Thứ Năm, 29 tháng 9, 2016

SolarCity (SCTY) part 209

  • 1/1/2015
    guest
    Yes it's possible. :)
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  • 1/1/2015
    guest
    Can someone share more info on this? PM me please if needed.
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  • 1/1/2015
    guest
    E-mailed you privately.
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  • 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.
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  • 1/1/2015
    guest
    Check your PMs, Dave.
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    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
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  • 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?)
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    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.
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    guest
    Is your point that there shouldn't be too many threads?
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    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.
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    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.
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    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.
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  • 1/1/2015
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    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.
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  • 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.
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    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.

    - - - Updated - - -

    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.
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    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).
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    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.
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  • 1/1/2015
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    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: US-PV-Installer-Market-GTM.png

    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.
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  • 1/1/2015
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    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.

    - - - Updated - - -

    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.
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  • 1/1/2015
    guest
    "Other investments" thread sounds good to me.
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  • 1/1/2015
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    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).

    - - - Updated - - -

    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?
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  • 1/1/2015
    guest
    Mod Note: some posts got quarantined in snippiness.
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  • 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.
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  • 1/1/2015
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    Talk on the street is scty coming out with a 200mln abs this/next week.

    - - - Updated - - -

    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
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    guest
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    spot on

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    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.
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    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.
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    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.
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  • 1/1/2015
    guest
    Or, for example with cheap electricity it would be possible to produce gasoline out of air and water gigi.gif Using more than century old F-T process that was and is used on industrial scale since world war 2.
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  • 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...
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  • 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.
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  • 1/1/2015
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    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.
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    Brendon Merkley's been on board since last autumn. He SHOULD own some shares outright! That's not right.
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    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).
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    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....
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    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.
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    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
    �
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    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!
    �
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    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).
    �
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    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.
    �
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    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.
    �
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    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

    - - - Updated - - -

    Care to show your valuation model?
    �
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    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.
    �
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    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.
    �
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    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

    - - - Updated - - -

    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
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    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
    �
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    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."
    �
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    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.
    �
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    thanks for the info.. what happens if you move within 20 years? thanks
    �
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    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.
    �
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    "218 MW Booked", when is the last time scty release their backlog?
    �
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    Up 2.50 in after-hours. Clearly the market's happy with the report.
    �
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    where is sleepyhead and his mom and pop shops will destroy Solarcity theory?
    �
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    I remember that the booking was 130+MW last quarter
    �
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    yep, "MW Booked of 136 MW for an annualized run rate of 544 MW Over 80% residential", demand is shooting through the roof, literally.
    �
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    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.
    �
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    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.
    �
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    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?
    �
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    booked means backlog.
    �
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    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.
    �
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    That's not quite correct:

    Previous backlog + orders booked - deployments = new backlog.
    �
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    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
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    You are right. this "booked" number explains the retained value leap this quarter, since backlog is included in the retained value calculation.
    �
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    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?
    �
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    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!
    �
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    Let's just leave out the deliberately provocative statements.
    �
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    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.
    �
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    @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?
    �
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    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
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    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.
    �
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    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.
    �
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    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
    �
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    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.
    �
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    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:

    �
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    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).
    �
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    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
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    Mosaic now doing direct lending for home solar installations. Targeting "solar leasing companies", whomever they might be :wink:

    Mosaic Lending.jpg
    �
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    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
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    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?
    �
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    guest
    a lot of scty solar panels on the roof


    gigafactory_aerial.jpg
    �
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    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?
    �
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    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.)
    �
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    STCY two new PTs

    here we go.
    �
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    SCTY is up over 5% during mid-session today, despite the overall market being down. Any ideas why?
    �
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    My guess is GF bill passage in Nevada.
    �
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    They'll use solar, wind and geothermal. I'm sure that the rooftop won't supply them with enough energy.
    �
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    Especially at night.
    �
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    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.
    �
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    Might best hold off on such conjecture until we learn the specs. of the panels their new acquisition, Silevo, put forth.
    �
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    What's to prevent SolarCity from obtaining or producing top quality solar panels for the huge industrial project of a related company?
    �
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    I think it's the fact that trina solar said that they have overwhelming demand and can't meet it. All solars liked that.
    �
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    Any idea why SCTY is tracking down with TSLA this morning?
    �
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    The market.
    �
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    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
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    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
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    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.


    gigafactory_aerial.jpg
    �
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    guest
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    SCTY price action makes no sense to me, it went down with tsla yesterday, today stays down even tsla jumped.
    �
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    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.
    �
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    yes .. TSLA is much sexier than SCTY ..




    �
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    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
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    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

    �
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    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
    �
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    Nice. Much appreciated. :) I seriously can't wait to see what's these two companies do in the next ten years.
    �
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    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.
    �
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    Inside those "thermostat boxes" would have be some whallopy-gallopy capacitors, indeedy!
    �
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    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
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    No. They need the grid. They also believe electricity consumption will increase so utilities will still sell a lot of energy.
    �
  • 1/1/2015
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    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 CapMarket ShareRetained VauleRetained Vaule per wattInstallation Cost
    Vivint Solar$1.9B 9%$309.9M$2.39didn't say, seems lower
    SolarCity$6.06B 30%$1800M$1.72$2.29/watt
    �
  • 1/1/2015
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    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....
    �
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    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
    �
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    well... can we at least allow SCTY's direct competitor to be discussed here?


    �
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    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.
    �
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    I am curious, respect curt but wonder why he gets to choose what is discussed? Originator of thread does not control content.
    �
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    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.
    �
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    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.
    �
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    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
    �
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    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.
    �
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    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 !
    �
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    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.
    �
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    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!
    �
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    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.
    �
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    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.
    �
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    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.
    �
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    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.
    �
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    I think SCTY should Buy or merge with VSLR.
    �
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    SCTY Jan2017 LEAPS are available now - not sure when they started but figured I would pass it along.
    �
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    Man does SCTY look tempting at these prices...I'm thinking about it.
    �
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    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 :)
    �
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    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!
    �
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    the latest upgrade w/ a PT $95 from Canaccord.
    �
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    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:mad:

    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
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    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)
    �
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    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?
    �
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    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
    �
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    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
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    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
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    new upgrades from Roth and Deutsche

    Roth Capital Partners PT $98, Deutsche Bank PT $90
    ...and Credit Suisse (no PT !!, "restricted"!)
    �
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    I should have bought at $60.
    �
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    Stock or Options? Why is $3 a game changer for you? Just curious...
    �
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    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.
    �
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    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.
    �
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    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
    �
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    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.
    �
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    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"
    �
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    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.
    �
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    OK, I'm in at these prices. Go SCTY!
    �
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    guest
    This is a really good deal for scty. The 8K has some juicy details. This is probably the best part:

    �
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    more info of the purchasers

    [TR="bgcolor: #cceeff"] [/TR][TR="bgcolor: #cceeff"] [/TR][TR="bgcolor: #cceeff"] [/TR]
    Purchaser Aggregate Principal
    Amount of
    Securities to be
    Purchased    		 Aggregate Principal
    Amount of Optional
    Securities to be
    Purchased if Maximum
    Option Exercised
    Goldman, Sachs & Co.
    		 $166,666,000 $25,000,000
    Credit Suisse Securities (USA) LLC
    		 $141,667,000 $21,250,000
    Merrill Lynch, Pierce, Fenner & Smith
    Incorporated
    		 $141,667,000 $21,250,000
    Deutsche Bank Securities Inc.
    		 $25,000,000 $3,750,000
    Barclays Capital Inc.
    		 $25,000,000 $3,750,000
    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.
    �
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    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."
    �
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    Just bought a bunch more SCTY stock!
    �
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    good timing, I think VSLR IPO tomorrow should pumps scty up, unless the oil price keeps crashing ..
    �
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    At these prices, it's a bloody clearance. Just went all in with the IRA
    �
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    I grabbed a handful of Jan '17 $60 calls at these prices. Maybe will buy more if we keep going down.
    �
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    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?
    �
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    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.
    �
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    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.
    �
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    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.
    �
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    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.
    �
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    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?
    �
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    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
    �
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    Mr Musk bought scty secondary offers at $46 .. so I assume at least $46 is a fair price for him.

    �
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    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.
    �
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    I'm not currently in SCTY, but it remains under consideration.
    �
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    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!
    �
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    Where has all the chatter gone? Big news this AM with the SCTY Leases... anyone?

    Is there another forum I don't know about :p ?
    �
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    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

    �
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    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.
    US-PV-Installer-Market-GTM.png
    �
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    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.
    �
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    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.
    �
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    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
    �
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    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.
    �
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    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?
    �
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    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.
    �
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    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.
    �
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    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.
    �
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    Then it is lein against home
    �
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    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.
    �
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    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)
    �
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    wow, current install cost of less than $2.50/W. Wish I could get that directly.
    �
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    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.
    �
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    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
    �
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    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.
    �
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    Those look like pretty good rates...
    �
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    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!
    �
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    Were you interested in purchasing some? I am very curious how many people are buying these and their reasons for doing so.
    �
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    Yes.
    �
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    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:confused:) I think it will be a good way to diversify.
    �
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    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...
    �
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    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.
    �
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    Baird & Co's Ben Kallo reaffirms his "neutral" recommendation with $83 PT.
    �
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    how is 65% upside neutral?
    �
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    very simple. He had also a few "outperform" ratings in the past. However, one should understand some analysts' opinions?
    �
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    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?
    �
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    guest
    Weird but why does scty report same day as tesla? Many investors have both and chairman of both in common
    �
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    Because maybe there will be some big "partnership" type of news?
    �
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    I remember that speculation the last time they did that same day and time report but there was no partnership announced then
    �
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    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.
    �
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    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.
    �
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    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.
    �
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    guest
    Wow, what a brutal morning. Does someone know something I don't? What's going on?
    �
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    Clearly selling those puts was a bad idea. sold for $5.6, they were $7 last I checked.
    �
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    I've been staying away from scty for a while. I think that we're taking a beating from the oil issues, and scty tends to drop on earnings (mostly because it runs up prior to earnings). Looks good for tomorrow.
    �
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    I'd simply look at it as 73.5c/day. What return can you get on it? Maybe more if you live somewhere with poor solar feed-in returns or if you have real-time pricing and can arbitrage the differentials. But over its life maybe only 6.25kWh usable average, so given charging/discharging losses it might be tough to do anything more than stick it to the man.

    What I think is _really_ good about it, is that static storage is a no-lose proposition for Tesla:
    - If current electricity pricing continues, with per-kWh pricing of infrastructural costs, static storage economics are good.
    - If static storage and solar PV forced pricing to adjust to separate fixed infrastructural costs by Amperage or fixed fee, and only fuel costs by kWh then it will make electric cars cheaper to own.
    �
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    To me it looks like Republicans taking up Senate is a perceived negative for SCTY (and VSLR). The fear is that tax credits will not be extended.
    �
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    I would say, all done SolarCity !

    �
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    Analyst Recommendations Today

    11/06
    Deutsche Bank : reiterates "buy" w/ PT $90
    Roth Capital: reiterates "buy" w/ PT $98
    JP Morgan: reiterates "overweight" but changes PT from $74 to $72
    Baird & Co: reiterates "neutral" w/ PT $83
    Raymond : reiterates "outperform" but changes PT from $80 to $75
    11/05
    Canaccord: reiterates "buy" but changes PT from $95 to $87
    �
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    Seems like a very good bet. With climate-change-denier Sen. Inhofe taking over as chair of the Committee on Environment and Public Works, and with Sen. Murkowski of Alaska at the helm of the Energy and Natural Resources Committee, it looks like "drill, baby, drill" is going to be the Congressional direction. A WSJ good article on this yesterday.
    �
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    QUOTE: "After representing 36% of total U.S. residential solar installations in Q2 2014�more than the next 50 installers combined�we expect the 33% sequential growth in our residential deployments to lead to an even higher percentage in Q3 2014."

    And market share really matters. As long as solar market continue to consolidate, with smaller players becoming uncompetitive due to economy of scale there is a tremendous value in being market leader. And there would be a market for residential solar in US, doesn't matter who won election, democrats or republicans.
    �
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    Maybe, but I would worry a lot, were I an investor in SCTY or any solar stocks, that a change in a retail rate regulation or removal of federal and/or state subsidies could cripple the business. I admit, though, that the solar industry has gotten so big and employs so many people that such changes are increasingly unlikely.
    �
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    Merrill Lynch confirms PT$95 and "buy" rating. Here's why.

    �
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    thinking about to sell some shares in SCTY. not because of the silly stock move, but I need some liquidity. Just don't know what to think about the markets right now. It's kind of playing Texas Hold'em and you're not allowed to see the 5th card on the table.
    �
  • 1/1/2015
    guest
    Tell the Walton Family: Stop your hypocritical undercover campaign to destroy rooftop solar. | CREDO Action

    Tell the Walton Family: Stop your campaign to make it harder for Americans to go solar. Click here to sign the petition.
    The Waltons own a majority stake in First Solar, a Malaysia-based corporation that manufactures large-scale commercial solar arrays that utilities may buy and add to their energy mix to meet state clean energy standards. First Solar is putting a bet on utility-scale solar, which wants to rig the playing field by suppressing residential solar installations. In a nakedly self-serving move, First Solar is working to impose fees on residential households with rooftop solar.[SUP]2[/SUP]
    First Solar sees rooftop solar as a competitive threat, and is heavily involved in cutthroat campaigns nationwide to destroy the residential rooftop solar industry and make it harder for Americans to go solar.
    Their strategy is already working in Arizona, where residential solar installations dropped 40% after Walton family-supported fees were introduced, leading to unprecedented job losses in Arizona�s solar industry.
    Not satisfied with a single state, the Waltons have also given millions to pro-fossil fuel groups like the American Legislative Exchange Council (ALEC) and the Koch brothers front group, Americans for Prosperity, to fund similar anti-clean energy policies across the country.
    �
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    Nice. Thanks for the article! I loved seeing this affirmation. A couple of people two years ago thought they would turn into this.

    �
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    I've been away from this thread for too long, finally catching up! SBenson, I am 99.9% sure that what Rive said/meant is that retained value does not factor in debt service costs. The debt (principal) is accounted for because the cost of the system is accounted for in the RV calculation. The fact that they finance the cost of the systems they build is separate.

    Does that make more sense?
    �
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    Roth Capital Partners reaffirms its "buy" recommendation and PT of $98.
    �
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    Technically the stock looks like a good buy right now bouncing off that hard support at $50 for the 10th time, really doesn't want to go below that number it seems. The financials are a bit confusing to me though, looking at the data from google finance which shows a large minority interest, 50% higher than their revenue, is this from their leasing contracts or? I would like to hear peoples case for owning the stock, what is the revenue per customer, what kind of profit margin can be expected in the future, are they cheaper than competitors?
    �
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    Could SolarCity install one solar system on the roof of a shopping mall and sell power to each tenant? If so, they could include storage in the package as well. This could lead to really efficient use of system assets.
    �
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    Thanks for the post FrozenCanuck� Although not 100% convinced, I think you might be right. The Retained Value definition from the slideshow in footnotes says that it is net of bunch of things including depreciation. So it seems the cost of the asset is effectively taken out of the retained value. Do you have any other references that indicate that the cost of the system is already accounted for in the RV calculation?
    �
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    51 days to break 80.... I can dig it :)
    �
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    Canaccord anD Raymond James reiterated their recommendations and price targets.
    �
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    Interesting research paper, but the novel concept in the paper is that any blu-ray disk gives you an easy to use template for photon capture. I believe the photon capture effect was already well known. Whether it is applicable to high efficiency solar panels, well, neither the article or underlying paper addresses that.
    �
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    If I read it correctly, they already have the contract, they just don't quite know where it's going to be built. They just closed on a $400M financing deal with BofA, though, so this particular contract is only 1.5% of that deal, and even less if you consider the total their total power purchase agreement style of installation. So I don't think it is all that big a deal for them. Walmart is much bigger.
    �
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    Happy New Year to you all,

    any thoughts on current directions of SCTY? I'm not quite sure what to think of the insider sellings - diversification of investment? And just a wild idea from a dream last night: What if Google acquired SolarCity?
    �
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    Insider selling is typically pre defined timelines. It's not voluntary action.
    �
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    NO idea about the insider selling, but what seems clear is that the bullish triangle pattern seen by Recognia never happened. They probably thought end of November was going to be a positive breakout but that was clearly untrue. Now the stock has hit the same peak twice while the lows in between have been getting lower. All at low volume.

    Looks like investor uncertainty which won't be helped by the CEO selling all his shares.

    I don't follow SCTY closely and am not an investor but as far as I can tell there doesn't seem to be any weakness in the fundamentals. The market seems uncertain about how SCTY will fare with these super-low fossil fuel prices. SCTY doesn't have the same 'still-equally-attractive-even-with-free-oil' quality that TSLA does, so I think the uncertainty here is more justified than at TSLA.

    If you guys know SCTY a lot better than me you might be sure that the low oil won't hurt SCTY in the long run and might be confident that the company can keep getting big contracts. If that is the case this looks like a prime buying opportunity. As Buffet said 'Be fearful when others are greedy and greedy when others are fearful'. Well, others look pretty fearful at the moment if you ask me.
    �
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    That article inaccurately states that Solar City is "mostly" owned by Elon. He has about 21.5% of the stock and no executive role. I don't see why this issue should stick yo him.
    �
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    From a commenter on the article, here are the congress members going after solar:

    Last election, Paul A. Gosar received $11,000 from oil and gas as well as $28,000 from electric utilities.
    Last election, Matt Salmon received $30,000 from electric utilities.
    Last election, Lamar Smith received $93,000 from oil and gas.
    Last election, Ted Poe received $79,000 from oil and gas.
    Last election, Jeff Miller received $30,000 from electric utilities.
    Last election, Cynthia Lummis received $91,000 from oil and gas as well as $13,000 from electric utilities.
    Last election, David McKinley received $77,000 from oil and gas as well as $72,000 from electric utilities.
    Last election, Andy Harris received $40,000 from oil and gas.
    Last election, Mo Brooks received $18,000 from electric utilities.
    Last election, Morgan Griffith received $56,000 from oil and gas as well as $61,000 from electric utilities.
    �
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    Solar Jobs Report Shows Huge Growth

    WASHINGTON -� The solar industry reports job growth 20 times higher than the rest of the U.S. economy, according to a new analysis.
    As of 2014, there were nearly 174,000 jobs in the solar industry, according to the report from the nonprofit Solar Foundation. That represents 86 percent employment growth since the organization began tracking job figures in 2010. By the end of 2015, companies said they expect to hire an additional 36,000 new solar workers.
    �
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    Yeah right, we should believe Koch Brother's funded organization writing against CleanTech.

    Here is the full official response:
    Monopoly Money
    �
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    Congrats SCTY longs today. Anyone still here?
    �
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    Yep. And now I'm trying to figure out what caused that bump up.
    �
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    Oil, I'm virtually certain.
    �
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    I'm not so sure, SCTY peaked a little after 11 Eastern when oil was still near the low of the day. They did announce the ER date today - TSLA got a similar bump last week after announcing.
    �
  • 1/1/2015
    guest
    Could be, but oil futures trade around the clock, and they were up significantly from Friday's price at open. It's often less just about the spot price than the trend investors see as well, and if they think the trend has turned, they will bid up oil futures and (though I don't necessarily agree with reason for correlation), so-called "alternative" energy stocks.
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  • 1/1/2015
    guest
    I own 7 solar stocks and SCTY is one of them. They all did very well today although SCTY did lead the pack. My US solars were just behind SCTY with 6-7% gains.
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    guest
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    pretty sure it had to do with Obama's proposal/ suggestion to extend the ITC and nothing to do with oil ;)
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  • 1/1/2015
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    SCTY earnings is this Wednesday. Anyone have any thoughts on it? They had a good run up the last couple weeks but I think they could report ok and the momentum could keep going. I'm not sure what the short interest is now but at one point about a month ago I beleive it was at 40%.
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  • 1/1/2015
    guest

    I am very excited about this earnings call. I am crossing my fingers for an update to the 1 million customer goal by mid year 2018.

    I believe as of Jan. 15 the short interest was 34.8 percent. Short Interest in SolarCity Corp Drops By 4.1% (SCTY) - The Legacy
    It has come down but it is still heavily shorted. On Interactive Brokers most shorted by sector they have come down from second (behind transocean) most shorted to fifth.

    As far as pure dollars invested it would seem that these people are more excited about the earnigns call than me. A hedge fund aquired 5.4 percent stake in SCTY :)

    http://www.streetinsider.com/13Gs/JANA+Partners+Shows+New+5.4%25+Stake+in+SOLARCITY+%28SCTY%29/10277181.html


    I own a bunch of underwater options that hopefully will be made right with this earnings report but we shall see.

    I am also interested to hear me about the old Solyndra facility that they leased. In the Silevo conference call they talked about really ramping up R&D and it is exciting to see this part of the business ramping up.

    In 5 years when SCTY is the top panel producer everyone will say it was always really apparent they would be the top producer :)
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    4Q results available at: SolarCity - Investor Relations (under Events & Presentations heading). I'm still reading, so no commentary, though certain headlines I saw suggest SCTY is down 5% or so after hours.
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    Bummer for SCTY:(. I was hoping for a short squeeze after earnings.
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    The earnings report looked good to me. A continuation of growth and growing prospects. The stock had taken a rise a couple of weeks going into earnings; we've lost about half that rise since. Sun Edison's results, with a similar story, caused SUNE to go up. Short term noise.
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    Yeah, I was pleased with the report too. Just another year doubling the business.

    I thought shorts were simply attacking the price to nullify the news. I put a limit order in at $52.50, thinking shorts would drive the price down again, but I was wrong. So maybe we'll see the price recover soon.
    �
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    My thinking too. I setup a limit order at 52.01 but I guess I was too low, too late.
    �
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    Well maybe enough of us had the same idea that the shorts knew it would be costly. They are able to see the order book and guage demand. So for me it's good if the order goes through and good if the price is defended. I've got enough shares already that I'm not worried about missing out.
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    I thought the quarter went really well too. I am really excited about the commercial jobs gaining momentum because of the new mounting hardware. A 2-3 week installation only takes 2 - 3 days.

    I was hoping they would guide for 2016 but it would make more sense for them to do that next earnings call anyway
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  • 1/1/2015
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    I was under impression that SunPower was competing with SolarCity on residential solar market in US. Today was an earning report from SPWR. So it was a good timing to take a look and do some research and here is the numbers I digged out:

    iWqlZpL.jpg

    So essentially SunPower is becoming irrelevant on US residential solar market. In Q2''13 they installed ~2.4 times less MW then SCTY, now they do less than a one tenth. And a year ago SPWR guided for 320 to 350 MW recognised total worldwide in Q1�14, now they are guiding for 240 to 270 MW recognised in Q1�15. Solar market is growing while SunPower installing less MW. And SunPower revenue gone from 758,192 in Q4'13 to 609,661 in Q4'14. Writing is on the wall.

    SolarCity had 39% of residential market share in Q3'14. In Q4'14 SCTY installed 24.5% more MW than in Q3. So most probably SCTY increased it marketshare again. Waiting for Vivint Solar report on March 4.

    US-PV-Installer-Market-GTM.png
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    Google invests $300 million into Solar City and no-one comments on this forum? Interesting observation about what companies investors are not currently paying much attention to.
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    I agree, with drinker. I expected to hear comments on this forum about the 750 million fund and Google's 300 million addition to it. I don't understand what is in it for Google. As a SCTY holder, I like it though.
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    Hi all,

    I am trying to wrap my head around what the value is of solarcity as a company.

    Could someone please explain to me what the difference is between
    1) the contracted customer payments, which stands at US$5B (from the Q4 result presentation)
    2) the retained value forecast of US$2.423B (from the Q4 result presentation)
    3) the leased and to-be leased solar power agreements of US$2.796B (from the cost methodology)
    �
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    And an extra question:
    Does the tax incentive of 30% hold up until 2017 or throughout 2017?
    �
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    Just bought an initial position at $50.50. Has gotten hammered since the last ER. Long haul should be just fine.
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    FWIW I think the last results were very bad compared with previous quarters.
    Mw booked dropped! to 206. While MW deployed went to 176 meaning the backlog barely rose.
    If they cant pull up there sales soon, they will have to stop the acceleration of production.
    The 920-1000 MW for 2015 doesnt look like a near certainty from where I'm sitting.

    Whats worse is that even when they booked less than in quarter 2 (218 MW) and 3 (230MW) the sales cost kept increasing to more than 75 million now.

    At the same time, the increase in retained value is also going down.
    In the 2nd quarter this was half a billion! Now its just half that.

    I wont comment on what my perceived value is of the stock but since the market didnt like the result of the second quarter, they should hate the last quarter.

    If it falls through 47 we could see low thirties fairly fast.
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  • 1/1/2015
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    What's not to like? Gross profit is up 100% from prior year, and GM is 31%, up from 24% prior year. Net loss to shareholders is about the same as last year. So this is truly spectacular growth with solid cost control.

    Apparently the sun does not shine as much in Q4 as in Q3. So be very careful about comparing different quarters of the year. All forms of construction and energy are seasonal. Summer is the big money quarter for SolarCity.
    �
  • 1/1/2015
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    SolarCity is not happy about this:

    SolarCity Files Lawsuit Against Salt River Project for Antitrust Violations : Greentech Media

    �
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    Not sure they have a leg to stand on. $50 a month isn't punitive. Perhaps, though, SRP should have had a tiered rate depending on system size.
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    SolarCity is wasting its money if it thinks this lawsuit will succeed. The idea of using antitrust statutes is clever, but it can only succeed if SolarCity can demonstrate that the rate structure is not supported by costs. Speaking as someone who has testified about rate design at my state commissions, SRP will have no trouble at all defending this rate design as cost-based.

    What SolarCity might achieve with this lawsuit is sending a message to other ?utilities that they will get into a nasty legal battle if they follow SRP's route.
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    Is it possible to have a solar + storage system that is off grid in addition to a grid connection? Use your solar + storage whenever possible and use the grid when you run out. In that way the utility doesn't need to know that you have solar, you don't pump anything back to the grid. Excess power is sometimes wasted and you need a large battery. But 50$/month is completely unreasonable. How much power can an average residential solar system produce? 100$/month worth?

    If the utility charges 50$/month to connect that to the grid, it is punitive compared to the 100$ worth of power produced. I can understand the utility paying you a lower rate for your power than they charge to supply you with their power but a flat fee makes no sense. It would make more sense to have the kind of system I described above for the extra 50$/month than paying the utility. Longer term utilities are shooting themselves in the foot if they think they can get away with this.
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    I don't know about the technicalities, but it rate payers with solar get pissed off enough with the utilities, Tesla and SolarCity will have little difficulty selling home grid storage systems to red blooded Americans. Controversy and showing how punitive the utilities are is really good PR. Think of how much free publicity auto dealers have given Tesla by trying to block their stores. Now we've got a utility in AZ that wants to the rump for solar+storage.

