen in our lifetime and most likely won't happen ever."
That's true- and the heart of the difference. I believe the 'unless' part of your supposition is already inevitable
I do in fact believe we are entering another super-disruption that indeed does convert energy from one form to another at quantum level in a semiconductor based format- destined to achieve the associated cost structure, amplified by a no cost source and distribution. The technology will in fact accomplish that in the field.
I'm a little uncertain as to your distribution concept- but once conversion and storage at the point of use is deployed- the distribution is concurrently accomplished in my view (and so free)
2)
"There are a lot of assumptions here. You're assuming solar panels (ie., local photo converters and storage) will drop in price to the point where it's negligible (at least when amortized over useful life). I don't see that kind of drastic cost reduction as you. Let's look at battery storage. Improving at 7-8% a year. In 30 years, the stationary storage required to power most households will cost a decent amount of money - definitely not negligible."
yes- we disagree; I believe those prices will in fact drop to (amortized)negligible - storage will not be battery (although will be initially at a very attractive price), but will be capacitive hybrid, produced with 3D printing at an extremely low cost, completely dislodging the 7-8% per year (although that alone largely turn the trick over 30 years.)
anyway- definitely a different vision - and relative to investment patterns- short term, probably doesn't make a market difference. But over time your belief system, might point toward the YieldCos and similar investment vehicles with emphasis on recurring revenue from system deployment and service, power generation and distribution revenues.
My investment scenario would take (after initially being similar of course) a different path that eschews the power revenue based path, instead deploys against the disruptive application of extreme DG (down to individual & business), followed by a withdrawal to other industries- as I believe inevitably the user will generate/store their own power beyond their ability to use it- even at 4x current levels, disrupting the market for sale and purchase of power.
that's the way I see it anyway�
1/1/2015
guest It definitely does look like we have some big differences in opinion, but it's understandable considering 30 years out is a very long way away.
I do agree that the core of our disagreement is how quickly costs for solar harvesting/converting and storage can decrease over the next 30 years. I'm assuming that solar continues it's pace of innovation as well as battery technology and leads to lower costs over time but will likely be offset by the increase of energy used per household so that the average monthly energy bill for a household remains relatively the same (or could even higher). The reasoning I gave was "It takes a lot to extract/convert energy, store it and deliver it. Taking solar energy and converting it to usable energy takes a lot of equipment/infrastructure cost (think trillions of dollars for the world) and somebody's going to be paying for it - namely, the end consumer/user. No investor is going to invest trillions of dollars over the next 30-40 years as the world's energy generation industry transitions to renewables, only to give away energy for free. Those trillions of dollars invested in solar/renewable infrastructure over the next 30-40 years will need to be paid for. And more tens of trillions of dollars of investment will be required to meet the growing energy consumption of the world as well." Basically, even with solar costs decreasing, we're still going to be spending tens of trillions of dollars transitioning to renewables over the next 30 years and it needs to be paid for. And even after 30 years, we'll still be spending trillions of dollars in energy infrastructure as energy needs grow.
Your stance is "I do in fact believe we are entering another super-disruption that indeed does convert energy from one form to another at quantum level in a semiconductor based format- destined to achieve the associated cost structure, amplified by a no cost source and distribution. The technology will in fact accomplish that in the field." - It appears that you're expecting a major breakthrough in solar energy conversion, so dramatic that it lowest the cost of harvesting/converting energy so low that the costs become negligible. I'm not expecting that dramatic of a breakthrough. I lean toward a steady march of innovation that lowers costs steadily over time. New technologies tend to be integrated over time. Consider the battery field... there's so much talk about revolutionary breakthrough in cell technology. But usually how it works is that new technology has holes and it takes time to mature and eventually gets integrated into the product to make things more efficient. The level of breakthrough required to bring down the cost of energy to near zero is unrealistic IMO.
Let's say there's a revolutionary/historical fusion breakthrough and it brings down the cost of electricity in 30 years to 1/20 of the cost of today (note: there will still be costs because fusion reactor/plant, storage, distribution, etc still needs to be paid for). In this scenario, I personally think that households will just use 20x the amount of electricity/energy they do now. It won't all be in the form of electric outlets in the house. But there will a myriad of applications. For example, my personal drones would fly to LA to pick up dinner from the best chef in the city and bring it to my house by dinner time. I could send my drone to practically anywhere to pick up practically anything. I could even have a drone pick up every piece of a new house I'm building, one little piece at a time. I could have robots create things for me - ie., they can farm food for me, become my own personal industrial robot force, build a business with them, etc. If I had a flying car, I would travel a lot more and use more energy as well. Personally, if energy was cheap enough I think humans can use 1000x+ the amount of energy that we use now, and that would just be a beginning.
The point being is that I think there will always be a healthy market for energy. It will likely remain one of the largest markets in the world (like it currently is). And it will be probably one of the most important markets (as it currently is) as well.
In other words, I think SolarCity has a bright, blue ocean to swim in for many, many decades to come.�
1/1/2015
guest I think that kenliles and I are saying the same thing in a different way. "Virtually free" does not mean $0.37/month electricity bill. It just means that the cost of electricity will be inconsequential:
In today's dollars, 10 years from now solar will be at $1.00/W installed, so 30 years from now it might be $0.50. A 10 kW system would cost you $5,000, and is enough for 10,000-18,000 kWh per year. With better technology it might last 40 years or 500 months. That is $10/month, I.e. virtually free. Another $10 for battery storage and you have your car as backup storage too.
But who knows what kind of technology we might see. If SPWR can scale C7 technology to fit on roofs, then electricity might become extremely cheap soon enough. I am sure that we will see a lot better technologies 30 years from now.�
1/1/2015
guest Agreed we have different visions of end point. The 1/20th cost is already baked in for my scenario and may be more like 1/100th and provide near endless power available to every individual/business.
I couldn't agree more that we disagree!
SCTY is it's own issue within the context of our disagreement
However, I'm currently uncertain as to SCTY because I don't know which direction they will head. In many ways they are on my side of the argument, eschewing Utility scale power and distribution in favor of individual rooftop DG with higher efficiency panels. On the other hand they charge exorbitant fees to own the power, modeling as a power generator which I do not adhere to. As an investment they are fine for a time. Under my model they will have to adjust rapidly, but that's down the road a bit. Remember my supposition is 20+ years out when Elon is on Mars.
That said I really like the catalyst of rooftop and storage SCTY has ascribed and applaud that strategically. I'm currently agnostic SCTY, but with a slight long bias pending more clarification. I really like the new direction of adding high efficiency panel production in house. I'll point out though they are very late to that recognition. It's couched in massive expansion that others have already achieved and are engaged. Others are already (correctly in my view) projecting in a few years that panel production will consolidate to massive outsourced capital outlay. The only way they maintain a viable position in that endeavor is to massively dilute to catch up, then abandon to others. Where as Tesla is ahead of the game via GF. SCTY is playing catchup to others who already have those for panels.
In short, I'll be using SCTY for a trading mechanism. Agree with Sleepy on that count, but with a long bias to the trade given Elon involvement and integration of storage from Tesla. Thought s are highly dynamic on that though, so reserve the right to change at any moment. SCTY for my vision, is schizophrenic - ahead in certain aspects, way behind in others. Thats a market!
Anyway. Really enjoyed the conversation Dave. Thank you
Cross posted with Sleepy. So quick edit from his post. Yes I agree with that position. The cost in my model becomes inconsequential relative to other life costs at the time - doesn't mean exactly free, but it's simply a non issue and no longer an investable growth channel. It's simply water from an appliance To our everyday lives. My time frame for that is 30 years, but investment wise, 10-15 and move on.�
1/1/2015
guest $10k for a 10 kW system plus stationary storage is not negligible in my opinion. That's quite a large expense. Further, no way that it can be amortized over 40 years. More like 10 years for the individual consumer, maybe a bit longer if there are creative financing vehicles.
Add to this that in electricity usage will likely increase dramatically (if costs per watt decreases dramatically), people might need a 30+ kW system, which only dramatically raises the costs for the system and storage. So, for a 30 kW system costing let's say $25k, amortized over 10 years, that's $2500/year (not including interest). That's $200/month for the consumer to pay. Or if we amortize it over 20 years, then that's $100/month... but that's not including interest payments over 20 years. Add in interest payments and for a 20 year loan for $25k at 5% interest you'll have a $165/month payment. Far from trivial.
- - - Updated - - -
Regarding SCTY specifically, I would suggest researching the company more in-depth. The recent Silevo conference call with Elon Musk is a great call to listen in on. From the call, you can feel the confidence, clarity/focus, and how the management team (Rive brothers with Elon as Chairman) are completely on the same page, following the Musk way as demonstrated by Tesla and SpaceX:
http://www.media-server.com/m/p/sfwejz2i
I've also gained a lot of insight listening to all their quarterly conference calls and interviews with management. The more I learn about SCTY and their management, the more confident I become of where they're headed. They are top notch and really a stellar team, guided and inspired by the leadership/vision of Elon. They are truly unique in the solar industry, and IMO best of breed. They will continue to surprise people by their innovation and out-of-box thinking/ways.
Same here. Good opportunity to think through things, hear different perspectives, and write ideas down. Best of luck.�
1/1/2015
guest I did exactly that and they have been a very strong part of my investment (small part currently). And there we agree. They have an excellent management team and I give high marks to their ability to adjust and maneuver. Probably one of their best assets frankly Based on that alone, I can understand those who invest. And to be clear I swing from bullish to bearish with SCTY, but much of the bullish comes from the excellent management quality. No issue there. And I really admire the aggressive mission. With the recent run up I'm very light SCTY, but on pull backs will add. I'm basically with a Sleepy on this one, it's a good trading vehicle with a bullish bias for this early Solar stage. Will evaluate continually. The recent move is a good one IMO and long overdue, but if aggressive enough (and sounds like it is) will work out well
Thanks again, for a great debate and conversation - one of the reasons I really like this forum and the people on it. Regardless of right or wrong, it's going to be a blast to be a part of this important set of events for all of us.�
1/1/2015
guest Did anybody else catch on the SCTY's Silevo conference call last week that they mentioned that Tesla and SolarCity were cooperating on inverter technology? I want to go back and transcribe that part of the conference call but I don't want to listen to the whole thing over again. So, if anybody remembers when in the call it was mentioned, I'd appreciate your help. Thanks.�
1/1/2015
guest ** It's right in the first few mins, where Musk started explaining the acquisition.
Elon R. Musk:
Thanks. So I think this acquisition will come as unexpected to some probably maybe to most, but SolarCity has decided to go into the actual solar panel production, which is something we'd stayed away from for a while. We do think though now there was really a need to do this. But Lyndon and Peter and Tanguy and the team actually came to me and said that they thought the timing was right to make an acquisition and go into advanced solar panel manufacturing, because if we don't do this, we felt that there was risk of not being able to have the solar panels we need to expand the business in the long-term.
So we ultimately expect to be installing tens of gigawatts a year. And if you look at the capacity in the world, it's simply not going to come online to be able to do that, and moreover the rate at which solar panel technology is advancing, at least the panels that are being made at large scale, it's really not fast enough. But we're seeing high volume production of relatively basic panels, but not high volume production of advanced panels. So we think it's important that that should be combined in order to really have dramatic impact on solar power, and in particular in order to be able to have solar power compete on an unsubsidized basis with the grid, with fossil fuel energy coming from the grid, it's critical that you have high efficiency solar panels at a total installed cost which is as low as possible. And there are really just two key levers for that; one is economies of scale and the other is making sure the fundamental technology that's being scaled is as best as it can be. So with the Silevo acquisition, that's what we believe we can do and are doing.
So we expect in the future to build solar panel plants that are an order of magnitude bigger than any plants that exist in the world today to assure we're taking maximum advantage of scale, and then we intend to put a lot of effort into R&D on the panel side as well as into the mounting hardware, which we already own and into inverter technology in partnership with Tesla, as well as battery pack technology to provide an overall solution that gives someone electric power at a price that is less than if they were drawing it from fossil fuels burned over the grid; that's really the key threshold. And obviously the demand grows exponentially as the price drops and you can imagine that it really grows at an enormous pace if we're able to compete with grid-powered electricity with no government incentives and that's really the goal, and that has to be the goal in order for the world to have sustainable energy future.
Thanks. Now, I'll turn it over to Lyndon and Pete.�
1/1/2015
guest Thanks, SBenson. That's a very inspiring Solarcity vision/mission statement by Elon.
Looks like Solarcity is working with Tesla on both inverter and battery technologies. Exciting times ahead. I'm very interested in the inverter solution that they're working on. Originally I thought they might acquire a company but from this it appears that they're working on this in-house with Tesla. My speculation is that they will release an innovative inverter solution, a sort of hybrid between microinverters and regular inverters that will allow them the flexibility to scale a system that microinverters give but the stability and reliability of a regular inverter. Also positioned where it'll be easy to access as well.�
1/1/2015
guest The inverter thing is a bit confusing. Here is another snippet around 27mins.
<Q - Pavel S. Molchanov>: Okay. And then just one kind of higher level question if I may, you guys obviously bought a mounting systems company last year. You've now bought a module company. Are you looking to get into other parts of the hardware value chain, and I'm particularly thinking inverters or power optimizers perhaps?
<A - Lyndon R. Rive>: The way I'd like to answer this is, we will continue looking at ways to reduce our cost per kilowatt hour. And so we're always out in the market to find out anything that will reduce our total installed cost or cost per kilowatt hour, we will be interested in acquiring.
- - - Updated - - -
On a different note here is a snippet on battery partnership.
<A - Elon R. Musk>: Yeah. The crazy thing is gigawatt plant is almost like the pilot plant for what will come. Obviously, the bigger plants to come beyond that will as we start to deploy a lot of solar panels, we'll need to start adding in stationary storage, so battery packs, Tesla is certainly working on that in partnership with SolarCity.�
1/1/2015
guest Finally, here is a Lyndon Rive interview on Bloomberg TV explaining the acquisition. A couple of good points here:
Why Elon Musk's SolarCity Agreed to Acquire Silevo: Video - Bloomberg
The one thing I found interesting was how these guys think they can manufacture at prices competitive to chinese standard panels. Apparently energy costs are lower in US than in China. Also it would be highly automated. Add to that, low freight costs and no tariffs. It all seems to add up quite well.�
1/1/2015
guest From their Q4 2013 conference call (Feb 24, 2014):
Pavel Molchanov - Raymond James
"And then let me ask something on a related point. You guys have historically been avoiding the use of microinverters in your systems. Any change in your stance on that?"
Peter Rive - Chief Operations Officer, Chief Technology Officer
"No, we are fans of local DC optimizers, but have not changed our position in regard to providing an inverter that is coupled directly to the module on the roof."
In other words, I take this to say they like the idea of "local DC optimizers" (meaning having the inverter closer to the module and smaller) but they don't like the current microinverter that are "coupled directly to the module on the roof." So, I'm thinking they'll have another place where they're pool all the microinverters together (rather than having one microinverter coupled directly with a module), and maybe each microinverter might be for 4 panels rather than 1. So, you could have the microinverters installed altogether on the side of the roof, maybe one one side of the mounting racks. That would make it easy to access in case the system needed to be scaled up/down or if an inverter failed.�
1/1/2015
guest No, that's not what that means. Local DC optimizers are not the same thing as micro-inverters. Optimizers have lots of advantages over micro-inverters including better efficiency, cost, and serviceability.�
1/1/2015
guest Thanks for pointing that out. Just did some reading and learned the following: (Power optimizer - Wikipedia, the free encyclopedia)
"A power optimizer is a DC to DC converter technology developed to maximize the energy harvest from solar photovoltaic or wind turbine systems. They do this by individually tuning the performance of the panel or wind turbine through maximum power point tracking, and optionally tuning the output to match the performance of the string inverter. Power optimizers are especially useful when the performance of the power generating components in a distributed system will vary widely, differences in equipment, shading of light or wind, or being installed facing different directions or widely separated locations. Power optimizers for solar applications, can be similar to microinverters, in that both systems attempt to isolate individual panels in order to improve overall system performance. A smart module is a power optimizer integrated into a solar module. A microinverter essentially combines a power optimizer with a small inverter in a single case that is used on every panel, while the power optimizer leaves the inverter in a separate box and uses only one inverter for the entire array. The claimed advantage to this "hybrid" approach is lower overall system costs, avoiding the distribution of electronics."�
1/1/2015
guest that was great, thanks. question for anyone....why are they so concerned about getting to a point where the price of solar will be lower than normal electricity without tax incentives? is it for psychological reasons for the public? because oil still gets and will be getting massive subsidies.�
1/1/2015
guest It's practical.
The key is that once you reach parity with the marketplace you can eliminate the subsidies and get political consensus.
You can then have PV installations crank up the renewable percentage, and there's enough room for a huge market up to whatever the ceiling is for each local grid.
Then the attention shifts to storage technology. That's where Tesla's focus on lowering storage costs comes in. As long as Tesla-Panasonic can lower the cost of storage enough, they raise the potential renewable percentage and lower the effective price ceiling on electricity.�
1/1/2015
guest ah, that's it. so basically psychological reasons. hahaha. I understand though. solar shouldn't have to lean on something to make it noticeable.�
1/1/2015
guest I disagree. Not psychological.
When a technology becomes market competitive without government involvement, that's a very significant milestone.�
1/1/2015
guest True. Wonder when Oil will ever reach that one. I'm guessing Solar gets there first�
1/1/2015
guest Nice one!
Is there anywhere data on just how much or what % oil is subsidized? Anti-solar people live to trot out solar subsidies but it would be nice to have the counter-argument for oil with actual sourced numbers.�
1/1/2015
guest In the US something like $35B per year, some estimates up to $50B.
$500B globally
Energy subsidies - Wikipedia, the free encyclopedia
Guess they still need help starting up. Soon they'll want the help to shut down.�
1/1/2015
guest Maybe not real soon, but still ROFLOL.
GSP�
1/1/2015
guest
I played golf with two oil and gas guys a couple of weeks ago; and they invest a lot of their money in those industries. I asked them why are they investing their money in a dying industry? Their response was that Houston can't find enough CNC specialist to work in oil and gas.
Then later they started talking about Russia cutting off gas supply to Europe and the conversation looked like this:
Oil and gas guy - "we can start exporting our LNG to Europe."
sleepyhead - "...or Europe can simply go solar."
Oil and gas guy - "I knew you were going to say that."
sleepyhead - "because it is the obvious solution."
End of discussion...
This conversation I had, just strengthened my investment thesis in solar. People are so far behind that it will be a very investible industry for the next decade.
Side note: one of the oil and gas guys said that he played options in those companies because those stocks have extremely predictable intraday movements. He would buy front month slightly OTM call options and try to cash out same day with a 40% gain. He said he turned $20k to $120k in a few short months doing this.�
1/1/2015
guest very interesting- thanks for that perspective. I agree, the blind spot currently is massive and will apply it's Solar-short for years to come, while collection of squeeze will be a continual support;�
1/1/2015
guest I've followed this discussion. I feel that SCTY has popped and its future growth is limited. Today I sold the shares I purchased the week of their IPO . I will be redeploying that capital to increase my position in TSLA.�
1/1/2015
guest Will SolarCity partner in the GigaFactory? I see that as a significant catalyst.�
1/1/2015
guest I believe Lyndon answered this in the last conference call. Basically that is the point in which you have "unlimited demand".