    Any chance this was timed for the unveiling of Tesla's next product?
    �
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    What about the fact that they are not charging all customers the same rate? Aren't they discriminating against customers with solar because they're not charging the same fee to other residential customers?
    �
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    I'd have to read the actual tariff filing, but they've probably got that covered. Utilities have long had a "standby usage" tariff for customers who met part or all of their load with on-site generation (e.g. factories that had cogen electric and process steam) but wanted to assure they had power even if their on-site generation failed.
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    Here is what folks at Bloomberg think:
    **
    SolarCity Powers Up Antitrust Lawsuit Against Salt River Project


    A March 2 SolarCity antitrust lawsuit accusing the Salt River Project electric utility of trying to monopolize the retail provision of electric power may have staying power. At issue is a new Salt River pricing plan that allegedly imposes higher rates on customers who choose to use home solar panels for some power generation. Asserted facts in SolarCity's complaint, which claims that the price changes were intended only to exclude solar competitors, appear sufficient to meet the bar for pleading an antitrust case.

    **
    Salt River Project Unlikely to Short-Circuit SolarCity's Lawsuit


    Salt River Project is unlikely to be immune from SolarCity's March 2 antitrust lawsuit against the electric utility. Regulated utilities, even if they're lawful monopolies, don't have blanket immunity from antitrust laws. While application of antitrust laws to these entities may be limited in some respects, in this case, where the utility is allegedly using its market power in one market (grid access) to monopolize a second market (retail provision of electric power), antitrust liability may apply.
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    Technologically, I think we are past the point where granting monopoly status to utilies serves a public good. I am able to get phone service from my choice of providers, natural gas, and satellite or cable television. But in the state of Georgia I have no choice of electric utility and companies like SolarCity are legally barred from leasing power generation equipment or writing PPAs, because only utilies are granted that privilige. So as bad as it may sound in Arizon, it's even worse in Georgia.

    If SRP ratepayers had a choice in power providers, this sort of rate plan would not stand.

    I'm tired of utilities arguing that it's not fair to have to provide back up capacity to solar residents who don't need much volume, or to have to pay feed in tariffs. They should give up their monopolies and let some other provider cover the capacity requirements or pay feed in tariffs.
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    Bloomberg hasn't spent 25 years working in utility regulatory law. I have. I haven't carefully read the complaint, however, so Solar City's lawyer may have come up with a clever angle I haven't considered, but I doubt it.
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    Standby usage tariffs are common for commercial customers, but for residential they are usually very small or nonexistent. Perhaps you can explain how the utility can get away with a rate structure where one customer without solar doesn't have to pay the tariff while another customer with solar has to pay it, even if they both consume the same amount of electricity each month. There are other reasons why a customer might not use much power in a month, not just solar. I don't think Tesla is complaining about this and is taking an antitrust angle instead.
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    I am completely unable to value it.

    I can't explain it all. But I *can* tell you that SolarCity is engaged in securitization. So: they lease a solar panel to a customer. But then they turn around and put the solar panel into a trust, which collects the lease payments. Then the trust issues stock or bonds, and these are sold off to banks and investors for upfront money. (The bondholders pay Solar City a lump sum, and in return get the lease payments in the future.) Solar City only collects a small management fee in the future; they no longer "retain" the value of the lease.

    I have no idea how this is structured for a PPA, but I'm sure there's something similar. There are also quite likely to be a lot of variations in the exact structure.

    But the basic idea is this: Solar City fronts its own money to buy the panels and put them up, but SolarCity immediately turns around and resells the panels (and the income stream from the PPA or lease) to investors, recovering the upfront money immediately (hopefully with a profit).

    So that's why retained value can go down even with contracted customers going up. It indicates increased securitization.

    This sort of securitization is a form of off-balance-sheet accounting. As such it completely conceals the true economic state of the business; the state of the business cannot be determined from its earnings or balance sheet. This is why I cannot evaluate Solar City; it requires a lot of very in-depth research to figure out exactly what's going on with the securitizations, and how much risk is retained by Solar City.

    I want to be clear: I'm not saying that the situation is bad. I'm saying that it is *hard to evaluate* because of the complex financial structure. If you can evaluate it, more power to you (and I'd love to read your analysis).
    �
  • 1/1/2015
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    Might be significant that Solar City is scheduled to speak today at 12:30 at the ROTH investor conference. I'm posting this in both the Tesla and Solar City section since it might be relevant to both.
    �
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    GridLogic

    SolarCity Launches GridLogic, A Global Microgrid Service
    We need to discuss the implications of SolarCity and Tesla getting into the microgrid industry. This could take SolarCity deeply global. This also could set infrastructure in place for selling EVs in places where utility grids are substandard or nonexistant. This could be huge.
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  • 1/1/2015
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    I got an email from my neighbor who is a Georgia state representative. She cosponsored bipartisan bill to allow solar installers to offer leases and PPA based financing in the state. The bill passed the House with no opposition.

    If this become law, and I expect it will, then SolarCity and competitors will finally be able to bring their business model and financing to Georgia. I believe Georgia will quickly become an excellent market for rooftop solar.

    Yay, Georgia!
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    Indeed!
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    @jhm Do you have a link to the bill or more information? When does it go into effect if passed? I wonder if SCTY will open house in Georgia right away since it's outside of their two current operating zones.
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    Interesting thought. I think the solar-battery microgrid business would be a viable solution for many towns and villages in Sub-Saharan Africa. There's a lot of countries with disastrous grid and power plant infrastructure.

    Do you have information that SolarCity is willing to go global?
    �
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    HB 57 2015-2016 Regular Session
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    No word yet. They do have an NPO that is bringing power to communities in underdeveloped countries. While many of this location may not have the economics to pay for such a system, it is an excellent test bed for this technology. So we definitely know that SolarCity is contemplating the potential to leapfrog power grids. It remains to be seen where exactly the best commercial opportunities will emerge. The global market for this is vast. India has the highest growth rate for power consumption and MENA follows close behind India.

    Another thing to consider is that SolarCity has been doubling it's business annually for a while just operating in a few states. To maintain that pace of growth, they will need to expand their footprint. Georgia should open up soon, but over the next 5 years they really do need to go international. GridLogic could take them virtually anywhere.

    Let's keep our ears open for announcements.
    �
  • 1/1/2015
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    Anyone want to speculate about why no one is discussing the developments at Solar City? The flat activity in this thread is representative of the movement in the stock :confused:
    �
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    I don't know. I think GridLogic is a really big deal for both SolarCity and Tesla, but few seem even remotely curious.

    How about this? U.S. Energy Storage Market Could Triple This Year - NASDAQ.com

    This group anticipates stationary growing 67% in MW per year over the next 5 years. This only factors in a $/W reduction of only 9% with just 800 MW @ $1.875/W in 2019. So this view seems ignore the contribution of the Gigafactory which could be as much as 15,000 MWh or 7500 MW power @ $0.50/W or $250/kWh, excluding installation and siting, which could be borne by ratepayers installing behind-the-meter. This puts Tesla storage potentially cheaper than a new NG plant at $0.90 to $1.80 per W. Thus, Tesla could be a really cost competitive source of peak capacity. So by 2019 Tesla could totally rock this market.

    But nobody's really interested in that.
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  • 1/1/2015
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    I remember this thread and the 'Alternative Energy' thread being hot in 2013/beginning of 2014, but I think a lot of people moved over to this site:

    The Contrarian Investor

    Which is unfortunate, because I liked the chatter here. Just another place I have to go now.
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    That site seems inactive. Last post I found on the main page was dated Jan 5, 2015.
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    jhm, I am very interested in your calculations and insightful future projections. Thank you for posting.

    Perhaps this post could get more attention if it were placed in gigafactory thread or perhaps a new thread on energy storage potential. That would be great.

    Most people here are Tesla investors, and only some have an interest in Solar City.

    I had an investment in SCTY in the initial stages and got out of it after few months, after doubling my investment. I got out because I thought that SCTY operates in very crowded space, plenty of competition, without clear competitive advantage. The only differentiation that SCTY has is its business model that involves financing, which I like, but that may not be enough to separate it from the pack. I will be happy to be corrected.

    Back to your great post on energy storage potential, I think that if the value is unlocked as you project, TSLA shareholders are likely to be the main beneficiaries as TSLA controls energy storage, not SCTY. Hence, your post did not get its deserved attention in this thread.
    �
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    It's a bit unclear where a discussion of GridLogic should belong. It is a new microgrid as a service from SolarCity, but at heart the energy storage and management devices are from Tesla. So any Tesla investor interested in the stationary storage market needs to pay attention to both SolarCity and GridLogic.

    What sets SolarCity apart is their market dominance strategy. They are by far the largest solar installer in the US. They have put a lot of resources into minimizing the total cost of installation, and if I recall correctly they've driven the down to $2.86/Wp, with installation accounting for $2.09, making rooftop installations nearly competive with utility scale installations about $2/Wp.

    Now here's what I find so interesting about GridLogic. They are developing a nearly plug and play, intelligent network approach to rolling out interconnectable microgrids AT A COST COMPETITIVE WITH UTILITY SCALE GRIDS. So these microgrids can be rapidly deployed at below utility cost and scaled up and interconnected as needed. Central to these GridLogic nodes are the intelligent storage devices that not only store energy but perform intelligent power management. I figure Tesla can sell this as low as $0.50/W and still make a 30% gross margin. But even at $1/W for storage and load management this is competitive with gas/coal/oil generators in the $1.8/W range and $0.9/W for combined cycle natural gas. Here we are only looking at the cost of capacity, not the cost of energy/fuel. As a source of both capacity requiring not fuel, solar comes in at $1.9/W and wind at $1.5/W. So GridLogic can integrate cheap renewable energy with fossil fuel generators for backup minimizing both the capacity of back up deneration needed and the amount of fuel used. Since this is a microgrid, large transmission lines are not required, but may be integrated if available. Users within the microgrid can each have meters and gateways to measure the amount of energy consumed and generated. GridLogic suppoers billing and reporting functions. Individual users may connect whatever energy storage and generation assets they may possess. So Teslas Home Grid Storage device will be plug-and-play within GridLogic. With such a device the end user can support power needs in excess of the capacity of powerlines connecting the end user to the microgrid. That is, the Home Grid device can charge at a daily average rate, say 3kW, but discharge when needed at much higher rate for peak demand, say 10kW to rapidly charge an EV. Reliability is also enhanced as storage is distributed across the microgrid. So the infrastructure needed to distribute power can be kept to minimum, it is scaled to daily energy transmission needs and not instantaneous peak power demand needs. So if the cost of generation is competive with utilities, the cost of storage and load management is lower than utilities, and the cost of distibution capacity is smaller than utilities, then the whole system (capacity, energy and reliability) is cheaper than a utility.

    Just as SolarCity has worked to squeeze out and finance the total cost of rooftop installation, it can squeeze out and finance the cost of expanding power grids with intelligent and efficient microgrids. In places like India and MENA, GridLogic could expand at much faster and cheaper rates than traditional utilities. Think of this like how cell phone networks have leapfrogged past traditional landline telephone companies in remote and underdeveloped regions. Microgrids can thrive where for over a hundred years centralized utilities have found it uneconomical to provide even basic service. The growth of demand for power is highest in India and the Middle East is second highest. SolarCity has the opportunity to deploy new utility access faster and cheaper than any player expanding the grid.
    �
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    Sounds great. Anywhere there's not already existing power infrastructure can simply skip installing power lines from the main grid and go with this micro grid, which is cheaper anyway and cleaner. Distributed generation.

    And in places where power lines already exist we are seeing friction (Arizona most recently) where the incumbent doesn't like distributed generation happening on roofs.

    Years ago people would go solar because green even given the high cost. Now the cost is cheaper than fossil fuels, and it's still green, with really no downsides (aesthetics?) especially with storage mixed in, have we reached the tipping point? SCTY thinks so, hence their own gigafactory being built in Buffalo for panel production.
    �
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    The GridLogic vision (or, more generally, micro-grids built on solar) would be great for new housing subdivisions in AZ and SoCal. Require that each new house have at least x kW of panels, and design the homes to incorporate those gracefully and in a variety of orientations to extend the solar generation as long as possible. Don't even bother interconnecting to the electric utility, so they have no control over anything. Install a shared storage & backup generators (high-efficiency NG fuel cells or Sterling engines), and you're done.

    This is easier to do on new construction, so you don't have to negotiate with the utility about ownership of the lines between the houses.
    �
  • 1/1/2015
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    Maintenance of these micro grid power lines and backup generators would be a great biz for the incumbents to pivot into...
    �
  • 1/1/2015
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    The solar forum on the Contrarian Investor is very active every day: Solar | The Contrarian Investor Discussion Board
    �
  • 1/1/2015
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    They don't update the front page very often, but the forums are buzzing with info.
    �
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    Here's the beauty of SolarCity's business model. They are pursuing microgrid-as-a-service. They design, install, finance and maintain the system. This is just the logical extention of their solar financing model. Potentially all components of the microgrid could be leased from SolarCity, but any owned components could also integrate into the microgrid. So it gives the end users the ultimate flexibility to arrange financing and ownership to meet their needs.

    If you look at the report from the National Bank of Abu Dhabi, you'll see that much of the challenge in meeting their region's growing power gap comes down to financing. And as a bank, NBAD sees this need clearly and wants to cultivate the financial markets to support this endeavour. I happen to view SolarCity primarily as a finance company. This is their genius. For a long time, centralized utilities have enjoyed financing advantages over smaller more decentralized players. So the big enabler for distributed power generation and sharing is leveling the financial playing field. Meanwhile there is a fossil fuel asset bubble looming, as utility investors start to wake up to the reality that many of their energy assets are overvalued due to obsolescence in the face of solar, wind and battery technologies, it will become increasingly difficult for utilities to get the kind of financing they are accustomed to. It is becoming increasingly difficult to finance a new coal plant today, for example, because high integration of renewables put utilization assumptions into serious doubt. That is, banks and the financial market just can't be sure a new coal plant will be able to compete and pay for itself over the next 40 years. So traditional utilities will be met with increasing skepticism from the financial market, while players like SolarCity will find it easier to bundle distributed energy assets and PPAs into asset backed securities and sell them on the bond markets. So the financial playing field is becoming level and may even tilt in favor of distributed power. Definitely SolarCity knows how to play this game.
    �
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    That's a very common misconception, popularized by a few strong willed folk, who don't write much here anymore. These folks have been saying that since the beginning (or since the IPO).

    SCTY market share increased from 6% in 2009 to 17% in 2012(IPO time) to 39% in 3Q14.

    This is "market share" growth.

    Per latest available data, their residential installations exceeded the next 70 competitors� combined!

    See the latest presentation at SolarCity - Events Presentations

    If solarcity didn't have a competitive advantage why is it's market share growing??

    It's very simple, their economies of scale is helping them out at every level from financing to operations.

    This will continue to play in their favor for a long time into the future.
    �
  • 1/1/2015
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    I'm hoping that GridLogic / SolarCity have hired some very good regulatory lawyers. There are aspects of this business plan that look strikingly similar to an electric distribution company (e.g. Southern California Edison)--they own and maintain a power grid for use by the customers, over which they sell power. It's going to be a state-by-state question about how far GridLogic can go without (a) violating the exclusive franchise of the incumbents and/or (b) becoming a rate-regulated utility. This could shape up to be a battle like that Uber is facing. Utilities are much better lawyered-up than the taxi cab companies, though.
    �
  • 1/1/2015
    guest

    Interesting indeed. From a bigger perspective it's always interesting to see how disruptive new businesses always seem to touch on and get in trouble with established business model who very often have the benefit of different forms of legal protection. Points in case:
    Uber vs. Taxi companies
    Solar City vs. Utilities
    Tesla vs. Dealers

    I guess identifying these kinds of conflicts early could be a good indicator of where to invest if you're looking for disruptive ideas?
    �
  • 1/1/2015
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    I have not followed SCTY for more than a year so I can easily be wrong.

    My guess is that their market share growth is due to their ability to eliminate capital investment hurdle for their customers. That is very attractive proposition for many people. When a potential customer weighs their current utility service vs Solar City utility service, the benefits of going green and paying less are on the one side and there is no clear downside in that equation.

    Some people prefer to own everything including their solar panels and they are unlikely to become Solar City customers. As panels are becoming cheaper, capital investment hurdle becomes lower and thus Solar City might be loosing this advantage over other solar providers.

    The strength of Solar City is in their footprint. They are building a distributed grid network that they own and lease and the size of that network grows with each customer, thus adding incremental value to Solar City business. That business will be enormously reinforced with GridLogic value proposition.
    �
  • 1/1/2015
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    Currently, they can offer power at $0.13/kWh in markets where the utility rates are in excess of $0.16. This is an addressable market of $60B. Their cost of installation is $2.09/W. If they can drive this down to $1.90/W in 2017, then they should be able to offer power at $0.118/kWh. This would have the impact of expanding their addressable market 20% to $72B.

    The implication of the declining cost of solar is that they can offer new systems at lower rates and address a larger market. So I'm not particularly worried that solar will become cheap and undercut their business model. Just the opposite, as solar becomes cheaper SolarCity will undercut the utilities and gain market share.

    You make a good point about a distributed grid growing in value with each incremental customer. To Robert's point, they'll want to be very careful with crossing legal lines that limit their business model. My view is that GridLogic will make the most sense in regions that are underserved by utilities. That's why I am enthusiastic about India and the Middle East where growth in demand for power is highest in the world. GridLogic will be offered worldwide. It would be a real kick to see it get started in a place like India and just start doubling every 9 months. Then we'd see both SCTY and TSLA take off.

    - - - Updated - - -

    I wonder if the Gigafactory itself may serve as a test case for GridLogic. They will be integrating PV, wind, geothermal, grid power and batteries. It could be a compelling demonstration site.
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    I am sceptical about business expansions to low maturity markets, like India and the Middle East. That is an option, but usually quite difficult and may require long time to be successful.

    The hurdles to overcome are different remote language and culture, often disagreeable local and wider politics, undeveloped financial markets. These are not empty words, these are real obstacles for business expansion, as business must overcome local nepotism, corruption and other similar phenomena that appear during the developing stages of society.
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    You might consider India's ambition to install 100GW of solar by 2022. Rooftop PV and microgrids have a role to play. Already rooftop installations are providing power at 8 Rupees or $0.13 per kWh.
    India's Solar Ambitions Face Challenges | MIT Technology Review
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    I do not doubt India's ambition to install large solar capacities.

    I doubt young business willingness and capability to bridge a huge maturity gap in establishing themselves in a culturally remote societies. The rules of the game are different in these societies. Foreign business must play by both the local rules and by their corporate rules. These rules might be conflicting or difficult to align. That is costly.

    Obviously these hurdles can be overcome. Mature businesses with a lot of cash on their balance sheet have much better odds than young developing businesses.
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    I feel lots of negativity coming from you man, you need to feel the flow:

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    ggies, I appreciate your creative expression of your personal sentiment, but I fail to grasp your arguments in this discussion.:smile:
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    I have worked and been friends with many people from India. I have no doubt that SolarCity would be able to staff their operations in India with very capable, intelligent, well educated and hardworking persons who understand their cultures, languages and politics quite well in addition to all the technical knowledge and skills. Indians themselves will be able to electrify their country, and companies like SolarCity can briing an effective business model, product innovation and financing capability to facilitate this transition.

    The hang ups that India has had around expanding their grid is that it has been a highly centralized and burueacratic endeavor that depends very heavily on government intervention. This government centric approach has left over 20% of India without any power and with grids that are very unreliable otherwise. The beauty of GridLogic is that it builds efficient and reliable microgrids from the highly local out to fully interconnected. This is a bottom up approach in contrast to the top down approach that as yet to succeed in India. What you will see are little islands of inexpnsive and reliable power string up a few businesses here and a few homes there. On the success of a nearby microgrid others will want to join in and still others will want to start their own microgrid. So these little islands will pop up and grow, and in time they will become quite interconnected. I think that GridLogic has the potential grow much faster than any state run grid or large utility. There is a reason why SolarCity is the fastest growing electricity provider in the US where the utilities are quite good and quite well connected politically with legal monopolies to protect them from competition. It happens one customer at a time, one rooftop at a time.
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    India has another problem with solar: dust. A good friend of mine who is both Indian and a chemical engineer has a lot of experience with solar panels in India. The airborne grit is much finer in the Dehli area than in the U.S., and if it's not removed from the panels on a regular (daily, or daily+) basis, the particles begin to weld onto the glass surface. There will need to be advances in the panel surfaces and/or automated cleaning technology, he reports, in order to avoid rapid degradation of panels.
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    A few days ago I saw a picture of people cleaning panels in India and they were surprisingly dirty! So after reading your comment, I googled it and here is what I found:
    india solar panels cleaning - Google Search
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    The main risk that I see in Solar City spreading to India is the incompatibility of leasing business model with the economic and financial environment.

    LeaseIndia.PNG Leasing.PNG

    What happens in a scenario: people sign up for panels with Solar City, as there is no downside for them in doing so, and then along the line stop paying as they can not afford it? That is one of the risks that is likely to be higher in less financially and economically developed markets.
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    An advantage of India though is that the current government is very supportive of infrastructure development, particularly power and particularly in remote communities.
    It is common for (local and regional) government to provide substantial capital to businesses that are interested in implementing projects that will help development efforts.
    I believe Modi is very serious about turning India into a modern economy and so we may see the regulatory and business environment improve in India, which along with serious willingness to drive sustainability and development and a highly tech-savvy people/economy at least gives hope that India could be a fantastic market for SolarCity.

    I actually have an unrelated involvement/interest in off-grid electricity provision in India and can say that the Indians are very well acquainted with the concept and most have very favourable views of generating electricity locally and independently from the national grid.

    I'm not saying that India won't be a very tough market to penetrate or denying the difficulties of language/cultural barriers and the incompatibility of SC's business model with the Indian norm, but in terms of the product itself, I think India is a fantastic fit and could be a HUGELY lucrative market if the barriers above are overcome.
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    Leasing is just one form of financing SolarCity provides. They mostly offer power purchase aggreements (PPA) wherein the customer pays per kWh used. In the US, the delinquency rate that SolarCity experiences is substantially lower than for mortgages, which have the lowest rates among consumer debt. Customers poy their PPA bill to SolarCity because they want to continue using power and utility rates are higher. So while there may be temptation to skip a car payment or even a mortgage payment, the power bill is one of the very last a person might skip. There is a certain amount of credit risk with any service contract. The state grid offering lower to an customer has just as much credit risk as SolarCity. Naturally, SolarCity would want to pull credit scores on any customer, whether in the US or India and screen out poor credit risks. SolarCity city has also develop an innovative new solar loan which as I recall ties interest payments to the consumption of energy, which protects the customer from the risk of underperformance of the system. In return for abslrbing this risk, SolarCity realizes higher retained value per watt on this product. The key point here is that SolarCity is very creative about developing its financial products. They offer outright sales, solar loans, monthly leases, PPAs, and on the deposit side they have solar bonds which pay better than CD rates to retail investors. Which products are most suitable in India remains to be seen, even so each product would have to be constructed to work within India's legal, tax and regulatory framework. This is a given. There may even be subtle issues that motivate innovation of a totally new financial product. Off the top of my head, there may be contexts where prepaid plans make sense. For example, a prepaid phone plan could have an embedded prepaid charging plan. Here SolarCity could contract with the company selling the prepaid phone credits to pag them so that the phone user may charge at SolarCity charging stations. This may seem pretty far fetched in places like the US or Australia, but in super remote and grid isolated places in India there may be lots of cell phones and other portable electic devices, but no place nearby to charge them. I'm not saying this is a plum market, but there may a context for it. Any in case, SolarCity is very innovative financially, so I am confident they can figure out what will work best in any particular context. In the view of Robert Shiller, all finance is technology. So it comes down to figuring out how to make it work.
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    jhm, I agree that every problem has a solution, often quite creative one. Developing markets present a great expansion potential for many businesses and many businesses do expand very successfully.

    The timing of such expansion is relevant. Solving all the unusual problems in foreign markets costs a lot of money, takes a lot of time and occupies a lot of business resources. For these reasons, such expansion is well suited to mature cashed up businesses that have resolved most of their domestic issues. Jumping to a foreign different market may seem premature if a business is still establishing itself in a more secure and familiar domestic market.

    Perhaps Solar City is ready for foreign challenges and I wish them all the best as only good can come out from what they do, in whichever market they take their business.
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    SolarCity has locked up 43% marketshare in US rooftop solar. They double their deployed MW every year, 1GW reached last year. They are truly at the top of their game within their familiar domestic market. However, within the next several years, they seriously need to address new markets if they are to continue their present rate of growth. Certainly they can move into a few more states and sell more storage with each installation, but this is pretty much BAU for them. They've got a nkce 1 mlion customer goal for mid-2018. This takes them to 6 GW deployed and will probably multiply their retained value 6 times as well. This could take thier stock to $250 to $300 in 2018.

    This would all be fantastic, but where do they go after 2018? This is why I am so keen on them developing GridLogic and taking it worldwide. It represents an evolutionary step forward from mere rooftop solar, and it addresses an incredibly large market. In the next two years, I'd like to see SolarCity build some really good demonstrations for GridLogic with a binder full of case studies. This is developmental work. Once the Gigafactory can produce stationary storage at scale, SolarCity should be in a good position to move aggressively with GridLogic. They can't really get ahead of the Gigafactory, even if they wanted to. But this gives them a few years to develop and refine their microgrid-as-a-service model.


    Tesla investors should also recognize that they have a lot at stake in whether SolarCity can pull this off. If they succeed, then Tesla should move quite dynamically in the stationary storage market. Either utilities will pay top dollar for storage, or a much more nimble SolarCity will usher in disruption. OTOH, if SolarCity does not succeed, then utilities will largely only buy what storage is required of them. Storage has the potential to send much of the fossil fleet to early retirement if the disruption is deep. India is one of the very last countries to be installing new coal plants. China is choking on too many coal plants thrown up in its haste to become an economic superpower. Should we wait for the rest of the developing world to take the same path? The best chance Tesla has is to disrupt with impunity.

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    How much of that is pollution?
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    As applied to India, this is a real howler. Pay for electricity? in India? There's a reason that the electricity infrastructure is in disarray: power plant operators don't get paid because distribution companies don't collect. Heck, a lot of the power isn't even metered. We call the gap "non-technical losses".

    This isn't to say that there aren't models that could work, but they'll have to pay up front for the gear. For example, treat the solar panels and micro-grid the same way you would treat the communal water-well, as a government cost, paid by taxes.
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    Any coincidence that Elon Musk and Bill Gates will talk together at this years BOAO Forum for 2015 Asia (Sunday, 2015-03-29)?
    Some kind of partnership here in the future?
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    Slandering solar is not about protecting taxpayers, but utilitys monopoly status | TheHill

    It may time to attack political support for power monopolies.

    Utilities have long complained about having to pay feed in tariffs for excess solar power, but give me the right to sell my surplus power to my neighbor and the utilities can offer whatever they like. If I offer power just slightly below what my neighbor is paying the utility, then my neighbor will gladly buy from me.

    This is the basic test of a free market: can I sell my surplus to my neighbor? If I can, then networking solar panels and other microgrid resources becomes a powerful economic force.
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    Question; since the utility installed and maintains the power lines you would need to use to power your neighbor, what cut should the utility get?

    I pay $7.21 as a connection fee. My guess is the costs to maintain the transmission grid are likely higher.
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    They can charge whatever they want so long as my neighbor and I have the right to establish our own power line on our own property. Yes, I am assuming that the properties are adjacent or connected by common area such as HOA owned property.
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    In most jurisdictions, you do not have that right. A utility has been given the distribution franchise, and stringing up a competing network crossing property lines is illegal in the jurisdictions I'm familiar with. Georgia may be different, but I don't think so.
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    That is exactly the privilege that must be challenged. It is clearly anticompetive and contrary to a free market, though it has been enshrined in law for generations. The laws should be changed.