When you can install solar with battery backup for less than normal electricity you are literally talking about every home/building in America. Or at least where the Sun shines a lot.�
1/1/2015
guest I think the better question is "what company can install beautifully architectured solar systems?" The man who takes Steve Jobs obsession for beautifully designed computers and applies it to solar will become incredibly wealthy.�
1/1/2015
guest The cheap panel will be installed on most roofs though. If you can make it cheap and beautiful even better.�
1/1/2015
guest SolarCity had 29% of Q1 US solar installer market share, beating out its 2013 overall share of 27%. Second biggest installer, Vivint Solar had a 9% share in 2014 Q1.
Overall trend is promising, small installers are becoming more and more irrelevant:
SolarCity, Vivint Solar Top US Solar Residential Installers In Q1 2014 | CleanTechnica�
1/1/2015
guest I can't help being skeptical about research like this. There's little doubt that SolarCity is the largest single installer but given their current coverage in 16 states then to have a 29% overall market share they'd have to be closer to 100% in some of those individual markets. It's worth noting that much of the data is based on state rebate numbers which are simply not available in many states.
SCTY's coverage map:
The next question would have to be: If SC has a 29% national market share they should be hugely profitable without facing downward margin pressure, no?�
1/1/2015
guest Actually, no.
Solar Market Insight Report 2012 Q3 | SEIA
SCTY's coverage includes states with the clear majority of installations and the vast majority of residential PV installations.�
1/1/2015
guest Seems like Mr. Rive has been cashing out a substantial amount of shares the last 5 weeks. Net proceeds of ~$9,000,000.
I'm out of SCTY right now but watching and I don't like this.
Now if I were able to buy at .87/share and sell at $71/share I would not be complaining! And in this case i don't think its healthy diversification...
Date
NAME
TRANSACTION
SHARES
PRICE
VALUE
7/3/2014
Mr. Lyndon R. Rive
Sold
30,293
$71.58
$2,170,000
7/3/2014
Mr. Lyndon R. Rive
Bought
25,964
$0.81
($21,031)
7/3/2014
Mr. Lyndon R. Rive
Sold
12,982
$71.58
$929,240
6/27/2014
Mr. Lyndon R. Rive
Bought
153,450
$0.81
($124,295)
6/27/2014
Mr. Lyndon R. Rive
Sold
76,725
$70.76
$5,430,000
�
1/1/2015
guest Absolutely nothing to worry about. Those trades were automatically executed under his 10b5-1 plan which was discussed up-thread here. You can see the SEC filings here.�
1/1/2015
guest
How many shares does Mr. Rive have?
It looks like he's exercised some options and NOT sold shares. Why isn't this "healthy diversification"?�
1/1/2015
guest Do you mean profitable now? I believe that SCTY would be profitable now, and for the next 15 to 20 years, if they'd just stop spending money on doing new installations! Of course, then they wouldn't be growing or even maintaining market share. They're definitely riding a tiger here.�
1/1/2015
guest Yes, he exercised options and bought shares. He could have held them. Instead he sold them. I don't think its healthy diversification when the company is still young and not profitable. His trades netted him $9-Million while the company lost ($56 Million) in 2013 and ($100 Million) in 2012. Sure they may have good reasons for the losses but I personally don't like it when CEO's do this.�
1/1/2015
guest The majority of the YELP reviews on solarcity is pretty negative:
SolarCity - Westchester - Los Angeles, CA | Yelp
Anybody has 1st hand experience?�
1/1/2015
guest There is also the yelp effect going on where a lot of reviews are hidden or don't count.�
1/1/2015
guest Interesting, how does Yelp decide which reviews are hidden or don't count?�
1/1/2015
guest So no substantive answers to the actual questions. Got it.�
1/1/2015
guest Ok sure, if that's what you think. I gave my reasons for my opinion and you go all snippy.
What do you think would happen if Musk sells the shares he gets from is next options tranche windfall? He already said he will hold them...first in last out.�
1/1/2015
guest apparently they have some controversial secret proprietary algorithm and have been sued by businesses a couple of times because they hide good reviews. but Yelp afaik won all those lawsuits.�
1/1/2015
guest I have first hand experience. I had a system installed by Solar City and everything went very well. The city inspector told me that Solar City "always does the job right the first time". He said most other companies have to return a few times until the city requirements are met.�
1/1/2015
guest I've had experience with both ends of this.
I help run a restaurant in my semi-retirement; Yelp is reputed to slant the display of reviews one way or the other depending on how much the business spends on advertising. They only "slant" the reviews, which means that businesses with consistent (good or bad) reviews still come across that way, but most have mixed reviews and the slant can be bad for the business.
We have a Solar City installation, and it was great, and we're currently negotiating to expand it. That's a positive review.�
1/1/2015
guest Sorry for any snippiness.
I was asking for facts and figures as I think it would help discern whether this is a serious concern or noise.
How many shares does he own and how much do these exercised options represent of his holding?
80% 50% 5%, 1%?
That's a much more important piece of information.
Were these part of a timed sale?
That we see an insider selling shares isn't very helpful.
As far as "losses", SCTY is making 20 year contracts that pay off over time. There are often investments in infrastructure in heavy growth phases of a business.
SCTY buys a marketing firm Paramount, for $120M.
Then they buy ZEP, a quick install hardware company helping them "double throughput" for $158M.
Then buys SILEVO, solar panel technology (with tax package), from the State of NY for $350M.
32% US Market share (both MW and % of customers) and addresses less than two tenths of 1% penetration.
Regardless of whether the PPA or outright sales model is adopted, Tesla is in the driver's seat to be one of the largest producers and storers of renewable energy in the US.�
1/1/2015
guest How come this is important? Almost certainly these sales are his major source of income. And what make you think that he is in position to invest ANY money into SolarCity or any other company?
From what we know he could be very well just spending them now instead of waiting till he be 80yo retiree.�
1/1/2015
guest Guys, if you're not familiar with them read up on 10b5-1 plans. It's good corporate governance to have one and Rive filed his last year to make the sales now; it's sensible for him to diverse a little or maybe he's building a house or something, the point is that there's nothing ominous in the recent trades.
Federal Regs/SEC/10b5-1
Investopedia.com/terms/rule-10b5-1
Wikipedia.org/SEC_Rule_10b5-1
Now if the trading was happening without a 10b5-1 in place that would be a different story...�
1/1/2015
guest I don't really agree that since he is not breaking the law all is rosy. A CEO or insider can file his/her sales plans via 10b5-1 in accordance with the laws and still make millions when shareholders are left holding shares in a sinking ship. I think it requires more analysis than blindly accepting all is good because is was done by the books. CEOs and board members can and do get relieved of their positions by making out like bandits when shareholder don't see good returns. (Not saying that will happen with SCTY.)
And in the case of SCTY I sold at 72 because I felt that compared to their peers SCTY had popped and future growth was limited. Whereas TSLA or other Solar companies are at a fraction of the market cap they will eventually be awarded. I decided to realize my 350% gains in SCTY and plan to reinvest elsewhere. For the record I did not sell because of the insider selling, I've followed them closely since the IPO and happen to agree with Sleepyheads and think some others here are a bit too exuberant.�
1/1/2015
guest It's not about "not breaking the law"; Rive 10b5-1 was put in place last August. I've run public companies and there's not a CEO on earth who can predict his share price 9 months out; you just have to plan your personal finances the best you can and then commit to your plan.�
1/1/2015
guest I don't want to add to the snippiness of this thread since I'd rather be engaged in constructive dialogue. First, congrats on your SCTY gains.
Regarding other solar companies vs SCTY, SCTY in my opinion has the following advantages:
1. Stellar management - includes Elon Musk as Chairman and strategic advisor
2. Fastest growing mainstream solar company - growing at 100% per year in terms of installs, customers, personnel.
3. Most complete vertical integration of any solar company - from marketing, permitting, install, maintenance, mounting equipment, now panels, and eventually inverters. This allows SolarCity to continue to drive down costs (along with economies of scale) and offer an unique value proposition from which they can and are accruing good margin.
But I'm not going to knock other solar companies, as I've mentioned on this thread that there are some that I find as decent investments (though I don't hold any long-term positions).
All in all, solar is a massively growing industry and there are going to be multiple investment opportunities. I just haven't found a better opportunity than SCTY (but I advise SCTY holders to have a very long-term outlook, ie., 10-15 years).
ps., I have to admit, and I've said this before on this thread, that I'm a fan of CSIQ. I think they might have the best management out of the non-SCTY solar companies, and they've proven that they can grow their company in a smart way. I don't have a long-term position in CSIQ (currently), but I respect that company a lot.
Here's a link to CSIQ's latest investor presentation. It's notable that they're projecting revenue growth of 75% YOY (from $1.6 billion in 2013 to $2.7-2.9 billion in 2014). Impressive.�
1/1/2015
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Fantastic! so how big is your solar system and how much savings do you realize on your monthly electricity bill? Also, what type of maintenance work does SCTY need to perform on your solar system? and how often?
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1/1/2015
guest We currently have a 6-year-old 3kW system. I can't remember what our electricity bill used to be, but we now pay a bit over $1k/year (SDG&E sends an account monthly but you only have to settle once a year) to support the house and two Teslas and a pool; I also work from home now so power usage has gone up. The pool has its own solar heater, but that's old and starting to leak, so we are looking to replace/move it, and put PV on that part of the roof for an additional 3.75kW. The estimates are that that will pretty much zero out our bill. Payback (after tax rebate) will be about 6-9 years.
As for maintenance, we had an inverter failure about a year into ownership. I got a call from Solar City's monitoring people, they organized a time to have it replaced... all perfectly simple. Nothing else needed except some tree trimming.�
1/1/2015
guest Thanks a lot! Your electricity bill is exceedingly low. I got a house+pool without any heater in Dallas, and my annual bill is more than $4K. So the ROI is really impressive. So how often do you need to wash the panels to get rid of dirt and dust and how much does it cost to hire some one to do it?�
1/1/2015
guest NigelM - I agree with you that 10b5-1 sales are nothing to worry about and good corporate governance. Heck, I just put half my money in GTAT, right after the CEO sold about 100,000 shares via a 10b5-1. But in the case of SCTY, I see something EXTREMELY WRONG with Lyndon Rives sale of 120,000 shares; let me connect the dots for you guys:
You guys remember last October when SCTY was trying to raise capital, and they couldn't get enough interest from people to buy the shares (not sure if the last part is true, but my understanding was that they couldn't get interest)? So SCTY, completely out of left field, decided to issue 2015 guidance in order to jack up the stock price to raise more capital. On top of that Elon Musk and Lyndon Rive agreed to buy 560,000 shares of SCTY as part of the capital raise to show the rest of the investment community that they have faith in SCTY. Well in the end the bought less than 400,000 shares, o/w Lyndon Rive bought 107,434 shares.
If what NigelM says is true that Lyndon Rive put his 10b5-1 plan in place last August (just a couple months before the capital raise) to sell 120,000 shares of SCTY (just 8 months after the huge "vote of confidence"
SCTY already diluted the heck out of shareholders by doubling share count over the past 2 years, and now we see that they are dishonest and misleading shareholders by playing these "vote of confidence" games. I am sure that Elon does have confidence in SCTY, and probably will not be selling his shares. But what Lyndon, the CEO, did is completely unethical and the guy is a joke in my book for trying to fool shareholders. The truth always comes out, and I am always happy to do the detective work to point out these jokesters.
Disclosure: I just recently cashed out my deep ITM SCTY J15 30/40 Bull Call Spread for 92% of max value (I wanted to hold to maturity, or at least Sep. for LTCG, but I needed to raise capital somehow to buy more GTAT on this illegally fabricated pullback by UBS, who had notes due July 10-15 that cost UBS a lot more money the higher GTAT's stock price was. This is another example on Wall St. how the big players, i.e. CEO's and investment banks, screw over the little guy, i.e. retail investor. But I digress). Therefore, I now do not have any SCTY positions, and absolutely do not have any short positions in the stock either. But I do hope that the stock keeps going up, because I will be looking for an entry point to short once it goes all bubbly again. At the same time, I will go long the stock if it crashes another 30%. I think that SCTY is a good trading vehicle. I actually think that the stock will be a lot higher 5-10 years from now, but fear that there is a 20%-30% chance that the business model will fail the shareholders, i.e. not deliver decent returns, and therefore I don't buy as a long-term investment due to huge perceived risks.
But the main reason I am not a fan of SCTY is because they are an unethical company as proven by this whole capital raising mockery they made out of shareholders, ripping off customers by pocketing the whole benefit of installing a solar system for themselves while the customer is left holding the bag on a lease in the form of depreciated home value due to solar lease (yes your house may lose as much as 10% in value due to solar lease, while owning a system can increase your property value by up to $25,000); note I am not a fan of SPWR (or any other company) leasing either. On top of that they screw over the taxpayers by jacking up the "appraised" system value price in order to maximize MACRS depreciation, so that Goldman Sachs can pay less in taxes and screw over the taxpayers (just what we need: an investment bank screwing over the taxpayers even more).
I am sorry, but SolarCity is a complete joke of a company to me! Extremely unethical in my book...
edit: jacking up the "appraised" solar system value price also means that SCTY is screwing the taxpayers over by pocketing 30% on this higher "appraised" value than the actual value of the system, which would be a much lower value; but that would mean less taxpayer dollars for SCTY to pocket for their own coffers, so that the executives can get their tens/hundreds of millions of dollars.
Also, make sure to read my hyperlink in the last paragraph about how solar leases can significantly lower the value of your home during resale, and how owning a system can actually increase the value of your home (I point I have been arguing here for over a year).
I am not a solar installer, and I have no positions in SCTY. Everything I write here is my own, unbiased, and honest opinion on this matter; and I understand that many people will disagree with me. That is what makes a market...�
1/1/2015
guest Laziness wins... they get washed once a year, when it rains... :-/�
1/1/2015
guest I'm my case that's daily lol�
1/1/2015
guest This do sounds like California
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1/1/2015
guest If you live in Dallas, then you are in the Oncor TDSP service area. Oncor is offering a very generous rebate for installing solar panels right now (at least they were 3 months ago when I installed mine, and the program has been going on for at least a couple of years).
If you get a lease with SCTY, then they will pocket your 30% tax credit, they will take away your generous Oncor rebate, and you will be left holding the bag when you try to sell your house and have to lower your asking price by $10k - $20k just to get people interested in buying your home.
But ignoring the home resale part, I also live in ONCOR TDSP area and just installed a 7.7kW solar system on my roof and it only cost me $9k out of pocket. This will give me a cost of about 2.5c/kWh ($0.025/kWh). Whereas, if I went with a solar city lease, I would probably have to pay 3x-6x (300% to 600%) more per kWh.
Do not lease a system from nobody, especially since Oncor offers very generous rebates. Find a reputable local installer that will do a solar system for around $3/W and then get your 30% tax credit and an Oncor rebate (mine was over $1/W) to bring your system cost down to about $1.30/W out of pocket.
BTW, ggr lives in San Diego, where the temperature is 75* year round and is nowhere near comparable to Texas. Get the biggest system that you can fit on your roof while Oncor is still offering these generous rebates. That way you will have about a 6 year payback period, and get to keep your solar system 30+ years. With a SCTY lease, you will have a 12-13 year payback period and then have to return the system to SCTY at the 20 year mark.
It is a no-brainer to buy in your situation if you are considering solar. Leasing a system in Dallas (with Oncor's generous solar rebate) is the worst financial decision you can make (unless you get an extremely good offer, such as $0.03/kWh on pre-paid lease or $0.06/kWh on a 20-year no money down lease).�
1/1/2015
guest I worked for three years as a "Solar Rebate Inspector" at the Los Angeles Department of Water and Power. In this capacity I was privy to both system financial data as well as technical data. I am in complete agreement with Sleepy regarding the advantages of purchasing vs leasing. Shop prudently and you will miles ahead for years to come.
I am vested in SolarCity because of their accomplished sales and marketing organization. Most residential solar customers will not burn the calories to ferret out the best terms and deals. That said, SolarCity provides an incredible turnkey solution. They simply reduce your monthly power bill.
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Just a couple thoughts on panel orientation. The ideal stationary (static) panel installation is facing due South, with the array pitched roughly at the latitude of the installation.
LADWP has used a couple variances. First, they consider everything from due South to due West as optimal, this favors afternoon production. Secondly, they consider everything from a horizontal pitch to installation latitude as optimal, this favors summer production. The idea being to produce the greatest amount of energy at peak loads. We all turn our air conditioning units on in the summer afternoons.
The devil in in the details is your utilitity company's "Time of Use" rate plan. The installation will affect production year after year. Plan your production to match the highest price power.�
1/1/2015
guest
Wow and well said.�
1/1/2015
guest So since you hate leasing so much, what would you suggest someone like me to do? I dont have $9,000 just sitting around, but could get on solar immediately from someone like SolarCity. So do you want more people to move to sustainable energy or not?�
1/1/2015
guest *note This was not a complete quote
I don't agree that it is a no brainer. Depending on someone's situation I would argue there could be much better uses for that 9k depending on the person. For instance possibly buying 9k worth of Tesla Stock. Over the life time of the solar panels the stock could arguably go to 2000 a share which I think would be better than any additional savings you got from buying Solar vs Leasing.
I think for many people buying solar might be the best option but I think Lease will be the way to go for many other people.�
1/1/2015
guest Sleepy - I'm not sure if I understand what you're trying to get at. Would love a clarification.
Here are all the Lyndon Rive stock transactions I could find from the SEC filings since IPO:
7/3/14 - Lyndon Rive exercises 12982 shares for $1.62 and sells those shares and 30293 more shares for an avg of $71.57. (The sales reported on this Form 4 were effected pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on August 30, 2013)
6/27/14 Lyndon Rive exercises 76725 shares for $1.62 and sells those shares for an avg of $70.75. (The sales reported on this Form 4 were effected pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on August 30, 2013.)
5/6/14 Lyndon Rive exercises 89,580 shares for $1.62 and sells those shares and 30,420 more shares for an avg of $54.15. (The sales reported on this Form 4 were effected pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on August 30, 2013.)
4/19/14 Lyndon Rive sells 160,000 shares for an avg of $52.25. (The sales reported on this Form 4 were effected pursuant to a Rule 10b5-1 trading plan adopted by the reporting person on August 30, 2013.)
10/21/13 Lyndon Rive acquires 107,434 shares for $46.54/share during SCTY secondary offering.
6/11/13 Lyndon Rive sold 220,743 shares at $14/share. (As previously disclosed in the Issuer's Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 30, 2013, and in the Issuer's final prospectus dated December 12, 2012, filed with the SEC pursuant to Rule 424(b), on December 30, 2011, the reporting person granted an option to 137 Ventures, L.P. to purchase 330,520 shares of reporting person's common stock at $14 per share. On June 11, 2013, 137 Ventures, L.P. exercised such option on a cashless basis, resulting in the reporting person transferring 220,743 shares to 137 Ventures, L.P. and withholding 109,777 shares to cover the exercise price.)
Note: From the 12/12/12 sec filing, Lyndon Rive had about 3 million shares (1,000,000 personally and 1,952,378 in a family trust). In addition to these 3 million shares, he has 2 million more shares that he could own via options (presumably milestone/achievement based). 1,000,000 of those shares have a $1.62 strike price (10 year period from 2009-2019), and the other 1,000,000 has a strike price of $5.07 (2011-2021 period).
In context, here's what I'm seeing:
1. Lyndon Rive had 3 million shares at IPO and an additional 2 million shares in options.
2. Lyndon Rive sold 220,000 shares in June 2013, apparently Lyndon Rive sold some options on Dec 2011 to a company and they exercised them.