    Until monopoly privilige is surrendered, I think the utilities have no moral grounds to complain about having to accomodate solar power. On a daily basis, solar power is politically attacked as being contrary to free market principles, and yet there can be no free market when persons cannot legally sell surplus power to the highest bidder. Barry Goldwater, Jr., is right to point out just how incredibly hypocritical that is.

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    Samsung, Tesla, Solar Firms Pursue Battery Microgrids TSLA SCTY ABB - Investors.com

    Other companies are teaming up to go into the microgrid business. SunEdison is specifically looking to enter India.
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    That privilege was acquired and paid for by utilities. Part of utilities' business value is based on the franchise rights, which belong to them. It is difficult to retroactively take away these rights as that would be akin to taking away and socialising private property. Not many people would approve such principles. Such actions, if carried out, destabilize economic environment as businesses then operate in an uncertain environment with the possibility of being de floored at any time by different rules. Established businesses, like utilities and dealers, require some time to readjust to different rules. Eventually they will lose out to newcomers and new rules, but granting them some grace period for readjustment may work better in the long run.

    Going forward, things can and will be different. Solar producers can either build their own grid or contribute for the upkeep of the existing grid if they wish to derive benefits from that grid.

    What is stopping neighbors from building the connections themselves? Perhaps they do not wish to pay the price of building mini-grid. If 2 neighbours decide to build their own network, it then belongs to them and it would be wrong for the third neighbour to come along and claim free connection rights. It is a simplistic representation but may fit here.

    Regarding paying for electricity, there is an interesting movie, "The Light Thief", about Afghanistan village and how villagers creatively steal power. The respected village electrician, 'light thief', gets called if someone is disconnected due to not paying and he illegally hooks them back up to power poles and tampers with their meter. That is a crime but is not considered a crime by villagers, it is a way of life. This is extremely difficult to police and enforce if the enforcer is from the same village. People in such environment develop different values, it seems cruel and unjust to them that they are denied access to power just because they can not afford it.

    If any business like Solar City dares to venture into markets like that, it has to be prepared to make choices which could easily be labelled heartless and cruel.

    Paying up front for the gear is a huge hurdle to overcome in any society.
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    Actually, in such a context, I think microgrids are advantageous. It is one thing to steal power from a big business or government at some distance from the community. But with a microgrid, one is simply stealing from ones immediate neighbors. If neighbors want to share power when one neighbor falls on hard times, they are perfectly free to do so, and that is what neighbors do. With large utilities, this sort of neighborliness is not possible.

    Regarding SolarCity, I would encourage people to take a look at their non-for-profit outreach GivePower Foundation. The video is quite moving. Solar Power Projects - Solar Energy for Schools without Electricity
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    This is actually a great point. The poorest Indians are not the ones who are likely to be micro-grid clients. Businesses and middle class who want a stable electricity source are. The stealing of electricity makes the case for solar stronger, since it weakens the grid.
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    Slave owners felt they had a legal right to compensation for loss of property when slaves have been emancipated. In some countries, governments actually provided such compensation.

    What is stopping neighbors with adjacent properties from installing their own private connection is apparently the laws which gave this exclusive to local monopolies. This is exactly what I am arguing with. My neighbor and I have lost a really basic property right long before either of us were born.

    In Georgia, this exclusive right to power distribution was so strong that a company like SolarCity could not enter in to a PPA with me wherein they would install a solar power system on my property and I would pay per kWh used. This is how strong the utility laws are.

    However, the Georgia House of Representatives has recently voted on a bill called the Solar Power Free-Market Financing Act. It passed with no opposition. The Senate must also pass this legislation before it can be signed into law by our governor. I hope it does pass. Yes, it will erode the privilege that the utilities alegedly paid for some time ago.

    These are laws, not inalienable rights. Legal monopolies only exist for the greater good of society. Once a democracy deems these franchise laws have outlived their usefulness, they can be changed.

    The fact that companies like SolarCity can offer power at a discount to the utilities demonstrates that the utility monopolies have outlived their usefulness to society. Rate payers can actually lower rates when companies are allowed to compete for the ratepayer's business.

    Every month I must pay Georgia Power about $7 as a cost recovery fee for a nuclear power plant they have not yet built. It will still be several years before this plant will start producing power. Many of us don't even want an new nuclear plant in our state, but we are all forced to pay for it whether it gets built or not. If Georgia Power had to compete for my business, that is if I had any choice, they would not get away with forcing my neighbors and me to prepay for a nuclear power plant we don't want. Upto this point, they have prevented solar installers from providing financing which has largely kept rooftop solar out of the state. Yet the utilities will tell you that solar cannot compete in a free market, which in a way is true because no free market exists so long as monopolies are protected by force of law.
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    In my opinion, Solar City will offer battery storage for free, to Solar City customers with a PPA, but will charge those who choose to buy panels from Solar City, a fee of some sort, that perhaps includes some sort of discount to what Solar City will charge other companies or those who choose to only buy the battery storage systems.

    My guess is Tesla will make its batteries available to all Solar Panel producers and installers, however Solar City will charge these companies a bit more. This will act as free advertising for Tesla, since the battery storage units will have Tesla's logo on them. This will be very beneficial for Tesla's brand awareness and sales.

    This would guarantee that Tesla's Gigafactory is at capacity by 2020, at which point, a second and perhaps third Gigafactory will be nearing completion. Batteries are very heavy and therefore cost a lot to ship. When Tesla says it plans to begin producing in China, I suspect Elon meant Tesla will be producing batteries for China, in China, to significantly reduce the cost of producing the final product, and to partner with Chinese companies, and the Chinese Grid. These partnerships will benefit China, Tesla, and Chinese consumers. By establishing strong partnerships in China, Tesla is very likely to get added to the list of companies and vehicles eligible for subsidies in China.

    Anyone see a problem with this logic?
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    I am not advocating for keeping the existing order, but for the grace period to give people time to adjust to changes. That grace period is given by a cumbersome electoral and legal system which move at slow speeds. Faster and more effective electoral and legal system is likely to provide faster changes in social and business landscape.

    It is inherent in monopolies to not give their power away, why would they. The onus is on the new entrants and voters to act to enforce the change, monopolies are behaving as expected. That is how it is in the democratic society that people collectively built, there is no one to blame for the outcome if everyone plays by the rules, as monopolies seem to be.

    I find it surprising though that neighbors are not allowed to lay an underground dc cable on their properties that connects their batteries if they are both off the grid.
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    Just had my Solar City PPA system installed today (2.6kw) Cannot wait to turn it on! Sold my scty stock to pile it into Tesla several months ago. Team leader said battery packs for all Scty systems are "on the way". I feel that in my investment time frame that my Tesla stock will do better than Scty but I wanted to "support" Solar City!
    :biggrin:
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    TMC members in another thread are noting the pop upward for the TSLA share price based on Elon's tweet teasing a new product line not involving a car, but SCTY is reacting similarly: Elon Musk on Twitter:
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    Musk's SpaceX Agrees to Buy $90 Million in SolarCity Solar Bonds - Bloomberg Business

    (Bloomberg) -- Elon Musk�s Space Exploration Technology Corp. agreed to buy $90 million in SolarCity Corp. bonds tied to payments from rooftop solar power systems.
    That�s almost all of the $93 million in one-year bonds that SolarCity is offering at a 2 percent interest rate, the San Mateo, California-based solar developer said today in a regulatory filing. Musk is co-founder and chief executive officer of Hawthorne, California-based SpaceX, as well as chairman and largest shareholder of SolarCity.
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    Wow, I did not see that coming. I wonder what the motivation is. Is SpaceX just needing to sit on cash for a little while? Makes me wonder if SpaceX might also be in the market for some new Tesla bonds.
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    but that just means that nobody is really buying those bonds... right?
    but also sounds like a warren buffet move... its nice to have money to play with like that.
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    my mistake. I forget that spacex needs solar panels and batteries for their internet satellite mission. brilliant,
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    This has all prompted my shift in stock strategy the last couple weeks. I recently did some homework on Elon and his ventures, and sold 75% of my stake in other solar companies. I invested it all in SolarCity and Tesla Motors, I think Tesla is a good buy now with the stock dip these past few months, along with the X and 3 on the horizon.
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    I still don't see why it makes sense for SpaceX to buy those bonds. Obviously there's something I'm missing.
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    SpaceX are very profitable and has always been. It makes sense to help the "elon empire" grow since solarcity, tesla and SpaceX share many of the same investors.
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    +1 I purchased SCTY at $18.50 and sold at $74 to buy more TSLA. Took a hit with the pull back, but will be buying SCTY bonds soon. Will need a higher return on some "cash" than my credit union. Been a Tesla long since $32. (Was doing the buy\sell from $28, but did not have the "time" to work and trade successfully."
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    Thanks for this analysis. How do you know that SpaceX has always been very profitable? It's privately owned. Isn't SpaceX growing at a good pace and therefore probably in need of cash itself? I thought about the fact that all three companies share the same investors but concluded that was not a good reason for SpaceX to buy the bonds. Yes it helps the empire to support each other but doesn't that also concentrate risk? Or not because they are very different companies?
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    My impression is that the CFO just needed to park some cash and these bonds happen to offer a competitive yield with low risk. The motive need not be any deeper than that.

    They got a 1 year solar bond at 2.0%. Same duration jumbo CDs are under 1.2% and UST is at 0.26%. So if you need to park cash for a year and find the default risk of solar bonds to be quite low, then 2% a damn good rate.
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    That's part of the brilliance... it is so logical.
    It even makes sense even if EM was not at the centre of all of this.
    As SpaceX will need to partner up with solar and battery company to power their internet satellites that they will be launching in the next 15-20 years
    which, having internet in space is part of the masterplan of being multiplanetary...

    I'd like to hear the masterplan behind space x actually...
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    From VentureBeat in 2010: http://venturebeat.com/2010/06/09/spacex-profitable-despite-musk-being-cash-poor-but-is-an-ipo-needed/:
    Also Elon has mentioned that SpaceX is profitable in many interviews over the years. Regarding the money. SpaceX took a $1B investment from Google and Fidelity not long ago. In conjunction with that, Elon announced that SpaceX would build worlds largest communications network of 4000+ satellites. They probably can't deploy that money both intelligently and immediately so parking some of it in bonds for a while probably makes sense. Not long after that the media started writing stories that after the Google/Fidelity investment SpaceX was now profitable, which I suppose is technically correct, they also were profitable before the investment.
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    What's going on with SCTY these days? It is up $9 since March 16th.
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    Yep, nice price movement, surely in part related to the upcoming April 30th announcement, but also due to positive analyst notes reaffirming high price targets in the range of 75-100 USD.

    I'm long SCTY, bought a while ago at around 50 USD.

    OT:
    btw, finally decided on a profile/avatar pic. :smile:
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    I would imagine it will be a proposal of covering the open-air aqueducts with panels to shade the water and decrease evaporation. SolarCity could tout not only the decrease in evaporation but also the decrease in water needed for energy production. If they could make this work there are a lot of cool possibilities and interesting implications...
    1. While SC has done some larger scale work, this could be a much higher level project. If state leaders/ public opinion are favorable to the deal, it could force the utilities to be somewhat friendlier to SC, at least for this project.
    2. Could this be one of the first projects they develop themselves without a customer contracting...they would obviously need to work with water commissions etc, but maybe they own it and offer the shading "philanthropically."
    3. This could be a perfect project to push their solar bonds with. If the Elon hype machine is able to have this blasted over the media like he always is, I'd imagine the public would want to buy in to their common well being. Likely, some of the big name companies would like to as well.

    I put the odds of this happening within 12 months low (less than 20%), but if they can pull it off that would be really cool! Thoughts?

    A 350 MW project in brazil to provide shading for a reservoir - http://www.popsci.com/brazil-building-giant-floating-solar-farm
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    SpaceX has extra cash in the bank. Normally companies invest such money in short term US Treasuries. The SpaceX CFO has determined that the 1 year SolarCity bonds are essentially risk free, and they, of course, pay more than 1 year Treasuries, so he decided to invest.

    Not many CFOs would do this. There is always a risk of a company going under. I am assuming that he assumes that Elon would tell the SpaceX CFO if there was going to be a significant problem with SolarCity since Elon is on the board of both companies.
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    I love the aqueduct solar panel cover concept. It looks like a win for everyone!
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    I was stunned when I first saw the water canals in the American west--they're uncovered and relatively shallow. The evaporation losses must be high. SolarCity installing solar covers for these canals in California could be a win-win: more solar power and less evaporation.
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    I don't think it means much. It is a large investor (probably a fund that has made its money) selling to another large investor (probably another fund) in an arranged cross sale. Both funds might be clients of the same brokerage and they have arranged sales to be done at end of day pricing or some such.
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    It's an interesting question how to tell when the race has been won. This article points to when renewables became a majority of new capacity. But suppose globally capacity is growing at say 4% annually while 2% of existing capacity must be replaced. I am totally making up these stats because I am too lazy to try to look them up, but for the sake of illustration lets go with it. These rates mean that new capacity is 6% of existing base. If 50% of this is still fossil fuels, the 3% minus the 2% replaced means that the fossil fuel fleet is still growing at 1% per year. So the fossil fuel fleet will not peak and begin to decline until renewables comprise 67% of new power, 1 - 2%/6%.
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    It's not capacity that matters, it's capacity x capacity_factor. 1MW solar < 1MW natural gas combined cycle < 1MW coal < 1MW nuclear.
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    That's a fair point. Making matters more complex, adding more intermittent renewable calacrity added to the mix reduces the utilization of fossil fuel. Renewables have no marginal cost, so they can go all the way down to $0/MWh (and below!) on the spot market. NG is more dispatchable than coal. So it is in a better position to tolerate real time competition with wind and solar. The economics of coal are becoming increasingly poor because it is losing so much utilization. At least in the US almost all new capacity is wind, solar and NG.

    Ironically, inclusion of battery storage into the grid will not only help wind and solar, but may also help coal and nuclear. Batteries will smooth out the intermittency of wind and solar, while smoothing out the intermittency of demand making it more conformable to base load generation. Any home with solar that charges the battery during peak sunshine and late at night when grid rates are low is actually helping all both extremes. However, depriving coal and nuclear access to the peak power rates that occur when the sun shines brightest will undermine the profitability of baseload power. So while batteries can help with utilization it will put a cap on peak rates. So either way coal is doomed.

    The virtue of batteries is that they enable the cheapest marginal producers of energy to optimize their utilization. Batteries will squeeze out the peakers. So this will reduce the total capacity grids require. This is potentially more threatening to utilities than wind and solar. Because utilities make money on their total capacity and recapture the investment from ratepayers. So as capacity requirements decrease, both the size of their asset portfolio shrinks and many assets lose value. The utility industry could be headed into a massive asset bubble. Will they be able to pass these capital losses onto ratepayers? Maybe not, if enough ratepayers defect by throwing up rooftop solar and rounding it out with batteries. This is what I find so fascinating about home storage, it will empower consumers with choices that transform them from being mere ratepayers to being customers who must be won over with superior service and prices.
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    Even though it may take some time I think you just answered you previous post on when it was won.
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    Moderator's Note

    We're wandering far from SCTY. This would be an interesting discussion over in the Energy & Environment area; if it keeps up, I'll move it there.
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    In the USA batteries could kill coal, but not necessarily from solar and wind, but because the cheapest capacity right now is Combined Cycle natural gas. Combined Cycle is the Atkinson Cycle of the electricity world. Take away the RPSes, tax credits and other subsidies for renewables and you would end up with an NGCC heavy grid.

    I don't see eliminating peakers as a threat. Robert can correct me, but I believe the peakers are usually old, amortized plants. Many of the load-following plants are newer, but cheaper natural gas. And, in the USA at least, there's a lot of old capacity, and newer capacity tends to be NG and renewables. So, I really don't think it's a problem.

    To me, the big threat to utilities is the support for renewables. Legislatures are supportive, so that's why ALEC and co are trying their best to kill the solar subsidies by lobbying the PUCs to make pricing changes that weaken solar.
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    While many older plants are now, in effect, peakers because they run so infrequently, there are new units being installed as peakers. For example, the proposed repowering of the E.F. Barrett plant on Long Island replaces two ancient steam units and some 1970-vintage combustion turbines and jets with a new 636 MW combined cycle unit and six simple cycle turbines (collectively 260 MW).

    A combined cycle unit is, in effect, one to four simple cycle turbines that feed waste heat into a heat-recovery steam generator (HRSG). The combined unit has higher efficiency than the simple cycle turbines: e.g. the CCGT replacing Barrett will have a 6,758 Btu/kWh while the CTs are at 10,122 Btu/kWh. But the extra complexity also increases the start time (notice and warm-up) and reduces the economic range of flexibility: CCGTs typically operate at no less than 40% loading. For this reason, I see the industry evolving to using more CTs (rather than CCGTs) when installed to support renewables. CCGTs are far better at replacing old baseload plants (coal, oil, or gas).
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    Well, to draw this back to SolarCity, it may helpful to frame the discussion from the view of SolarCity's share of the meter. Rooftop solar produces the most power when the sun is brightest, and this corresponds to the time when AC usage is heaviest and when grid power has historically been priced the highest. So solar cut into the most profitable hours of production. It cuts into the hours that make the capacity of the system profitable. But solar only leaves a huge share of the meter for utilities to satisfy. The next step of adding batteries to solar enables SolarCity to go after an even larger share of the meter. Depending on the type of rate plan, TOU or demand, batteries can take advantage of low TOU rates or shave demand charges. Either way share of meter is gained by SolarCity and the leftover share to utilities is limited to their least profitable hour, the times when surplus capacity and minimal demand drive the spot market prices to levels that are not high enough to pay for the CapEx of new fossil fuel capacity of any sort. So per installation, SolarCity will be able to extract virtually all o d the profit with its share of the meter.

    The next question beyond that is how quickly can add more customers and how deeply can they penetrate the customer base of a utility. Adding storage to their product offering, SolarCity has the potential to sign up even more customers at lower acquisition cost per sale. They can even sign up storage only customers where rooftop solar is not a desirable option. A storage only installation still capture the most profitable share of the meter, leaving the utility with a less profitable share. So I am optimistic that storage will help SolarCity to continue to double its customer base year after year.

    Renewables plus storage has the potential to extract virtually all the profit out of fossil fuel generation.
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    At November 2014's Electricity Natural Gas price of $4.68/(1000ft^3) that's 1.5435c/kWh difference between CCGT and CT.
    If you have a battery that costs $100/kWh, usable for 10 years with 75% average usable capacity, and 90% cycle efficiency, then the cost per cycled kWh per day (ignoring cost of money) is 4.056c/kWh/day. If the battery could be cycled 4 times per day, that'd be 1.014c/kWh. (Over 10 years that would be 14610 cycles) CCGT or CT might depend greatly on where battery prices and durability end up.

    Relevance to SCTY: cheap batteries could be a great way to help renewables, but cheap batteries would also help the economics of fossil generation. Until solar really beats fossil, success depends on government support.
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    That's really beautiful. Having two peaks of load minus wind and solar gives home batteries the potential to cycle twice per day. On the right sort of TOU rate plan, this can improve the economics of batteries. It would be nice to see spot prices along with this.
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    SolarCity's Gigafactory

    Have not heard much about SolarCity's solar panel gigafactory. They broke ground with NY governor and all but not much since. The factory was said to be the Largest Solar Panel manufacture in the western hemisphere and in the world!, (IIRC). That's Pretty Exciting! Other related topics are how Lyndon and Peter are utilizing the absolute rock star team from Silevo, (Dr. Zheng Xu, Dr. Jianming Fu and VP Christopher Beitel).

    Here is a information rich (older) interview with CEO Lyndon Rive. It's laughable how many times Lyndon has to correct reporter.

    http://www.youtube.com/watch?v=g6SzQeeZOPw
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    Nice video. I think the interviewer is like most investors who don't quite get it and are operating on old information. The explanation at the end of crossing one market after another and doing so without subsidy is the key thing to understand. SolarCity has been relentless in cutting the total installed cost. The Giga watt factory is part of this effort. Higher efficiency and local production for the Rast coast reduces total installed cost. I expect the West Coast will still source panels from China, while the NY plant will supply the East Coast.

    You can definitely see Elon's strategic philosophy at work here.
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    Thanks JHM!

    That is what I visualize as well. I foresee SCTY developing into the largest power provider in the country, TSLA the most profitable auto manufacturer/power battery provider. That's why I invested about equal weight TSLA/SCTY, ok a little more TSLA than SCTY. SCTY like TSLA is growing like Elon described in his Khan Academy interview with Sal Khan. Elon said, You want to cause the customer base to grow like bacteria in a Petri Dish. Oh BTW, SpaceX Launch You UP as well! :biggrin:
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    Solar City Q1 IR is on 05/05 after market closes.
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    Yep, I pretty much feel the same way as you except I have my investment slanted much heavier to scty right now. After the 20-?? percentage gain over the next month I am anticipating I may re-balance closer to 50/50 tsla/scty
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    Interesting! I had no idea that was coming. It just might happen. :wink:
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    Why do you think the stock price will go up 20% over the next month? What catalysts do you see? Anything beyond the April 30 announcement?
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    A few events might contribute to a spike over the next month:

    *April 30th announcement and demonstration(as you pointed out). But might here a number for how large the initial home storage roll out might be. Also, Bloomberg just reported large utility energy storage units will be announced as well. Not sure if Solarcity will have anything to do with it, but possible they could.
    *Q1 conference call is on May 5th. Rumor is they booked 18k+ customers in the month of March alone. They booked 21k in all of q4, so potentially as massive booking of 40K+ new customers. In addition they hit at record 5GWh of total deployed production at the end of March, which could indicate they may exceed high end revenue forecasts for Q1. Also, we may hear big guidance news for the rest of the year as well as how home storage will fit in that equation. Greentech Media also reported today Solarcity unlocked $1bln in financing for 300MW of commercial installs. That is a significant number and may reflect in bookings and Q1 installs. Commercial installs have been disappointing in the past few quarters so if they show strength here it might reflect well with the market. It will also be of interest to see how levered retained value looks this quarter since it is a new metric never disclosed before. Q1 report has a lot of momentum building it seems.
    *My Solar loan ABS offering. This is significant because it includes no tax equity. If Solarcity is able to do $100s of millions in my solar loan abs dollars, they could really thrive post ITC 2017. So important to see how this pipeline works out. Thus far, they have raised about $140-150mln in online solar bonds, so it might be a nice surprise if this works out as well. If the finance works out, it could be possible to see continue 98% compounded growth and a 1.8-2GW year for 2018. I think it's a low probability they will give out 2016 guidance, but that doesn't mean it won't happen. 2016 guidance would squeeze the stock in and of itself. It would be a massive catalyst at this moment in the year.

    always a chance of a surprise outside these events, but primarily these outline may push the stock up the mentioned prior 20%+. My only caveat is any sudden rate changes or utility uncertainty news events over the same time period.
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    The biggest catalyst I see is when they announce their install targets for next year. If They predict the 2 Gigs that seem obvious to me that will put them at over 800k customers at the end of next year. They would start 2017 with 800k customers and end it with 1.6 million (If they double production the next two years). Currently analayst are using their target of 1 million customers by the middle of 2018 for their models and It is a much too conservative number.

    The April 30th announcement also has the potential to be huge. I think there is a chance Tesla announces some HUGE sales to Utilities around the country and if they do and they are using Solar City's Demand Logic software it could be a huge boos to scty as well.

    We also know they have had record breaking bookings this quarter and I believe what they have said regarding the commercial install times being a week for all of their competitors and only a couple of days for them. I think we will see some of the momentum on that front.

    Also their retained value per watt on the mypower loan is around twice what it is on the PPA's/Lease's which should be taken very positive.

    I am also hoping to hear more about cell research and factory construction and I believe with each earnings call more and more people will realize the benefit of having the state of New York build one of the largest solar plants in the world producing panels at the lowest cost per watt.

    Edit: There is also the large short interest but I think a decent amount of it has covered recently. Based on the Interactive Brokers Short Interest that is sent out. Scty has been somewhere in the top 5 of the energy sector shorts since I have used them and they were not on the list this time.

    I see a lot of articles about how tough it will be on SCTY to lose the ITC when it will affect the whole industry and SCTY is the only company I know of that should have a brand new 1 Gig plant humming along at full production q1 2017.

    That last point is getting more into my long term thesis... The bottom line is I am expecting a 20 percent move when they announce (officially) a 2 gig target for next year.
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    Thanks, Blake. I share your optimism. I'm particularly interested in the 1 million customer goal, and want to see solid progress towards it. I figure if they hit that goal, retained value should be $14B or maybe more depending on how rich the loan mix is. I think market cap should be around 2 time retained value, $28B. So assuming 5% annual increase in the number of shares (employee incentives mostly) we could see $240/share in 2018. So basically I just want to see them build up the retained value.

    They should come out with a new unlevered retained value which will net out the value going to debt. Currently levered retained value is a kind of enterprise value, but the unleavened will be strictly the value to equity. So it will be very interesting to see how this breaks out.



    Regarding ITC, I think SolarCity is working very hard to cut all costs. So I think they will be in a good place to get through the transition, while less efficient competitors will stumble. So it won't be easy for any, but it is the right challenge to face. I also think it sets them up for more international opportunities. Squeezing every last cent out of intallation costs is the right discipline to have anywhere. They have quietly entered New Zealand this year.

    BTW, I believe that DemandLogic programming was done by Tesla, but I suspect their is a lot of IP sharing going on. Microgrid-as-a-service is a big wildcard for both companies. It could be that New Zealand is a good place to develop some microgrids, a few islands perhaps.

    Viva Cinco de Mayo!
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    Will the trade be to buy stock now and take advantage of the run-up into april 30th? OR will it be to buy after the announcement when the stock takes a dive? Not saying it will 100% dive after the announcement but that seems to be the trend. Usually a quick recovery follows though.
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    In my opinion it would be to buy now and hold on or sell after announcement. In the past few quarters you would of done best buying about a week ago and holding until maybe 2 days before earnings. I am thinking this time will be different but time will tell.
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    Hawaiian Electric Co. can't solve rooftop solar issue alone, SolarCity exec says - Pacific Business News more support for a q1 revenue beat is Hawaii connecting a substantial backlog of over 2500 customers over the fist three months of 2015. Systems were installed so as soon as they were connected, revenue started flowing in to Solarcity. maybe why we also saw Solarcity hit record 4GWh/day and 5GWh/day production within two weeks of each other.
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    I would love to see SCTY close in the green today. On a day when the market has been down all day I would feel better about the lottery tickets I bought :) (may 8ths)
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    First Solar: Likely The Best Bet In The Solar Industry - First Solar, Inc. (NASDAQ:FSLR) | Seeking Alpha

    Interesting article that compares the cost of utility and residental solar about half way down the page, according to the study its $1.88/w and $3.60/w respectively, now the margin addon is significantly higher on the residental side, but even discounting the margin cost is still more than 35% higher for residental. I guess this is why I'm not as excited about residental as others, the growth might have been higher in residental compared to utility but you certainly pay a premium for this growth in the stock, and how sustainable is it when utility is cheaper?
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    SolarCity has an installation cost of $2.09/W. SG&A is another $0.76/W, for a combined $2.86/W. Also note that residential solar need only compete with residential rates, while utility installations must compete with wholesale power rates. The ratepayer is still paying a profit margin to their utility for whatever power they buy. So it is not apples to compare retail and wholesale prices.
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    There is margin both in residental and utility, unless you are producing your own panels and mounting them on your roof. The price of a residental and utility watt is an apples to apples comparison as I see it, unless people are able to disconnect from the grid entirely which would save money on infrastructure, but that wouldn't make much sense as it would take a lot of batteries.
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    SolarCity is able to sell power to their customers a few cents cheaper than utility rates, and that is good enough to make the sale. That is a retail to retail comparison. If SolarCity were to offer the same rates to a utility, they would not buy it. Utilities buy power to resale. They need wholesale rates, not retail rates. The question you should be asking is, if utilities can install solar more cheaply than SolarCity, why don't they offer retail rates lower than SolarCity? If you think that utilities have an absolute cost advantage over rooftop, then why are they losing market share to rooftop installers? I think it has something to do with not wanting to destroy the value on their balance sheets.
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    Those prices don't tell the whole story. Utility is cheaper when you consider cost per watt on a large scale but there are many advantages of rooftop.

    No transmission losses - Land is rarely free and sometimes very expensive for a utility solar farm and sometimes they must be placed pretty far from where the power is used. This requires expensive Transmission lines and losses. So you already lose some of that advantage.

    Strengthens grid- Having distributed solar helps lower peak demand all over, When combined with small batteries it will alter peak demand dramatically as solar reaches higher penetrations.

    Individuals can invest- One thing rarely mentioned is there are a whole lot of homeowners who want solar and they don't have the option of building utility scale solar so they go residential :)

    The main reason I am excited about residential over Utility is it so much easier to execute. Each Utility Project is unique and requires extensive engineering work and paperwork. Their is a high likelihood that there will be delays with utility projects because there are so many actors at play.

    Solar City Management has found a way to double every year and it looks like they will continue to do that which is going to result in some staggering wealth generation

    You also have to consider the ITC step down. It sure looks like the US utility solar market will be hit hard if it drops down to 10 percent for them like scheduled. I guess you could argue this one both ways but I think SCTY and other US rooftop installers will fare better than US utility players.
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    We should probably talk more about ITC step down. I don't have a feel for how it might impact utility or rooftop differently. I suppose for utilities after the step down, it will just be harder to pencil out solar projects relative to other projects a utility might consider. For rooftop customers there are fewer choices: utility or solar with or without batteries.

    Another issue that should be consider explicitly is the problem that utilities have with integrating too much solar into their mix. I alluded to this in my comment about balance sheets, but it does need to be said. As more solar is added, whether utility or rooftop, it decrease midday demand net of solar. Traditionally these are peak hours and most generation assets are most profitable during these peak ours. As the demand net of solar declines, these assets can become unprofitable to operate. So too much solar has the risk of impairing many assets on a utility's balance sheet. The utilization assumptions that justified their investment many years ago just do not hold up. So the utility industry is at risk of a serious asset bubble. Adding yet more utility solar could do more financial harm than good. But it gets worse as even more solar is added. Taken too far an power generation can exceed demand and the spot market puts a negative price on power, that is, wind and solar operators may be paid or forced to curtail production. This is where grid storage and perhaps aggregated customer side storage can be enormously helpful. With sufficient storage capacity the spot price would never go negative. Storage assets would soak up power selling a just a fraction of a penny per kWh. Later when the sun goes down storage assets would then sell the power back. In this way, the energy mix could integrate 100% renewable sources. Additionally, the daily spread from the lowest spot price to highest would be no greater than the levelized cost of storage, maybe 5c/kWh some day. So in the long run as solar goes to 5c/kWh and storage to 5c/kWh, the price of power could be bounded between 0 and 10 cents, and these prices would be obtainable from a utility or on your rooftop. The pace at which we converge to such a state determines whether the utilities can get a full return on their prior investments. So it is basically within the utilities' interest to transition slowly. And this is what give the likes of SolarCity a huge advantage.
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    I must admit I don't know much about this whole thing, but does the utility pay for the infrastructure, or some of it? That would make for an uneven playing field. Every source I have found says utility scale solar is much cheaper than residental.


    "Strengthens grid- Having distributed solar helps lower peak demand all over, When combined with small batteries it will alter peak demand dramatically as solar reaches higher penetrations."

    This peak demand argument works for both resi and utility.

    "No transmission losses - Land is rarely free and sometimes very expensive for a utility solar farm and sometimes they must be placed pretty far from where the power is used. This requires expensive Transmission lines and losses. So you already lose some of that advantage."

    This might be true, but according to the articles I've found utility is still significantly cheaper.

    "The main reason I am excited about residential over Utility is it so much easier to execute. Each Utility Project is unique and requires extensive engineering work and paperwork. Their is a high likelihood that there will be delays with utility projects because there are so many actors at play."

    Utility scale can be huge projects though, last year First Solar built a single project bigger than the whole of SCTYs installations for the year put together.

    "Solar City Management has found a way to double every year and it looks like they will continue to do that which is going to result in some staggering wealth generation"

    Like I pointed out before they are still a relatively small player, growing this fast will soon be a lot harder, if utility scale really is significantly cheaper it could put a stop to the rampant growth.

    I don't see why utility should have a harder time with legislation than residental, I would argue the opposite would seem more likely given who has the money muscle.
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    Ratepayers pay for the infrastructure through the rates they pay. Utilities essentially build out infrastructure and recapture the cost through rates. Generally utilities are monopolies, so there is no such thing as a level playing field when monopoly status is granted by the state. So the question should be whether all this infrastructure is worth the cost. If a utility builds a power station, solar or otherwise, hundreds of miles from where the power is used, then it must have the transmission and distribution infrastructure needed to deliver that power at great distance. So all this infrastructure is part of the real cost of utility solar. Rooftop solar, on the other hand, does not need any transmission and distribution infrasture. An inverter and a few meters of wire is sufficient to deliver this power to the house or business. Now if it were legal to sell your surplus power to your neighbor, you would only need a little cable and your neighbor would be willing to pay you nearly as much as their residential rate charged by the utility. But where utilities are legal monopolies, neighbors are not allowed to share power. But the infrastructure to do so would be quite minimal. The reason why it is equitable to require utilities to pay feed in tariffs for surplus solar power is that their monopoly status prevents the owner of rooftop solar from selling to any other entity. So feed in tariffs are a small accommodation to preserve legal monopoly status. There is absolutely nothing level about this playing field. The utilities have the privilege of putting the cost of their infrastructure on to ratepayers, while rooftop solar demonstrates that not all that infrastructure is actually needed. Utilities for their part are claiming that customers with rooftop solar are not paying "their fair share" of infrastructure costs. This, of course, presumes that ratepayers have a more obligation to pay for infrastructure that enables utilities to generate power at great distance and sell it locally. But this argument falls apart when it becomes clear that power can be made and shared locally. It is like saying that one has to pay the shipping cost of produce from South Africa even if one chooses to buy locally grown produce.

    Let's be concrete. Part of the reason that utility installations are cheaper per watt than roof top is that these locations are sited where land is cheap and there are not competing economic uses for the land. One is able to choose a location that is idea. So this is exploiting cheap real estate, and this most likely means this land is at substantial distance from highly populated areas where the power is most needed. So transmission lines are required to get this power to ratepayers. If you add the cost of these lines to the cost per watt you may well find that there is not much of a difference between utility installations and SolarCity in the fully installed and transmitted cost per watt.
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    Utility is much cheaper. Utility and Distributed are very different models. I think there are additional cost with Utilities that you don't have with residential but even with these Utility Solar should be much cheaper than residential.

    I don't think the argument works both ways on this, because they work in tandem. The utility solar farms will be built and treated as a utility power plant. At the same time customers are installing solar to decrease the amount they consume. I know some people try to frame it as a battle of Utility vs Residential/Commercial but they are really just very different. On a broad scale I think they are both good for each other and all solar is great for air quality.


    I agree with you here completely

    That is true but it was 3 year project. Started in Nov 2011, Finished in Nov 2014. Even if they had completed it in a year I think it misses the point. Solar city installed ~500 MW in 2014 and they will install ~1GW in 2015 and ~2GW in 2016 and ~4GW in 2017. At least that is their plan and the path looks pretty clear to me.

    I don't think they are a small player anymore. If utility solar and residential solar were at odds in the way you think Solar City would not have been able to grow from 31MW in 2010 to 1GW in 2015. That is two of Topaz Solar Farms in one year when it took First Solar 3 Years to build it. That comparison is not fair but I don't think yours was either :)
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    @jhm

    Okay so the playing field is uneven, the utility has to pay for infrastructure while residents with solar on the roof gets that service for free, this isn't exactly fair either tbh, well I guess its fine as a government incentive to get solar rolling but should be fixed at a later time, I don't really like the fact that resi solar is more subsidized than utility solar though. You can't just act like residents with solar doesn't need the grid, with current battery prices that is just unrealistic, it would be much more expensive for the quantity of batteries needed to stay completely off grid (at least if you want to have power on cloudy days) than to just keep it.


    "That is true but it was 3 year project. Started in Nov 2011, Finished in Nov 2014. Even if they had completed it in a year I think it misses the point. Solar city installed ~500 MW in 2014 and they will install ~1GW in 2015 and ~2GW in 2016 and ~4GW in 2017. At least that is their plan and the path looks pretty clear to me."

    I don't think you should be so sure about that continued growth, especially when you agree that utility scale solar is cheaper, because if utility and resi solar then were to compete on an even playing field in the future then utility wins.
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    Residents with solar don't get to use the infrastructure for free. They pay for all of the energy that they use. In some cases they have to pay 50 dollars a month for having the solar.

    "I don't think you should be so sure about that continued growth, especially when you agree that utility scale solar is cheaper, because if utility and resi solar then were to compete on an even playing field in the future then utility wins. "

    If starting tomorrow all utility solar installed in the US would be installed for free I think Solar City would still be successful. Utilities are still going to charge you for your power and they will have a bunch of graphs to show you why they have to charge you what they do. The point is it really does not hurt Solar City at all if Utility Solar does extremely well. In fact I think they will get into the utility solar game once they ramp up their manufacturing.
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    If some of the cost of the infrastructure is incorporated into the rate paid to the utility (which is how I understood jhms post), then the residents using their own solar panels does get at least some of the advantage of being connected to the grid for free (paid for by the majority of people who doesn't own solar panels), which gives residental solar a one might say unfair advantage to utility scale solar at the moment.
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    The size of the net-metering benefit depends on the structure of your rate. Commercial customers' electric costs are mostly fixed charges and demand charges; there is still a need to manage down your peak load, which may or may not match your solar production. Residential customers have a small fixed charge, with most of the cost assigned to a �/kWh charge, but that's changing as utilities wise up to the revenue crunch caused by energy efficiency and behind-the-meter generation.

    The other question is whether the net-metering benefit exceeds the value the distributed generation creates for the grid. A recent study by the Maine Public Utilities Commission shows that distributed solar creates 13.8�/kWh of 25-year levelized savings to the utility through lower energy procurement costs and reduced need for future investment in T&D. (There was another big source of value from reduced air emissions, bringing the total benefit to nearly 30�/kWh.) So I'd argue that paying solar (in Maine) less than 13.85�/kWh is an unfair charge. Net metering here gives a slightly higher "payment" to solar, but not unreasonably so IMO.
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    Net metering might or might not be of benefit to the utility, that is not my point though. My point is that residental solar seems to have an unfair advantage against utility scale solar right now as resi doesn't contribute to grid cost and utility scale does. If this changes residental solar might lose momentum as utility seems to be the cheaper option, that's all I'm saying, I'm a big solar fan and have money invested, just not in SCTY.
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    Thanks for linking the study and quoting the 13.8 C/kWh. I have seen a lot of articles reference the report but not slit specifics and not link the report. As always, much appreciated.
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    > SolarCity currently serves 17 states. [atang]

    And the states must have financial incentive programs or NO SolarCity. SCTY business model is based on low hanging fruit, none of which grows in WY. Here its DIY or forgedaboudit.
    --
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    Currently on CMP: (Delivery) $0.063264 + (Standard Offer Supply) $0.065441 = $0.128705.
    If on CMP A-TOU, with peak usage 7am to 8pm: $0.102708 + $0.065441 = $0.168149
    CMP A-TOU Off-peak, weekends and holidays $0.045318/kWh + $0.065441 = $0.110759

    Not bad. I'll have to read that report.
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    Solar power
    This article lays out the politics behind anti-net-metering tactics. Solar produces less than 1% of the electricity in the US, but apparently that is enough to threaten incumbent industries.
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    Jhm,

    The key is establishing the value of solar to all grid users. Multiple studies have come out showing the benefits outweigh the costs to all grid users. In addition, the same Arizona utilities that have said solar costs non-solar users(thus added fees to solar customers), are now asking the Arizona commission for permission to put solar on homes. Ironic, they say home solar costs non solar customers yet they want to put solar on homes. It is painfully clear some utilities find home solar a threat to revenue, not a burden on the grid. In the end, utilities will either play ball with distributed solar competition now, or painfully lose in court and in the wallet and have to play ball with DG solar later.
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  • 1/1/2015
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    A new kind of utility: Why SolarCity wants to be 'more than a solar company' | Utility Dive

    If you want to know where SolarCity is going with Tesl, Nest, and utilities, you need to read this. Owning the customer relationship is very smart, aggregating distributed assets to utilities is genius.

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  • 1/1/2015
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    It is interesting to note that Hanley jumped ship from PG&E(big CA utility) to work for Solarcity on grid integration solutions.

    On a seperate note, just read a Twitter post that Solarcity reps and tesla reps had a team meeting @ Hawthorne design studio today. Can only speculate this has something to do with April 30th unveiling.
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  • 1/1/2015
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    I agree. The claim that rooftop is "not paying it's fair share" should be held with suspicion. The claim implies that nothing of value is being contributed to the grid, which is simply not true.

    I recently learned that T&D accounts for 42% of the power bill. Broken out that is 31% transmission, 11% distribution, 58% generation. So right off, DG avoids transmission cost, and during peak hours when spot prices are high may even save on generation cost. So at a minimum rooftop solar reduces the transmission load which is a benefit to the grid. Trillions of dollars are needed to be invested in T&D in the coming decades, but distributed solar, batteries, and microgrids can minimize this burden on the system. While not every player in this space will realize the economic benefits of this transition, it will benefit the economy as a whole, and those players who are willing to innovate stand to profit the most.
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    I agree. As DG + storage amasses, less peak generation is required, faster demand response happens as well. With predictive analytics that Nest, home weather sensors, electric car sensors, and wearable devices such as the apple watch and other fitness trackers bring to the table, DG assets can develop the highest accuracy in determing how to deliver energy when and where it's needed with the highest efficiency possible. All this adds up to significant cost savings for every electricity user in the country. Big significant stuff here, in my opinion.
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    Because so much of the T&D network is a sunk cost, not using it doesn't lower its cost. The T&D benefit comes from lowering losses (losses rise with the square of current, so lowering current flow lowers losses) and deferring the need for future investment. The benefit is clearer on the T side; D might need more or less investment, depending on how the flows work out.

    The Maine PUC's Value of Solar study I linked above shows first-year and 25-lifetime savings as follows (for Central Maine Power, the largest Maine utility):

    		First-Year25-Year Levelized
    Avoided Energy Cost$0.061$0.081
    Avoided Gen. Capacity Cost$0.015$0.040
    Avoided Res. Gen. Capacity Cost$0.002$0.005
    Solar Integration Cost($0.002)($0.005)
    Avoided Trans. Capacity Cost$0.014$0.016
    Avoided Dist. Capacity Cost--
    Subtotal: Avoided Market Costs$0.090$0.138
    Net Social Cost of Carbon$0.021$0.021
    Net Social Cost of SO2$0.051$0.062
    Net Social Cost of NOx$0.011$0.013
    Market Price Response$0.009$0.066
    Avoided Fuel Price Uncertainty$0.000$0.037
    Subtotal: Societal Benefits$0.092$0.199
    GRAND TOTAL$0.182$0.337
    The distribution cost/benefit was left open. The report states, "Not included, but left as a future placeholder if the peak distribution loads begin to grow (requiring new capacity)." It also omits voltage regulation cost/benefit, noting it was "Not included, but left as a future placeholder if new interconnection standards come into existence allowing inverters to control voltage and provide voltage ride-through to support the grid."

    I would caution against generalizing from these findings, because the costs and savings are going to vary by state.
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    I see SolarCity has some new Advertisements on there YouTube channel


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    And as a Avid Solar City supporter .... I don't like these at all. I watched the first one and felt the need to mark my disapproval somewhere ....

    I guess people might respond to this. Maybe this is their market research. Educating the public about 0 down solar is their mission ... I don't think this does it.
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    Agree. Seems to cheapen the message, the opportunity, the product, the company. Hope they move off of this rapidly
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    It's a bit like a Saturday Night Live sketch making fun of a commercial.
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    Put the infinite power of the sun to work and saaaave.

    feels like a geico commercial... kinda grows on you.
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    I was reading through them after reading your comment and ran into this gem.

    "
    He doesn't have one. Just another pointless comment. The sheer size of this facility is apparently lost on him. The needs of a facility that produces micron scale parts is probably beyond his comprehension. The obstacles faced in this construction have not been covered well by the News, perhaps not revealed to reporters. Radioactive (trace level) materials were found, and required haz mat procedures. Entire rail cars were found buried. No one wants it known that Republic was given an easy road out, with site remediation improperly done. The state DEC and the EPA caved on this one."

    Pretty interesting if its true.
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    I cannot see how the announcement tonight, cannot mention solar city. I personally feel the stock is going to get a good lift in the next few days, likely in the 5 to 10 per cent range.
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    I agree completely, if SCTY drops tomorrow and I am not overextended on margins I will double down on any weeklies I can pick up for the earnings call ! Excited for the announcement. Its getting pretty close.

    A breakthrough in the affordability of Solar Battery Systems (yea SCTY is involved. I was a little worried by the TSLA press kit)
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    That's good to see; I was stunned that SCTY isn't listed as a partner in the Tesla Energy press kit.
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    Well that's because they have an announcement of their own on their website:

    Off Grid Solar Power Systems – Off Grid Hawaii - SolarCity

    $0 down lease total package solar+storage.... "Hey Hawaii, you want to get off the grid?"

    this info dropped the same time as Tesla Energy...

    i bet the press hits the wire tonight or tomorrow morning...


    Update...
    New blog just posted by Peter rive, Solarcity CTO:
    A breakthrough in the affordability of Solar Battery Systems

    update#2:
    first Solarcity battery+solar installs begin in October...
    SolarCity Introduces Affordable New Energy Storage Services Across the U.S. - Yahoo Finance

    update#3:
    Elon states Solarcity is its lead installation partner in home storage.
    http://af.reuters.com/article/energyOilNews/idAFL1N0XS03L20150501

    updat#4:
    first battery+storage orders will go to new customers (then first come, first serve to existing. Customers)... Might be interesting if the 10k nest thermostat offers in CA coincides with this storage+solar ramp? Presumably, Solarcity will benefit from the SGIP incentives here...
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    SolarCity throwing down the gauntlet to Hawaii in tonight's blog. Utility won't let homeowners connect solar to their grid? Fine, we'll disconnect the grid and install a battery alongside the panels...
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    Wow, SolarCity is taking a bold stance. SolarCity to utility: you can work with us and benefit from aggregation services or we will enable mass defections.

    Emboldened by batteries, perhaps.
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    That's awesome! Hell yeah, good for you solarcity! Can't stop technology progress!
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    @jhm. They are emboldened now, yes, but take a few things away and things do change. Fed Tax credits, state battery storage incentives (in some states) and also take away SREC selling and Net-metering programs... I don't know how things change without the incentives, but someone today having Net-Metering and SREC selling programs along with the tax credits does pretty well buying Solar PV. Some of the programs mentioned here are not going to be around forever. Batteries may need to take the place of Net-Metering over time. SREC markets have collapsed hurting many who bought into solar during 2009 and 2010 expecting payback. To me, I look at batteries as a necessary technology that needs to come to fruition as state power commissions are looking at ways to slowly ween solar PV customers off of net-metering since the real demand spike is later in the day and not mid-day when solar is running best. Be careful out there but in some ways, SolarCity is kind of acting like the white truck driver in this video facing off with the power industry: Youtube: CceSRMmhv3w
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    They have stated publicly every time until now that they thought disconnecting from the grid would be a terrible idea. They also worked with HECO at the NREL in boulder and proved they could hook up more than double the solar with no problems. After that HECO continued to drag their feet. It seems like they were somewhat forced to be bold here. They were patient for a long time.


    That video is hilarious but a completely unfair characterization ... This one is a lot more accurate representation of the Utility/SCTY battle ...

    PIMP VS KARATE MASTER Knock Out! - YouTube

    The pimp (utilitues) are cleary upset when the Karate Master (SCTY) tells him he will actually benefit from distributed solar.
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    There are mixed messages floating around. Some press say "Tesla batteries will take customers off the grid" and Musk says in the presentation that utilities want to buy battery units. The common person gets confused, but the real issue is education of those on the street wondering what is really going on and who benefits. Clearly, peak load has been a grid problem for some time. Peak days in 2007 and also way back during the Enron shenanigans caused California major headaches and occasional voltage drops and brownouts and blackouts. High heat in the west and cold nights in the eastern and northern states can be some trouble. Grid operators pay excess backup generator fees and prices during these hot days and a major concern is how to shut down some coal plants while turning to more irregular power from renewables. Some standby generators only run a few days per year, maybe for a few hours. Baseload coal plants can run 24/7 while renewables have trouble doing that. Do power companies want us to go off grid? I doubt it and I wouldn't go off grid to spite the utilities. I would go off grid if net metering goes away and grid prices rise .10/kWh. But I don't see that coming for 10 years. By then, hybrid systems will be plentiful and relatively cheap. Now, if I lived in CA I might add a load shaving battery but in doing so, I would have my hand out for all the subsidy money available which can make the cost nearly free. I do think it makes more sense to install 100kWh systems for grid stability than dozen or more 7-10 kWh systems. Far better cost of scale deployments. One system in every convenience store and larger box store would easily smooth the grid power if they could be managed smartly through grid operators. Convenience stores run lots of refrigerators, lighting, gas pumps and deli equipment. Perfect deployment location. Running a load shaving 100kWh unit there takes the store nearly off the grid while it is load shaving, most likely at 20KW.
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    Seems to be entirely too much focus on comparing Tesla's new offering to traditional grid power generation, transmission and distribution. Don't forget that the costs of electricity production (generation), transmission and distribution are heavily subsidized, wasteful, polluting, massively less efficient, and in many cases - more expensive means of converting energy to electricity than photovoltaics, inverters and lithium ion batteries.

    Bonaire are you short TSLA or SCTY at the moment? Just curious.
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    It's like you are implying that utilities can't or doesn't use solar, remember that utility scale solar is much bigger than residental right now. Centralized energy storage solutions also has a utilization percentage advantage compared to batteries in every home, just like it is inefficient for homes to be completely off grid right now as you need to size your battery much larger than what you need on average. Don't hate on the utility scale battery use, it's the lowest hanging fruit.
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    I am all for utility scale storage, but transmission and distribution via poles and wires is not ideal long term for a resilient and efficient grid. Just like single points of failure in computer networking are problematic.
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    I think one important advantage of distributed solar is being overlooked here: virtual power plant(ing).

    Distributed solar is deployed much faster then centralized solar or fossil fuel power plants. Distributed solar is much closer(on top of in many cases) to location of need. If utilities can use the distributed asset to offset peak loads, then that is worth billions of dollars in developing, deploying, maintaining centralized peakers.

    Obviously, this will start out in "low hanging fruit" utility markets now and expand as DG price points continue to fall thus expanding that install base further.

    Solarcity has has pretty much built out its current 200k+ customer base in neighborhood clusters, or specific utiltity clusters where solar has made most economic sense, which also has had an organically added benefit for aggregating for virtual power plants. So, Solarcity is already "ready" to build this virtual peaker plant in ideal areas where utilities can benefit almost immediately, or as soon as Solarcity installs this initial powerwall production ramp. There is a reason Solarcity is strategically prioritizing selling powerwall to specific customer sets in addition to economics right now...
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    As Elon pointed out in the PW/PB presentation, there are 2 billion vehicles in the world, with a replacement cycle around 20 years, which is a 5% re-build rate. If material resources are not a problem, then manufacturing is not a problem, it's just a matter of building manufacturing plants.

    I agree that it would make sense for major solar installers to get into construction: the key thing is that if you're going to have solar, the roof becomes more than just something that keeps water off the house.
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    SolarCity sent me an email yesterday thanking me for my interest. But the thing is, I didn't contact SolarCity. I signed up for Tesla Energy. I used a special email address for the Tesla Energy signup, just so I could see how Tesla distributes that email to third parties. Guess what email address SolarCity sent to.

    Not a problem at all, but I do have a small grumble about how SolarCity and Tesla are executing on what is clearly a partnership. When done right, that is, when a customer of Company A signs up for something and grants permission for Company A to send customer info to third party companies working with Company A, and then you get an email from Company B, it says "Thanks for your interest in Company A's product. We're here to help you with Company A's product and our own value add services, etc etc."

    This is where I feel SC and Tesla dropped the ball a tiny bit. Nowhere in SC's email to me does it mention Tesla, Tesla Energy, PowerWall, or anything of the sort. It just says "Thank you for your interest!" Interest in what, though? What if I'd never heard of SolarCity, and I got this email, and I'm like, who are they? It was only after checking the email address it was sent to that I confirmed that Tesla referred me to SC.

    A minor complaint, but a lack of detail that they need to clean up if they want to accelerate crossing the chasm from early adopters to the mainstream market.
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  • 1/1/2015
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    I just went through the teslaenergy.com site. Did you unclick the "interest in solar" box?

    Maybe the other partners aren't ready yet to offer the product like Solarcity is at the moment. It feels like the other companies have a deal to distribute and/or sell powerwall, but won't be selling it any time soon. Nor has Tesla disclosed how many powerwalls they are actually producing this year.

    I see where you coming from. Even if Solarcity is the only one ready to take orders, Tesla ought to provide a disclaimer your personal information will be sent to a third party.
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    Foghat, I doubt many powerwalls come out this year. First, the CA SGIP program is waitlisting new projects. Tesla and SolarCity has to deliver dozens if not hundreds of commercial and government larger systems. The projects already are on the reserve list for SGiP money. I think that takes them through the end of 2015 with a good $30-40 million transferred from SolarCity to Tesla for equipment. That is where the money is rather than moving small projects. The powerwall was cute and good for lots of tv and press coverage but it needs some time to ferment. It was stated limited supply this year and full production once the GF is complete. Early announcement done last week possibly to prepare for a small to medium sized financing vehicle soon.
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    I guess we'll see how they execute. Solarcity did say they are taking powerwall+pv orders now to start installing in October. That to me means they intend to start installing during the entirety of Q4, which infers home storage+solar will happen this year. Not sure if that means California or one of the other markets Solarcity operates in so SGIP may not be a good indicator of how powerwall+pv will be deployed this year anyway.

    I also think Solarcity and tesla know exactly how many they will sell this year and have already allotted that to home, commercial, and utility installs for 2015. I'm really now just waiting for the big press release or Elon at one his talks announcing powerwall is "sold out" for 2015.