3. On August 30, 2013, Lyndon Rive submits a 10b5-1 to sell some shares.
4. On October 21, 2013, Lyndon Rive buys a bit more than 100,000 shares in SCTY's secondary offering.
5. From April to July 2014, according to the 10b5-1 plan he sells about 400,000 shares. (There could be more shares he's selling in coming months, I haven't seen the 10b5-1 plan.)
Lyndon Rives still has 2.6 million shares as well as a possible 1.8 million options (until 2021).
It's also likely that SolarCity will give him (and other executives) more incentive plans in coming years as well. So he'll likely end up with more shares than he currently has.
If things are strange with insiders selling, then I'm definitely a person that would point that out. (see Short-Term TSLA Price Movements - 2013 - Page 376 and Short-Term TSLA Price Movements - 2013 - Page 377.)
But in this case, it looks like a normal selling of a small portion (ie., 10%) of Lyndon Rives holdings. To sell 300,000 shares (since he bought 100k and sold 400k shares) at let's say $50/share is just $15 million. After taxes, it's probably under $10 million. Probably just enough to buy a nice house in the Bay Area.�
1/1/2015
guest l
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looks like little maintenance work is needed in many parts of CA and FL. This is great!�
1/1/2015
guest Thanks a lot, I'm indeed in the Oncor service area. A few questions for you:
1. Any idea why Oncor is so generous?
2. At cost of around $3/W?who is the manufacturer of your panels?
3. how often do you need to wash the panels?
4. Any other maintenance so far?�
1/1/2015
guest Answer: Use common sense!!!
I really can't believe that this question keeps popping up, and I apologize if my response comes off as rude, since I am annoyed having to answer this same question every month. The reason I post all of this stuff is because I am trying to help you guys make sound financial decisions, so that you can save yourself tens of thousands of dollars. I have no other agenda behind this stuff. Seriously people, this is not hard. Every time I bring up the topic how much better it is to buy vs. lease, I always get this exact same annoying question. I have already answered it at least a handful of times in this thread.
What do you do when your car breaks down and you don't have $20k to buy a new one? What do you do when your AC/furnace breaks down and you don't have $8k to buy a new one?
The answer is simple: you get a loan!
Step 1: Go ahead and google "solar loans" or "credit union solar loans" (or something similar to find CU's or banks in your area that give out these loans). You can find loans for up to $60,000 (or more) and 4%-7% interest rates. My loan was for $21k at a 3% interest rate with $0 down:
Step 2: Apply for loan
Step 3: install solar system
Step 4: Sign up with Green Mountain Energy that offers net metering.
Step 5: Make payments on loan
It really isn't that hard and I feel like there is a lot of willfully ignorant SCTY investors here pretending that if you don't have money to buy a solar system that your only option is to lease. Banks are one by one finding out that solar is an extremely safe investment and there are more new loan products coming out every single day. SPWR for example just announced a partnership with Admirals Bank for loans up to $60k. But if you go with a local installer then get a loan at a credit union to pay off the solar system.
The only caveat is that you have to pay the full price of the system, and then wait a few months for your rebate as well as tax credit. But this is not a problem:
E.g. For someone who lives in the Oncor TDSP area (which is what this discussion is about): Say you want an 7.7kW (same size as mine) solar system at $3/W = $23,000
1. Take out a loan for $23,000 at 5% interest rate over 5 years.
2. Now you have a solar system on your roof and a $434 monthly payment
3. You will get your $8,000+ rebate check by the time your second (or 3rd) payment is due
4. You will get your $5k ((23k-8k)*30%) tax credit when you prepare taxes in less than 12 months.
Side note: if you don't have tax liability to take advantage of tax credit then you most likely can't afford a home anyway (unless retired or some other uncommon circumstances). If you don't have good credit to qualify for a solar loan, then you most likely will not be able to qualify for a solar lease either.
So you have a $23,000 loan and $13,000 cash back. You can use that $13k to pay down your loan principal and you are left with a $10k loan to pay off over 5 years, which knocks your payment down to $188/month. After 5 years, your loan is paid off and you are free and clear receiving free electricity for the next 20-30 years (might possibly need inverter replacement, but those have 10 year warranties and should last).
A 7.7kW system here in Texas produces on average 1000kWh/month, so you will be saving about $120/month on electricity. So effectively you have a $68 ($188-$120) monthly loan payment for 5 years. And then you will be saving $120/month (or more due to most likely higher electricity costs in the future) for the following 20 years.
Buying a system will cost you $68*60 = $4,080 over the first 5 years and then save you $28,800 over the next 20 years for a total savings of $24,000 over the life of the system. Leasing a similar system from SCTY might save you $30/month on electricity, which over 25 years would save you $9,000.
So you decide, do you want to save $24,000 or $9,000?
And before I get the next annoying question about "what if you sell your house...?" I recommend reading this Bloomberg article from last month:
Rooftop Solar Leases Scaring Buyers When Homeowners Sell
http://www.bloomberg.com/news/2014-06-23/rooftop-solar-leases-scaring-buyers-when-homeowners-sell.html
If you lease a solar system you might have to lower your home resale value by $15,000. But if you own a solar system then it could increase your home resale value by up to $25,000. That is a $40,000 difference!!!
This why I always say that SolarCity's business model is built on preying on the uneducated customers. If people knew everything I said here then the lease model would not be so successful. I understand that people will most likely remain uneducated for a long time and most likely SCTY will be successful for many years to come. But I am not willing to bet my money on that.
The reason I make all of these posts is because I am trying to help my friends here at TMC make smart financial decisions when going solar. A lot of people here at TMC make great contributions and this is my way of giving back.
If you can find a way to buy a solar system then please do not lease one. It can give you huge headaches and cause big losses when selling your house, and it won't save you anywhere near as much money as buying a solar system outright...�
1/1/2015
guest 1. I really don't know the reason for this, maybe they had some kind of deal signed that they had to earmark dollars for solar systems. I think that they set aside something like $8m for this program last year, and I really can't believe that it hasn't been exhausted (it is possible that they renew the program every year, I am not sure; what I do know is that I got a rebate check for more than $8,000 for a 7.68kW system or more than $1/W).
It is very possible that this is simply good business. In Texas the high cap price for electricity is going up and will be $9,000/MWh very shortly and I heard they are trying to raise it to $14,000/MWh. My solar system offsets peak load perfectly, which means less investment necessary in transmission lines and other power plants. So if my system is producing 6kW's during a time when prices are at $14,000/MWh or $14/kWh, then I am saving that company $84/h. You get a couple hundred hours like this over the next few years and I saved them over $2,000. Then at other times when electricity is less expensive I am still saving them money at a lower rate.
IMO, the $8k that they gave me for this solar system will create a lot more value than $8,000 to Oncor. It truly is a win-win situation here.
2. I actually paid $2.50/W for a Sunpower solar system (best that money can buy). I got a great deal since a family member of mine works there and I got "scratch and dent" panels that have no downside at all (just aesthetic, but you can't see them anyway; I inspected them before they went up and wouldn't have known they were scratch and dent if I hadn't been told).
I would say that you can't go wrong with any tier 1 Chinese solar panel supplier. They all buy cells from Taiwan to ship to US to circumvent 2012 tariff scheme, so they are all similar in quality; and the Chinese do make high quality panels). With this new round of tariffs, the Chinese might start shipping using home made cells. In this case I would recommend using JA Solar (JASO) panels, since it appears that they put the most effort and pride into quality compared to peers. But in the end, I think that all should be similar. I am not an expert in this field, but a solar installer here on TMC said that you should stick to the tier 1 solar panel producers and you will be fine.
3. I don't wash my panels at all and let the rain wash them. It doesn't rain here much recently so I probably need to wash them. But all you do is hose them down and voila. I once had back to back 0% cloud cover days and did a test (since it hadn't rained for a month and the panels looked dusty): On day 2 I hosed them down and got about 5% more production. So you may want to hose them down from time to time if it doesn't rain, but no washing is really necessary (maybe once every 3-5 years). Note: it is possible that I get better production due to cooling the panels with cold water as much as washing off the dust. I really don't know, but did get 5% more for sure on virtually exactly similar days with 0% cloud cover.
4. No maintenance on solar is necessary, and that is why you don't need to lease a system to get the benefit of no additional cost for service and maintenance. I have only had my system for 4 months, but a solar installer here on TMC has installed many systems over the years and never had to perform any maintenance on any systems. That speaks louder than any one persons testimony. He said he only got called out once because of a faulty inverter, but that was the manufacturers fault for supplying a bad inverter. He replaced it with a new one and that is it.
The only problem with buying over leasing is if the inverter breaks down you have to pay for replacement. But you get a 10 year warranty and these things go for $0.15 - $0.25/W today, so for a 5kW system it is only $1000 to replace if necessary, and these things might get cheaper in the future too.
I think that if you shop around, you can get a system installed for $3/W minus $1/W rebate minus $0.60/W tax credit = $1.40/W out of pocket cost. I got a flyer from some random solar installer called longhorn solar and they were advertising prices of ~$3/W. But go to the SEIA or other solar websites to find reputable and accredited installers. I can't remember what the other website/organization was called.
I can get you a discounted deal on a SunPower solar system for $4.40/W installed. So after rebate and tax credit that is about $2.30/W out of pocket. But you can get a solar system for $3/W elsewhere from a reputable dealer then it probably isn't worth paying 80% more for a SPWR system. SunPower makes by far the best systems and if you want to build a forever home that could withstand a zombie a apocalypse and keep your AC running, then definitely go with SPWR (and buy a bunch of backup inverters). I recommend SPWR even if you have to pay 30% or more for it, since you will get your money back over time due to lower degradation, better performance, and most likely significantly longer useful life). But it is hard to justify a SPWR system at $4.40 vs. $3 for Chinese if you are not planning in living in that home for 30+ years.
Good luck with your research and let me know if you have any other questions.
Cheers,
sleepyhead.
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That's why you take out a loan to pay for the system if you are worried about applying your cash elsewhere.
You may think that lease is the way to go for many people, but I know for sure that buying a solar system is by far the best way to go for the vast majority of people. Heck, even a solar inspector chimed in on the other page agreeing that buying is the way to go if you are willing to put in some legwork: a few hours of legwork to save thousands or tens of thousands of dollars.�
1/1/2015
guest If that is all that you are "seeing" then you have been fooled by Lyndon Rive as well. These guys are purposely misleading shareholders and I may have to write an article about it. I don't have time right now to respond to your post, but I have done the research and they are obviously screwing around here; probably hoping that nobody will notice how they tried to "trick" the shareholders into believing that Lyndon Rive is buying more shares in the company as a "vote of confidence."
Thanks for your post, this story is getting better every minute for me. On second thought I have to do a little more research on this subject, because there is still a couple things that I need to check that might make the story even better.
Stay tuned...
Edit: changed Give to Rive. Thanks autocorrect�
1/1/2015
guest I agree with all the solar analysis. I own my system and would absolutely recommend ownership to anyone looking to go solar.
However the note about GTAT interested me. Mind expanding on it in the "Other Investments" thread?�
1/1/2015
guest I had a chance to go back and read your other post again. It appears that your claiming that Lyndon Rive was insincere(?) in his purchase of 100k shares in last October's secondary offering and you go on to say that he's "purposely misleading shareholders". I'm assuming you're claiming that he's trying to boost stock price for the secondary by purchasing 100k shares while knowing that he'll be dumping 400k shares in 6-8 months (with the 10b5-1 already filed in August 2013).
It seems like you're reading into it a lot. Lyndon Rive is free to buy shares and to sell shares as he wants, as long as he follows SEC regulations which he did. You might have interpreted his October secondary purchase of 100k shares as a big "vote of confidence" that wasn't sincere because he knew he was going to sell 400k shares the following year. But it could also be that he instituted his 10b5-1 plan with the idea of divesting 10-15% or so of his holdings in 2014. But when the secondary offering came along, he thought it was a good deal to buy some more shares. This is totally legal and understandable. Could have there been other motives as well, like showing support for the company and helping the secondary? Sure. But I don't think it's stock price manipulation or deceiving shareholders, since his later selling of stock (ie., this year) is done publicly. And if he thought him buying 100k shares was going to boost the stock price, then surely he would think that selling 400k shares later would tank the stock price (which would not be good since they might need to raise more money). The reality is he's probably not thinking on those lines. A few hundreds thousand shares here or there isn't a significant number compared to his total holdings.
On another note, I've seen Elon Musk if he thinks the stock price is low (ie., the company is undervalued) he will go in and buy more shares at the secondary. Elon Musk doesn't actually have the money, as practically all his money is vested in TSLA, SCTY and SpaceX. But he's using a line of credit from Goldman Sachs to make purchases like for his house and other things. And he uses that line of credit (kind of like margin) to buy more shares of TSLA (ie., at $92/share in May 2013), and at SCTY's IPO and at SCTY's Oct 2013 secondary offering. Elon thinks the stock is cheap and he buys more stock, even on margin. Now Elon is unique in that he's okay with holding hundreds of millions of dollars on margin, but most people are not like that. So, in the case of Lyndon Rive, he's more of a normal human being (compared to Elon Musk) and he's going to buy and sell stock and that's fine. As long as he follows SEC guidelines, I'm fine.�
1/1/2015
guest I can see the points from both sides of the argument and the questions sleepy raises could have very simple answers; as an ex-CEO I know how difficult it is to juggle personal financial planning with laws and regulations. (FTR: I'm not in SCTY right now just because I'm uncomfortable with nailing down what the true potential really is, and I'm personally not a fan of their leasing model).
On a slightly different note, SCTY missed an opportunity here:
With Leilani's connections to Tesla and her driving a Model S etc...�
1/1/2015
guest I get what you are saying, short-term work for long-term gain. But someone like me doesn't have an extra $434 a month until 3 and 4 kick in. I guess we would have to save that much money first and then do it this way, because the only debt my wife and I have is the house. We do the Dave Ramsey thing and try to not use debt as a way to have things in our lives. Houses and cars are the only thing loans are used for, but maybe solar panels will have to be an add on to the list.
Part of getting panels is to save money, but it's also to get onto sustainable energy. So if others out there can use a company like Solarcity to automatically get it with a lower price on their electricity bills, then that's great to me. I thought there was talk that Solarcity could eventually one day become like a utility company, where they are supplying the equipment, and you pay for the energy, so owning doesn't really matter. It's more about getting people to switch. I don't know....I see it both ways...�
1/1/2015
guest here is some bad news for my man sleepyhead.
"The world trading body ruled that the U.S. improperly imposed duties on Chinese steel and solar products. "
http://news.investors.com/business/071414-708616-us-steel-and-solar-firms-impacted-by-elimination-of-tariff-on-chinese-products.htm�
1/1/2015
guest What's with the personal attacks again?
And you couldn't be more wrong. This is really good news for me, so I have no idea what you are talking about.
Go look at the charts: as soon as the news came out JASO went vertical and so did my smaller positions in JKS, SOL, and TSL. My only other solar positions in CSIQ and SPWR finished in the green as well. As I wrote over the weekend, I sold off my SCTY deep ITM bull call spreads for 92% of max payout and I now have no SCTY positions at all.
Now can we stop with the personal attacks! Please?�
1/1/2015
guest Everyone play nice please or we'll go back to zero tolerance. Thanks.�
1/1/2015
guest I've seen this mentioned before...and often wondered: with his salary very low, and claiming he won't sell TSLA shares, and cannot sell SpaceX shares, does that mean the only "income" Elon gets is from selling SCTY shares? He has to pay back this line of credit somehow.�
1/1/2015
guest My previous post on this topic was incomplete and there is more to this story, but I just don't have time to spare to research this.
That said, your response is very reasonable if you assume that the part I bolded is correct. But it isn't correct...
Here is the timeline of events:
June 18, 2013: SCTY announces secondary offering. In order to prevent the stock from tanking, as a vote of confidence Elon Musk and Lyndon Rive announce they will purchase up to 560,000 shares.
http://www.streetinsider.com/Corporate+News/SolarCity+(SCTY)+Files+2.8M+Common+Secondary%3B+Elon+Musk+Plans+Purchase/8425605.html
Stock tanks anyway over the next few months...
Aug 30, 2013: Lyndon Rive submits 10b5-1 plan (that "no one" reads) to sell 400,000 shares over then next 6-8 months (possibly a lot more shares than 400,000, I really don't know if there will be more sales based on that filing; just going off of what DaveT posted, and I know I can trust his research).
Oct 16, 2013: SCTY stock is still weak so they announce 2015 guidance outside of normal announcement time to jack up the price of the stock, so they can issue shares 5 days later.
Oct 21, 2013: SCTY raises capital and Lyndon and Elon purchase 400,000 shares, of which Lyndon buys 107,434 shares.
Over the next half year, Lyndon Rive unloads 400,000 shares...
I hope that with additional detail you now see that Lyndon Rive, CEO of SolarCity, is purposely misleading shareholders that he is buying shares as a vote of confidence, when in fact he was planning on dumping 4x the amount of shares that he actually purchased.
I see this as extremely unethical and they are screwing around with shareholders. All you guys who own SCTY, should be asking them a lot more questions...
Even though I have no skin in this game, this whole situation still bothers me immensely. How can you trust a CEO when he makes a mockery out of shareholders like this?�
1/1/2015
guest So you're telling me Elon and his cousin are the best con artists we've ever seen? Slap me silly. Pull out your TSLA shares too then....come on man. If this ever was true and brought to attention, this would sink TSLA and the Tesla name. You think Elon needs and wants that attention?�
1/1/2015
guest Thanks for explaining the timeline more. Now that you mention it, I do recall that it did take quite a while between when they announced the secondary (June 2013) and when it closed (Oct 2013). And so Lyndon Rive first decides to buy 100k or so shares in the SCTY offering (June 2013), then files his 10b5-1 plan in August to sell 400k (at least) shares 8-10 month later, and then closes his 100k purchase in the secondary in October.
While it does seem a bit strange, I'm hesitant to jump to conclusions because we don't know the whole story. And there could be some financial planner helping Lyndon with his personal/family finances. Maybe the financial planner was pushing Lyndon for the longest time (i.e., since IPO) to divest some of his SCTY shares (ie., 10-15%) and Lyndon finally agreed to it (maybe in Spring 2013 but he filed the 10b5-1 later). And maybe he wanted to buy 100k more shares to support the company's secondary, but also because there's some kind of reason that we're not aware of. Or it could have been he decided to buy 100k shares in June, then his financial planner went bezerk on him and told him he was crazy and that he needs to be divesting, and then Lyndon Rive's wife also disagreed with the 100k purchase and wanted to divest to buy a house, etc, etc, etc. So, it's too late for him to go back and cancel his 100k share purchase in the secondary, so he decides to sell 400k shares by filing his 10b5-1 plan to sell in April-June 2014.
Is it strange? Yes, somewhat. Is it clearly a misleading of shareholders? I don't think it's that clear. It somewhat of a grey area because we don't have the full story. And he didn't break any SEC rules.
Also, in the bigger picture Elon's purchase is much bigger than Lyndon's. And Elon is the company's largest shareholder as well. And to my knowledge, he hasn't sold any shares yet. If anything, Lyndon Rive's confusing purchase/selling of SCTY shares is dwarfed by Elon's monster stock position in SCTY and him borrowing money to buy even more shares.
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Yes, somehow Elon will need to pay back his line of credit with Goldman (and maybe others). He could either sell shares of SCTY, or SpaceX, or TSLA (which he said he'd be the last one out). Or perhaps he has some other investments that strike it big (I know he's made several investments in some startups but probably not very large investments, so this probably won't be enough to pay off his debt). Or he could wait until his companies start issuing dividends (ie., 10-15 years later) and use those dividends to pay down and eventually pay off his debt.
Elon's situation is quite fascinating to me. It's really interesting that he's chosen to use a line of credit to not only fund his lifestyle (ie., buy house, etc) but also to buy more stock in his companies. He's really gone all-in, and then some. Most people in his position would be divesting and diversifying, but he's putting more in.
I personally lean on the following scenario... Elon is thinking of keeping his TSLA, SpaceX and SCTY shares "forever" (at least until he dies and passes them on) and doesn't want to sell a single share. He's content with a large line of credit in the hundreds of millions of dollars range to fund his lifestyle and even investing more in his companies. He figures that all his companies will eventually pay handsome dividends and he'll use those to pay off his debt. He doesn't care much, if at all, about divesting or diversification into other assets. He'd be happy of all the assets he ever had were shares of TSLA, SpaceX, and SCTY. He did buy a house though but it wasn't necessarily because he really wanted to buy a house but he wanted to remodel and such and couldn't do that as a renter. He did buy the house across the street from his house but that was more for security purposes. So, he'll buy stuff but his real/true assets/investments are TSLA, SpaceX, and SCTY. And he doesn't intend on selling ever.
Now, this "scenario" might not be true. We do know that his intention with TSLA is to be the "last one out" (meaning never sell his shares unless the company is sold). We don't know what his intentions are for SpaceX or SCTY shares. But it's an interesting thing to ponder.
And the day if/when he starts to sell SCTY shares, my theory will be destroyed.�
1/1/2015
guest Dave spacex is not a listed company. We do not know his salary from that venture. Another potential source of income. I have known people who inherited their wealth and are scared of it going away. They have no confidence in their ability to replace it. He has had 5 ventures all paying off well. I doubt he has any fear of losing it, he knows he can make it again�
1/1/2015
guest Yes true that he could be getting a salary from SpaceX, but I doubt it's much since they run SpaceX as a fairly tight ship regarding expenses. Also, a few hundred thousand a year from a salary is not going to put a dent in Elon's total debt, nor is it going to fund his lifestyle either (ie., private jet, ex-wife/child support, etc).
I agree Elon's not afraid of losing it all, since he knows how to create value. I just find it interesting that he'd go into debt to buy more shares of his companies. It strikes me as fairly uncommon.�
1/1/2015
guest Just FYI, as of Feb 2014 (according to Tesla's annual report) Elon has a $275 million line of credit from Goldman Sachs (a large portion used to buy TSLA and SCTY stock during secondary offerings) and a $25 million loan from Morgan Stanley.�
1/1/2015
guest Based on my own situation, which is...well, not quite the size of Mr Musk's!.....a $275mm line of credit at Goldman is going to run him LIBOR + ABOUT 100bps, or 1.2%, more or less. So as long as we're conjecturing, let's conjecture what gross salary he would need to service, say, $200mm of that: about $2.4mm. Less of a salary - at that borrowing level - and he's falling a bit behind all the time.
Now, I really think that neither he, Goldman, MStanley nor we should worry much over this situation. On the other hand, someone I've known since we were lads put his full faith and credit behind loans to one of his companies, securing it with $1bn of his own fortune. However, when things turned nasty, and the stock price plummeted, his own $30bn turned to ashes, he couldn't make good on his promise, creditors seized what was left...and Eike Batista became known as losing the largest amount of money a single person has incurred in history.�
1/1/2015
guest Are you getting a line of credit for 1.2%? If so, that's amazing. I didn't know that was possible.
That's one amazing story. I had to look up his wiki page to read more about it, Eike Batista - Wikipedia, the free encyclopedia .�
1/1/2015
guest Yes it's possible.�
1/1/2015
guest Can someone share more info on this? PM me please if needed.�
1/1/2015
guest E-mailed you privately.�
1/1/2015
guest It seems like Elon's creditors have good reason to give him such a favorable credit line. They and their friends (investors, advised customers) own shares in his companies. If Elon has to sell shares to pay down some of his debt it could very well reduce the value of the stock they own. It's a catch22 that Elon has cleverly negotiated.�
1/1/2015
guest Check your PMs, Dave.�
1/1/2015
guest Another article came out today questioning the leasing model. Someone sold their house with a solar lease, then the buyer came back to renegotiate the deal, since he wasn't aware that solar lease would last another 15-16 years. The seller had to give him $10,000 because of the solar lease agreement. Just another data point to add what I have been saying this whole time; buying a solar system is an asset, while entering into a solar lease is a liability - difference between the two is measured in tens of thousands of dollars:
http://www.npr.org/2014/07/15/330769382/leased-solar-panels-can-cast-a-shadow-over-a-homes-value�
1/1/2015
guest Whenever I come to this thread to learn about SCTY, I find you criticizing the lease model, or something else, like you are on a crusade. I'm starting to feel that it kills any other conversation that may take place.
(Maybe a thread specifically for discussing the lease model?)�
1/1/2015
guest
The argument could be made that this is a Tesla forum and other companies should not have a designated thread at all. But since this is the investor section, and SolarCity is being discussed by investors, it seems only reasonable to point out the concerns about the risks of the company for investors. Leasing is a primary component in the SolarCity model so its discussion is more than warranted - it is vital.
Sleepyhead has engaged in this debate when others were promoting the benefits of leasing and denying or ignoring the faults. I have no holding in SCTY and never have, but I do read the thread. I don't see why the promotion of SCTY as an investment should be permitted on this forum and no challenge allowed to the thesis. Usually sleepy's posts have come in response to other statements, but when they seem isolated, it's only because he came across more support for his argument or was presenting something he failed to include earlier. Those comments are sort of "wit of the staircase" to which most of us succumb.
�
1/1/2015
guest Is your point that there shouldn't be too many threads?�
1/1/2015
guest My point was that sleepyhead has every right, and arguably a responsibility, to point out the flaws in the SCTY model as far as investors might be concerned.
You seemed to want a separate thread for an aspect of SCTY. This is something to which I totally disagree. Since this is the investor section and SCTY has a thread, all discussions related to SCTY should remain here, especially when it concerns valuation and risk. The leasing model carries a lot of risk should potential customers become better informed about the ways in which they could afford to buy a system as well as the risk to lowering the value of their property if they think they might be selling within ten years or so of starting a lease.�
1/1/2015
guest Yes, I don't want a single topic to dominate the thread. To me it is just one of many questions to discuss as long as the installed systems actually convert solar to electricity.�
1/1/2015
guest Again, I refer to the fact that this is the investor section. Converting solar to electricity is what SolarCity customers seek, but at prices they can afford. Leasing is something that should concern SCTY investors and sleepyhead may argue that it is the central concern against the current valuation. But I think sleepyhead can defend himself and offer his own reasons for providing data related concerns for SCTY in the investor section of a thread dedicated to SCTY.�
1/1/2015
guest Well, I'm hereby disclosing that I own some SCTY. There you go. As far as I'm concerned, SCTY can lease and/or sell in whichever way they please.�
1/1/2015
guest I guess all threads relating to Model S accidents, power train and other issues should be moved to the investor thread. TSLA investors need to be concerned of those, too.�
1/1/2015
guest
That's fine. I'm sure every investor in SCTY hopes the company is successful, and if leasing is a path to that success, good for them. Any company that contributes to the global solar array is doing something positive for the environment.
I own a large amount of TSLA and I hope for success with that company. I don't disclose any fault I find with the company or product because I am not looking to encourage those who want to see the company fail. However, I do want to know about those concerns so that I can make an informed decision about risks vs reward. If I were considering SCTY as an investment, and in the past I have, I would want to know about the drawbacks of the lease program as it could affect the stock price.
We all hope our investments are successful. Sometimes we make errors in judgment, sometimes we miss the obvious. When the error is an oversight, that's too bad. When the error is because we bury our head and hide from what is obvious, that is gambling that others also won't see the obvious and we become big losers of our own making. On the other hand, sometimes what seems obvious is not actually so clear. The naysayers who oppose TSLA for any number of reasons are the ones I believe who are blind or gambling that enough of the investing world will miss what we see as clear. So by the same token, SCTY investors may be the ones who see the bigger picture that others can't. Only time will reveal the entirety of the pictures.
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Yes, that would suit me fine. I don't read the threads in the other sections so I am not as well informed on every aspect of TSLA as perhaps is possible from reading the full forum. I guess it is up to the mods to decide what thread is relevant to each section. And then, they have to decide what subject in each thread should be moved to some other thread or tossed out entirely.�
1/1/2015
guest Mod Note: We tolerate Solar City discussion because of the obvious link(s) to Tesla. I can see the point about wanting space for a wider discussion but at the same time we need to consider how messy that will make the Investor Section where primary discussion revolves around TSLA. No promises that we'll change anything but I'll put it to the other moderators and admins for consideration; in return please give us until a week after TMC Connect (workloads for many folk are high right now).�
1/1/2015
guest I agree with this 100%. Sleepy's post have been extremely valuable to myself (who has some skin in the game) in understanding what could be the major hamartia in solarcity's business model.�
1/1/2015
guest There are few important questions:
1) What is the SCTY price per watt installed? If it is smaller than what could do small installers - SCTY is doing good. Because on the long run SCTY(and other big players) will squeeze those small players out of the market.
2) What is SolarCity's expenses per customer acquired(per watt ordered)?
Answer to the first question - most likely yes, economy of scale for panel/inverters purchase, specialized teams of inspectors/system designers(paperwork)/installers could be used way more efficiently if company have sizable amount of orders.
I'm not sure how effective SCTY customer acquisition efforts are. But reading Yelp/solar forums it looks like SCTY do use aggressive tactics. Which is rather good.
And efforts seems to pay out:
Market share of top US installers are growing fast, and SCTY is doing even better.
As for what is better - lease or purchase, it is quite an idiocy to generalize for 100% of the market. Both have advantages and disadvantages. Doesn't matter if we are talking about solar lease or purchase, car lease or purchase, or factory/industrial space or office space lease or purchase. Each case is different and depends on what offers are available on the market.
Talking specifically about residential solar prepaid lease vs outright purchase the first one should be much cheaper. Not only that, but in case of purchase customer had to purchase insurance, and pay retail insurance rates against things like hail, vandalism, etc for his solar system. Add inverter replacement costs(paying retail price for inverter, paying certified electrician for one time job) in 10-12 years. Even more important - one should add maintenance expenses, if panel gone bad, it is customer problem to remove it, send it to manufacturer, get replacement and pay for installing it in case of purchase. And if the lease was chosen, it is installer problem.
Overall one is not better than other, it is all depends. But pointing potential problem with lease while keeping quite about what purchase really mean in terms of hidden expenses down the road is plain wrong.
Anyhow I think pressing lease model is a right move for SCTY right now. As long as SCTY is able to install, maintain solar systems cheaper than competitors SCTY is in the great position. If sales instead of leasing would become more profitable SolarCity would be able to switch easily.�
1/1/2015
guest Many things I wanted to respond to in this thread and will try to do so over the next few days, as long as this thread doesn't grow out of control that I can't keep up.
Definitely buying a system is the way to go. I will admit that a lease can make sense for certain situations, but I would imagine that buying is the way to go for over 90% of home owners, possibly a lot more than 90%. E.g. I bought my system and it will save me over $100 a month for the next 25+ years (probably 40 years) after factoring in costs of the system and 0% increase in utility rates (highly conservative estimate). A lease might save me $30 a month, so the leasing company gets 90% of the benefit, while the consumer gets 30% (I know it adds up to 110%, because leasing creates an additional benefit of MACRS). I will expand on this topic a lot more later when I have more time.
As far as GTAT (sorry for going off topic for a second here), I will try to write something up in the "other investments" thread, but there is so much to write about. In the mean time, I recommend reading some of Matt Margolis articles on seeking alpha or his website, such as this article he posted today:
GTATs Hyperion Technology is Laser Focused on Cancer
He is just a regular dude that posted on yahoo message board, where he learned a lot, did a ton of legwork, and ran with it. He now tries to sell a research product for about $100/month at PTT research. I would never recommend paying for that unless you have hundreds of thousands of dollars in GTAT or MU (only 2 stocks he writes about now). He posts most of his stuff to the public about a week after releasing it to paid subscribers anyway, so no reason to pay because his info is not really market moving that you need it now.
Word of caution on Matt, is that he extrapolates everything into best possible case and subtracts ~20% to be "conservative" and comes up with a PT of $87.50 by next June (GTAT is at $15 right now). He is a little exuberant, so be careful. But his research is really good.
GTAT just had a 30% decline last week due to some analysts manipulating the stock, since it started running away from them and on 4th of July weekend a sapphire 4.7" iphone screen was leaked out and GTAT was poised for take-off. It appears that some research analysts colluded to "downgrade" to hold while keeping PT's steady for some extremely bogus reasons; not unlike GS downgrade of TSLA. A bunch of shorts had to close their positions and UBS had some autocallable securities due last week that lost them more money the higher GTAT went.
What I am trying to say is due your research quickly on this stock, because it may turn out that this is a great buying opportunity on this pullback. Apple should unveil iphone6 in just 2 months, so a huge catalyst could be on the way. Their will be many leaks and other possible catalysts at any time.
In the mean time, GTAT is a momo stock like TSLA and it can pull back hard during a market correction like other momo stocks.
(Shameless plug) We have a very good discussion of GTAT on our TCI website and the GTAT thread has picked up a lot of steam and useful information of the past month. rsk has some extremely useful input on this topic. I recommend reading over the thread if you are seriously interested in investing in GTAT. Note: there are huge risks investing in GTAT, but I have more than half my money in that stock (sorry JASO, still love you but you are now second):
GT Advanced Technologies Inc. (GTAT) | The Contrarian Investor Discussion Board
And to go back on topic GTAT was originally a solar equipment provider, but has since diversified into sapphire (huge potential after signing huge deal with Apple, who invested $578m in GTAT to build out sapphire capacity), Hyperion (this could be a major game changer in slicing stuff really thin; oh, and BTW it can also cure cancer - no joke, read the article posted above), LED, power electronics, other stuff.]
GTAT has this really cool Merlin technology that will allow you to make solar cells that are 0.7% more efficient, use 80% less silver, save money on paste, and allow you to make 50% lighter modules that will be more flexible and have better longevity; it also uses cheaper copper instead of silver.
Sorry for going off-topic - if you guys have any GTAT questions, please ask them in the "other investments" thread and I will try to respond. It is a high risk/ extremely high reward stock.
Now back on topic and I will be talking SCTY now.
GTAT also supplies solar equipment and it is possible that SCTY will be buying some equipment from them to build out Silevo.
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It is actually only ~$300 more per month, since you are saving about $130/month due to solar generation. And I mentioned in my post that I got "no.3" rebate check by the time my second payment was due. So at worst, you might have to do about $300x2, i.e. you need an extra $600 before 3 and 4 kick in. If you can't afford $600, then you should probably rethink the Dave Ramsey thing :smile:
Also, I am recommending a 5-year loan that essentially costs you very little per month ~$60, but then you can enjoy free electricity after year 5 for 20-30 years, with only minimal maintenance costs due to long warranties.
A lease on the other hand is like taking out a loan for 20-years for something that you don't even own. You will continue making payments for 20 years. It is really not much different than taking out a loan to buy a system. I am offering a tiny bit of short-term pain for 5 years and then 20 years of freedom, while a lease is just 20 years of less than normal pain, but still pain.
I laid out the math in one of my previous posts and showed how you personally can save as much as $20,000 over then next 20 years when buying a system compared to leasing.
I have more to say about the leasing model and why I am not a fan of it. The biggest reason I am not a fan is that the leasing companies are pocketing the majority of the benefit of you going solar, while the customer gets screwed and only gets ~30% (depending on your lease offer, and what generous rebates and incentives are offered in your city/state) of the benefit he could get if he bought a system instead.�
1/1/2015
guest "Other investments" thread sounds good to me.�
1/1/2015
guest 1) I find sleepyhead's numbers for outright purchases to be very optimistic. He is very savvy with this stuff, so he can find best possible deal(s) out there. But an average person may not come anywhere close to sleepy's numbers.
2) (no offense but) except for a few solar geeks, nobody knows what $/W means. Let alone comparing different quotes based on this.
An average consumer at best, if at all, knows Cents/kWh.
SolarCity competes with utilities on that metric. When SolarCity goes out and says: "lets pull up your electricity bill, this is the rate you are paying, we can reduce this by x%. meanwhile you will be reducing pollution and contributing to the planets well being." its very appealing to most people.
As much as people here would like, the comparison of $/W is highly irrelavent, which no body really knows or understands.
3) Lets says sleepyhead turns out right and the lease model entirely dies away, that doesn't in any way mean death to SolarCity. They started out by selling systems outright and by many accounts they still do.
Musk said they will produce and install in the order of "tens of gigawatts per year". At that scale, starting from now, the potential growth is so much, the exact mechanics of the sales: lease vs cash-sales vs financed-sales is largely irrelevant.
It so happens that leasing produces the best longterm shareholder value AND currently, consumers are appreciating this model. Thus, it makes complete sense for solarcity to focus on this model. If it doesn't work over time, they can very easily adapt to a different model.
4) Solarcity has become the most vertically integrated player out there and becoming more so every passing quarter. The economies of scale + execution efficiency will, in time, make this company very valuable. I have no doubts about that.
In closing I want to say this:
I have been reading this thread for a long time. No one, I mean absolutely no one, predicted that solarcity will get into panel manufacturing. But solarcity did it and very clearly explained why they are doing it. The management sees far ahead of anyone here and they are ever focussed on growing the company at a phenomenal rate for decades to come. They see obstacles, they will come up with ever more profitable solutions. I trust Musk's vision and Rive brothers' execution.
I have a large position in solar city (together with Tesla). None of the bear arguments here have swayed me a single bit.. (they did make me research and think a lot though).
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Finally, the thing about leasing companies eating away tax benefits meant for the end consumer. Well, we can argue the same about rental homes, can't we? Homeowners get to take mortgage interest tax deduction, which the end consumer would have enjoyed if they bought a home instead of renting one.
Is renting out homes un-ethical?�
1/1/2015
guest Mod Note: some posts got quarantined in snippiness.�
1/1/2015
guest seems to me that the liability issue could be solved with an option to buy-out the solar install on some sort of pro-rated basis over time. Sure it still wouldn't be as good of a deal as an initial purchase but it could be wrapped up in the selling price of the house. It does transfer some risk to the original owner, but taking out a loan (assuming you could get one) to install a system also entails risk - in fact the same risk as the original owner needs to recoup his install costs (be it cash or loan) when selling the house.
I think this would not cause an issue to the securitization model as it would be similar to a mortgage pre-pay. I seriously doubt that the current SCTY bonds are valued much on cash flows past twenty or thirty years anyways.�
1/1/2015
guest Talk on the street is scty coming out with a 200mln abs this/next week.
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The first one came out Nov 13, 13 for 54.5mln
The second one on Apr 2, 14 for 70mln
The latest is for 200mln.
I believe there was some prior management guidance on this. So not sure if this will be market moving.
To get a feel for why this is important for scty, you might want to read this old article:
SolarCity Corp (SCTY) Could Issue Larger Asset-Backed Securities in 2014�
1/1/2015
guest Here it is
SolarCity Announces Pricing of Third Securitization (NASDAQ:SCTY)�
1/1/2015
guest spot on
�
1/1/2015
guest As per Raymond James Energy Daily Update newsletter SCTY's cost of capital through tax equity funds is in the range of 8% to 11%, which I believe is currently the main source of financing the projects.