    Also, I'm holding to the virtual power plant concept as being more valuable to Solarcity AND utilities so powerwall may have a little more momentum behind it then you think. Not sure how long it would take to deploy utility level installs, but Elon did say it would take only an hour for powerwall. Speed might trump size in many cases with energy storage.
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  • 1/1/2015
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    The term sold out is simply a marketing term used to describe, well, an inability to deliver something. No company should ever be sold out. Even concerts announced as sold out really are not. Now, they were sold out in terms of projects for commercial storage for 2015 already. The projects lined up on the SGIP have been there for a few years and there are rules that require interconnect 18 months after application or face two, now three, 6-mo extensions. They have the hawthorne project still on the books which they showed at last week's demo and the SGIP shows it is not interconnected. Maybe that is why it showed 0 from the grid (left meter), or the SGIp people didn't update the project yet.

    the powerwall is not compelling to me, as an ev driver and solar pv owner. The reason is the lock in to certain installers and also the lack of one unit power. I want 5KW of continuous power out of an inverter and one single rack of batteries. If I were to install one. It would be 40 kWh and include the ability to island the house. The powerwall is only a small part of a hybrid island-able grid-tied with battery backup system. Yet some people think it will charge off the solar pv if the grid goes down. That is called islanding and there are no islanding specs because you need to send your typical solar inverter a grid signal indicating it is up. Also, you need to dump excess load into something if the batteries are full or the solar pv is outputting more power than the battery charge rate. To me, the powerwall is a verticle box of batteries which is a building block and not a solution. It fits into some people's needs but a hybrid grid tied system that load-shaves is really what people want and they need to get their installer to engineer a full system for them at a much higher price. They have basically made the 18650 cell available, nearly at cost, to the renewables community and load shaving solutions for commercial. Utility is a scaled commercial approach.
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    These are important points, @bonaire. Net metering raises substantive question about how the (largely fixed) costs of maintaining the power grid should be allocated; any reasonable answer will raise the fixed portion of customers' bills and lower the per-kWh portion, making net metering a much less attractive prospect for solar. A bill to introduce SRECs here in Maine is floundering because of reasonable questions about why we should be "picking technology winners and losers" instead of just supporting renewable energy generally. I heard no good answers to this at the public hearing. (Maine already has a REC program.)

    The big advantage of an off-grid solution is that the future costs are completely known. Any calculations that depend on the future of utility rates is on shaky ground.
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  • 1/1/2015
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    i guess the net metering question boils down to the value of distributed solar to the grid. If having solar customers connected to the grid provides a benefit at current rates, then net metering is appropriate and necessary. Thus far, there are multiple independent studies that support the notion distributed solar is a benefit to the grid. Most notably, the study from Maine where they assert the value might be near double the current utility retail rate.

    i think we all have to remember utilities operate on a cost plus model in a monopolist market regulated by a governing body or a rate payer elected board. They are set up to add more assets to the ledger. Most profit motives are determined by raising rates not reducing them and they can easily hold customers captive since there is no other place to get electricity in town. These governing bodies are there to look out for the interests of the rate payer. If something benefits the grid, it benefits the rate payer. Thus to impede that from happening through adding fees or cutting net metering is not only counter to the rate payers best interest, it violates a slew of state and federal anti trust laws.

    this is, again, if DG is determined to be a benefit at retail rates which current evidence is leading in that direction. Also, it is fair to mention currently 44 states are implementing net metering and that list has only been additive since it started. The behind the doors conversations by utilities since 2012 has been distributed solar is a threat to revenues, not a cost shift onto non solar customers.
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    I dont think you are locked into using any installer. I believe Treehouse is selling it. That is just a home improvement store so I would think you could buy it there and install it yourself if you know what your doing it. It was described as "just works" so I would think install is pretty easy.

    Anyone have the Baird downgrade that was issued this morning? I would any details anyone can provide.
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    This totally changes the economics. A Powerwall unit offers 3 kW peak. So if the utility pays $10 per kW per month, that is $30 per month and $3600 over 10 years. This alone pays for the Powerwall unit.

    What's going on here is that the grid pays for standby power and distributed batteries provide standby power. So essentially SolarCity is working on how to monetize this.

    I'd also point out that this distributed standby power is of greater value to the grid than power that must by tramitted. It avoids transmission cost at precisely those moments when transmission load is heaviest. Robert Boston has pointed out that transmission losses are proportional to the square of the load. So avoiding transmission when it is at peak load has a lot of marginal value.
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    Does anyone know who would have this capability other than Solarcity in the DG space? If not, could be a significant differentiator in and of itself in the retail electricity market.
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    Yes, it's part of a system, but the key effect of PowerWall is providing knowns for the storage. Price, warranty, capacity, power, dimensions. Maybe now with a price and storage more in the public consciousness people are going to ask about back-up and off-grid operation, and it'll lead to a shift to use of smart inverters that would allow storage to be added.
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    Longterm I expect a lot of innovation and competition in this space, even directly from utilities. However, SolarCity is very well positioned. Scale matters, supply of batteries mattters, programming and networking matter. A lot of solar installers will not be able to match this. So SolarCity may come close to offering batteries for free with installation of solar, which will be a much better deal than stand alone solar.

    Also think about these utilities that want to put extra fees on rooftop solar owners or cut net-metering. Aggregated DER grid services is a powerful bargaining chip. Batteries bring grid services to the table. We could potentially see utilities give preferential treatment to rooftop solar owner who also have batteries enrolled in aggregation programs.
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  • 1/1/2015
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    Forgive me, I am a car enthusiast who is learning about solar. Could someone tell me about how many days/hours it would take an average home solar roof installation (say 10-15 panels?) in Southern California to charge a 10Kwh Powerwall? What's the formula? Thank you.
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  • 1/1/2015
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    Rough order....200(+)W/panel * hours effective sun per day. I believe Los Angeles is about 5.5hours average over the year.

    So 10 panels would give about 11kWh per day. 200W * 10Panel * 5.5Hours

    The nice thing is that the parts of the year where you might need to run A/C is the time of year when you get the most sun.

    The bad part is that you may only get half of the average production in the Winter.
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    Wow, that really surprises me, thank you!
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  • 1/1/2015
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    @chateauoaks: I suggest you look through some of the threads in the Energy, Environment & Policy forum, where home installations of solar is the subject of several threads. You can play around with some figures at PVWatts Calculator
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  • 1/1/2015
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    It's interesting the Baird downgrade, CNBC downplay, and a couple negatively toned articles come out the day before solarcity's earnings.

    My theory is creating a favorable window to cover short positions before earnings.

    CEO has already stated Q1 was on schedule to be the biggest booking quarter in company history. March is speculated to have booked 18k customers where they booked 21k in all of Q4.

    Q1 saw multiple financing deals totalling nearly $2bln in install capital. Over the past two months, online solar bonds have brought in ~$200mln alone.

    Hawaii unloaded policy restricted backlog, connecting 2.5k systems to the grid in Q1 which suggests revenue influx would begin immediately in Q1. Also, Arizona's APS claims to have permitted more solar system's then they did last year Q1, indicating a potential positive effect on Solarcity systems installed and potentially generating income within the q1.
    Also Solarcity broke two major production milestones within two weeks of each other: 4 gWh and 5gWh single day records. To me, this being noted by an Elon tweet as significant only signifies a potentially unexpected production level not anticipated in revenue guidance. Thus, the NE seasonality might not have had as dramatic affect on revenues(as Baird and others today are indicating as negatives on ER tomorrow).

    Given multiple positives going into this ER, it is difficult to see this being a neutral to negative Q1 report. The guidance ought to be very strong since we are enter the prime spring/summer months.

    Lastly, Powerwall orders going forward will be strong which is another metric to judge future revenue streams given the potential of utilities paying for aggregation capacity Solarcity is offering. Again, California is already speculated to be offering $10 per kW month. These installs are set to happen starting in October, so momentum will only build from here on out. Not to mention the positive affect on pv system booking numbers nowing that Powerwall might be an add on feature down the road.


    update:
    my understanding aggregating powerwall+pv means utilties will essentially "island" the home from the grid when the home turns on "internal power" thus reducing the load on the grid during peak times.

    To me, this "service" will only improve solarcity's current retained value numbers as it will be additive to current NEM rates, especially for customers already grandfathered into current NEM rates. So, the entire previous retained value could shift higher incrementally(on top of the new customer value created)as current customers integrate powerwall into their systems.

    this also gives more weight to customers signing back up for Solarcity at year 20 because the aggregating service value they bring to the table, which reduces your electricity costs regardless of panel efficiently. Again, powerwall is a 9-10 warranty, so further advances can be plug and play with pretty much any aged pv system. Thus, Solarcity may gain a higher probability of retaining customers well past year 20...
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    Once the utilities begin to pay the full value for "ancillary services" provided by these fast ramping batteries that can also provide reactive power (VAR's) for voltage support/regulation, the economics of these batteries will get even better. Think about it there are already times on the grid when energy prices out at $1000/kWh!
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  • 1/1/2015
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    Exactly, these are the kinds of transformative developments that can radically alter the economics of batteries. With adequate pricing mechanisms that can enable home storage to participate in offering aggregate grid services, one $1000/kWh event is enough to fully pay off a Powerwall unit with 3 kW peak output.

    With battery aggregation like this, I see no real economic need for any new peak power plants. Utilities can avoid capex for such plants and simply buy peak power as needed. That is, the utilities do not even to pay $10/kW/month to battery aggregators. Such payments are needed to cover capex for peak power plants. But with distributed batteries owners are willing to absorb the capex already, no inducement needed. So all that is needed is that when the spot market gets above a critical threshold, the utility makes an offer to the aggregator. Say, the spot market is at $3/kWh. The utility offers say $2.50 to the aggregator, which in turn gets passes on say $2.25/kWh to battery owners. The battery owner nets about $2.00/kWh to offset the cost of the battery. Over the life of the PW unit, only about 1500 kWh ever need to be sold to cover the cost of the unit.

    Such a mechanism creates a market. If there are too few PW units participating in this market, then peak payments will be larger and more frequent. Thus, PW owners stand to make a profit. If there are too many, then these events pay out very little per unit. So this leads to an equilibrium that is based on both the value of peak payments and other derived benefits of PW to their owners, e.g. self-consumption and back up. These derived benefits may suffice to assure that enough PW units are available to meet the utilities need. When this happens, they will no longer need to make stand by payments to merchant fleets. This in turn reduces the power bill of every ratepayer.
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    Good news: The SCOTUS agreed to hear the appeal of EPSA v PJM. If that decision is overturned, retail customers will be allowed to sell products in the wholesale markets (ancillary services, energy, capacity). Or I should say the reverse: absent a repeal of EPSA, ?retail customers will be frozen out of direct participation.
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    Q1 results, folks!

    "
    SolarCity First Quarter 2015 Shareholder Letter
    153 MW Installed Exceeds Guidance of 145 MW
    Record 237 MW Booked
    Nominal Contracted Payments Remain
    ing Up 144% Y/Y to $6.1 Billion
    Incremental Q1 Economic Value Creat
    ion to Equity of $147 Million
    Net Retained Value of $2.7 Billion "
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    I sure was hoping that they would announce 2016 targets. I guess with a new CFO that certainly was up in the air. I love their new value metric of Unlevered Retained Value. *hoping for 2016 guidance please.

    Conference call Just started: I will try to blog important questions. Lyndon Going over details now but they seem pretty close to what is on the slides so far.

    Installed a Commercial Project in 3 days instead of the 20 It would have taken without their new commercial mounting hardware (tonga Talking)
    They expect to see results from commercial in q3 and q4.

    5-10 years SCTY will install a battery by default on all solar installs.

    The backup generator market is actually bigger than solar with around 3-5 percent residential penetration (peter talking I think)

    Next year SCTY will offer 0 down off grid in Hawaii but peter thinks going off grid is the result of bad policy and should never be needed with good policy.

    Brad Buss

    Nailling down 2016 Financing Now. New 500 million aggregation facility is much more flexible. Get to draw down cash at installation which is 90 days faster than currently

    Will soon have all off their offering be investment grade but can not talk much about it because their new ABS is close to being completed.

    Q1 deployments expected to generate 11 percent ROI over life of contract. In one year the projects deployed this quarter will generate cash of 5 Million on projects deployed .

    Net retained value- Old retained value-all debt = new net retained value.

    Currently sitting on 2.7 billion - If they stopped booking contracts at end of quarter the net cash flows after paying off debt would be worth 2.7 billion to equity markets.

    Targeting 180 MW q2 installation which will be a record.

    2nd half of 2015 will have a significant MW deployment ramp.

    Q&A session.

    Q1. Patrick (credit susse) Congrats on quarter thanks for the new metrics very helpful. How should we think about the evoulution of those numbers the 11 percent Ir giving the geogrphic mix of q2,

    We are not looking to forecast that right now (b.buss)

    How should we htink of the hurdle rate for entering new rates, on arizona have they offset your growth plans or are new markets going to offset that.

    When we look at new markets we look at the economic value for the region. It needs to be cash flow positive on day one.

    Commercial IRR will be in the 20 percent range

    In arizona we are not growing and have moved some of our operations to other states. We are suing snp right now for them using their monopoly strength to kill the market, Once that is cleared up we will move back into that market but right now we are allocating those resources to other regions.l

    Brian lee Goldman sachs

    Kudos on new metrics, How will the debt cost assumptions with your 4.5 percent change, (missed first part of question)

    brad,
    wow alot of questions , again I dont want to forcast these metrics.

    Lyndon You can pick some of it up off the Retained value if the retained value is going up the IRR should be going up so that is something you can look at in the future but we dont want to forcast it.

    brad, on the 4.5 percent we feel it is very conservative as every 6 months we have seen our financing cost drop it is really our cost and cost of financing that we our outpacing our competitors and I think that will continue to be the case.

    Goldman, Follow on volumes if you can talk about your operation capacity and how it has grown I think you had targeted 1 gig by the end of the year how is that coming , He thought they might have guided higher on q2 to hit numbers.

    Lyndon - let me clarify that it is not 1 gig residential it is 920-1 gig commercial and residential

    tonga- On commercial things are tracking nicely I think we will see a lot of progress on q3 and q4 based on where projects are now.

    On residential you dont want to scale to quickly ahead of when you need to because you increase you cost but we have great formulas that help us predict the time we need to hire installers so they are ready to be trained in time to install the projects and we are very confident on how this process works.

    Questions form roth

    What were MW deployed in q1,

    143, you can always find that in the ~tables

    When can you make a distribution to investors due to your billy bad ass financing ( my words)

    Brad buss, I have a dream , No , with the growth rate we have we will plow all money back into the company for the forseable future in my view.

    Chris(BOA) Hi thanks, I ahve a couple, First on CA, Now that they are collapsing the tiers some of your earliest customers might be underwater based on new rates and escalators.

    most of our ca pricing is in the 15/c pricing so historically we are protected from these type of changes.

    Lyndon- This is actually the second time in 3 years they have changed the rate structure,

    q. Given the troble you have seen in arizona and the international markets do you plan on expanding sooner rather than later,

    Lyndon- We are actually very bullish on US market and see afuture where the grid is two way and consumers are providing a service to the utilities, Arizona is challenging for us because they are doing what ever they can to prevent consumers from benefiting from solar, In markets like that we will fight the fight, having said that we have been thinking about expanding internally in the next year or two ( he jokes they have said that for 8 years)
    No urgency to expand internationally , just to be clear we are offering micro grids overseas,

    Duece bank. You talk about this 5k battery system , when do you think you can offer a system for customer in the US market for base load storage,

    Sorry I dont think I understand your question,

    What price point do you need to see for a broader adoption of storage to release it beyond just a backup,

    a. I think the market structures have to evlovle, Demand response, time of use , I think the economics are kind of their now if the right market constructs in place.

    lyndon, There is a great blog post peter right that I recommend everyone read that there is no incentive for the Utilties to want distributed solar and the real way they make money is new capacity,

    Peter. I will say our battery demand has been way beyond expectation

    question (something about mypower)

    Bookings are much higher in Mypower right now then installs because of how long it takes the backlog to filter through.

    q. Robert baird,

    Looks like a large portions of the 1.07 a watt is coming from renewal years, can you break down the 1.07 on the original contract vs renewal,

    Brad, Its not a number we are looking to seperate but we are thinking that value roughl comes to 2/3 for contracts and 1/3 for renewall.

    q. will you get grandfathered in for net metering laws, or is it state by state.

    lyndon, Yes we will be grandfathered in , Peter, well it has been state by state but so far all have been grandfathered,

    question (new person ) Of the 920-1000 deployment this year how much will be commerical.

    lyndon it has always been around an 80-20 and we expect the commercial to be in the low teens.

    question (Could not tell)
    question , last question on myupower , since you guys have launced the product have you seen more competition on the loan side of it are you seeing competitors do the same.

    Lyndon they strategy has never been to lead by financials , Our focus is differentiating cost and services but that being said we are not seeing much competition with mypower.


    Question about yield co , I am going to stop this because the questions have lost quality along with my typing .. I will clean this up a little later.
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    Blake, thanks for transcription!

    CFO also said powerwall is seeing "off the charts" demand, more then anticipated. He also said Solarcity may grow faster if ITC is not extended.

    CTO Peter Rive said they already have micro grids set up internationally and are seeing strong demand in general. CTO also noted that California is pay $190 per kW year, potentially more then the $10 per kW month mentioned in Greentech article. 50/50 cut with customer already built into the customers contract right now. Peter also noted the powerwall is a two man lift and there are handles alread imbedded within the powerwall for this lift and installation onto a wall.

    CFO said they hired 1300 people in Q1 or 433 new employees/month. So at total at the end of Q1 ~10250 employees.

    CEO is very pleased that total installation costs stayed flat as they carried more overhead then installed. COO Tanguy Serra noted they are hiring and developing capacity in a just-in-time process to not get ahead of deployment growth with costs. A whole sophistacated algorithm to hire and grow capacity in balance.

    Also, big negotiations on aggregation and capital stream already being conducted for 2016. Big ABS offering on its way soon.

    overall, beat on top and bottom. Company record bookings at 237MWs. Contracts grew by 1.2bln well over the $800mln inQ4. Prospects into the future are good.

    Potential areas to track: Arizona SRP lawsuit. Right now in discovery process, no court date set yet. However, as soon as the case is settled, Lyndon Rive said they will continue the growth in Arizona.
    California rate change will have a positive effect on growing solarcity's market.
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    He didn't actually say "off the charts" demand, unfortunately, but he implied it. Here is my transcription of what he said in the quarterly call with regards to the power wall:

    "As many of you know, we announced new versions of our solar battery systems in all of our business units: commercial and government, microgrids, and residential. We're seeing great growth in commercial and microgrid offerings and the new Tesla batteries are helping to widen the addressable markets where we can offer those systems. On the residential side, our fully installed solar battery system costs are about 1/3rd of what they were a year ago. We expect costs to decline further as manufacturing scales, and over the next 5 to 10 years, these cost reductions will make it feasible to deploy batteries by default with all of our solar power systems. Our solar back-up battery system will sell for $5000 as an add on to a lease or a PPA, which is comparable to other backup generator options. It is important to note that the Tesla price of $3500 doesn't include the inverter, permitting, installation, management software, and electrical equipment to wire the circuits that need to be backed up. All of those things are included in our turn-key service in our solar battery systems. Interestingly, the residential backup generator market is actually larger than solar, with over 3.5% of residential customers having back-up generators. The industry leader in this space had over a billion dollars in revenue last year, and had seen a 12% compound annual growth rate over the past 10 years. Now extending the appeal of SolarCity to the traditional market is interesting, but it's a small part of the strategic interest we have in batteries. Batteries spread throughout the distribution system can lower the costs of maintaining the grid and new market structures designed to take full advantage of this benefit appear likely in several states. Our products, and by that I mean the contracts (?) as well as the management software is grid services ready and as these markets develop, there's a 50/50 revenue share model embedded in the contracts that we have with our customers. Now, we're not in the position to estimate what these revenues could be, but it's interesting to note that in California, its currently estimated to cost $190 per kW per year to meet new peak loads. The other strategic options that batteries make available to us are hedges against bad policy outcomes, with examples being changes in net metering and solar penalties like high fixed (?) charges. As always, Hawaii is a postcard from the future, the high electric rates there make economic now what will be affordable in other markets with further cost reductions. As a result, we will be offering a 0 down lease in Hawaii next year that will give customers the ability to go completely off grid. With that said, I want to reinforce that customers removing themselves from the grid is a bad policy outcome. There's so much value in distributed energy resources, so we're hopeful that utility business models will adapt to embrace solar with batteries rather than penalize adoptions, which in turn will encourage good defections (???)."

    The question marks are me second guessing myself over what word he actually said.

    EDIT: Foghat is correct, I'm quoting the CTO, Peter Rive, and he's quoting the CFO at a later time in the conference call (I can't seem to find where he said that without re-listening to the whole thing). Oh well, I guess I'll wait for the Seeking Alpha transcript.
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    I think you're quoting the CTO. I'm quoting the CFO Brad Buss(former Tesla board member). Brad Buss during the conference call said "off the charts" for powerwall. He's pretty emphatic. I especially like his line about competitors putting two "bullets to the head" since they won't be prepared with the necessary cost structure post ITC.

    as your quoted CFO statement, I think it is very important to note the new revenue model with aggregation asset model with utilities. This could get very interesting for solarcity's bottom line quickly as powerwall deployments rise. Rive said they expect to include powerwall by default in 5-10 years, so it could prove to be a significant area for modeling potential future retained value(essentially NPV) which is not currently part of that forecast on any analyst coverage assessments.
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    Yeah, I was quoting the CTO. But I found your quote of the CFO in the seeking alpha transcript on page 5.

    "And in the interim I mean neutral demand for the backup generation that we just announce has been off the charges and way beyond our expectations."

    I think you misquoted him, as he said, "off the charges"     :tongue:

    This is what I am pretty sure he said:

    "And in the interim, I mean, the (indiscernable) demand for the backup generation that we just announced has been off the charts and way beyond our expectations."

    Anyone can listen for themselves between 33:45 and 34:00 in the webcast.
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    Thanks for the transcript blakegallagher. Looks like the company is doing well!
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    Elon on the conference call:

    Pretty much "sold out" through the middle of 2016 within the first week of the offering Powerwall. 38k Powerwall reservations. Could dedicate all gigafactory capacity with overall storage demand trend at the moment.

    There it is... Solarcity is booked through mid 2016 already.
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    http://www.utilitydive.com/news/maine-senator-unveils-unprecedented-federal-distributed-energy-bill/394599

    Looks like the transformation is going to happen. Federal bill to force utilities to value distributed solar (distributed energy resources DER). Either they debundle costs and benefits, or utilities will be forced to buy DERs through 1978 law...Looks like combative utilities are being counter attacked in the court room and in federal legislature now.Solarcity clearly to benefit big time as a result.
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    This link worked for me: Maine senator unveils unprecedented federal distributed energy bill | Utility Dive
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    Thanks... Didn't test the link, sorry about that!

    From Bloomberg:

    "SolarCity�s spokesman, Jonathan Bass, said the company received more customer inquiries about the battery packs last Saturday than it ever did for solar during a one-day period in the company�s history, though he declined to disclose the number."
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    This couldn't come at a better time. I like how this sets out principles for states to work through. This leaves open possibilities for DER aggregators to provide rational intermediation between DER owners and lessors and the utilities. I don't think any of us want to be trading 3 kW of storage capacity in real time, but sign me up with an aggregator who can trade on my behalf and I'll be happy.
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    Really abnormally low noise level in here. This company is a rock star and in the end their SP will dwarf TM. Well, that's what I speculate. :confused: Don't tell anyone though!
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    I agree completely ... unless you include Tesla Energy.... That being said I am 100 percent overweight in SCTY right now.

    There seems to be very solid resistance at 62 and some weak support at 61.50. The last few days it has stayed in that channel or at least got back in it by close every day. I would love to hear what the TA looks like on SCTY. I think if we can hold above 62 things could get pretty exciting pretty quick but I am getting a little worried about falling back down.

    I would hate to see 48 again without making any moves .. but sure don't want to clear this margin I have held so long right before we break to new ATH's. With no 2016 guidance last ER I dont expect it untill Q4 although I guess Q3 makes just as much sense so who knows.

    It will get really interesting if they factory construction finishes on time/early and SCTY can get production up without too many hiccups.
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    finally bought some today... been thinking about it for a while, but convinced this is a solid long term play
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    SCTY has been fantastic for me since I bought it. Up 400%!
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    Glad you are doing so well! Here's to you being Up 1600% :biggrin:
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    62 appears to be a tough nut. But its been done before. I don't know enough to do a proper TA. I also would enjoy seeing TA.

    I observe Lyndon and Peter's conviction and it's like "THE FORCE" is very strong with those two. They are relentless in the company's growth. The team they have around them is rock solid. I'm also very pleased with their strategic acquisitions of Silevo and Zep Solar. Not to mention cousin Elon Musk being Chairman of the board. :wink:
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    Have the Rive's (or Elon) ever mentioned a 'blind faith' future market cap estimate for SCTY?
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    No but they have stated that they plan on being the largest utility in the US and the largest panel manufacturer in the world.
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    I've been thinking about that. They've got a 1 million customer goal for mid-2018. This corresponds to a certain level of retained value, which as a measure of enterprise value seems like it could lead to a sensible long-term price target. I don't have the details handy, but I do intend to post this soon.

    Update... I found an earlier post that works through these assumptions to arrive at a $240 long-term price target for end of 2018. A 4-bagger in 3.5 years would be quite nice.

    SolarCity (SCTY) - Page 118
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    One thing to contemplate regarding SolarCity's long-term growth rate is that in a few years SolarCity intends to include storage, specifically Tesla's Powerwall and Powerpack products, with every installation. This is important because it links the growth rate of Tesla Energy with the maximum growth rate for SolarCity. So if Tesla Energy grows at only 50% per year long term, then SolarCity cannot sustainably grow any faster.

    Now is this a limit on SolarCity, which has been growing about 90% per year, or does it suggest that Tesla will rise to the challenge of going it Power lines fast enough to keep up with SolarCity?

    Seriously, I think SolarCity needs to take an equity stake in a Tesla Gigafactory. They need to lock in this supply to fuel their continued growth.
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    The one million customer goal is so aggravating to me. Management has alluded to how at some point it will start looking ridiculous as a goal and I think we are there. I will be very disappointed if they do not exceed their goal significantly and I think they should have updated it by now to match managements actual goals. Maybe they will announce an updated goal when they announce 2016 guidance. That would really force a lot of shorts to cover.

    SolarCity CEO Lyndon Rive Defends His Companys Long-Term Business Strategy : Greentech Media Here is a really good podcast that I highly recommend for anyone Invested or thinking of investing in SCTY. It is the closest I have heard to the grand plan. If you want to skip to the future market cap estimate spot go to 7:30 . If you want to start at the beginning of Lyndon go to about 2:30 . The full part that includes Lyndon is about 30 or 40 minutes.

    They currently have 218k customers and a net retained value of 2.7 billion. If my math is right that comes out to 12,385 dollars per customer. So if they hit their current goal of 1 million customers by mid 2018 then in q2 2018 they would have a net retained value of ~12.3 billion

    That is oversimplified and does not account for the new factory in cost or returns after its operating. It is also low. If They continue their pace of nearly doubling every year they should hit 1 million customers closer to mid year 2017 then mid year 2018. Hitting either goal should reward current shareholders nicely.