These ABS sales significantly lower the cost of capital and thus improve retained value.
A few bears speculated that the tax credit expiry in 2017 is a death blow to scty. It turns out, solarcity is looking far ahead and effectively turning "problems" into "opportunities".
They are not only solving the potential issue of lack of funding but are actually lowering the cost of funding!
Similar thing happened with panels. By getting into manufacturing through silevo, they are not only solving the potential issue of lack of enough panels, but they are using the opportunity to further lower the total cost of installations (not just panels).
A number of "risks" pointed by bears are technically risks. But the bears are significantly underestimating the management's ability to address these and go much beyond.�
1/1/2015
guest In case you are wondering, the latest ABS had a weighted average cost of capital of 4.32%
Here is the reference SolarCity Raises $201.5 Million in Bonds Backed by Panels - Bloomberg
That's an improvement of 518bps compared to raising capital through tax equity funds!�
1/1/2015
guest According to reports from GTM research, third party ownership accounts for 2/3 of all residential solar installations in year 2013. The ratio stays the same in 2014 so far.�
1/1/2015
guest
http://www.buffalonews.com/business/solarcitys-prospects-upbeat-as-cuomo-sees-more-state-incentives-20140728�
1/1/2015
guest The whole state of NY needs lots of manufacturing jobs!�
1/1/2015
guest I have to agree with David. There's just so much things that cheap electricity can do so demand won't be an issue. For example, there're many places in the world that have severe water problem. With cheap electricity, we can simply produce fresh water from sea.�
1/1/2015
guest Or, for example with cheap electricity it would be possible to produce gasoline out of air and waterUsing more than century old F-T process that was and is used on industrial scale since world war 2.
�
1/1/2015
guest cool! Similarly, chemical engineers should be able to find a way to produce jet fuel etc economically and more environmental- friendly...�
1/1/2015
guest More significant insider selling going on with SCTY. Peter Rive sold 135,000 shares of the stock on July 30th at $74.00, for a total value of $9,990,000.
I said it before, I'm saying it again, this really doesn't sit right with me. They are making so much money selling their shares. Presumably significant dilution is coming to fund their solar panel factory. If it were not Elon being Chairman and JB being a Board Member I think this stock would be valued at a fraction of what it is today.�
1/1/2015
guest Debunking the FUD around SCTY's insider sales
I really wish people would do more research before making claims such as this.
Alright, let�s review Peter Rive�s holdings and selling.
1. 12/12/12 filing, SolarCity - Initial Statement of Beneficial Ownership
Peter Rive has 2,952,378 common shares.
option to purchase 1,000,000 shares (2009-2019 incentive plan)
option to purchase 1,000,000 shares (2011-2021 incentive plan)
2. 6/11/13 filing, SolarCity - Statement of Changes of Beneficial Ownership
Peter Rive sold 220,743 shares at $14 (137 Ventures exercised option to buy shares from previous 12/30/11 agreement). Amount: $3.09 million.
Total shares held: 2,731,635 plus option to buy 2,000,000 shares (incentive plans through 2021)
3. 12/19/13 filing, SolarCity - Statement of Changes of Beneficial Ownership
Peter Rive sold 40,000 shares (from 8/29/13 Rule 10b5-1 plan) for $56/share, total amount $2.24 million.
Total shares held: 2,691,625 shares plus option to buy 2,000,000 shares (incentive plans through 2021)
4. 7/31/14 filing, SolarCity - Statement of Changes of Beneficial Ownership
Peter Rive exercised option to buy 30,200 shares at $1.62/share and then sold 135,000 shares at $74/share (from 3/24/14 Rule 10b5-1 plan), total amount sold: $9.99 million
Total shares held: 2,586,835 shares plus option to buy 1,969,200 shares (incentive plans through 2021)
5. Regarding his option to buy more shares (from incentive plans), 1.65 million out of the roughly 2 million shares are exercisable currently. Meaning, the requirements have been met and he can exercise those shares whenever he chooses. (More info on # shares and option held: SolarCity - Definitive Proxy Statement)
Ok, so let�s now look at what this means.
1. SolarCity was founded in 2006. That�s 8 years ago, and founders have every right to raise some cash especially after their company has gone public.
2. Since going SCTY went IPO, Peter Rive has sold voluntarily only 175,000 shares (40k shares on 12/19/13 and 135k shares on 7/31/14, he sold 220k shares but it was an agreement from 2011 with 137 Ventures).
3. Let�s put this into perspective, after 7-8 years since the company was founded Peter Rive sells 175,000 shares but still has over 4.5 million shares. That�s like 3.7% of his holdings. Not much at all.
4. His recent sale is from a 3/24/14 10b5-1 plan and I would actually expect some more sales from this. I think it�s totally normal and acceptable for Peter Rive to sell 5-10% of his holdings, or even up to 15%. That�s fine and causes no concern for me.
5. Let�s look at this from another perspective. Let�s say your Peter Rive with an annual salary of $275,000 and no other bonuses. $275,000 is not much for the Bay Area, especially after taxes. So most of your compensation is in the form of stock - some from being a founder and some from incentive plans. Now you�ve worked on the company for 8 years and haven�t made much money in terms of salary over those years. Almost all your gains are stock gains. So, when are you going to sell a bit of your stock to take that money and do other things with (ie., build a custom house, buy a private jet, go places, do things, etc)? Sure you could wait another 5-10 years, but that�s not typical. It�s totally reasonable for you to want to sell 5% of your stock holdings to raise some cash so you can use that money for various things. It�s a lifestyle upgrade that�s been put on hold for many years, and now after 8 years the company is doing well and you feel it�s time to take the 5% off the table so you can have tangible benefits in your lifestyle. Totally makes sense.
It�s quite confusing to me that people would be shocked that a founder liquidates less than 5% of his shares after 8 years of working on the company. Guys, this is how it works. Founders liquidate shares over time. It�s a reality. Now, Elon is quite an anomaly and I don�t think it�s fair to expect other CEOs or founders to never share their shares and to take up line of credits to buy more.
If anything SolarCity has one of the largest and strongest insider holdings of any company out there. A whopping 70% (!!!) of the common shares are held by the Directors, Executives, and entities affiliated with the Directors.
Elon has roughly 23% ownership in the company, but there are other groups with large holdings that have been very committed to SolarCity from the early years and have held on to the vast majority of their position until now. This shows amazing commitment.
Now, it�s only natural that these entities will liquidates their holdings slowly over time. It�s just reality as some of these entities are venture capital firms that need to return capital to their investors as well. So don�t be surprised that over time that these insider entities share more and more shares over time. It�s just not realistic for insider holdings to remain at 70% over the long-term. Over the next few to several years it�s only logical and practical for insider holdings to drop to under 50% and eventually end up at around 30% or so, IMO.
However, for insider holdings to be at an incredible 70% currently is testament to how strongly the insiders believe in the growth and future of the company.
If anything, if you look at the insider activity the most glaring fact is not that some insiders sell some shares occasionally to raise cash, but rather that insiders are religiously keeping that vast majority of their holdings in SCTY and insider holdings remain at a incredible 70%.
Think about that again. Insiders hold 70% of the common shares of SCTY. How is that not incredibly bullish. Even if it was 40-50% it still would be super bullish.�
1/1/2015
guest 
source: 4/24/14 sec filing, SolarCity - Definitive Proxy Statement�
1/1/2015
guest Brendon Merkley's been on board since last autumn. He SHOULD own some shares outright! That's not right.�
1/1/2015
guest SolarCity - Statement of Changes of Beneficial Ownership
Looks like Brendon Merkley (EVP, Process Engineering) has an option to purchase 150,000 shares at $52.79 (date exercisable 12/2/14, date expiration 12/15/23).�
1/1/2015
guest Yes, that appears to be correct, Dave. I reiterate, though: he should own some outright. I have no truck with senior management or board members of any company that fail to show that simple show of support for and courtesy to the shareholding public. When such a person is hired and he is granted in-the-money options, as is the case here, it is even more distasteful to me. Long-term readers of my posts do know I am the cranky old-timer here, with old-time beliefs....�
1/1/2015
guest Hmmm, I'm not sure if I'm getting exactly what you're saying.
Brendon Merkley is not on the board of directors, but rather is a newly hired EVP of Process Engineering. If he was a board member, then yes I would agree that he ought to buy shares to show his support. But as a hired executive, I don't get the mandate for him to use his personal money to buy shares of the company. SolarCity granted him at-the-money options when he was hired back in Dec 2013. So that's part of his compensation and incentive package, and gives him a vested stake in the company and its future.
Overall, I like the board and the executive team to have a decent stake/ownership in the company since it aligns their interests with shareholders and allows them to have a longer-term view. However, in Brendon Merkley's case, we don't know his personal finances and I'd much rather have him join the executive team with at-the-money options as part of his incentive/compensation package (ie., 150k shares in this case), rather than him buying a few thousand shares when he was hired from his personal money because it'll look good to shareholders. In my view, him holding options that were at-the-money when issued (issued Dec 2103 but exercisable starting Dec 2014) is pretty much the same as him holding stock outright.
Maybe I'm missing your point, but I'm not seeing the mandate for a newly hired executive to own shares outright from the outset. Would love to hear more of your thoughts though.�
1/1/2015
guest Have any of you heard of quality of service issues with SolarCity?
Looking them up on Yelp - SolarCity - San Mateo, CA | Yelp
There are many negative reviews, and I did come across a critique of SolarCity in this regard, but couldn't find it now.
I'd admit that for this reason I'm somewhat skeptical of SolarCity, plus the fact that the cost of entry is very low for new companies doing the same. i.e NRG is now competing with them directly.
This is the exact opposite of my impression of Tesla which I invested in, where the costumer satisfaction is considered astounding, and the barrier to entry even for established car companies into the EV market in a meaningful way is high. The leaf cost Nissan some imaginary figure of around 6 billion $ to bring to production.
If you got the same impression, wouldn't it be better for them to outsource the servicing? They seem to have enough on their plate and I'm not sure why it makes sense to be so vertically integrated in the home solar business to begin with.
I'd like to hear also if you think I got this wrong. Its a first impression and not based on substantial research.
Thanks,
Daniel�
1/1/2015
guest Here is the mentioned critique - Tesla Motors And SolarCity: Moving Beyond Musk Obsession
Thanks,
Daniel�
1/1/2015
guest First, Dave, I am aware that the world - and most fundamentally, the US corporate world of 2014 - mostly thinks quite differently from me. With that, MY perspective is:
* that a senior executive brought in last fall is no longer "newly hired" (H*ll, that makes him an old-timer by today's corporate standards of race-around).
* that all senior executives of a publicly held company - and board members too, of course - have a moral and even a fiduciary responsibility to the shareholding public of owning shares outright.
* that compensation packages these days are so bloated that no such person has the ability to claim personal finances as a reason for not fulfilling this duty.
* that a compensation package that included those 150k share option is that much more reason that he should cowboy up and purchase real shares. NOTHING an executive can do is more demonstrative that he has faith in the organization that he works for than this action.
Those are my reasons. They also should give you good insight as to why I have spent the past two decades ensconcing, entrenching, embedding myself in a remote part of this remote state. O tempora! O mores!�
1/1/2015
guest Thanks for the explanation. So, is there a minimum number of shares you want executives to own outright from the outset? For example, if Brendon Merkley purchased 1,000 shares would that be satisfactory? Just curious, since rather than him purchasing a trivial amount of shares outright from the outset I'd rather have him take a comparatively lower salary than the industry and take on a significant stock incentive plan that will align his interests with the long-term future of the company (which SolarCity did by giving him ATM options when they brought him on).�
1/1/2015
guest Large scale.
Soft costs are primary cost driver.
Subsidies will be cut significantly.
Cheap backup on the horizon.
Vertical integration provides the opportunity to gain competitive advantage in an increasingly tough, but rapidly growing market. There are potentially huge amounts of money to be made. Imagine panels+battery in every building.�
1/1/2015
guest As usual, people with negative experiences are very much more vocal. I had Solar City install a system on my house. The process went very well and I haven't required any service as solar systems pretty much never need service. I am satisfied.
Another point, after the installation, the city inspector who does only solar systems as they are coming online so rapidly, told me "Solar City always does the installation to code just the way we like it, I never have to call them back out to fix anything. Other guys have to come back sometimes several times." I did not ask him who the "other guys" are.�
1/1/2015
guest Yelp review issue came up many times before on this thread. Several commentators, with first hand experience, said Yelp skews ratings based on if businesses pay Yelp or not. I actually started investing in SCTY after hearing/reading a number of *very* positive reviews. I believed, and still believe, customer satisfaction is their biggest strength.
'Low barriers to entry' topic comes up here a lot. Let me give a good answer on this one:
1] Even a high school grad can create a website with a shopping cart. So how come Amazon grew to be so big?
How hard is it to sell random stuff in a box store? Then how come Walmart became so big?
How hard is it to make and sell hamburgers? Well, how did McDonald's become so big?
What about coffee? Any idiot can make coffee and sell it. What made Starbucks so big?
The answer to all these questions is
a) Being at the forefront of an emerging trend -and/or-
b) Business acumen + execution efficiency, typically translating into economies of scale
2] It's not that easy for someone, even with a lot of capital, to sort of become as big as SolarCity in one shot. It takes time to create a network/hierarchy of competent people, (software) systems, business processes etc. Just because NRG can or will dump a bunch of capital, doesn't mean they will automatically race ahead of solar city.
3] The size of the market is HUMONGOUS. Will write a detailed post, with data, in a followup. There is enough for everyone who wants to succeed.
4] GE is a 250+ Billion dollar company. It makes more money in Energy industry, one way or another, than in any other industry. The head guy has this to say about SolarCity:
At the World Energy Innovation Forum at the Tesla factory in Fremont, Calif. this week, the CEO of GE, Jeff Immelt, said during an onstage interview that GE had focused so intently on how bad the solar panel business was that they �missed SolarCity.� �My God I wish I had thought of that,� said Immelt.
Reference: Immelt: I Wish I Had Thought Of SolarCity - Business Insider
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Care to show your valuation model?�
1/1/2015
guest Dave -
Certainly buying 1,000 shares is infinitely superior to owning none. 2,000 shares would be twice as good as 1K...and so on. But as to answering the important question of what is the appropriate amount, I confess I do not know. Now, this gentleman came to Solar City with a bit of baggage....and a "poaching" lawsuit. That has brought upon a countersuit, so, in this one case, we might surmise a bye is in order until the jumping-ship mess is resolved.�
1/1/2015
guest I think what I'm getting at is that Brendon Merkley effectively owns shares outright via his ATM option signing bonus. Let me explain a bit further.
When he signed on with SolarCity, as compensation they could have given him a high salary, cash signing bonus, a stock/option plan, etc. In Brendon's case, he and SolarCity opted for the option/stock package as part of (or all of) the signing bonus, which implies to me that they probably didn't give him a large cash signing bonus and his salary probably isn't exorbitant either. So, in this case Brendon is choosing to opt for equity in SCTY as a large part (or all) of his signing compensation package.
His option/stock package was given to him in Dec 2013 when he joined SCTY and gives him the option to purchase 150k shares at $52.xx anytime between Dec 2014 and Dec 2023. So, in effect SolarCity gave (and Brendon choose to receive) $52 strike Dec 2023 LEAPS. Market value for these options back when he joined SCTY would be at least $25 (probably more since they expire in 2023. I for one would love to buy $52 strike SCTY LEAPS that expire in 2023 for $25.). So, at $25 market value the option to buy 150k shares is worth approximately $3.75 million. Note from what I can tell this isn't an incentive plan with milestones but it like a signing bonus where he's able to exercise the options starting Dec 2014.
I think my point is Brendon Merkley decided to choose equity in SCTY for his signing bonus, and that equity (basically $52 strike 2023 LEAPs) is in all practically the same as holding 150,000 SCTY shares. While he could have taken a large cash signing bonus, he probably didn't and by taking the equity grant he choose to become a vested stakeholder in SCTY's future.
I, for one, who much prefer him taking the 150k option grant than him purchasing 10k shares on his own when he was hired. The 150k option grant gives him a much bigger stake in the future of SCTY (practically the same as him holding 150k shares) and aligns his interest much more with the long-term future of company.�
1/1/2015
guest These are some data points that highlight the growth potential for SCTY:
****
Snippets from Bloomberg New Energy Finance (BNEF)'s 2030 Market Outlook report
By 2030, the world�s power mix will have transformed: from today�s system with two-thirds fossil fuels to one with over half from zero-emission energy sources. Renewables will command over 60% of the 5,579GW of new capacity and 65% of the $7.7 trillion of power investment.
Rooftop solar PV will dominate, taking up a fifth of the capacity additions and investment to 2020.
A small-scale (meaning, rooftop) solar revolution will take place over the next 16 years thanks to increasingly attractive economics in both developed and developing countries, attracting the largest single share of cumulative investment over 2013-26.
The Americas region will invest $1.3 trillion in 557GW of new power generating capacity through 2026. Renewable energy technologies will account for two-thirds of the new capacity over that period.
Small-scale solar will be the most important form of renewable energy, accounting for 18% ($231bn) of all investment in power-generating capacity in the region over 2013-26. In the US alone, a 27-fold growth of rooftop PV installations will give it a 10% share of the US capacity mix.
About the report:
Published annually, the analysis pulls together the expertise of over 65 technology and country-level experts from 11 Bloomberg New Energy Finance offices worldwide, taking nine months to complete.
About Bloomberg New Energy Finance:
With unrivalled depth and breadth, we help clients stay on top of developments across the energy spectrum from our comprehensive web-based platform. BNEF has 200 staff based in London, New York, Beijing, Cape Town, Hong Kong, Munich, New Delhi, San Francisco, S�o Paulo, Singapore, Sydney, Tokyo, Washington D.C., and Zurich.
Reference:
http://bnef.folioshack.com/document/v71ve0nkrs8e0
***
From Green Tech Media (GTM) research report: U.S. Residential Solar Financing, 2014-2018
The share of third-party ownership (TPO) of residential solar, which has grown from 42 percent of the market in 2011 to 66 percent in 2013, will peak in 2014 at 68 percent. Beginning in 2015, the expansion of residential solar loan programs and alternate financing mechanisms such as property-assessed clean energy programs will drive the trend line back toward direct ownership, while the share of TPO will fall to 63 percent by 2018.
(63% market share for third party ownership is still a LOT by the way)
All portions of the residential market will experience rapid overall growth.
About the report:
The report provides a comprehensive update on the vendor landscape as well as innovation in both both consumer finance and project finance. In addition, the report provides an outlook on the total addressable U.S. residential market, the share of third-party ownership versus direct ownership, and the market size by ownership type with forecasts to 2018.
About GTM:
GTM Research, a division of Greentech Media, provides critical and timely market analysis in the form of research reports, data services, advisory services and strategic consulting. GTM Research�s analysis also underpins Greentech Media�s webinars and live events. Our coverage spans the clean energy industry including the solar power, smart grid, energy storage, energy efficiency and wind power sectors. Our analyst team combines diverse backgrounds in investment banking, engineering, information technology, strategic consulting and regulatory sectors. Our analysts are widely known across the industry and speak regularly at industry events all over the world. GTM Research is based in Boston with offices in New York and San Francisco.
Reference:
Market Share for Leasing Residential Solar to Peak in 2014 : Greentech Media
****
What about SolarCity's Market Share?
"Our U.S. Residential Solar Market Share Was the Equivalent of the Next 14 Competitors Combined in the Most Recent Data Available for Q3 2013"
Data from GTM Research - U.S PV Leaderboard.
Reference: SolarCity - Events Presentations -> 26th Annual ROTH Conference Presentation -> Page 8
****
So putting it all together:
Globally renewable sources will continue to grow phenomenally. In US, rooftop solar will dominate the growth. Within, the rooftop solar business, third party ownership will continue to dominate. Within this space SolarCity happens to be the biggest player by far.
As you can see this data is from two leading authorities in market research in this space.
****
Now lets see some management guidance into the long term:
"Even if the solar industry were only to generate 40 percent of the world�s electricity with photovoltaics by 2040, that would mean installing more than 400 GW of solar capacity per year for the next 25 years. We absolutely believe that solar power can and will become the world�s predominant source of energy within our lifetimes"
> Written by Elon Musk, Peter Rive and Lyndon Rive
Reference: Solar at Scale
**
"we expect in the future to build solar panel plants that are an order of magnitude bigger than any plants that exist in the world today to assure we're taking maximum advantage of scale, and then we intend to put a lot of effort into R&D on the panel side as well as into the mounting hardware, which we already own and into inverter technology in partnership with Tesla, as well as battery pack technology to provide an overall solution that gives someone electric power at a price that is less than if they were drawing it from fossil fuels burned over the grid; that's really the key threshold. And obviously the demand grows exponentially as the price drops and you can imagine that it really grows at an enormous pace if we're able to compete with grid-powered electricity with no government incentives and that's really the goal, and that has to be the goal in order for the world to have sustainable energy future."
> Musk's introductory remarks in the Silevo conference call.
Reference: SolarCity - Events Presentations -> Silevo conference call webcast
**
"Yeah, so absolutely one day we want to go international. But just in the markets that we service today, it�s about half the U.S. population. If you look at the adoption that we�ve had, we have 45,000 customers. 45,000 customers, you can see just with your eye. So we could expand almost infinitely for the next 10 years just in the market that we are in without having saturation. So we�re absolutely interested in international expansion, but the markets that we�re in, it�s a massive market to expand in."
> Lyndon Rive, Mar 2013
Reference: SolarCity CEO talks the future of solar power - Fortune
This whole interview is very insightful by the way. A must read for SolarCity investors.
**
"The market is insanely huge and sometimes the biggest challenge is to remain focused on what we are doing here because it is exciting to move into new markets. However, I have to finish this job before I can do that job. The market expansion is essentially going to be infinite in our lifetimes with distributed solar. Countries are starting to realize the benefit of this. For now, we are focused solely on the US."
> Lyndon Rive, Sep 2012
Reference: Distributed Solar: Unalloyed Growth Story? Discussion on the rooftop solar market at the Chadbourne global energy and finance conference in June - Chadbourne & Parke LLP - Publications
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I'll post some comprehensive stuff on two other widely discussed/confused topics in subsequent weeks.
1) Profitability (or lack there of)
2) When there is Tesla, why invest in SolarCity�
1/1/2015
guest I remember a CEO once quoting a study that indicated on average a happy customer will tell 3 people their positive experience with a company but an unhappy one will tell 14 others their negative experience�
1/1/2015
guest Not sure of the content of all of the previous 81 pages, but the economics of our SolarCity PV system were a complete no-brainer.
Early in 2013 we leased a 7.5 kW system for 20-years with one, repeat: ONE, up-front payment of $8k. Even with our 85-kWh Model S charging every night, and some pretty absurd net-metering here in Texas (Green Mountain Energy's plan: the first 500 kWh is paid back at 100%; all power pushed back onto the grid after that 500 kWh is paid back to us at 50%, YES 50%. I WANT A RESIDENTIAL TESLA BATTERY YESTERDAY!), we end up with a credit bill or a small token payment (i.e. less than $20) every month, for a 3,500 square foot house with 4 bedrooms and 3 bathrooms.
So let's see:
1. No more gasoline $ given to those that want us dead; our Tesla is mostly powered by the sun.
2. No more electric bills, for the most part.
3. Massive reductions in our GHG emissions.
4. And a future Tesla residential battery (NOW PLEASE!) so that we'll eventually push #2 to a full credit every month.
all for ONE payment of $8k in 2013.
And we'll enjoy full warranty coverage, and monitoring of performance, from SCTY for the next 20 years.
I pitch the SolarCity/Tesla to anyone who has a cm of common sense and gives a damn about leaving the planet just a little bit better than how we entered it.
And this is far more painless than dealing with a local "Ma and Pa" Solar Company where they work out of a pickup truck and may, or may not, show up for repairs and will never monitor a single kWh of output...which makes SolarCity a very, very compelling company and an investment as well.
Hence, our lease of a SolarCity PV system, and purchase of SCTY stock at about the same time, BECAUSE IT WAS A NO-BRAINER.
As the ad copy said about 40 years ago, "Ask the man who owns [leases] one."�
1/1/2015
guest Just read on Raymond James Energy Daily update that per GTM Research:
In residential sector, for 1Q14
- SolarCity is leading with 29% market share.
- Followed by Vivint at 2nd place with 9% share.
- Sunrun/REC solar combination may be close to the second position.
In terms of market share data coming from SCTY management, we only saw it upto 3Q13. So this is a good data point as in it's the latest we can get.
Btw, SCTY market share was
32% in 3Q13
26% in 2Q13
20% in 1Q13
20% in 4Q12
19% in 3Q12
16% in 2Q12
12% in 1Q12
So it seems to have stabilised at around 30% for now.�
1/1/2015
guest Vivint IPO
Vivint Solar makes confidential IPO filing - report - PV-Tech�
1/1/2015
guest thanks for the info.. what happens if you move within 20 years? thanks�
1/1/2015
guest I had a Solar City lease and ended up moving within the first year.
They have a very smooth process for a lease transfer to the new home buyer. It was pretty simple for all parties. Of course, it does require educating the new buyer on the system benefits, lease obligation, and they have to qualify. But if they are paying cash for the home or getting a mortgage, they can most likely qualify for the lease.�
1/1/2015
guest Business is good, "We experienced unprecedented demand in the quarter with triple-digit year-over-year growth in all our key operating metrics"
SolarCity Announces Second Quarter 2014 Financial Results (NASDAQ:SCTY)�
1/1/2015
guest "218 MW Booked", when is the last time scty release their backlog?�
1/1/2015
guest Up 2.50 in after-hours. Clearly the market's happy with the report.�
1/1/2015
guest where is sleepyhead and his mom and pop shops will destroy Solarcity theory?�
1/1/2015
guest I remember that the booking was 130+MW last quarter�
1/1/2015
guest yep, "MW Booked of 136 MW for an annualized run rate of 544 MW Over 80% residential", demand is shooting through the roof, literally.�
1/1/2015
guest Interesting tidbit from today's earnings conference call:
Analyst: We�re starting to hear more about solar loan products. What�s your view on solar loans? How might they impact the economics of your business if you were to add them to your product offering?
Lyndon Rive: I think solar loans have a lot of potential. We are testing different products on the solar loan side. We�ve always been a financial leader in this space. Once we have come up with the absolute best product out there we�ll make a big announcement of what it will look like.�
1/1/2015
guest If you accept SolarCity's retained value calculation (which covers NPV over a 30 year cash flow period), they get $1.72 per watt. They booked 218 MW in the quarter. This means they added $375 million in the quarter, or if we annualize this, $1.5 billion.
The market cap of the company is $6.8 billion.
I realize there are risks, i.e. competition and a declining government subsity (from 30% down to 10%?), but given the focus they have on owning the supply chain (similar to Tesla), does this valuation not grab you all as incredibly low?
I'm early on in my research, but I liked what I saw enough to invest following the Silevo acquisition. It seems to me this is a potential multi-bagger. DaveT, I liked your piece on how to get outsized returns. As a former sell side analyst I can assure you that what Dave wrote is exactly true. The Street focuses very short term, and I feel the short term nature of the market is exactly why we're able to sit back, take a long term focus, and earn better returns on growth companies.�
1/1/2015
guest When they say "booked 218 MW" does that mean that they intend to build that in the future, or they did indeed build 218 mw this past quarter?�
1/1/2015
guest booked means backlog.�
1/1/2015
guest I don't see why this is such a great achievement- it means tons of demand but does that mean that they will be able to install all 218 MW? I'll have to go read their conference call but I don't get why you are so excited, FrozenCanuck.�
1/1/2015
guest That's not quite correct:
Previous backlog + orders booked - deployments = new backlog.�
1/1/2015
guest This might sound harsh, but where I come from thick skin is required for investing. Instead of jumping to conclusions and interpreting what I wrote as being "excited" (emotions are not useful when investing), just actually go read the conf call transcrpit or listen to the replay and then come back. Booked = signed contracts. It's an indicator of near-term future installations.
Back to the topic ...�
1/1/2015
guest
You are right. this "booked" number explains the retained value leap this quarter, since backlog is included in the retained value calculation.�
1/1/2015
guest Hello FrozenCanuck, A fellow SolarCity enthusiast here. I appreciate your sentiment. SCTY actually reported $1,291mln Retained Value for previous quarter and $1,804mln for the latest. Thus they added $513mln in the quarter, bringing the annualized number to $2Bln change.
I am not sure if Retained Value can be interpreted as deferred-earnings though. I am not sure if that is what you are alluding to. Given your background, what's the best way you see this metric can be interpreted as?�
1/1/2015
guest The one thing I truly appreciate in this quarter's presentation is how they broke down their cost structure and gave full detail. Page 8 of the deck. Or the supplemental document for full detail.
Looking at some comments on this thread one would think SCTY's operating expenses are so high, given their "bloated corporate structure", that their bankruptcy is imminent. These seemingly deliberate vengeful remarks are truly appalling!
Thank goodness, they explained it out and tied it all back to the real financial reports.
Turns out,
Installation Costs are $2.29/W
Sales Costs are $0.48/W
G&A Costs are $0.26/W
--------------------------
Total Costs are $3.03/W
While they accumulated $2.32/W of retained Value for Shareholders.
This is an incredible business that abundantly pays off in the long run.
Note: There are many idiotic articles on Seeking Alpha talking about reported EPS and such. They don't understand the basics of this business. The entire operating expenses (Sales + GA) are recorded in one shot, while Revenues are recorded over 120 quarters!! Of course the EPS will be negative. It doesn't matter!�
1/1/2015
guest Let's just leave out the deliberately provocative statements.�
1/1/2015
guest With hypergrowth companies, I often find that the more simple the analysis, the easier it is to analyze a stock's potential. So I'd rather have a simple, easy to understand (and track) model versus highly complex forecasts and variables. I can be off by a wide margin on actual outcome, but if the upside potential is enormous that's OK.
So in keeping with that logic, here's ONE way of looking at SolarCity.
They want to have 1 million customers by 2018. They've said this several times, and they most recently said they're on track to achieve it after adding 30,000 new customers to the backlog last quarter. They are going to need to ramp that 30k per quarter massively to hit the goal, but let's assume they do.
Each customer has an average retained value of $14k.
So if they get to 1 million customers they'll achieve retained value of $14 billion.
They'll still be growing at that point (very low market penetration), so it stands to reason we might still put something like a 2-3 multiple on this number, giving you a potential market cap of $28-42 billion.
Keep in mind I'm throwing out an uber-simple model for now. This model suggests that, within 4 years, we could be looking at something in the vicinity of a 5-bagger.
Thinking way longer term, what's to stop SolarCity from having an installed base of 5 million or even 10 million customers? The economics will obviosly change, so the retained value probably wouldn't be as high anymore (per customer), but why can't this happen?
This is why I'm so interested in the idea of owning as much of the supply chain as possible. I think it's critical to their leadership in the industry.�
1/1/2015
guest @FrozenCanuck, Appreciate your comments. I actually believe they will hit the 1mln mark by mid-2017 itself. They have consistently grown around 100% rate for many years and there are no signs of slowing down. At that pace mid-2017 is doable. Of course there are risks to it, primarily if their financing avenues don't scale at the same pace. But looking at the trend, it seems achievable.
Relating to your long term view, Lyndon Rive said multiple times that they will expand into other countries either this year or next. So that should make the 5mln or 10mln customer marks that much more achievable. He is also on record saying that he wants to grow SolarCity to become the largest energy company in the world (it's on youtube somewhere). In my view they are clearly setting up the company in a way to achieve ambitious goals like that.
After all, in Musk's big vision, Tesla addresses consumption side of the energy equation, while SolarCity addresses the production side. There is nothing to indicate SolarCity's long term goals would be small.
On the flip side though, I have some trouble equating Retained Value directly to Market Cap. Ideally growth in Retained Value should directly correspond to growth in Book Value (Shareholder Equity) as SolarCity puts all the contracts on the Assets side of the Balance Sheet. But that doesn't seem to be happening. I am not sure why. Do you have any insights into this?�
1/1/2015
guest Ok - the retained value on contracts is not the same as retained earnings. The value should flow into earnings over a long time, at which point it lands on the balance sheet and you'll see it as asset / equity.
It seems reasonable to me to look at market cap as a direct function of retained value, provided you believe the value is real. The contracts that create this retained value should translate into actual earnings, right? And since they are already present value calculations, it's a simple way to look at discounted cash flow of current contracts.
Then investors will have to adjust for future growth, risks of the company making poor investments, etc.
It's an unusual one for me. I'm used to looking at companies that don't have 20 year contracts on cash flow, but are more like Tesla or Apple, and just sell products in-quarter and generate earnings. I'm probably in very good company here, so let's figure this out together.�
1/1/2015
guest My understanding of retained value is that it goes beyond the contracts that have been signed with the current customers (of 20 years) and assumes that 90% of those customers will remain in the lease terms for another 10 years, which can add 29% or so over the value of the contracts signed. I would have preferred that the company calculated retained value as the value that they have actually signed people up for (20 years) and not included a speculative portion- that way there would be unexpected pleasant upside in 20 years. When I think of their retained value, i drop it by a third for the above reason.
Since demand doesn't seem to be a problem now, it seems that money to pay for installations or the number of crews installing each day are the limiting factors. To me, the fact that the quarter will be cash flow negative isn't a problem unless it prevents them from installing booked systems because there isn't enough money.�
1/1/2015
guest Adding customers to the backlog isn't necessarily a healthy indicator. In a rapid growth environment it needs to be considered together with the average time metric between booking and deployment.�
1/1/2015
guest I reached out to Investor Relations at one point and I got an answer very much in-line with what you are saying. But here is my beef with this: looking at the latest 10Q document, Balance Sheet on page 3, they already have a line item saying "Solar energy systems, leased and to be leased � net" with $2Bln as asset. So it makes me think that the future revenue is already recorded as asset. So I am missing the connection when you/investor-relations says that value will flow into earnings over time and then land's into assets. To me it feels like its already in assets.
I understand retained value intuitively. I am just unable to put it together with any of the financial statements.
I have access to two research reports. Both of them strongly support valuation through retained value.
1) JP Morgan - direct quote from latest report - "We believe retained value is the most appropriate way to value this stock since it provides a present value of future cash flows on a net basis."
2) Raymond James -direct quote from latest report - The #1 question we�ve heard from investors as part of our coverage of SolarCity over the past year and a half surrounds the �right� valuation method and how to think about the many variables. To state the obvious, SolarCity will not have positive earnings, or even EBITDA, anytime soon. A revenue multiple is theoretically viable, but we agree with management that a discounted cash flow (DCF) approach is the most relevant one. The starting point for DCF is the metric entitled �retained value based on discounted forecast of net cash to SolarCity�: $1.80 billion as of 2Q14.
So everything points to saying that Retained Value is the best way to look at this company. I only wish I can better understand it's connection to 'shareholder equity' as they both seem to imply the same concept.�
1/1/2015
guest I completely agree that retained value is the best way to look at this company, but how this translates into stock price is the big question. It is possible for this metric to be the best way to value the company, and simultaneously be overvaluing the retained value.
What if the value of the solar energy systems, leased and to be leased, is the cost of building the system, and different from the retained value: the retained value would be the money that then comes in from the system?�
1/1/2015
guest SolarCity reports both numbers actually. A pure contract value and the one with speculated future renewal.
For the previous quarter - see deck, page 10
Retained Value under Energy Contract - $840 mln
Total Retained Value (with renewal) - $1,291 mln
For the latest quarter - see deck, page 11
Retained Value under Energy Contract - $1,245 mln
Total Retained Value (with renewal) - $1,804 mln
So just with a mere quarter lag the pure retained value grew to be as much as the total retained value. I can afford to stay 3months longer in the stock for the desired Retained Value�
1/1/2015
guest Morgan Stanley initiated SolarCity (SCTY) coverage with Equal-Weight and target $92�
1/1/2015
guest First, thanks for the quotes from the two reports. I'd love to read them if you can send them to me, dropbox them, whatever.
Second - and I have not fully explored this yet, but I think the assets you are seeing are the result of SolarCity actually owning the equipment they've installed on people's roofs. This asset has a value, and there is something on the liability/equity side of the balance sheet to offset this because they had to raise the cash to build these systems somehow, which is an ongoing issue.
Imagine you and I started a business putting vending machines in stores. We have to buy the machines, and we own them. They sit as an asset on our balance sheet. Say the stores have 20 year contracts with us so we know the $5k machine is going to return $20k over its life. We generate the money up over that period of time, but the asset sits on our balance sheet (and is depreciated) right from the start.
Make more sense? I hope that's an adequate explanation.
- - - Updated - - -
Does anyone actually have full PDFs of analyst coverage reports? I used to have easy access to these when I was a sell side analyst but I exited the biz a few years ago. I'd love to read some of the reports. Usually they focus on the short term, but the initiation pieces are often full of useful info.�
1/1/2015
guest That makes complete sense. Thanks for explaining this out. I have been looking for this answer since a while. Really appreciate it.
After looking at this enough, I see that Retained Value is really the only real way to value this company. It totally explains why management chose to highlight this metric in quarterly presentations.
Unfortunately the source that I read those two reports from has become completely uptight about redistribution. But I have some good news which I just remembered.
Deutsche Bank released a very elaborate initiation report in Jan. It's 63 pages long and is quite comprehensive. You can get a copy of it by going to dbresearch.com -> Contact link at the top -> fill out the form. They usually respond back in a few days. The title of the report is "Still Early Innings of Distributed Generation Era; Initiating with a BUY" written by Vishal Shah published 15 January 2014.
If you want faster response, drop me your email id in a private message.
They have somewhat of an elaborate model for valuation but at the bottom of it, it still is based on Retained Value.
- - - Updated - - -
There are quite a number of skeptics who question the 6% usage for the NPV calc of Retained Value. Here is an interesting tidbit from the Deutsche Bank report:
�
1/1/2015
guest With all the back and forth comments on owning vs. leasing months ago, thought this was an excellent article: Would You Rather Own or Lease Your Rooftop Solar?
�
1/1/2015
guest +1. Well-balanced article.�
1/1/2015
guest I expect cost of the systems to go up over time (if not stay steady). It's very unlikely they will go further down over the course of years. My reasons are
1) More EV driving will mean greater electricity needs. My very rough guess is that an EV doubles the system size for an average user.
2) As net-metering gets pared down, or alternative means of charging solar users for grid usage gains traction, batteries will become an inevitable solution. So adding in the cost of batteries will increase the overall system cost.