    I think the biggest risk is the factory and getting it up and running and producing (cheap) great quality panels. I think the risk is someone mitigated since New York picked up the tab for the factory and machines that go in it. They still have to make it work well though.
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    I agree the batteries will be huge. They will have great margins on it and it will add a lot of revenue for those installations. I am excited for everywhere that will want Solar City to install a large commercial solar installation with a few Powerpacks!

    An investment in the Gigafactory 1 by Solar City is an interesting thought. I am sure Elon will do whatever is best for both for companies. I love how Elon talked about the Gigafactory as a product. I wonder what Tesla Energy will charge to build a Gigafactory for another company.
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    Thanks, Blake. It was good to listen to that interview again. I'm very impressed with the idea of producing panels at dominant scale to achieve the best cost structure, even a high efficiency panel at the cost of standard panels. As a hedge, they want to have a superior product to sell. So the Gigawatt factory will drive cost efficiency across all the cost per Watt. This will allow SolarCity to address more competitive markets, where utilities offer lower rates.

    I think we got pretty similar numbers for the value of the 1 million customer goal. I'd certainly would like to see them hit it 2017. I'd like you're thoughts on where they'll be in, say, 2025. For the BFPT methodology, I think it is good to set an anchor that is pretty far out there.
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    How about as big as Duke ($53B market cap, 7.3 million retail electric customers) by 2025 for a BFPT
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    Honestly I have no idea and I doubt the company does either hah. I am guessing by that time their will be some International expansion and I have no idea how to model that. I would also assume by that time they will be the largest panel manufacturer in the world with the best margins. The number I would most likely get would be so outlandish I would have even less credibility than I do now with SCTY lol.

    With SCTY making new highs with sustained heavy volume on little (new) news, Sure feels like this could be the beginning of a sustained short squeeze!
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    As I've followed Warren Buffett's advice about looking at the management of a company before investing in it like a did with Tesla, I took the same approach to SolarCity........and that's way when all the naysayers to slightly naysayers go on about this company, I am not worried. This video was released in March and I didn't see that it had been posted yet.....and hot damn do I love how Lyndon Rive thinks and his attitude towards the future. This video just reaffirms how well this company has done and how big it has yet to get!

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    Does anyone know what is happening with SolarCity's Silevo acquisition? They were selling solar panels before SolarCity bought them, but I can't seem to find anywhere to buy them now.
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    I'm pretty sure what SCTY is doing with that is using the plant to manufacture panels to get you to sign up for SCTY service. That play was just to bring vertical integration to bring profitability up in the long run.
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    Lyndon talks about this a little in the video above - it's also to get ahead of the tax incentive that is going away so they can still keep their prices down. It's an extremely smart move that has been thought about years in advance.
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    So they aren't selling them to distributors anymore? Just using the panels in-house?
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    MRR

    I'm thinking around $500B in 2025. By 2018, retained value is about $14B. Market cap at twice reined value seems about right for growth. So $28B market cap in 2018. If they grow at Musk's rate of return, 50%, for 7 more years, this leads to a MC of $478B in 2025.

    What do folks think of this concept of a 50% Musk rate of return? I am basing this on his personal track record as a self-made multibillionaire. Musk knows what it takes as an entrepreneur to grow business reliably above this rate. It seems that any business that cannot grow like that is just not going to engage his interest. Why would he waste his time even if only as a chairman on an enterprise that was only capable of growing at 25% annually. I also expect that his familymembers in business have also embraced this way of looking at the world.

    SolarCity has been doubling every year for quite a while. The global intallation of solar can double 6 more times before solar produces even half of the electricity demanded. Storage and microgrid opportunities likely double the market potential of solar alone. So certainly the Rive brothers have the opportunity to keep growing this thing well above the Musk Rate of Return for the next 12 years, and they have the entrepreneurial chops to pull it off.
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    that is correct they will use all panels in house for the foreseeable future

    I have a feeling they might be using them all on comercial flat roof applications
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    I would be thrilled if that happens. So far, officially, I only heard Lyndon saying his ambition is to make SolarCity into the world's largest 'energy' company and explicitly refrained from stating a time frame. This is in one of his lengthier old youtube videos.

    XOM is the world's largest energy company today with a market cap of $364B.

    Right now there is literally only one company with bigger than $500B market cap, which is Apple. The next one is MSFT at $385B.

    So $500B is a tall order, let alone reaching it in 10 years. It's not impossible given that it's a Musk based company. If colonising Mars is possible, why not this. But nevertheless it's quite a bit of stretch.

    I would be totally thrilled if it happens though.
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    Yep, it's a tall order.

    Ten years ago, May 2005, Apple was trading at $5.25. Today it is at $131. That is 25x increase, 38% per year average share growth. This is close to the order of growth I'm contemplating for SolarCity.

    So SolarCity currently has over 200k customers on multi-decade contracts. They target 1 million mid 2018. Growing at 50% per year for the next 7 years gets to 17 million customers by 2025. Meanwhile, the economics for solar and batteries improve, while utilities struggle to recapture more cost of obsolete capacity from fewer ratepayers. Wthin the US, 17 million customers is a small share of the market. If that was not enough opportunity, SolarCity could enter other countries and already has with its microgrid service.

    So, yeah, it's a tall order, but it is a huge addressable market.
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    Market capitalization is but one way to measure size, and it's an extremely fickle one. Petrochina, I believe, has hit the $1tn mkt cap level, and now is about one-third that.
    Bbls oil produced? Bbls oil/equivalent? BTUs? TwHs? Gross revenues? Profits? # of employees?

    Lots and lots of determinants of size.
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    True. What my proposal for a long term price target is actually based on is retained value, which is the net present value of existing service contracts and financing discounted at 6%. I've also made the assumption that market cap will be twice the retained value, but that's where the fickleness comes in. Retained value should be the biggest component of worth, but other revenue streams may come to light such as DER aggregation service fees. And of course growth potential has value beyond existing revenue streams. So the market can be pretty fickle about what price is put on growth. For now I am pretty happy to focus on growth of retained value. The size and value of SolarCity's customer base is truly fundamental and growing at an astounding rate.
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    The risk factor for SolarCity is, essentially, bad loans. If there's a high default rate, they could be in big, big trouble. They're basically a financing company.
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    There are a few other risk factors for SolarCity. Yes, bad loans, or rather a severe downturn in the economy might make some people think twice about paying their SolarCity bill. Unlike a real power company, SolarCity can't just shut off the power if a homeowner doesn't pay the bill.

    But the stock price is based on future growth too. So, will the ITC get renewed? If it doesn't, then that will increase installation prices and affect new installations. What happens if interest rates go up significantly? That too will make SolarCity's power more expensive and thus reduce new growth.

    So yes, while SolarCity is very well positioned and is executing well, it does have some potentially big headwinds ahead.
    �
  • 1/1/2015
    guest
    SCTY - NASDAQ

    Take a look at the investor presentation. It addresses credit risk and ITC preparedness, plus everything else you want to know about the company. Credit risk is low and may continue to be lower than that of mortgage loans. (With mortgages, there are prepayment and default risks that depend on home prices which do not so much apply to leased solar installations. So my view is that mortgages are riskier financial priducts.)

    ITC preparedness is a big issue for management. This is why they are pressing toward an installed cost of $1.9/W and SG&A cost of $0.6/W for a total of $2.5/W in 2017. At this cost, they can continue to grow through the ITC reduction. Actually the installed cost may be the more critical peice. Many competitors will not be able to survive the ITC reduction. Reduction of competition may well reduce sales cost as cost of customer acquisition goes down. Also they intend to integrate Powerwalls with all systems at this time which should also reduce sales and marketing costs on a per Watt basis. So this makes compressing the SGA cost component potentially easier than the installation component. On the installation side, the Silevo acquisition and Gigawatt Factory are critical. They are pressing toward high effiency panels, 24%, at standard costs. This reduces the balance of system costs and labor cost per Watt in addition to keeping the panel cost competitive. They will also be able to install more watts per rooftop and accomodate complex rooftop geometry. Again pairing with Powerwall units will also facilitate increasing watts per rooftop. (Currently, I figure that they install 5kW per customer, but we should see this increase over time, which improves all the costs per watt.) So, yeah, ITC will be a challenge, but I think SolarCity is up for this challenge and will be even stronger coming out of it as inefficient competitors are driven out of the market and rooftop solar proves it can compete with any energy source without government incentives.

    To this last point about competing with other energy, new NG capacity comes in at a levelized cost between 6.9 to 9 cents per kWh. And this does not factor in transmission and distribution costs which add in another 5 cents per kWh. So if SolarCity hits the $2.5/W target, this leads to a levelized cost about 6c/kWh WITHOUT SUBSIDIES. Thus, they beat natural gas by a cent and get to pocket a chunk of the 5 cent transmission and distribution cost ratepayers would otherwise pay. So regardless of ITC, this is the cost structure that will truly enable rooftop solar to disrupt the energy market.
    �
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    guest
    Thanks. There is still interest rate hike effects. Financing costs will go up.
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    guest
    the bigger risk in my mind-
    In say the 10 year time frame, when current leases cost more than double the going rate of new systems at that time- It may actually be cheaper for an owner to default and replace. I think there is a potentially massive arbitrage created by the massive cost reductions coming in newly produce systems, (many funded through roof replacement etc); and are 30% or less of current lease rate costs. I believe we are going to experience a technological (and volume driven) cost curve that rivals the semi-conductor and matches the device throw-away-and-replace-obsolescence experienced with computers and similar. This will come concurrently with both PV and Captive storage combined.
    I acknowledge you have to believe these reductions will occur to be worried about this scenario-
    but since I do...
    then I do..
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    guest
    I'm not sure I understand (English isn't my native language). You're saying that if another recession hits the US, Solarcity customers will stop paying their lease and then replace the solar panel + home storage with newer, cheaper PV systems?
    �
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    jhm beat me to this. But will post anyway :)

    Potentially high default rates is a *very* overrated risk for SCTY.

    1) Their Retained Value calculations have a discount rate of 6%. This is higher than average 30-year mortgage rate which is at 3.89% right now.

    On the contrary SCTY's default rates are lot lower than normal mortgages. They have a chart in one of their investor presentations.

    So default rates are more than adequately already priced in.

    2) SCTY checks home owner's credit before giving out the contracts or approving transfers. There are minimum requirements and they don't take subprime borrowers.

    3) If a homeowner defaults on their contract, they would be paying a *higher* amount for electricity from utility. Naturally it means the homeowner can't afford utility rates either.

    How many households have you come across (in your lifetime) that can't afford utility electricity and live without power? Whould they be qualified to get the panels/contract in the first place?

    - - - Updated - - -

    To add, one should be willing to mess up their Credit to default. There is a cost to it. How many people will "default" just to save a few tens of dollars per month? especially prime borrowers.

    - - - Updated - - -

    Credit spreads will decline as they build longer track record over time, especially with their low default rates. So even if benchmark rates rise, their cost of capital will be flat, up to a point.

    Only if you are expecting some sort of hyperinflation, where interest rates go up like crazy, *and* utility rates won't go up, then SCTY will have a problem. That is extremely unlikely.
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    guest
    No- it's not recession related- these are long term (20 year-ish) leases.
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    guest
    No but if people's economy starts falling apart the will start defaulting on their different loans. And they might choose to not pay their SolarCity lease before they stop paying the home mortage or car loan for example. In this case it's not like Solarcity can just show up and take down the panels and demount the whole system, that would be very costly for SC and they'd be loosing a lot of money either way.

    If you don't pay your car loan for serval months a debt collector comes and takes your car. If you don't pay your mortage the bank forcloses, you're evicted and the bank sells the house. What happens if you don't pay your SolarCity lease?

    But I agree with other posters; the risk if mostly just theoretical and since the system made financial sense in the first place something truly remarkable would have to happen in the electricity markets for it not to make sense even during a recession.
    �
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    guest
    But their systems are internet connected, with software monitors etc. Couldn't SC just disable/modify inverter firmware remotely?

    And in that case customer would had to pay utility prices anyway...
    �
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    guest
    Yes, they can and they will. It is clearly stated in the contract. So the consumer would have to pay for electricity anyway. So why would they default on SCTY contract, mess up their credit and then pay to the utility a higher fee? That doesn't make any sense.

    People generally take contracts seriously. Even when there is an arbitrage opportunity, people don't walk away from contracts. How many people default on their rental contracts just because they found a cheaper rental on craigslist?

    Yes, I agree. It is as theoretical as theoretical gets. Unfortunately, vast majority of the risks I have seen people throw around are all very theoretical. Sort of like, hey what happens to TSLA if there is a big earthquake in California.

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    A sample contract is here:

    http://www.solarcity.com/sites/default/files/solarcity-contract-resi-ppa-example.pdf

    Page 6 talks about defaults.
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    I looked and passed on a Solar City system for my house. My reasoning is as follows:

    1). Solar City was offering to sell electricity to me at 15% less than the current cost of electricity from my local utility.
    2). Solar City embeds a 4% annual escalator in their leases.
    3). I am in the LED business. Lighting consumes 34% of annual energy use in the USA. LEDs are 80-90% more efficient than existing lighting. So as LED utilization increases, it can have a MAJOR impact on macro energy production. If 10% of businesses switched to LED lighting, this could be a 3-4% annual decrease in national energy usage.
    4). Things like the Tesla Batteries at commercial and utility scale will kill off the expensive peak demand production.

    So with 3 and 4 above I can see the cost of electricity coming down substantially in the future even with renewable energy mandates. So if your Solar City lease increases 4% annually, and if the cost of electricity is stagnant or decreases in the future, your Solar City lease can end up costing more than buying from the utility. I can certainly see some consumers saying go ahead and take the solar panels away, it is cheaper for me to buy from my utility.
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    If the peak demand suddenly drops all the peaker plants will be stranded assets and cost could go up for the average user as the utilities are forced to spread out their cost over their entire user base.
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    guest

    I take an economist's skepticism at the emboldened portion of your argument. On the margin, I suspect, the American consumer will respond to a diminished electric bill by finding other ways to consume electricity. A second (3rd/4th) EV? A refrigerated pool in Yuma for the pet polar bear? A heated pool in Paxson for the koi pond? And so on.
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    Actually, I'm a bit concerned about this as well. What particularly concerns me is the use of escalators. Under the PPAs, the rate paid per kWh goes up 2.2% each year. The assumption here is that utility rates will go up like that and so the customer will be happy just to be saving a few cents per kWh over the utility rate. But I see problems with this. There is the possibility that utilities actually become more competitive over time. If your escalated SolarCity rate becomes higher than your utility rate, will you switch back to the utility? The more likely scenario is that other solar providers may come along to offer better rates. Either way if SolarCity starts to see rate competition, it will have to lower its rates defensively. So why build in an escalator into a 20 year contract if it just exposes you the price competition. The answer I suspect has been that this is the way to hold down the per kWh rate initially, a kind of loss leader. Another problem with this from an investor viewpoint is that this pushes more of the net retained value way off into the future. I would simply prefer to see the cash come in sooner than later. I think as a prospective customer I would be more confident to get in a contract with no escalator. The customer gets the assurance that their rate will never go up, not even for inflation. A hedge against inflation is a good selling point, especially for people living on a fixed income.

    Over 20 years with 6% discount, 13 c/kWh with a 2.2% escalator has the same present value as 15.45 c/kWh with 0% escalator.
    �
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    guest
    Has SolarCity always included escalators in their contracts? For some reason I thought their prices were locked in over the life of the contract and that was part of their sales pitch.

    Anyway, 2.2% escalator doesn't seem too bad.
    Looking at EIA.gov Electricity data browser for Avg Retail Price of Electricity from Jan2001, to Feb2015, seems like price increase over the last 15 years is considerably more than 2.2% annually.

    What makes you think utilities would get more competitive?
    �
  • 1/1/2015
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    Cheap solar and batteries. ;)
    �
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    guest
    Plus the need to compete with cheap solar and batteries.

    Not too worried though.
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  • 1/1/2015
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    The Big Play

    SolarCity CEO: Why You Should Buy a Tesla Battery - Bloomberg Business

    I've been puzzling over this interview Lyndon Rive gave. The interviewer was keen on why SolarCity wants to move ahead with the 10 kWh Powerwall weekly and not the 7 kWh daily and seemed to assume that the point of these batteries were so that customers could go off grid. Lyndon was clear that the weekly was just for back up and not to enable off grid living. Moreover, he was emphatic that going off grid would be a really bad policy outcome. Rather, he wants customers to stay connected and potentially provide "grid services."

    In a way, this does not make much sense. Customers stay connected, but get a $3500 battery just for back up. Moreover, we know that SolarCity typically gets 80% to 90% of the meter already due in large measure to generous feed in tariffs. No doubt customers will place positive value on battery backup, but it is not clear how this creates value for SolarCity. It adds cost to the installed system, but there really is not much more energy to sale to the customer. If SolarCity already has 80% share, weekly backup batteries may add another 10% or so, but this marginal gain does not seem worth the extra $3500 added to the average $15000 installation. Certainly adding 28 kWh of Powerwall units at a cost of $12k so that the customer can go offgrid does not make sense for SolarCity.

    So what is it? What is the play here that makes this really work for SolarCity. Again Lyndon's insistence that going off grid was a bad policy outcome offers a clue. The big play here is offering grid services. When offering grid services the utilities themselves become the customer. It's not at all about selling a few more kWh to customers. It is about aggregating all those rooftop systems with just enough storage that they can lever feed in to the grid so as to provide peak power, voltage regulation, demand response (charging) and perhaps other services I do not understand at this point. SolarCity need a big enough book of PV+storage to drive utilities and regulators to the bargaining table to Crack open enough regulatory leeway that they can begin to sell these aggregation services. Once this happens the weekly Powerwalls will be quickly paid for and daily Powerwalls will be quickly deployed. This happen because the 2 to 3 percent of households within SolarCity's book can now be deployed to provide value to the other 97% of the utility's service area. This is a very big play that my just double the value of each installed.system.

    If I am correct about this big play, then it will be a critical development for shareholders. It is the sort of thing that could double the stock in a very short timeframe. Of course, we have no guarantee that SolarCity can pull this off. It would require major policy changes. So the actions of utilities and regulators are critical. But I also feel that some sort of new arrangement is inevitable. Solar and the utilities are on a collision course, and at some point the existing framework falls apart. Off grid is a really bad policy outcome because distributed energy resources have something to offer everyone.

    So let's see if we can dig into this, and figure out when and how this can go down. If we can anticipate this transition, it will be a huge investment play.
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    guest
    Excellent write up and analysis jhm. I agree with your general thoughts here and coupled with micro-grid strategy is the incremental step to invert the relationship...
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    guest

    Somewhere there is some audio of Lyndon spelling exactly this out. He said there is one (or two) markets that are working on changing policy to allow this and every contract has this ability built into it with a 50/50 split between the homeowner and SolarCity. He also mentioned that the Utilities need this about 50 times a year which is what they 10Kw packs are designed for.
    �
  • 1/1/2015
    guest
    Very nice. It would be good to find this clips. The video I reference above has a few statements about grid services but does not really speel this out. Its wonderful to see this is written into contracts. This shows serious forethought.

    - - - Updated - - -

    Yeah, microgrids hold big opportunity for turning utilities into customers. If utilities really do have major problems with bidirectional power flow, then microgrids can handle power sharing with the microgrid and provide grid services in aggregate back to the grid. So if there really is a problem here, SolarCity can solve it. Otherwise, the utility may just be bluffing.

    Obviously, the next step beyond rooftop power for homeowners is sharing rooftop power with neighbors. Feeding in to the grid and microgrids are both ways to do this. The bad policy outcome is losing the ability to share power with neighbors.
    �
  • 1/1/2015
    guest
    I believe the "0 dollar down" plan always had an escalator clause, but they offer other plans as well that remove the escalator, but require an upfront payment.
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    Solar PV costs to fall another 25 per cent in three years : Renew Economy

    Canadian Solar anticipates reducing the cost of PV modules another 25% over the next 3 years. Much of this reduction is derived from increasing efficiency, and they have the goal of increasing efficiency 0.5% each year. Gains due to efficiency also reduce much of the the balance of system costs. So this drives down the total installed cost of solar. This good news for SolarCity and other installers. within this timeframe ITC could be reduced from 30% to 10%. Thus, installed costs need to come down about 20% to preserve today's level of profit.

    Silevo is targeting higher efficiency, 24%, modules. SolarCity will continue to source panels from other makers while sourcing from Silevo. So it is critical that all panel makers drive up efficiency and drive down cost. The competion is not so much within the solar industry as it is with natural gas and coal plants. The combination of solar and storage needs to drop below 6.4 c/kWh in utility installations and below about 10 c/kWh in rooftop installations to beat natural gas. Solar alone is pretty much there and whacking another 25% off the cost seals the deal, but solar needs stoarage to come down to become highly dispatchable.
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    guest
    I'd put it "So it is critical that all panel makers drive up efficiency while driving down cost per Watt."
    Cost per Watt is number one, efficiency is two.
    Silevo's potential for lowering price per Watt was what attracted SolarCity, as I recall.

    For now, I think that there's enough high-priced electricity and spare land to allow significant growth and plenty of time to eat away at the margins. I also think you need to consider that longer-term competition with natural gas is liable to be with higher natural gas prices as demand for natural gas continues to increase, including with growth in sales of electric vehicles and more electrification of heating. As renewable share significantly increases, then natural gas use will fall again (as seen with windy years in Texas).
    �
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    guest
    Lyndon Rive is the one who points to high efficiency as a critical success factor for SolarCity. The company aims to get high efficiency (~24%) panel cost down to that of standard efficiency panels (~20%). This means that for given rooftop installation the total installed cost of the system is same, but with high efficiency panels SolarCity produces sells 20% kWh over the life of the panels. Put another way, this decreases the total installed cost per Watt by 17% = 1 - 1/1.2. So 20% more revenue for the same cost is a pretty big deal, and it is almost enough to bridge the reduction of ITC from 30% to 10%.

    The longterm prospect for solar is that the industry continues to drive down the installed cost per Watt year after year. Beyond a certain point solar is cheaper than NG on an installed basis and it really won't matter what the cost of NG is. We have a similar situation with electric vehicles once the cost of making an EV is less than the cost of a comparable gas vehicle, then it does not matter how cheap gasoline may become.

    Of course, in the near term it is sufficient if solar is competitive with NG including operating costs. In the spot market, solar always can operate at a lower positive spot price than any fossil generator, without having to pay out for the privilege of idling when spot prices go negative. This puts all fossil generators at economic risk. The more impacted the spot market becomes with solar and wind the lower the utilization for all fossil generators. All levelized costs for fossil plants depend on making certain utilization assumptions. As utilization declines the levelized cost goes up. Basically the capex is amortized over a smaller base of lifetime kWh generated. As this happens it makes little difference what the price of NG or coal may be. What matters is getting enough profitable utilization hours to pay back the cost of installation.

    How does the impact of renewables on the spot market impact the relative economics of utility solar versus distributed solar. Utility solar is directly exposed to the spot market. While utility solar can sell into the market at below fossil at any price and avoid paying for idling when spots are negative, it too suffers from the problems of oversupply in the generation market, which calls into question whether capex can be paid off. (Really low PPAs may in fact be pricing this risk in to some of the amazing low kWh prices we've seen.) All utility generators be they fossil or renewable are at risk of an oversupplied power market. But what about distributed solar? Distributed solar has the distinct advantage of being paired with consumption without cost of distribution or transmission. This pairing minimizes the risk of an oversupplied spot market and the friction of transmission. Under net metering, distributed solar is exposed to a generation glut, but the worst that can happen (in an unregulated market, not that such exists) is that feed-in tariffs go to zero. This essentially pushes the distributed solar owner into consuming all the power they make, but with appropriate sizing of the installation along with batteries, this risk has a limited downside. So the key difference between utility and distributed solar not that one is marginally cheaper to install than the other, but that one is highly exposed to the risk of generation oversupply and the other has locked in local consumption to mitigate this tisk. Until their is sufficient grid storage to drive out most of the fossil overcapacity and stabilize the spot market, utility solar will be a much riskier play than distributed solar. It could easily take 20 years or more to resolve the generator glut.
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    guest
    I believe that the "cost - vs - efficiency" argument is, indeed, specious on first look; perhaps a more understandable way to look at this is to argue that most of the production methodologies to drive down cost-per-watt already have been achieved given current photonics conversion rates, therefore the next significant steps in making major cost reductions will accrue as a result of greater 'efficiencies' - i.e., photonics conversion rates. The bottom-line result is the same: a lower cost per Watt.

    That said, I write "most...production methodologies..." at my peril. One can envision an entirely new method for creating PV capture that would cost, say, 1% of today's panels - something like a spray-on paint, for example - it might still have a piddling 16-18% efficiency ratio yet could bring the bottom line to something far lower than what we see today.
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  • 1/1/2015
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    JHM appreciate your hard work, thank you. Also BFPT on TSLA! Just wondering, were you thinking of doing the same for SolarCity? Again, thanks for your work! :smile:
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    guest
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    guest
    Any news causing the big drop today?
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    guest
    Maybe realizing that most buyers should run away fast from solarcity? The last quote I saw was $5.10/watt.
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    guest
    Where did you see that? A link would be helpful.
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    guest
    on paper

    Looking for a really expensive solar install?
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    guest
    Interesting that you make this post on the day you join TMC. Any link or anything beyond a vague comment would be appreciated. Clearly you don't like Solar City.
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    guest
    According to their May 2015 Investor Presentation, their fully loaded cost of installation is $2.95/W, and for leases and PPAs, their retained value is $1.86/W. So retail sales price around $5/W would make them indifferent to selling or financing. It seems quite appropriate for their business model. If a prospect gets a better offer from another installer, it's fine for SolarCity to pass on it. They are already busy enough doubling their book every year and don't need to cut prices just to undercut local installers. Of course, they could, if they wanted to.
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    guest
    What is "like"? I'm not in a solar related business. I have had no contact with solarcity.

    I do recognize a business model that has no value except selling unsophisticated customers during the solar "gold rush".
    Here is what a mature solar market looks like. Note the prices are AUD:

    Residential solar PV system prices for May 2015 - Solar Choice

    Solar is simply an integrated home appliance, like a furnace or air conditioner. Who pays a company $27K to install $7K worth of HVAC equipment? The difference in HVAC is that the technicians are higher paid than electricians and roofers.
    Solarcity should be able to do well until the market cools off and buyers become sophisticated. At that point it becomes just a local business, like all other residential trades. Residential trades work for a daily wages, as electricians do today installing solar in Germany and Australia.
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    Solar city sells power. Selling panels is a side business.
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    If they just sold power, there wouldn't be a lien on the house for an overpriced solar system. The reality is that most people will pay solarcity for their costs plus a profit, and then pay them again to remove the lien when the house is sold. The great american business tradition of getting as close to a scam as possible without stepping over the legal line.