As long as SolarCity is able to lower electricity prices (including everything: panels, batteries, grid connection fees etc), they will be able to continue to grow at a very rapid pace. That's what Musk says too.
One can argue that if consumer lending of solar systems grows rapidly then more people might be interested in financing. But I'd contend, given SolarCity's scale, their financing costs would be lower than that of consumers. Same holds with respect to everything else: cost of panels, labor costs, pretty much everything else. Scale should enable them to be the lowest cost provider and still be reasonably profitable. Sort of like becoming the WalMart of Solar.. Ofcourse, SolarCity is not there yet. But the objective is to get there. Meanwhile keep picking the low hanging fruit and continue to expand scale (sort of same exact thing Tesla is doing).�
1/1/2015
guest Interesting that this rating isn't shown on BBG.
just had a look at <ANR>. The ratings/PTs are in descending order.
Roth Capital - buy - $98
Credit Suisse - outperform - $97
GS - buy/attractive - $96
Cannacord - buy - $95
Deutsche Bank - buy - $90
Baird - neutral - $83
JPM - overweight - $83
Raymond James - outperform - $80
all PTs published between 08/08 and 08/21 !�
1/1/2015
guest Mosaic now doing direct lending for home solar installations. Targeting "solar leasing companies", whomever they might be :wink:
�
1/1/2015
guest Thank you for the full page ad. They have been doing this since a few years and their scale seems to be barely in the order of a few million dollars.
Mosaic Inc. - Wikipedia, the free encyclopedia.
This should give Mosaic a run for their money
SolarCity to Introduce Solar Financial Products for Individuals, Institutions of All Sizes | SolarCity�
1/1/2015
guest Not an ad, I should have provided more info. I received this in an e-mail yesterday. Thought that I would post it here to let everyone know that Mosaic is making this push. I have invested in the solar crowd funding model that Mosaic uses for maybe a bit over a year. Currently a small amount in three different properties. Not being able to put up solar panels myself, I wanted to be able to help make it happen in any case, and the return is about 4.5% on the funds invested. I believe that their lending to homeowners directly is a new activity for them. Preciously, they pooled investors money to put in solar installations in various facilities.
RT�
1/1/2015
guest Interesting that for such a volatile stock, SCTY has traded essentially flat around $70 for 2.5 months. Anyone who follows it closely care to comment on this current stability?�
1/1/2015
guest a lot of scty solar panels on the roof
�
1/1/2015
guest why is there wind energy on the hill? Who even supplies wind energy that tesla would tap into? If they have that many solar panels, why go for a wind farm?�
1/1/2015
guest Simplistic answer, wind still works after sunset.
We can debate the cost/benefit, but one fact remains, wind is 24x7 to some , ehem, degree. (no pun intended.)�
1/1/2015
guest STCY two new PTs
here we go.�
1/1/2015
guest SCTY is up over 5% during mid-session today, despite the overall market being down. Any ideas why?�
1/1/2015
guest My guess is GF bill passage in Nevada.�
1/1/2015
guest http://www.streetinsider.com/Corporate+News/SolarCity+(SCTY)+Amends+Silevo+Merger/9826394.html�
1/1/2015
guest They'll use solar, wind and geothermal. I'm sure that the rooftop won't supply them with enough energy.�
1/1/2015
guest Especially at night.�
1/1/2015
guest Well, I figured they might be able to rig up some battery storage to help with that. It's the total power generation from the rooftop solar that's the big problem.
- - - Updated - - -
Probably, but not necessarily. This will be a large industrial installation for a power-hungry facility in the middle of a very sunny desert, so they could consider favoring more expensive high efficiency panels over cheaper SCTY ones.�
1/1/2015
guest Might best hold off on such conjecture until we learn the specs. of the panels their new acquisition, Silevo, put forth.�
1/1/2015
guest What's to prevent SolarCity from obtaining or producing top quality solar panels for the huge industrial project of a related company?�
1/1/2015
guest I think it's the fact that trina solar said that they have overwhelming demand and can't meet it. All solars liked that.�
1/1/2015
guest This morning it has been announced that SolarCity will be added to the NASDAQ Q-50 Index prior to the market open next Monday, September 22. The index is designed to track the performance of securities that are next-eligible for inclusion into the NASDAQ 100 Index.
Link: http://www.nasdaq.com/press-release/quarterly-changes-to-the-nasdaq-q50-index-20140915-00181�
1/1/2015
guest Any idea why SCTY is tracking down with TSLA this morning?�
1/1/2015
guest The market.�
1/1/2015
guest Link to this morning's article on SolarCity website: New SolarCity Product Makes it Possible for Businesses to Significantl
New SolarCity Product Makes it Possible for Businesses to Significantly Increase Solar Output From Each Rooftop
8:00a ET September 16, 2014 (GlobeNewswire)
SolarCity (Nasdaq:SCTY) unveiled a new product in its Zep Solar line of solar products today--a flat roof solar mounting solution that is twice as fast to install and can generate significantly more solar electricity from each rooftop than alternatives for the commercial market. ZS Peak makes it possible for far more businesses, schools and other organizations to install solar power on their buildings and immediately pay less for solar electricity than they pay for utility power, and will significantly expand the addressable market for commercial solar.
Like the revolutionary Zep residential solar systems, ZS Peak provides an innovative snap-together system to simplify and accelerate installation. SolarCity estimates that ZS Peak can increase generation capacity on flat roof buildings by 20-50 percent per building and do so without requiring any penetrations. The system's dense, east-west layout structure will allow SolarCity to fit up to 20 percent more solar panels on standard roofs and up to 50 percent more panels on lightweight roofs, such as those commonly found on warehouses. The increase in panels per roof is particularly valuable in the commercial market, as conventional flat-roof solar systems typically power less than half of a commercial building's load.
ZS Peak's east-west orientation not only allows installers to fit more solar panels on each roof than standard south-facing systems, it also captures peak power production throughout a longer period of the day. By lengthening power production time and eliminating the typical mid-day spike of standard solar systems, SolarCity can also make more efficient use of solar inverters to further reduce costs for customers. ZS Peak has so significantly improved on the aerodynamics of conventional systems that it can be installed as a lightweight, non-penetrating system on many roofs that would otherwise require the solar panels to be bolted down.
SolarCity is currently installing its first project with ZS Peak and expects to begin installing the product in volume in January. Businesses and other organizations interested in SolarCity's services can contact the company directly at 1-888-SOL-CITY (1-888-765-2489) for a free, no-obligation solar consultation or visit SolarCity online.�
1/1/2015
guest Thanks for posting that SC press release. I would love that system on my house roof. It would be perfect because it is non-penetrating and lightweight. SC won't install on my roof because it has a 1.5" hard polyurethane foam layer with an elastomeric top coat, supported by 2x4" tongue-in-groove and 4x10" beams on a 6' spacing. SC says they don't want to deal with foam roofs because they might leak even though I've offered to sign a liability release. They also said (this was just last month) that their mounting system was not compatible with my roof structure, even though earlier this year they had installed a PV system on a neighbors roof that is the same structural type as mine (but not the same top surface).�
1/1/2015
guest You're welcome. Oh my, and you live in the same town as SolarCity. I got the impression that this new system is only for business customers. Perhaps if you keep knocking on their door, they will relent and accept you as a customer.
Meanwhile, it appears that the system is what could win the bidding to install solar panels on Tesla Motors' huge battery factory being built in Nevada. Of course the fact that the two companies share the same board chairman is helpful.
�
1/1/2015
guest This energy storage system put up today in NE Germany just made the news on ZDF, the link from the TV channel:
Startseite - ZDF Mediathek
WEMAG AG - Batteriespeiche
�
1/1/2015
guest Another interesting article
Musk Solar Strategy Used as Model for Record Investments - Bloomberg
Can be viewed through bull eyes or bear eyes�
1/1/2015
guest SCTY price action makes no sense to me, it went down with tsla yesterday, today stays down even tsla jumped.�
1/1/2015
guest MarketWatch Bulletin
NASA awards $6.8 bln contract to Boeing, SpaceX to send astronauts into space
09/16/2014 04:14:29 PM
_____________________________
I realize it is not a direct SolarCity story, but any positives for a Musk related enterprise can be helpful.
- - - Updated - - -
Since yesterday�s market close, Tesla benefitted from bullish commentary by analysts at two firms. Very late in yesterday�s trading the news began circulating of Massachusetts allowing Tesla�s direct sales method. The benefits from the news today of SolarCity�s improved system for business customers may not yet have sunk in with investors. The latest Tesla news may have inhibited institutions from selling any more TSLA shares to raise cash for the Alibaba IPO, at least not since late morning. SolarCity may have been seen today as still ripe for milking ahead of that IPO.�
1/1/2015
guest yes .. TSLA is much sexier than SCTY ..
�
1/1/2015
guest The "Inside Energy 2014" summit in New York City on Wednesday, September 17 wil be hosted by SolarCity.
1:00 pm EDT - Keynote Speaker - Elon Musk
Inside Energy | Presented by SolarCity | Home�
1/1/2015
guest Awesome. Thanks for letting us know!
Edit: Well, I thought there would be a streaming of the Keynote, but it looks like there is none....so hopefully we get some info after the event.�
1/1/2015
guest You're welcome. Here's an article about today�s SolarCity �Inside Energy� summit in New York which featured Elon Musk as keynote speaker.
____________________________________________
http://www.marketwatch.com/story/elon-musk-a-thermostat-sized-box-may-one-day-power-your-house-2014-09-17
�
1/1/2015
guest did Musk and his cuzzie just declared war on the grid?
�
1/1/2015
guest Solar City is being added to the NASDAQ Q-50 on Monday. Remember how Solar City acted prior to being added to the Russell 2000. There was a brief pause and decline the week before the event, followed by the stock rallying over 100 percent in the weeks that followed. Do funds that track an index and funds that own a stock that is about to be added to be added to an index usually pause the week before the event occurs?
Update : Why wasn't Solar City added in March? According to the first link, Solar City was supposed to be added in March.
Quarterly Changes to the NASDAQ Q-50 Index (NASDAQ:NDAQ)
Quarterly Changes to the NASDAQ Q-50 Index - NASDAQ.com
Could this explain why the stock fell after reaching $80? At an $8 Billion market cap, Solar City was among the largest market cap holding for many of the larger indexes that own it.
Holdings | SolarCity Corporation (SCTY) | ETF Analysis and Performance�
1/1/2015
guest Nice. Much appreciated.�
1/1/2015
guest I don't understand the thermostat sized comment...an object that small will not have adequate energy storage potential. It would even need to surpass the energy density of gasoline to have any measurable amount of energy storage on a home consumption scale.�
1/1/2015
guest Inside those "thermostat boxes" would have be some whallopy-gallopy capacitors, indeedy!�
1/1/2015
guest Has there been any time frame given on when they will build this panel manufacturing plant an order of magnitude larger than the current plants? I really need to get back into SCTY before that happens. I liked to see the recent press release about the commercial mounting hardware. I love to see the R&D ramp up in SCTY.�
1/1/2015
guest No. They need the grid. They also believe electricity consumption will increase so utilities will still sell a lot of energy.�
1/1/2015
guest Admin note: As a reminder, please respect copyrights and don't copy and paste entire articles. Link to the original article and perhaps just quote the intro or whatever relevant part. Some posts above were edited accordingly.
Thanks!�
1/1/2015
guest Vivint Solar IPO
Vivint Solar expected its IPO to be priced between $16 and $18 per share, valuing it at about $1.9b billion at the top end of the price range.
Market Cap Market Share Retained Vaule Retained Vaule per watt Installation Cost Vivint Solar $1.9B 9% $309.9M $2.39 didn't say, seems lower SolarCity $6.06B 30% $1800M $1.72 $2.29/watt �
1/1/2015
guest What's the rub on this company. I know they are #2 on installs right behind SolarCity. Is it worth getting into? I got into SC at $10 right on the IPO, wondering if this company is a solid player in the industry....�
1/1/2015
guest Anyone else going to Equinox East today?
Equinox East�
1/1/2015
guest I repeat the final paragraph of the post in which I initiated this thread:
"Eventually that thread was hijacked for the discussion of other solar companies and alternative energy in general. SolarCity got lost in the noise. Now that SCTY has fallen 30% this month, I'm resurrecting a purely SCTY thread. Other alternative energy companies should only be mentioned in the context of how they might affect SolarCity. Current or potential SCTY shareholders are invited to participate."
There is another thread in this forum for more general discussion of Solar and other alternative energy companies. It was originally a SolarCity thread but got hijacked and was renamed: Alternative Energy Investor Discussions�
1/1/2015
guest well... can we at least allow SCTY's direct competitor to be discussed here?
�
1/1/2015
guest As long as that pertains to how it will affect SolarCity and its shareholders. Otherwise, this thread is doomed to be hijacked in the manner of the first SolarCity thread whose title had to be changed to "Alternative Energy Investor Discussions". It would be appreciated if discussions solely about Vivint Solar be posted in that other thread. Otherwise we'll again have to go through the process of starting up a new solely SolarCity thread for SolarCity shareholders and prospective investors. Thank you in advance for understanding and cooperating.�
1/1/2015
guest I am curious, respect curt but wonder why he gets to choose what is discussed? Originator of thread does not control content.�
1/1/2015
guest I understand. However, I hope that others understand the intent of this thread and why it was created to replace a previous SolarCity thread that had been hijacked. Otherwise, chaos reigns. As I did this spring regarding other attempts to hijack this newer thread, I have again asked a moderator to intervene. It was the moderator who then moved non-SolarCity posts to the older thread which he had renamed. That other thread still exists for the discussion of other solar companies.�
1/1/2015
guest I understand and get it. I was just really wanting someone who had read about them to give a crash course in basically one post of whether or not to invest in them.....I've seen the name for along time, but never studied them. Would be nice to spread the eggs in the basket.....but I agree, I want this thread to be focused on SC as well because I have a lot of money tied to it.�
1/1/2015
guest That's understandable; you're not the one who started posting about Vivant Solar and were simply responding. However, I suspect you may get a good answer to your question, if posted in the other much more heavily frequented thread: Alternative Energy Investor Discussions�
1/1/2015
guest
because he is willing to put in the extra time needed to be a moderator. I thank them for what is normally a thankless job.�
1/1/2015
guest I have been out of SCTY for awhile but now seems like a great time to get back in. I am going to be looking at some LEAPS tomorrow.
Key Strengths that have brought me back to SCTY (I have always believed in them but at some point on a huge pullback from TSLA I dumped all other securities into TSLA.
-The rate at which they are adding retained value
-The financing company they bought that included the creator of Prosper coming to work for SCTY.
-Their plans to build a Giga Factory for High Efficiency panels.
-I believe the money they are pouring into R&D will continue to separate them from the pack.
-The rate at which they are adding retained value !�
1/1/2015
guest Falling below previous support... could this be the start of a correction coming?
I have been waiting for a reentry since I sold a few months ago.�
1/1/2015
guest I bought a few SCTY calls and leaps today. Seemed like a good time to get back in with everyone distracted with BABA. Hoping for a good week for SCTY next week!�
1/1/2015
guest Money being withdrawn from momentum stocks to buy the BABA IPO may have pressured SCTY this week. An upcoming IPO from another solar company might also affect SCTY. I'm waiting for that to pass before considering reentry into SCTY.�
1/1/2015
guest Thanks for the heads up on the solar IPO Curt. I take it your referring to Vivint Solar Inc.? Is it possible that Vivint Solar could boost SCTY by bringing attention to the solar stocks? I don't see people selling SCTY to buy this new solar stock.�
1/1/2015
guest You're welcome, Chris. Yes, that's the IPO to which I was referring. You may be right about attention being helpful. However, I remain cautious due to the possibility that some people may want to diversify their solar holdings by selling some SCTY to buy the IPO. Then again, they may not. I don't believe a firm date has been set for the IPO, but it should be soon. We'll learn how investors react before long.�
1/1/2015
guest Curt, I found this article that talks a little about Vivint Solar and Solar City. I posted the link just because it talks about how Solar City has a 30% market share and Vivint Solar only has about 9%. Vivint Solar will be valued around 2 billion where Solar City is valued around 6 billion. So to me it seems Solar City is still a better buy at a 6 billion Valuation. The Blackstone Group - Vivint Solar IPO: A Potential Green Triple-Play? | Benzinga.�
1/1/2015
guest I think SCTY should Buy or merge with VSLR.�
1/1/2015
guest SCTY Jan2017 LEAPS are available now - not sure when they started but figured I would pass it along.�
1/1/2015
guest Man does SCTY look tempting at these prices...I'm thinking about it.�
1/1/2015
guest I recently went long on some Jan 2017 140's and added some Jan 2017 120's today. I was excited to see SCTY more or less hold the line at the 200 day. With SCTY adding 500million in retained value per quarter (and increasing quickly) I think it is a very attractive proposition at these levels. As a TSLA permabull I am even considering transferring some of my TSLA calls over to SCTY.
- - - Updated - - -
Why do you feel this way? I am not sure what that would bring to the table for SCTY? not the mounting hardware�
1/1/2015
guest I think SCTY would benefit due to:
1. Knocking out #2 in market share, (9% + SCTY 30%=39). More exponential growth for SCTY.
2. Decent Retained Value $309.9M.
3. More reasons to serve customer Alarm, Smart Home, etc. SCTY does Home Energy Audits.
4. 850,000 Customers they have only penetrated 2.5% of that amount with 21,921 customers w/#3 above. Here is a good article:
All The Numbers Of The Vivint IPO You Need To Know | SolarWakeup.com
I could be wrong as I'm not a businessman.
BTW Thanks for answering my first post here ever! And I would like to thank all of you for posting here and teaching me so much! Much respect to you all! I got into SCTY and TSLA with my retirement IRA because of positive comments from Sal D., breaking through the Massive amount FUD on Seeking Alpha. I can't believe it's even legal to operate that sight!�
1/1/2015
guest the latest upgrade w/ a PT $95 from Canaccord.�
1/1/2015
guest Governor Cuomo Announces New SolarCity Gigafactory Complex at RiverBend http://www.governor.ny.gov/press/09232014-solarcity-gigafactory-riverbend
?�
1/1/2015
guest Holy crap, really? Did anyone know this was happening?�
1/1/2015
guest Well, Flux - neither any press release or blog from Solar City, as of this afternoon, nor ANY reference in that article other than the first paragraph, makes use of the giga-word. I looked it up just to make sure that it was indeed either ann over-enthusiastic reporter and/or headline writer who snagged that soon-to-be-waaaaay-overused term
But, as far as the development of a Very Large factory for Silevo/Solar City in the Buffalo area, yes, that has been discussed over the past several months.�
1/1/2015
guest Indeed, the story is three months old, but the New York governor put out a press release today and apparently thought the term Gigafactory is cool and applicable. Here's a story from June: SolarCity to build factory in New York - Jun. 17, 2014
Of more immediate concern, this notice of a half billion dollar convertible note offering came out after the market close and may have caused some jitters in the after hours:
SolarCity Launches $500 Million Convertible Senior Notes Offering (NASDAQ:SCTY)�
1/1/2015
guest I would love to know what the expected output is? Elon had mentioned 1GW in the Silevo call, but I did not see that mentioned in any of the articles today about it? Anyone know anything on this?�
1/1/2015
guest Huh. 5 billion dollar plant. Funny same figure as tesla giga factory. Are these realtime estimates or pulled from the air. I find it hard to think each one would have the same estimate. Remarkable coincidence�
1/1/2015
guest The real figure is 750 million. The 5 billion includes all payroll and other things over the next 10 years.
Edit: seem to be conflicting news reports and now I can not find that article I had read. I sure wish I could get a video of this event.�
1/1/2015
guest Indeed - it will be interesting to see how the market responds to this convertible note offering. It's not dilution so that is good.
What are the risks associated with this convertible note? Are they on the hook to meet certain benchmarks by 2019? Some of the legal-speak in their announcement was a bit over my head and I didn't see specific note pricing.�
1/1/2015
guest new upgrades from Roth and Deutsche
Roth Capital Partners PT $98, Deutsche Bank PT $90
...and Credit Suisse (no PT !!, "restricted"!)�
1/1/2015
guest I should have bought at $60.�
1/1/2015
guest Stock or Options? Why is $3 a game changer for you? Just curious...�
1/1/2015
guest Oh I was referring to the fact that I posted on the day of the dip to $60 that this was down below what I thought was fair value given the news of the day, and was going to buy short term calls, but I didn't. That's all.�
1/1/2015
guest SolarCity breaks ground on huge solar factory in New York, strikes deal with state
SolarCity broke ground on its massive solar panel manufacturing facility in Buffalo, New York on Tuesday, according to a release from New York Governor Andrew Cuomo. The facility, when, and if, fully completed in early 2016 is supposed to make a gigawatt worth of solar panels a year, in the one million square foot facility on 88 acres of land in the development park called RiverBend in South Buffalo.
SolarCity � led by Chairman Elon Musk and his cousins CEO Lyndon Rive and CTO Peter Rive � is following a similar strategy to the one that Musk is using for his electric car company Tesla, with Tesla�s plans to build a massive battery factory outside of Reno, Nevada. The similar strategies are causing some to refer to the new SolarCity factory as Elon Musk�s other �Gigafactory.�
SolarCity breaks ground on huge solar factory in New York, strikes deal with state Tech News and Analysis
The above was posted 2 hrs ago.�
1/1/2015
guest My leaps I bought at 60 are still underwater due to the hugespread on the bid and ask price but come 2017 they are going to look sweet�
1/1/2015
guest Cuomo unveils $5 billion SolarCity fab deal - The Buzz: Business news
�
1/1/2015
guest Solar City was already way undervalued before this deal. If the details of this article are correct then the implications are staggering. This article had the best paragraph I have found so far on this deal.
"SolarCity expects to spend US$150m initially to fund construction of the facility, with the state kicking in an additional US$750m. The company will lease the facility for a 10-year period at a rate of US$1 per year, but must provide 1,450 manufacturing jobs and employ 2,000 downstream jobs in sales and installations, as well as help create 1,400 more jobs to support contractor and suppliers."
http://www.ifrasia.com/solarcity-funds-gigafactory-with-us$500m-cb/21165975.article
To only spend 150 million to build out this huge factory is so amazing !
edit: SolarCity - Current Report
very nice ... 150m confirmed as the price they expect to get factory operational.�
1/1/2015
guest Guys, checkout SolarCity twitter feed at SolarCity (@solarcity) | Twitter
There are a ton of tidbits. Here is a good one:
"W 700+ crowd @NYGovCuomo announces deal to create largest solar power manufacturing plant in W Hemisphere to Buffalo"�
1/1/2015
guest 500mil convertible is priced. Details are here:
SolarCity Corporation Announces Pricing of $500 Million Convertible Senior Notes Offering (NASDAQ:SCTY)
- - - Updated - - -
A few key points.
- The notes will bear interest at a rate of 1.625% per year.
- The initial conversion rate for the notes is 11.9720 shares of common stock per $1,000 principal amount of notes (which is equivalent to an initial conversion price of approximately $83.53 per share).
I am not an expert in convertible pricing. But this looks like a very good deal for the purchasers of the notes. SCTY already reached $83.53+ early this year.
- The Company expects to use approximately $57.6 million of the net proceeds of the offering of the notes to pay the cost of the capped call transactions described below and to use the remaining proceeds of the offering for general corporate purposes, including working capital, capital expenditures and potential acquisitions.
Not clear until what price there will be dilution protection. Nevertheless this is a positive.�
1/1/2015
guest OK, I'm in at these prices. Go SCTY!�
1/1/2015
guest This is a really good deal for scty. The 8K has some juicy details. This is probably the best part:
�
1/1/2015
guest more info of the purchasers
[TR="bgcolor: #cceeff"] Purchaser Aggregate Principal
Amount of
Securities to be
PurchasedAggregate Principal
Amount of Optional
Securities to be
Purchased if Maximum
Option ExercisedGoldman, Sachs & Co.
$ 166,666,000 $ 25,000,000 [/TR][TR="bgcolor: #cceeff"] Credit Suisse Securities (USA) LLC
$ 141,667,000 $ 21,250,000 Merrill Lynch, Pierce, Fenner & Smith
Incorporated
$ 141,667,000 $ 21,250,000 [/TR][TR="bgcolor: #cceeff"] Deutsche Bank Securities Inc.
$ 25,000,000 $ 3,750,000 Barclays Capital Inc.
$ 25,000,000 $ 3,750,000 [/TR]Total
$ 500,000,000 $ 75,000,000
�
1/1/2015
guest new upgrades from Credit Suisse and Raymond James
seems that Patrick Jobin is realizing the potential of SCTY.
"outperform", PT $97. Raymond James, "outperform", PT $80.�
1/1/2015
guest Looks like we got dilution protection up to $126.
See the latest 8K filed on 25th.
"The Capped Calls have initial strike prices of $83.5282 per share and initial cap prices of $126.0800 per share, subject to certain adjustments."�
1/1/2015
guest Solar power is growing so fast that older energy companies are trying to stop it - Vox
A well-written summary on the parabolic growth of (and corrupt resistance to) solar.�
1/1/2015
guest Just bought a bunch more SCTY stock!�
1/1/2015
guest good timing, I think VSLR IPO tomorrow should pumps scty up, unless the oil price keeps crashing ..�
1/1/2015
guest At these prices, it's a bloody clearance. Just went all in with the IRA�
1/1/2015
guest I grabbed a handful of Jan '17 $60 calls at these prices. Maybe will buy more if we keep going down.�
1/1/2015
guest I know this is the SCTY thread, but the VSLR price is pretty low right now. Would I be betting against myself to buy (using new cash) some of it since it's direct competition is SCTY or does the whole "spreading your eggs around" and the fact that there is enough room for solar installations to go around make it ok?�
1/1/2015
guest As stated in my post that initiated this thread, discussion of other solar companies should only be made in reference to how they might affect SolarCity and its shares. Otherwise there is a thread in this forum titled "Alternative Energy Investor Discussions". It was originally a SCTY thread but got hijacked by discussion of other solar companies and SCTY got drowned in the noise, so its title was changed. That's the reason I initiated this new SCTY thread last March.
As I expressed in post's #903 & #905, I was holding off on reentering SCTY due to the possibility that some investors wanting to buy VSLR would sell some of their SCTY shares and depress SCTY's price. Apparently you would use new cash to buy VSLR. I can't quarrel with diversification, but keep in mind that yours is money that would not be used to support the SCTY price.�
1/1/2015
guest Well, I'm really wondering where I would make the most money. SCTY or SCTY + VSLR. If Vivint starts to move on Solarcity's turf, then that could affect SCTY pricing......so to me they are linked in discussion.�
1/1/2015
guest You called it Curt. I started buying too early and my SCTY leaps are pretty deep in the red. I did save some cash just in case it went south so I bought some more SCTY leaps today. Hope SCTY can recover a little tomorrow.�
1/1/2015
guest Since its founding in 2011, Vivint Solar has been in competition with SolarCity as a solar panel installer. Vivint Solar was a subsidiary of Vivint and later the Blackstone Group. Today Vivint Solar became a publicly owned company whose VSLR shares compete in the stock market with SCTY.�
1/1/2015
guest Curt- I'm curious if your buying SCTY now that the price has come down quite a bit? I know you were holding off for a pull back, is this it or do you see it dropping more?�
1/1/2015
guest I would be a bigger buyer today but I'm worried about a margin call. I wish someone would ask Elon what he thinks about solar cities price�
1/1/2015
guest Mr Musk bought scty secondary offers at $46 .. so I assume at least $46 is a fair price for him.
�
1/1/2015
guest Yeah im in the same boat. I wanted to buy some more today on a 6% drop but didn't want to over do in case it fell even farther tomorrow. I am happy to see SCTY up a little in the after hours even though I know that means nothing.�
1/1/2015
guest I'm not currently in SCTY, but it remains under consideration.�
1/1/2015
guest SCTY finally sees a little green. Maybe because TSLA is having a good day it is following suit or maybe because the market is up I don't know. But I'll take it!�
1/1/2015
guest Where has all the chatter gone? Big news this AM with the SCTY Leases... anyone?
Is there another forum I don't know about�
1/1/2015
guest Yep, pretty big deal.
Solar Installation at no Additional Cost and Immediate Utility Savings Just Like a Standard Power Purchase Agreement, But Now You Own it
�
1/1/2015
guest I think SolarCity Introduces MyPower, a Solar Loan Paid Back by the sun is the link that tang intended to include.�
1/1/2015
guest Thanks for the assist!:smile:�
1/1/2015
guest Also an article out about honda adding 50 million to a previous 65 million fund for solarcity to install panels for Honda and Acura owners. I am trying to get some more Jan 2017 140 calls.
http://www.streetinsider.com/Corporate+News/SolarCity+(SCTY),+Honda+Announce+Fund+to+Finance+$50M+of+Solar+Projects/9896179.html�
1/1/2015
guest Posted on G+:Well, this is quite an obvious outcome, SolarCity is the #1 installer in US, and economy of scale is kicking in big time. I bet new SC product got as good if not better margins than PPA offers from SC, while allow more fair direct comparisons with offers from small scale installers who could not realistically compete on price. And on the long run this will ensure even bigger and faster market penetration for cost effective solar.
�
1/1/2015
guest Definitely an interesting loan product by SolarCity. It appears to be a 30-year loan. This is something I haven't heard of existing in the solar industry for residential customers prior to this. SolarCity will definitely charge a premium in terms of total purchase price, but since it'll be amortized over 30 years the monthly payments will be quite low. I'm curious to learn more of the details.�
1/1/2015
guest I am very surprised to see this from Honda as they seem to be lagging in electric vehicles the one type of car that could benefit from solar.�
1/1/2015
guest Low payment BUT increased total interest over the life of the loan. Why wouldn't one just refinance mortgage and get lower interest rate and interest tax deduction? Seems like a product to prey on the lower financial class�
1/1/2015
guest Disagree. this will be much simpler than refinancing your house. You can also pay it off at any time without penalty. It sounds like an exciting new loan package that will give people a huge benefit over a lease. There is also no lien on your mortgage with this.�
1/1/2015
guest Fellas, They got a new deck at SolarCity - Events Presentations under Featured Event.�
1/1/2015
guest Never heard of a lien on your mortgage before but home equity line would also do better and can be paid off earlier. Not sure about Texas but Virginia there is no penalty for paying off mortgage faster. I am curious, is there a lien placed on the home for the loan? If not what is the collateral? Home could be sold without settlement agent or buyer aware of loan that would need to be paid off for the solar system. For that matter what does solar city do to secure their interest in the solar system on a lease? Do they rely on the sellers good will?�
1/1/2015
guest Thanks for letting us now. I really like this part:
Now, it's only been a few years, and I'll be interested in seeing what it's like 15 years from now, but as an investor and potential buyer this is great to see.�
1/1/2015
guest You are welcome. As per Roth capital, this presentation was used for the latest convertible roadshow. Here is the reference. It has a few other interesting notes by the analyst as well:
http://www.streetinsider.com/Analyst+Comments/Roth+Capital+Affirms+SolarCity+%28SCTY%29+at+Buy%3B+Comments+on+Recent+Meetings+with+Management/9888459.html�
1/1/2015
guest It's quite possible they're getting a lien or 2nd mortgage on the house including the solar system. That often qualifies it for home mortgage, not home equity because it is used to buy or build your home. I don't know what they're doing. Don't worry about the owner selling the house without paying it off. The note will be recorded with city/county records and can't be overlooked when the property is sold.�
1/1/2015
guest How could it be paid off faster, I thought you could pay off the Mypower loan whenever you want. Keep in mind all other loan options are still open to homeowners. For people who just purchased their home or are underwater in their mortgage this loan would make a lot of sense.�
1/1/2015
guest Then it is lein against home�
1/1/2015
guest Great podcast with Lyndon Rive. Since the company is all about vertical integration, the last question was about buying an inverter company. Makes me wonder if they might try and get Enphase since they are the number one installer.....
SolarCity CEO Lyndon Rive Defends His Companys Long-Term Business Strategy : Greentech Media�
1/1/2015
guest One thing to keep in mind is that this program also includes all repairs and maintenances to guarantee a certain output from the system throughout the life of the loan which creates an inherent value added. You could classify it as a Rent-to-own scheme but at the end of the day it opens up solar to a much larger market.�
1/1/2015
guest That's a very informative podcast. Thank you!
- - - Updated - - -
One thing that struck me in the podcast: Rive says the Retained Value is net of tax equity guys but it is NOT net of debt. He said that debt is on the Balance Sheet that we can see so that's not netted out as part of Retained Value.
Does anyone know how to reconcile the Balance Sheet with the Retained Value?
The real answer that I am after is:
- What is the true 20-year retained value after "everything"
- How is it evolving on a quarterly basis
- How is it evolving on a quarterly basis "per share" (to account for equity dilution)�
1/1/2015
guest wow, current install cost of less than $2.50/W. Wish I could get that directly.�
1/1/2015
guest That is what I got directly just by shopping around and maybe you can too, especially in CA where you have a lot of choice.�
1/1/2015
guest If I am reading the info right.
I compared from the end of year report last year to the numbers as of Jun 30th because that is what was used in the 10-Q which is where I am getting my "all in number" for debt and accounting for stock dilution (I think but I would love to have someone double check this)
The retained value after 20 years considering a 0 percent renewal rate is 1.245 billion as of Jun 30th. In December it was 660 million so it has almost doubled in 6 months. [Increase of 585 million ]
The retained value after 20 years considering a 90 percent renewal rate (which is what SCTY uses in their model) is 1.8 billion as of Jun 30th and it was 1.05 billion on Dec 31. [Increase of ~750 million]
The total liabilities and equity has increased by 333 million during this same time period. If you only look at liabilites it has increased 165 million in this period.
Its late and I need to do more research on the subject, But I would love anyone else to correct this data or expand on it.
- - - Updated - - -
And yes +1 Sbenson that post was awesome Thank You�
1/1/2015
guest Interesting...
http://dealbook.nytimes.com/2014/10/15/solarcity-offers-bonds-online-to-ordinary-investors/?_php=true&_type=blogs&_php=true&_type=blogs&emc=edit_dlbkpm_20141015&nl=business&nlid=65508833&_r=1
More info here:
Solar Bonds & Investing - Clean Renewable Energy Bonds - SolarCity�
1/1/2015
guest I think there a lot of benefits to offering these bonds to individual investors that have been overlooked thus far. the biggest one is that it lets SolarCity know where to expand next they will now have a map of everyone in the country who was willing to spend at least a thousand bucks in support of solar. This will give them a tremendous advantage compared to their competitors.
for instance if they had 300 people from Kansas City that had invested in these bonds and they were considering expanding into that areathey would know that there was potential demand from at least those 300 people. I don't think that it was a coincidence that the my power loan and these individual investor Bonds were rolled out at the same time.�
1/1/2015
guest In case anyone doesn't want to register to see the exact terms/rates, they are:
1 yr 2.0% 2 yrs 2.5% 3 yrs 3.0% 7 yrs 4.0% �
1/1/2015
guest Those look like pretty good rates...�
1/1/2015
guest Bummer. For those of us in the "sunshine state" if florida we cannot buy directly. Only through a broker. Pretty crazy to be the only state in the country demanding we also pay a middleman fee. Time to write our represntatives!�
1/1/2015
guest Were you interested in purchasing some? I am very curious how many people are buying these and their reasons for doing so.�
1/1/2015
guest Yes.�
1/1/2015
guest Wondering if anyone has info on bond ratings for these?
Soon as I get this info, gonna go to my local FL car dealer .... oh I mean broker (you know for consumer protection�
1/1/2015
guest These bonds are unrated, junior to existing debt, in the event of default, something like 25% of investors must band together to push for a claim...�
1/1/2015
guest SolarCity's New ZS Beam Solar Carport System Makes it Faster, Cheaper, Easier and Safer to Install Solar in Parking Lots (NASDAQ:SCTY)
New product on their Zep product line that allows them to install panels on carports. While I dont think this has the potential as the last product that was for flat roofs, The continued innovation and long term value of this will be very nice. This will help those 2017 Leaps I have that look so silly right now.�
1/1/2015
guest Grid Parity to Reach 36 States in 2016
something interesting to read & think about it.
http://www.bloomberg.com/news/2014-10-29/while-you-were-getting-worked-up-over-oil-prices-this-just-happened-to-solar.html�
1/1/2015
guest That was a nice little article. Thanks!�
1/1/2015
guest Just be aware that the article is talking about grid parity of retail electric prices versus retail solar installations (while the picture in the article shows a utility scale solar plant). That's still great news, but don't expect utilities to dump their nat gas power plants in favor of solar anytime soon (unless forced to by mandates) since solar is still 4x the price of nat gas at the utility level.�
1/1/2015
guest Baird & Co's Ben Kallo reaffirms his "neutral" recommendation with $83 PT.�
1/1/2015
guest how is 65% upside neutral?�
1/1/2015
guest very simple. He had also a few "outperform" ratings in the past. However, one should understand some analysts' opinions?�
1/1/2015
guest Anyone setting up a play on SCTY earnings? Historically they have been a disappointment and we have had a nice recovery from $45. Time to buy some puts?�
1/1/2015
guest Well those puts from yesterday seemed to be a good call... I'm wondering whether to let them ride, or close them out. Any thoughts in the closing minutes?�
1/1/2015
guest Weird but why does scty report same day as tesla? Many investors have both and chairman of both in common�
1/1/2015
guest
Because maybe there will be some big "partnership" type of news?�
1/1/2015
guest I remember that speculation the last time they did that same day and time report but there was no partnership announced then�
1/1/2015
guest Yep , Same thing has been said before. Although there is news that came out recently that next year Tesla will offer battery storage at competitive pricing. It has also been stated that in 2018 (or was it 2017) battery backup will be offered with every SCTY install. I think they could offer some news on more battery storage that is coming next year but I would not count on it in this earnings call.
I would not rule out a SCTY/TSLA announcement but I would not bet on it (this quarter)
I think SCTY will follow the market tomorrow and move up after earnings report.�
1/1/2015
guest Someone recently shopped SolarCity for a 10 kWh pack from Tesla. The quoted price forna 10 year lease was $1500 down plus $15/month. Discounting at 9%, this has a present value of $2684. If an average of 7.5 kWh is discharged each day, this works out to a levelized cost of about $0.10 per kWh. This strikes me as a pretty reasonable price. The value of having backup when the grid is down may prove to be the tipping point for many.�
1/1/2015
guest Well those puts I bought were for protection from a bad ER, but it seems like I'll be closing them early, which is good b/c I don't have to loose IV premium.�
1/1/2015
guest Wow, what a brutal morning. Does someone know something I don't? What's going on?�
1/1/2015
guest Clearly selling those puts was a bad idea. sold for $5.6, they were $7 last I checked.�
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