    What they have managed to figure out is how to take the financial benefit of solar from the homeowner and keep it for themselves. Clever!
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  • 1/1/2015
    guest
    Electracity, please tone down your condemnatory language. This is not a scam. This is business that is competing directly with the utilities. They build their business where utilities are charging over 16 cents/kWh. What SolarCity is a complete installation and financing package for no money down so that the customer pays only 13 cents/kWh. SolarCity is doing an excellent job at competing directly with these monopoly utilities and bringing customers relief. I would encourage you to take a closer look at their business model to see where improvements could be made. I would challenge you to come up with a business model that could offer power at 11 cents/kWh or less with no money down. If you can figure out how to do that, then fantastic. We need smart entrepreneurs to enter this space. For SolarCity's part, they see a path to reduce their total cost from $2.95/W to $2.50/W by 2017. If you see a way to achieve cost reductions fast, then by all means share that with us, or better yet go into business and show the utilities how it's done.
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    guest
    So they should put the panels on your house and just trust you to pay them? SolarCity is a business and the one business making the most difference to the adoption of residential solar. You can complain about their pricing, practices or whatever else but they are adding customers at a breakneck pace. So obviously they are doing something right even if you don't agree.
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    Is there a lien on the solar home?
    No. What you�ll find on the title of a home with a SolarCity power system is a UCC-1 fixture filing. A UCC-1 fixture filing is not a lien against the home. SolarCity files a Uniform Commercial Code Financing Statement, or UCC-1, on all of our solar energy systems in the real property records where each system is located prior to or when the system is installed. We file the UCC-1 to notify anyone who might perform a title search on the address where the system is located that our property, the solar energy system, is installed on the home. This filing protects our rights as the system�s owner against any mortgage on the real property. If the lender that holds the mortgage on the real property forecloses on our customer�s home, the UCC-1 filing protects our interest in the solar energy system and prohibits the lender from taking ownership of it.

    If a UCC-1 is not a lien, can it be removed?
    Yes. We are aware that lenders prefer not to see anything on the title so it�s common practice for us to release the UCC-1 fixture filing for financing purposes and re-file later. In fact, we have a dedicated team for this purpose to ensure that there is no disruption to the sale, purchase or refinancing of your home.


    Selling or Buying a Home with Solar Panels | SolarCity

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    electracity,

    You are here just to spew nonsense with ZERO research.

    I'd say lets not feed this troll. We fed him enough.
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    I'm sure their lead to sale ratio is falling fast. But they are in a strong up market. I'm evaluating their value proposition, which is horrible. No one should be signing a solarcity contract. Have you compared solarcity to alternatives in a particular market?

    You can say "good for them" for finding naive customers. But how is that a long term business plan? Do an ROI calculation from a homeowners perspective. Look at mature solar markets in other countries. Solarcity has no IP, and no barriers to entry to their potential customers.

    Is this investing, or did I stumble into a solarcity cult of some sorts? Tesla is a business with fantastic upside potential. Solarcity is not Tesla.
    �
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    This.
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    You go to the bank, take out a small loan, and install a properly price system you then own. This will return far better than 11 cents. There is far less economic risk than a twenty year contract.

    There no need for entrepreneurship in this space any more than is required to replace a home air conditioner. "Innovative solar financing" is a short term move to trick some customers, and apparently some investors. Existing lenders and regular electricians provide the same service at far lower cost to the consumer.

    That leaves solarcity business as a modern day loan shark making high interest loans to people without adequate credit.

    Solar will scale huge because it is a very low cost commodity business. Commodity equipment and commodity installers. Look at Germany. Look at Australia. When solar prices are far higher in the U.S. than in Germany, the important question is "why?".
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    Screen Shot 2015-06-09 at 11.23.05 AM.png

    - - - Updated - - -

    Because you don't know "why?" it must be SolarCity's bad business practices.
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    Electracity, your inflammatory language and unsupported accusations are out of place in the forum. If you persist in this disrespectful manner, you will be regarded as a troll. It's your choice.

    I do encourage you to educate yourself of SolarCity by reading the investor presentations. For example, it you suspect that SolarCity might be having increased difficulties acquiring new customers, then you need to know that SolarCity actually publishes its sales expense as a ratio to Watts. If marketing were to lose traction, then investors would know about it by observing sales expense per Watt increasing over time. So go ahead and look it up and tell us if this cost component is on the rise. You will be much better received on this forum if you do your homework and bring meaningful facts and analyses into the discussion.
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    guest
    I would like to see your math on this bank financing scheme. I work in banking and am very familiar with the mathematics of financing, but I do not see how can get financing good enough to get to 11 c/kWh. The median system that SolarCity installs generates 1412 kWh per kW installed. At 11 c/kWh, this is annual loan payment of $155.32. This size payment per year on a 20 year loan at 5% interest would get you a loan of $1969.41 per kW, about $1.97/W. Plus, the borrower has to pay back the full loan whether the system actually produces 1412 hours per year or not and cover all maintenance and repair. I'm not aware of any bank where you can borrow money with the mere promise to repay 11 cents per kWh used from the solar system you elected to install. But even if you use a more traditional home improvement loan, I do not see how you get enough financing to fully install your system.

    Moreover, is this do it yourself financing business model is taking off in this country? Do you have any data to support the contention that self financed rooftop solar is growing as fast as leased solar?
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    Leasing a car rather than buying one is usually a bad financial investment, yet there is s huge market for it. Solarcity obviously also fills a need.
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    SolarCity does provide loans for those who don't like PPAs/Leases. I believe they do outright sales too for those interested in paying full cash (wether the cash is borrowed or otherwise).

    If competitors provide better prices or better terms, their market share won't be growing the way it is growing.
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    There is a common misconception that mom and pop shops are solarcity competitors. I have a solar system installed for $2.50/W but I would not consider that competition for SCTY because I have no peace of mind for 20 years, no online monitoring, nobody pays me if the system performs less than expected, I still have to replace the inverter in the 20 year period. Even though the panels have a 25 year warranty, that only applies to electricity production, the rest of the warranty is only 10 years (which is wierd - if the panel breaks because of a defect and stops producing, is it covered after 10 years? I have no idea, probably not). If my roof leaks from the panel mounts after 5 years, who is responsible - Me. I have a string inverter as opposed to SolarEdge which solarcity uses. If I added all that to my system (solaredge, online monitoring, inverter extended warranty, 25 yr warranty panels = sunpower is the only option that I know), I would be pretty close to what SolarCity quotes.
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    Are you leasing your HVAC from a hot and cold air provider? No? What if it breaks? What if it leaks?
    Has the market just not appreciated the huge opportunity in HVAC leasing?

    Within ten years panels will be $.20/watt and inverter will be $500. The main hardware components of a typical residential system with be $2K at most. Yet solarcity customers will be half way through a twenty year lease.
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    And the effect on SCTY is?

    (Can a mod please move electracity's posts to a different thread about the merits of the model itself?)
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    For disclosure, I sold out SCTY in 2013 at $55 after having bought in the low $30 range as I had trouble with the risk/reward at the time. Now that it's $55 again and it's a year and a half later it's starting to look attractive to me again, especially with exciting developments like the NY factory they are building.

    In trying to understand your example, are you trying to state that the financing would cost you $1.97 over the life of the loan? I'm not sure what you are trying to show here.

    Lets look at it another way. The system I had installed from a non-SCTY installer cost me $13,203 after tax credits for a 5.886 kWh system. If I used a loan instead of cash (since most people need loans or lease arrangement) and plugging this value into a loan calculator for 20 years and 5% (your numbers) gives me a payment of $87.13 a month. It's supposed to make 8502 kWh a year, which averages 708.5 kWh a month. My utility charges $0.135/kWh so that would have been a $95.65 payment to the utility each month for this amount of energy. In this example I would still save $7 a month right now (and more when the utility raises rates each year) and at the end of 20 years I would own the system and pay practically $0 per kWh for the rest of the life of the system, which I expect to be a while because I went with Sunpower panels. It will last at least 5 more years as SPWR has a 25 yr warranty. If I could get 0.11/kWh with a SCTY lease that would be $78/month payment for now, which is 9 dollars cheaper than the loan scenario at the start but with the escalator will quickly match and pass the loan scenario and the kicker is that at 20 years I do not own the system, so I have to sign a new lease and I know it won't be 0 cents a kWh.

    I think the biggest rebuttal here is you can't get 20 year loans for solar panels, at least not that I could find, so if you can't afford huge loan payments and or the cash then SCTY is your only option (and not a bad one!). I did cash for mine but got a loan just for the tax credit portion until tax season came. Am I missing something else? Even if it's better for people to get loans and do their own I agree with the value that SCTY provides. Obviously the SCTY business model is working and I think it's great but I would like to know what I'm getting back into.
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    Within 10 years SCTY "will" sell systems standard with storage, they "will" share the revenues from providing peak shaving services with you.

    You must not have heard of these guys:
    The Home Warranty Leader – American Home Shield

    Think of Solarcity as the solar "applicance" provider with that bundled in.

    There are so many things that a network of solar + storage "will" do that not being on the network cannot provide.
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    Yes! A terrible financial decision, but some people do buy this sort of thing.
    Insurance always has a negative expected value.

    That doesn't require solarcity. Just install a solaredge inverter to be powerwall compatible in the future. Tesla Energy will likely sell wholesale service, not solarcity.
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    Question:

    I live in Canada and there's no SolarCity here. The thing that's keeping me from installing solar is if I pay for my installation upfront and decide to move in a few years, I'm not sure if I'll breakeven on my initial investment. Potential home buyers would have to be aware of the value of my solar installation and include the premium in the home value.

    For states that have SolarCity as an option, how does SCTY installations compare with non-SCTY installations in terms of the hassle/value of transferring the solar installation to the new homeowner? Would it be accurate to say that a SCTY installation is more advantageous and attractive in this regard for homeowners who are likely to move in ~5 years because the SCTY contract would just need to be passed off to the new owner like any plain old electricity bill?
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    SolarCity does not offer a PPA at 11 c/kWh. Electracity made the claim that financing from a bank would suffice to make 11c/kWh possible. I challenged her/him to show how this is possible. One W can only pay back about $1.97 in financing under very generous terms, if even possible to get a twenty year loan. There is no viable business model Electracity can point to here.
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    First I'd like to welcome you to this thread. It's badly in need of a SCTY bear. I say that despite (or should I say because of) the fact that I'm a SCTY investor.

    I agree with Cosmacelf that the lease model has proven to be useful to a lot of buyers. Many people are capital or credit constrained and a Solar City lease is better for them than no solar system at all. Many homeowners are simply unable to borrow against a new solar system, or at a rate that competes with Solar City's equivalent cost of financing.

    You have, however, brought up a point that's almost never discussed among this thread full of SCTY bulls. What worries me most about SCTY is its ability to maintain its high margins. Like you said, these are boom years for solar. You have pointed out a lot of similarities between the HVAC and solar markets. SCTY's cost of acquiring a new customer is very high compared to their cost of installing the system, although they've made substantial improvements in this area. In the HVAC industry you see most large mechanical contractors focusing on the commercial market. The reason for this is that there are greater margins than in residential. Why? because there are far more barriers to entry in the the large commercial HVAC business. I think you may be correct in some of your comparisons between the two industries.

    Having said that, Solar City has some things going for it that local installers and other competitors don't have. One is their access to better technology. The factory they're building will produce more efficient panels giving them at least a temporary advantage. They also appear to have really good management that is quick to take advantage of new opportunities and laser focused on efficiency. Perhaps the biggest thing they have in their favor over smaller competitors is access to capital. They have already demonstrated the power of this by owning almost the entire lease market, and buying the startup that is the foundation for their new panels. These are some of the reasons I'm holding my long position in SCTY.
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    1) Solarcity can take the credit risk on those customers due to high margins.
    2) Few if any of these customer will benefit financially from the contract. In just a few years these customers will be more informed and disgruntled with the inability to take advantage of low cost solar. Unbelievably, many of these people will have escalators in their solarcity contract.

    It's a clever company strategy. I guess people have bad credit because they make poor financial decisions. Monetize that ignorance while it lasts!
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    I'm not so sure about price reductions in panels going forward. I see them going to at the most half of now and then staying there. Pricing has already been stabilizing and future price drops are more likely form efficiency than cheaper materials. And at some point (I say double of current efficiency), there will be a limit. Also as pricing drops, storage will become more and more popular effectively maintaining or increasing total system price.

    The bear arguments for SCTY
    1. Competition: There is none. Most of the competition is like saying my local convenience store competes with Walmart
    2. Leasing vs Buying: That is the biggest bear argument and people seem to like the leasing model. Start saving from day 1 as opposed to 8-15 year payoff of investment.

    I was kind of ambivalent about SCTY as an investment until I did some analysis for an article on SA. When you look at SCTY as a future utility, their contracted payments and growth in those, it is difficult to bet against them. I think I made some calculation errors in the article but overall it is not difficult to see that their massive borrowings will produce outsized returns and $6B is a decent valuation for the current state.
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    Walmart sells huge volume on tiny margin.

    2014 is the year solar became a lock for becoming a huge business. Yet solarcity stock has declined. I would think that individual investors holding the stock for long term gain would wonder why. Do you understand something about solarcity that industry specialists don't?

    The interest I have in solarcity is buying on the bad news of the federal tax credit expiring. And then selling when the stock recovers.
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    Really? It's declined? From what perspective, yours? I bought in at $10......I'm doing just fine and the stock continues to edge up month by month, year over year.

    The tax credit expiring won't affect this company and you would know that if you read and listen to their plans.
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    U.S. Solar Installations Decline, but 2015 Should Be a Record Year

    Residential solar advancing 76% Q1 y/y, while utility installations are down. Commercial is also declining, but not as much as utility solar. SolarCity is a big contributor to residential solar. SolarCity also competes in commercial solar, like Walmart installations, but residential appears to be more profitable for them. Utility solar will get burnt badly by decline in ITC. It is very price sensitive, and its tendency to favor Q4 installs my reflect heightened sensitivity to tax issues, specifically ITC. Price sensitivity is lower in the residential segment. Commercial will benefit emensely from Powerpacks and other technologies. So in all, this seems to confirm my bias in favor of distributed solar over utility. SolarCity seems to be doing the right thing by staying out of utility solar.
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    @electracity: Some of Solarcity's lease customers include the U.S. military, and companies such as Walmart and Walgreens. Are these customers also "monetorizing their ignorance?" In your view, is every kind of lease agreement based on "ignorance?"
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    Electracity, what makes you think that the ITC expiration is not already baked into the market price? This is an extraordinarily foreseeable event. There also seems to be plenty of room for surprise to the upside, like reducing only to 20% not all the way to 10%, or new incentives for batteries or cooperation with grid, or imposition of carbon tax, or anything else politicians might cook up to ease the transition. So if the market has already baked in a reduction to 10%, and the political deal is not that severe, then the price goes up on this news, not down.
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    A lease has more value to a lot of people than borrowing to own the system. Many of these people are not ignorant and have good credit.

    Wait, you think the tax credit expiring is "news"? If you do, I have some real news for you. On the one hand you suggest the bulls in this thread are naive because they think they know something that industry specialists don't, and then you seem to think these specialists haven't already priced in the expiring credits. Maybe you can explain yourself better...
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    Solarcity in Q1 had a $2500 customer acquisition cost, and retains $2/watt.
    While in Perth, Australia customers in May paid $4888 USD on average for a 4kw system they own.
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    That's a really nice price in Australia, about $1.24/W. It's hard for me to believe that that is a complete picture hower. Consider that the going price for utility grade solar installations in the US this last quarter was about $1.55/W. How is it posible that residential solar in Australia could be cheaper than utility solar in the US? Clearly there are bigger differences here than what can be explained by business models. We can just bring a bunch of Aussie solar installers to the States and expect them to throw up rooftop solar for less than the cost of utility solar. We also cannot lay the blame at US utilities saying that they are too ignorant or unsophisticated to get solar at lower cost. I fail to see how you can get solar in the US down to $1.24/W simply by letting local contractors install it and banks finance it with conventional home loans. If you knew how to make this business model work, you could make a killing installing solar for utilities at $1.44/W. Just do a GW installation and you could net $200M. Pretty simple, right?


    USSMI - GTM Research - GTM Research
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    I believe the price he quoted was after government incentives. It's still a low price and helps make his point that margins are slim in some regions. However, prices in Australia have not been declining like they have everywhere else. Resi solar has a very high adoption rate in Australia - something like 11%. At those prices you can see why!
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    Australia has incentivized solar by subsidizing panels. They also don't have a panel tariff like the U.S., AFAIK. The price is post incentive. I didn't try to make a detailed comparison, but their incentives are roughly similar to the U.S. solar ITC. Germany has no solar incentives, AFAIK, and prices far below the U.S.

    The labor component of the price is Bob the Perth electrician making wages. He doesn't have a $2500 customer acquisition fee. I'm sure Bob complains about too many competitors.

    Here are the first two recent solarcity quotes I find online:

    Hi Guys,
    Hoping to get help from the experts. I got a quote from SolarCity that seems high. So wanted to see what you all think & any suggestions you may have. Also can anyone recommend any local installers?

    SolarCity - $21K for 3.06 KW system

    System Size AC 3.06 kW
    System Location MP2
    Shading (% Sun) 89%
    Direction 154�
    Slope 26�
    Monthly Electric Usage 524 kWh
    Annual Electric Usage 6,291 kWh

    here's another:
    IMG_6510[1].JPG

    Note how the quote is structured towards the absurd PPA. How will they avoid mass lawsuits in a few years?
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    Another one more believable: 10.29 kW DC for $22,230

    But notice, this is SolarCity partner, not SolarCity, which is probably cheaper. And do not forget, if one choose purchase over leasing, one would need to pay retail insurance rate, pay for new inverter in 10-12 years, etc.
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    Electracity, thank you for the examples. The second one is a little easier to follow. I think the purchase price looks pretty good at 7.8 c/kWh. It's less out of pocket when you net out the 30% tax credit, $2.70/W before ITC, $1.65/W after ITC. The PPA price nets out the ITC.

    I don't personally feel like this quote is steering the buyer to select the PPA over the purchase price. At least, it does not have that effect on me. It may actually be that SolarCity is leading more for the Purchase option. Why? Because, if they sell the MyPower solar loan, they actually get more retained value than the PPA, about 50% more, $3.66/W vs $1.86/W! MyPower is a 30 year loan at 4.5%, if you opt for auto payments, of 5% if you don't.

    So here's the cleaver finance question: how does MyPower generate more retained value than SolarPPA? Bonus points to anyone who can figure this out. Hint: If you can, you should work for a bank!
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    Here's an interesting quote from Y a yieldco's IPO that gives an indication of who they are selling PPA:

    The residential solar assets "are leased under long-term fixed-price offtake agreements with high-credit-quality residential customers with FICO scores averaging 765 at the time of initial contract."

    These companies, and likely solarcity, are targeting and selling PPA's to unsophisticated homeowners with good credit. Is this the type of business where homeowners with good credit will continue to be stupid? What will be the reaction of these homeowners when they realize that they were sold by a PPA by a company that obviously understood the steep fall in the future price of self-generated solar?
    Understanding solarcity has diminished my opinion of Elon Musk's sincerity and character.

    http://www.sec.gov/Archives/edgar/data/1635581/000119312515084389/d876955ds1.htm
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    http://files.shareholder.com/downloads/AMDA-14LQRE/3938639145x0x830612/1A32ABBC-4024-44B9-8F81-1B5BD77DD00B/2015.05_SCTY_Investor_Presentation.pdf

    There are 40 million households in Solarcity's 17 markets. The majority of households (53%) have a FICO score above 700. The super majority (2/3) have a score above 650. In successful business, the first priority is targeting the highest probability sales given margin demand. Clearly, if 20 million households have a FICO score above 700, its crystal clear that where any solar business would go. As scale happens, growing the business to meet this tremendous demand, Solarcity reduces internal costs to broaden its compelling product offering to a broader market. Nothing new here or any different for any other solar company or any business in any industry for that matter.

    ITC 5-Year Extension Is In | CleanTechnica
    The ITC is now most likely to get extended. Since solarcity is planning on being competitive without ITC in 2017, this will only support their current 90%+ growth for many more years to come. Solarcity didn't build the 1GW buffalo factory without an expectation of continued compounding growth after 2017. In fact, they are already publicizing a 5GW factory and currently have a provision in the New York state incentive contract to build it in New York. The Solarcity "my power" solar loan is designed to function as the next vehicle to raise significant levels of capital in the absence of tax equity partnerships. Since the Solarcity solar loan has proven to be a popular option for its customers, they are well positioned to thrive in the worst case scenario of no ITC after 2016. Soon they will do an ABS (be rated) with the new Solar loan, which will complete the post ITC capital raising cycle that will enable them to thrive. In addition if the ITC is not extended, many solar companies will not be able to compete with solarcity and either go out of business or be bought up by the larger companies. Solarcity will in fact gain market share as well as increase it's access to module supply at very advantageous prices(due to lower demand from out of business solar companies). See, the ITC expiration will hurt the solar industry, but be a boon for Solarcity for the pure fact that they are prepared for the incentive drop.

    In the end, the biggest obstacle is not in competing with other solar companies, it's not in technology, or anything to do with anything about the solar system sold to customers. The biggest obstacle is political/regulatory. That's it. Situations like Arizona utility rate hikes and permitting/certification delays are the key drag on future compounded growth for the entire solar industry, but most pointedly on solarcity's 90%+ compounded growth. My belief is Solarcity will win it's Arizona lawsuit. Look at multiple monopolistic industries in America's past from the movie business to the telecom business and you will see how our courts have decided. One glance at the Sherman Act and you will see where this is going to end up and it will be truly transformative for the future of distributed generation solar. The Antitrust Laws | Federal Trade Commission

    And with powerwall and microgrid services, Solarcity is establishing a strong position to take the entire national grid to a new level. Solarcity is already has a provision in its contracts that will share profits 50/50 with its customers under PURPA type arrangements. And currently hitting 6GWh/day levels (and rising), if you don't think the utilities are extremely concerned about this, then you haven't been keeping up with Warren Buffet and his near instantaneous rebuke and lobbying effort to get the anti competitive wall built higher. Buffett's Berkshire Hathaway Energy pushing for PURPA reform | Utility Dive

    In fact, here is a clear statement of where Warren Buffet stands on how his energy companies will obtain their fuel sources for decades(and centuries) to come: http://video.cnbc.com/gallery/?video=3000376493

    And not all utilities are fighting against Solarcity, in fact, not many actually are. Currently 44 states and counting with net metering for DG solar customers. Many states are already planning on the solar+storage as an aggregating resource and solarcity is right there in the planning mix(with other solar companies). In New York, Solarcity is one of the newest members of the utility consortium.

    To say that interest and momentum in Solarcity is not building is not really knowing the reality of the situation:

    -- Lyndon Rive #20 highest rated CEO in the United States.
    http://www.bloomberg.com/news/articles/2015-06-10/here-are-the-top-25-highest-rated-ceos-in-america-as-judged-by-their-employees

    -- Solarcity's 30 second commercial has 11 million youtube views. It's two 10 second spots have over 11 million views combined. That means Solarcity has received over 22 million views creating significant web presence in approximately 30 days.SolarCity Commercial - At Home with Ra: Fish Tank Diet - YouTube

    -- Solarcity Buffalo factory supplier conference(next week) is "sold out" with potential suppliers interested in working with Solarcity. Solarcity is seeing high demand for it partnership. SolarCity supplier event sold out - Business - The Buffalo News

    -- 35K+ "solar ambassadors" created by word of mouth promotion sales reflects customer satisfaction is very strong, strong enough to become a solarcity advocate within their communities. #1 marketing tool across all industries is word of mouth, so solarcity has significant momentum in future sales accumulation, especially reflected in the company's all time record breaking Q1 booking number.
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    Nicely done @Foghat :wink:
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    I see finance is not strong here.
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    With all due respect ... please quit calling everyone who went with a ppa stupid. Just because you can not see the value does not mean that no one else can...

    This could be said for any technology. What will people think when they realize that the apple 1 was way overpriced and future generations of computers would be much more capable at a much lower price. I wonder how all those "idiots" feel that bought a computer that is completely worthless now.

    Historic Apple 1 computer sold at auction - BBC News

    Never mind .. looks like whoever got duped by apple ended up ok.

    Might also be worth pointing out that one large reason the price of Solar is falling is SCTY and the massive number of PPA's sold by them and their many competitors.
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    The force is, who needs finance ;)
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    You wouldn't own the Apple 1 in your analogy. The equivalent of a PPA would buying 20 years of computing from Apple that would be provided by an Apple 1 owned by Apple.

    How would that have worked out?
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    What would happen if you bought the Apple 1? You'd pay for the Apple 1 and then if you want to upgrade you'd buy another computer, which would cost you more. And it's a terrible analogy, because even if solar panels became massively more efficient and cheaper in the next 20 years, if you wanted to upgrade you'd have to buy new panels and inverters and then pay for permitting and installation. At this point the main problem in the USA is in the soft costs, rather than the hardware. Soft costs are much lower in other markets. And if soft costs are lower in other markets, then it suggests that large installers in the USA have room to lower cost of residential installation, which is what matters if you're looking at the company's value. The potential issue for now and for the future is if utilities change the pricing model to have higher monthly fees and lower power prices (but lower power prices are good for electric cars). Anything else (lower hardware costs, lower permitting costs, streamlined permitting) would lower prices and expand the market.

    Yes, leasing is almost always a bad deal, and SolarCity is taking advantage of information asymmetry and risk aversion. But unless people are ethical investors, the question for SCTY investors is not whether SolarCity is exploitative, but whether it's profitable now and will be profitable in the future. Is the company taking advantage of current market conditions? Is the company working to adapt to future market conditions? Is the company trying to expand the market? Is it doing it better than competitors?

    It seems to me that mainly you're repeating (a) PPAs are a bad deal (b) SolarCity steers people to PPA. If you want to say to people that they shouldn't invest in SolarCity for ethical reasons, well, you've said it, so now either you're done and should stop posting, or you need to focus on market shifts, adaptability and competitivenes.

    Giving prices in mature foreign markets without any depth or context is unhelpful. What are competitors asking in SolarCity's markets? How do permitting processes differ in foreign markets? How do labor costs compare in foreign markets? Do installations differ in foreign markets? What are customer acquisition costs, and more importantly why are they different?
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    Is it about ethical Investing? Maybe I'm short SCTY based on low profitability combined with unsustainable financials.

    I'm interested in empirical evaluation. Perhaps someone will show up in the thread wanting to get into the numbers. I don't see the point of discussing a company in a commodity market based on one's feelings. My point may be repetitive, but my posts are not. What is repetitive, in my opinion, are the great number of bull posts without depth of analysis.

    If there is a "Bullish SCTY Investors Thread!!!", I promise not to participate.
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    I would love to get into the numbers with you. I missed where you were interested in discussing them. Which numbers would you like to discuss?

    I am guessing you don't like the retained value figure, Should we start there?
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    Sure. I "like" their retained value now.
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    Awesome! That was easier than I thought. Next skeptic please!
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    The thread is mostly people in SCTY long. I don't see value investors.

    Let me quote you from May 14:

    "I agree the batteries will be huge. They will have great margins on it and it will add a lot of revenue for those installations. I am excited for everywhere that will want Solar City to install a large commercial solar installation with a few Powerpacks!

    An investment in the Gigafactory 1 by Solar City is an interesting thought. I am sure Elon will do whatever is best for both for companies. I love how Elon talked about the Gigafactory as a product. I wonder what Tesla Energy will charge to build a Gigafactory for another company."
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    Im failing to see how that quote is relevant. It is pretty apparent I am a SCTY bull. Once again let me ask what numbers you would like to discuss?

    As far as the Batteries adding a lot of revenue with great margins .. I still believe that. Lyndon think that within 5 years every SCTY install will have batteries paired with it. There are huge implications to what services Solar City could sell to the Utilities with widespread distributed batteries.
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    Agreed!
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    With all due respect he is not here. I would love to discuss the numbers with you but I am waiting to hear which ones you have a problem with. I will start. The numbers I think are bogus that management keeps sticking to is the 1 million customer goal. I think it is pretty clear that they will be there closer to mid year 2017 than 2018 but they keep that goal of around 60 percent growth even as they continue quarter after quarter to be in the high 90's percentile. If they had updated their target last quarter the stock would of exploded. In the end it wont matter but I had placed a bet with some options on it that hurt a little.

    If you look at the Analyst reporting on the company (5 buy and 3 hold I believe) they mostly use this 2018 target to model growth and then drop down growth to 15 percent or so for every year after 2018. These are the numbers I see and they all point to Solar City being one of the best buys of my lifetime.

    Another really exciting number for me is 750 million. That is what is being spent on the factory and all the equipment in it by New York. Solar City has to pay a grand total of 1 dollar a year to rent that factory and all the equipment. This has added 0 value to the stock but when the building is finished and equipment is being moved into it (end of this year) I think people will start to think about what a free factory of this size filled with Silevo tech means.
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    SolarCity CEO Wants Partnership with Utilities | Electric Co-op Today Lyndon says his main goal for this year is partnering with a utility .. would be sweet to see a deal in one of Solar City's major markets get done this year. This is one of the many fronts that solar city is going after that could drastically alter their business model. The future is bright!
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    Thanks for that article Blake. Solar in general looks like a freight train heading down the track!
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    PG&E is a strong candidate for this utility partnership Lyndon is advertising through the media right now... As for the CFO buying shares... Brad Buss resigned his Tesla board spot to become Solarcity CFO 9 months ago. He has been CFO for less then a year and is buying shares out of his own pocket, not option grants. His contract calls for big performance grants, so it's a little surprising to hear he buy more on his own. Also, he has stated in previous conference calls how impressed he was by Solarcity's financial discipline and how staggering the size and scope of what is to amass down the road. As someone who came in from the outside a few months ago(now having the most indepth understanding of the financials of Solarcity on planet Earth), he may be the biggest "bull" out there. That says a lot to many traders and investors alike.
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    Musk disagrees with you. Listen to what he said last week at the Edison Institute and then a few days later at the shareholders meeting: 1) Powerwall will be provided to vendors who do minimal markup, and 2) Powerwall in the U.S. will be for backup - "non-economic use" in his words.

    - - - Updated - - -

    The article I linked claims 10:1 sell to buy ratio for insiders

    - - - Updated - - -

    token investment:

    http://www.bloomberg.com/research/stocks/people/person.asp?personId=981217&ticker=CY
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    Strong move up this morning for SCTY. What's up?
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    SolarCity Introduces its First Community Solar Option for Renters - NASDAQ.com

    This is a really promising sort of development, community solar. So far SolarCity's business model has focused on home owners dwelling in single family homes with good south facing roofs. About a third of the US population are renters, and there are many condo owners in multi-unit housing as well. Community solar bridges these limitations, bringing SolarCity's financial product strength and microgrid capabilities into play. So I see this as a very good step toward addressing a much larger market and diversifying their business model.

    I think this also shows the kind of utility partnership with utilities that Lyndon Rive has been talking about. For SolarCity to address wider markets it needs access to distribution services. This is why grid defections I'd a bad policy outcome for SolarCity. The company needs to be able to offer shared solar power and battery backup.
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    I got to see a little of this first hand a few weeks ago. I was on a road trip through Minnesota with my Model S and there was a (then) available free Chademo charger in Ramsey, MN. Turned out it was Connexus Energy. They are an energy co-op. They had a large solar array that they were testing (their engineers were playing with it, so they were around). They saw me charging so they came by to watch and strike up a conversation. They are selling solar power via the grid, where people can purchase a "share" of the energy produced from the solar arrays. This model works well for people who can't put up their own solar arrays. This seems to be similar to the Solar City model, so there is certainly already competition for what Solar City is trying to do. Interesting, but I should have gotten more details from them...

    Connexus Energy IMG_1787.JPG
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    It reminds me of Enercoop, a French network of regional co-op in which each customer and energy producer has the same voting right. The coop buys electricity from renewable energy producers only (members) with a fixed kwh rate of 16 cts - twice the 8 cts rate from EDF, which gets 75% of its electricity from nuclear. The power is distributed via the public-owned electrical grid.
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    I wonder if this has to do with new commercial zep mounting. I think that is more for flat roof applications but I am not sure. I also wander if this has anything to do with them getting into the manufacturing business. I think Silevo panels will make a very be very compelling in "community solar gardens".

    This first announcement is targeting up to 100 Mw of these at 1 Mw each with the total US installation last year at around 86. It is exciting to see how fast they are entering new markets within their main business unit but also creating new areas of growth.
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    I think the Zep mounting is for large flat roofs. Their is another company involved with this deal that seems to have more experience with ground mounted systems. I should hope that not all of these solar gardens will be ground mounted systems. I'd like to see the roofs of apartment building used. Also solar canopies over parking areas could be attractive. In urban areas, ground mounted systems just don't seem like good land use to me.
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    :rolleyes:
    Rural counties outside the twin cities. They are not moving electrons from the panels to the apartments. They are simply connecting to xcels grid. It doesn't matter what equipment they use. What matters is the cost per watt.
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    And what equipment they use directly influences cost per watt. This is why they acquired Zep mounting, because it shaved pennies off their installed cost per watt.
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    Minnesota renters sign up for the Solarcity electricity, they get cheaper rates for the clean electricity. That's it, that's the sell. The panels will be off in a field somewhere, xcel charges Solarcity for the use of the poles and wires to get to the renters. Renters pay the Solarcity rate which is lower then standard excel prices. Done deal.

    The clever part about this is this is exactly what Solarcity envisions the future to be, just the next step is combining all the different elements (home, commercial, industrial roof top) with utility poles and wires as well as large scale utitlity clean energy.

    Solarcity is working so many different levels right now it's pretty creative, cunning, and ambitious. Roof top solar, micro grids, and variations there of(solar gardens) all the while changing policy and long entrenched energy business models... And it appears surprisingly they are quite successful in its nimble execution of this intense simultaneous balancing act.
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    You forgot their quest to become the largest high efficiency panel manufacturer in the world!
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    About Zep mounting brackets

    I was discussing the Zep system with a Solar City regional supervisor last week; this is my takeaway from our discussion. Please correct my understandings if anyone knows differently.

    1. The Zep system initially was appropriate for pitched roof applications, and not for flat roofs. Thus, it was conceived as mostly to be used for single-family residences.
    2. It consists of little more than a support bracket along the bottom of the lowermost set of PV panels that looks similar to a 90� roof flashing, plus hockeypuck-like support nodes for the corners of each panel - one puck may support as many as four four panels' corners as they are very close-mounted.
    3. Panels are snapped into final position by first dropping them into their lower edge supports, then angling them onto their upper supports. Wiring connected as needed before the next row goes on.

    It is extremely easy and fast - it reduces installation time by an amazing amount. The disadvantage is that if an "inner", non-exposed panel fails, there is significantly more disassembly time needed than in traditional systems. But the tradeoff for the upfront very low cost of installation far exceeds that rare occurrence.

    I found a video here: Two Solar Panel System Installations, One Crew, One Day – We Are SolarCity - YouTube Pause it at, e.g., 0:35, 0:45 and 1:35 to get a fair view of the lower support and the corner hockeypucks.

    Now, Zep has been altered to be used on flat commercial roofs. To my eyes, it differs significantly from the original but it retains its toolless,snap-together features. Here is a discussion of its advantage from an Oct 2014 Solar City site:


    I haven't been able to determine if the system needs the special frame configuration that would be unique to Silevo panels or whether some/many/most other PV panels can be used in a Zep system.

    Hope this helps.
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    1 Sign of SolarCity's Success (SCTY)

    Good little story on SolarCity's gross margin. As with Tesla and other high growth companies, discipline around gross margin is very important. Any company doubling revenue ever 12 to 30 months is going to spend a ton on SG&A and likely R&D too. Much of that spending is in anticipation of operation at at much larger scale than current revenue, but solid gross margin is necessary to catch up and continue to fuel growth.
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    Real-time data on Solarcity installs and power output from all systems nation wide...

    SolarCity Now

    within 10 minutes of 9am pdt, two new systems turned on, a new customer signed, and 700mwh of output (thus far this morning).
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    This is very cool. I wish Tesla had something like this.

    Getting back to the community solar idea again, I am wondering if ordinary rooftop installations can participate in this scheme. For example, suppose I am a SFR homeowner who needs a 7 kW system, but have a roof good for 10 kW. Can SolarCity go ahead and install 10 kW where 7 kW serves my needs and the other 3 kW goes to community solar. Moreover, any kWh beyond what I consume also goes to community solar. I get compensated for the extra 3kW of roof space I contribute and for surplus kWh. This enables SolarCity to make a bigger sale on my roof, which improves their economics. Also the utility is off the hook for any net metering, as I am selling to community subscribers, and the use of transmission and distribution resources is minimal, as the power originates close to consumption. It's a win for everyone, except power generators who are losing marketshare to solar. If this is the sort of opportunity for SolarCity, then this project could also energize their their whole business. Imagine the marketing value along of being able to tell potential customers with their own roofs that their installation will also reduce energy prices for renters in their community. This could be a decisive selling point for some community minded prospects.
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    Great thoughts jhm. To add one more advantage of such "community add on" solar; it could greatly facilitate solar installations in situations where one individual wants to do it but is stopped by for example a sceptical home owners association.
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    Another cool possibility for community solar is the integration of energy storage. At the solar gardens, Powerpacks could be installed. This would be lower cost storage than Powerwalls and would assure that all the energy is consumed by subscribers throughout the day and night. Additionally, subscribers could install Powerwalls at their own homes for back up and these can be aggregated to assure self consumption across all subscribers. While this would cost and extra $100 or so per kWh over the cost of Powerpacks, the advantages of backup power, peak shaving and location may be worth the extra expense. Another curious posibility for the Powerpacks at the solar gardens is that they can can do some rate arbitrage if they are able to charge at night from three grid.
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    So you're thinking about how the benefits to the wider community can make a more compelling case to HOAs. I've looked at the variety of roofs in my neighborhood. A large fraction of homes in my HOA would not be good candidates for solar. There are natural inequities of opportunity. So I could see those with poor roofs for solar getting upset about other neighbors getting solar and perhaps compromise home values for everyone. But when all neighbors can benefit from solar on a few roofs, it becomes more acceptable.

    I actually think it could be very good for SolarCity to market directly to HOAs. This is why I like microgrids. Make a microgrid of the whole neighborhood and drive down costs for everyone. Moreover shared amenities like street lights, a club house or swimming pool can get power for free from the microgrid. Shared EV charging infrastructure could also be a terrific amenity for a community.
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    SolarCity creating 1,500 new jobs in WNY

    "BUFFALO, N.Y. (WKBW) - SolarCity addressed a crowd of over 300 people at the Hyatt Regency Thursday. The event held by the Buffalo Niagara Partnership gave SolarCity the chance to tell Buffalo that their plant will be complete by the end of the year.

    Their South Buffalo plant is 1 million-square feet and will produce 10,000 solar panels a day. Production will begin the second half of next year.

    They�re initially looking to create 1,500 jobs but hope that supply demand will also help local business thrive.

    Job positions will include engineer managers, operators, installers and more. Nearly 1,000 positions will require a two-year college degree or less."

    http://www.wkbw.com/news/solarcity-creating-1500-new-jobs

    Moving right along! :smile:
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    Update from now.solarcity.com ....

    past three days solarcity has hit over 6gwh/day - 6.4gwh/day. At this rate, they will be hitting 12ghw days next year this time... Wild stuff. Averaging about .15 cents per kWh so revenue is escalating significantly.
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    Solar Power for Everyone - The New Yorker

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    Based on solar bond offerings this quarter, SolarCity potentially has raised over $421mln in Q2 alone. That's just solar bonds sold over the internet to individual investors, not including tax equity partnerships or the standard capital raising avenues. Pretty significant if true.

    This has never happened before.

    Don't hear this in the news, it's all flying under the radar right now. SolarCity - SEC Filings

    Maybe this will highlighted at the conference call August.
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    Looking like SolarCity systems may hit 7 GWH record today if they have not already (Hasn't been publicized AFAIK). At 6.87 as of 6 Eastern, or 3 Pacific
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    Could you please point to specific filing and page number (or a search keyword)?

    You used the word 'potentially', so what's your math behind 421mln?
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    Start on the latest page and reiview each new filing all the way back to April 1st.

    By the way, Solarcity hit 6.5gwh today... Might be peaking just under 7gwh/day this summer... Last summer I think they hit at its highest a few times 3.5gwh.
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    Anyone have any thoughts on what to make of the price movement over the past week? Very low volume and almost 0 volatility. Time to buy a straddle?

    All this news and no press or analyst commentary? Something is going on. The options chain for January is a bit unusual. Something tells me part of this might be because Solar City is not being widely covered or discussed by anyone.

    Bank of America, which has a $150 price target for Solar City increased its position by 75% last quarter.
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    Hey Guys I'm new to this thread but am an investor in Tesla. I have been interested in SCTY for a while but don't fully understand their business model. Can someone give me a quick breakdown of how they are going to make money and when they plan on being profitable. I know I could read this thread but its 150 pages long and...ain't nobody got time for that.

    Thanks all
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    The being profitable part is not in the near future. Some self promotion - simple way to understand solarcity business - The Unstoppable Force Of SolarCity Simplified - SolarCity Corp. (NASDAQ:SCTY) | Seeking Alpha - there are some math errors in that article but think of the QCP (Quarterly Contracted Payments) in the article as QCP + rebates and then the numbers are right.

    Basically scty borrows money to give you a solar system. They recover their costs in 10 years or less and you pay them for 20 years. So your system is not profitable to scty for 10 years.
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    Interesting. Do they make profit off of the grid as well? Or no...
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    Solarcity makes a profit off each install they do already. Each install is cumulative, adding reliable revenue streams for 20-30 years. Kind of like subscriptions to Netflix, but each customer pays he monthly fee for 20-30 years.

    Since demand is very strong in a 40 million rooftop market that has 99% of rooftops yet to be installed, Solarcity is building their company infrastructure to meet that staggering demand(in current 18 state markets). That means hiring a lot of people, building a lot of operations hubs, and constructing massive manufacturing centers unlike we've ever seen before.

    That requires capital. More then current revenue can achieve. So, Solarcity has to get capital financing build the company to obtain those long term contracts. This looks like they aren't profitable, but the reality is they are growing the business to meet the seemingly endless demand. At the same time they are doubling, they are reducing all in costs per watt installed which is truly noteworthy since they are growing so rapidly.

    As Solarcity reaches an infrastructure level that can handle the rate of installs its achieving with sales, then you will see a massive reversal in accounting profits. This is why Solarcity is so attractive as a long investment. Once growth slows down, they achieve big time profits and essentially will turn to big dividends for investors. Meanwhile, the stock will appreciate significantly giving opportunities for short term/medium term investment vehicle(it trading is your type of thing.)

    How they make money is from each customer paying for the electricity the pv system produces. In the future, the grid utility will pay for each systems production just like any other power supplier. This will eventually replace net metering which is essentially the same thing without a direct contract with pv system owner. The truth is distributed solar over the grid is very reliable, extremely responsive and significantly cheaper then centralized power generation. Traditional Utilties know this and are fighting tooth and nail to slow down competition while they figure out a way to corner the solar market before these "new guys" do. It's like what gordon Gecko says, Solarcity and the distributed solar business is "going to eat your lunch" if you don't do something about it and slow these guys down. And that's exactly what a few big Utilties are doing right now, especially in Arizona.
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    Not quite right. On all of the tax equity investments they have made the systems are cash positive within year one of installing them. To show a gap profit will take a long time because they are growing so fast. They build a new distribution center like every 25 days and hire 300-400 people a month.

    They also have a giant factory they will use to produce very cheap high efficient panels and they did not have to pay to build the factory or buy the equipment. When they get the kinks worked out of that factory it will add substantial value.
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    Solarcity hit another 6.1gwh day yesterday... That 5 in a row since I started count last week. This is significant stuff. That's over 6 nuclear power facitlities worth of production. Solarcity has developed that capability in just eight years where it would take decades to develop the equivelent amount of nuclear plants. Elon said last week at the utility conference if you built a solar+battery plant on current land of nuclear facilities you could produce more energy then the nuclear plant can, and that's today with today's technology. The truly wild thing is Solarcity will easily double this production by this time next year, literally putting the equivelent of 6 nuclear plants in operation in just 1 year. That is seriously some astounding horse pucky.

    How California plans to integrate distributed resources into its ISO market | Utility Dive

    Aggregation all these distributed systems is the name of the game and California ISO is chomping at the bit to do it. Major win for Solarcity and investors when it happens...
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    That's 6 nuclear power facilities worth of production for one hour only. Nukes can do that day in and day out, year round, 24h a day. Apples and oranges.

    But I agree with your larger point, which is that SolarCity is writing "we are coming for you" in large letters on the wall, and the utilities can't help but see it.
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    Not to stifle your enthusiasm but a nuclear power plant makes a GWh, every hour. So an average nuke plant can make 24 GWh each day (except for outages/trips). So 6.1 GWh is 6 nuclear power plants for just ONE hour, while it took Solar City all day to make that much.

    Still impressive, though.
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    "Curb your enthusiasm" is my mantra to myself for the day...

    I was thinking capacity of which solarcity is about at 1.5GW which a little more then 1 nuke plant, not 6 as you helped me see. Although I just read the the average nuclear plant produces approx. 14.6gwh/day. Solarcity might hit that number in 2016, but could double that number by 2017, which then, we'd see nuclear power plants worth of new distributed solar generation come online annually... Again, I might be too enthusiastic, but in two years we might see an entire nuke plant of DG come online and potentially 2 more in 2018 if growth rates stays where it's at currently. That still beats decades of equivalent nuclear development required to get nukes up and running.
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    Go ahead and answer! your still on here let it flow!
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    I know your trolling the internet deep for people that might back up your misguided ideas but Please do not link other random forums that are not relevant

    edit: was going to delete my post because of snipiness but since I was quoted I will say the link may very well have been a relavant form to the discussion I stopped reading when I saw the OP had a post count of 12 and the name "IamadoorKnob". I do believe there is a rule against linking to other forums though.
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    This Guy/Gal is really on the wrong side of history. Truth is this in a nut shell, Bet against Musk = Failure!
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    This is the part I do not understand. There is so much video evidence out there of Musk being brutally honest and people being convinced he is lying. How can so many shorts be convinced he is lying about this thing or that.
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    Here is the rub Blake: He's not lying, no matter how they twist things they can not make it so. I found Musk searching for the least evil Billionaires in the world! That right there should tell you something. Check me if I'm wrong Blake?
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    "They misled us and we feel ripped off. And there is no way to tell if what we are generating is correctly going towards our electricity usage, so you can't verify that everything is working correctly."

    "I am so angry that we did this and wish we could get out of it."

    Only 19 years remaining on the contract.

    http://www.consumeraffairs.com/solar-energy/solarcity.html
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    No one knows who the heck is writing in there. The reviews are so polarized. Why are there no reviews with 3 stars or 4 stars? For about last 1.5 years every place I have seen there have been only extremely bad reviews. But they are literally doubling every year and the 'market share' is growing. How is that possible. Somehow there is a disconnect between internet and reality.

    Will reality catchup to the internet? or will the trolls get tired and stop spamming? I have no idea which way it's going to go.

    Personally I trust Musk. I would much rather give benefit of doubt to SolarCity and their track record than to random reviews on internet.
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    I have a Solar City system. Working with the company has been excellent. The installation is perfect. My city inspector told me that he is assigned only to solar system inspections and that Solar City does a better job than any other company.
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    Moderator's Note

    Please remember that this is a thread in the Investor's Forum. Discussion about SolarCity's business model or practices needs to be connected to an investment thesis or likely impact on SCTY price to be on-topic.
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    certainly understood robert; i do think a discussion about whether Solar City is regularly misleading customers is relevant to the investment thesis (ie. if this is really happening on the regular, it will eventually come back to bite them).

    i've never heard of the consumer affairs website, but i think a read of solar city's better business bureau page is probably a more reliable source for this type of information. i haven't read through it, but would probably recommend it before making a significant investment in solar city. [adds another thing to his to do list].

    surfside
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    I agree, which is why I didn't already move all the recent posts. I'm just trying to steer the conversation back to the question "what does this mean for the future of SCTY" rather than getting lost in the weeds.
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    Clearly, there is a voice here that is not adding to the solarcity investor conversation either bull or bear, but rather set on expressing their dislike for the company. Many members have tried to engage in civil, reasoned debate, but yet this same individual continues to harbor hostile language toward others without reasoned or civil ideas supporting his/her accusations. It comes off as disrespect to the forum and the members that populate it.

    I feel it is only reasonable to point out that solarcity has nearly 250k customers (including a reasonable addition of new customers this q2) as well as over 35k "solar ambassadors" and well over 20 million views of its "Ra" commercials. They are popular as well as have the highest better business bureau rating one can receive. It is reasonable to assume they will have dissatisfied customers as well, however, the evidence is clear the vast majority of customers approve of solarcity as their solar energy provider.

    If there is a challenge to this assertion, please respect all members of this forum/thread and respond with facts and reasoned opinions in kind. Otherwise, it might be best for a moderator (like Robert.boston)to make the appropriate decision to guide those that come to this thread to disrupt the civil, reasoned discussion (pro or con on solarcity as an investment) to another method/place of expression.
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    SpaceX just bought $75mln solarcity solar bonds today, raising their total to $165mln over the past three months. SolarCity - Prospectus Filed Pursuant to Rule 424

    solarcity has now raised its solar bond offerings from $200mln to $350mln. SolarCity - Current Report

    And according to structured finance expert Ben Cohen(CEO of T-Rex), solar bonds could experience "meteoric growth" soon. Tesla's (TSLA) Elon Musk Takes Solar Financing to the Brink of Change - TheStreet

    its looking like solar bonds make a lot of sense to a lot of different people with substantial amounts of capital.
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    Yea I stopped reading Rogier or whatever his name is. He always toots the same horn, Solar PV is a terrible investment because it uses valuable roofspace that should be used for hot water heating and other thermal PV and that since Solar City is using all this valuable roofspace with PV they are destroying the future of the country because it makes soo much more sense to put up thermal PV. I have little doubt he installs thermal PV for a living.
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    Frankly, I'm still having trouble figuring out the financial model.

    There are a few possible scenarios:
    (1) SolarCity is doing solid credit checks, has solid collateral, and the lending is solid; solid enough that both the "solar loan backed notes" *and* SolarCity corporate will make solid profits
    (2) SolarCity is stiffing the investors in solar loan backed notes, dumping the risk on them while giving them a low return rate, and SolarCity will make profits even if they have made a lot of bad loans
    (3) SolarCity is giving the investors in solar loan backed notes a fair deal so they'll do fine, but has completely misestimated their lending and will go bust if there's a high default rate.

    At this point I really do not know how to tell. This is a matter of analyzing loan quality, which is *notoriously* hard, as well as a matter of looking at intricate detailed of ABS legal arrangements.


    It is quite clear (from earlier linked things such as this: Solar City flakes? ) that SolarCity isn't really in the business of selling solar panels, and wants to be primarily in the financing business.

    Fine. Then it has to be evaluated as a finance business. And I find that difficult.

    Most finance businesses are scummy to one degree or another, so SolarCity can be pretty scummy and still come out on top. The investment question is really whether their loan quality is solid.

    It appears that having solar panels which *you don't own* on your home, which are either owned by SolarCity or collateral for a SolarCity loan, can impair the saleability of a house. Apparently SCTY doesn't offer a buyout option for a new home buyer. I know I wouldn't buy a house with that sort of obligation; it's at least as bad than a condo agreement or HOA. What odds are there that a home seller will sell the house, the buyer will refuse to assume the contract on the panels (which the buyer should be able to do, unless it's a 'covenant which runs with the land'), and then the seller will default on the payments? I'd expect it to be a fairly likely scenario...

    Frankly, the bear case is that a lot of loans are defaulted, for one reason or another. And repossession of collateral gets SolarCity very little -- more than half the costs are in installation, and the old solar panels are becoming obsolete as time passes. If their lending standards are screwed up, they could go under quite suddenly.

    There are, by contrast, no such risks with Tesla, which is fundamentally not in the lending business.
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    From a classic "unethical investor" point of view, the big question is how many of them will default -- and whether SolarCity can collect if they default. What are the collection provisions in the contract if those customers don't pay up? What if the customer declares bankruptcy?

    - - - Updated - - -

    Nah, pricing can go down a lot more than that. It won't be a linear drop; there'll be a flatlining for a year or two followed by a massive decline as multijunction cells start to become cheaper.

    Wrong. Your local convenience store DOES compete with Walmart. The only reason Walmart has been winning is that it can generally undercut your local store on price, and maybe even on selection.

    By contrast, in areas where local installers go head-to-head with SolarCity for *sales*, the local installers are almost universally cheaper.

    But SolarCity isn't really in the business of selling or installing solar panels, they're in the businesses of
    (1) lending money against solar panel installation
    (2) selling power to customers who may or may not be getting better prices than the alternative, while leasing space on the customers' roofs for next to nothing...
    (3) and possibly other financial models I haven't noticed yet

    The high profits on the PPA model (#2) depend on a shortage of competitors in the business. Eventually someone will start actually paying customers for the roof location.

    SolarCity is a financing firm. Any other solar financing firm could outcompete them, and I don't see that they have any sort of lock on the financing business. Where's the barrier to entry?

    They don't have any real ringfencing around their business, though, do they? I mean, they're not even competitive on price or quality in the sales market (as opposed to the leasing and PPA markets). So basically they're relying on people paying high rates because they're capital-starved. A competitor who competes on interest rates or finds a cheaper financing model could make a humungous dent in their business.

    I guess they have a brand, but it seems kind of weak.

    As opposed to competing with Tesla, which requires designing and manufacturing a car, and developing massive brand reputation on top of that.

    I guess my biggest point here is that SolarCity's business model is *cloneable*, and it can be cloned very easily, and the clone can do a better job pretty easily. So where's the long-term investment future? (The short-term future looks good, but what about the long term?)

    This was also an analysis I undertook with Tesla, and in the case of Tesla, (a) other startups have major hurdles to overcome which Tesla has already overcome, while (b) existing car companies have a bad attitude which will prevent them from competing until it's too late and Tesla is firmly established.

    I don't see that sort of blinkered attitude in the solar industry. Other companies offer leases, other companies offer PPAs, other companies are floating solar bonds; all of them are capable of getting lots of capital; any good business model will be copied and copied fast.
    �
  • 1/1/2015
    guest
    Thanks for your analysis neroden. WRT barriers to entry, what do you think of the things Solar City is doing that are giving them or will give them (with some luck) a cost advantage over their competitors? I'm thinking of their installation systems, the advanced panels that will be produced in the new factory, and a head start on battery storage? What led me to invest long in SCTY was their ability to consistently be one step ahead of their competitors in this regard. Overall I agree with you that this will become a more competitive industry. Margins are likely to shrink.
    �
  • 1/1/2015
    guest
    SCTY.ORp.png
    SCTY.Earnp.png
    �
  • 1/1/2015
    guest
    @Electracity, Does this mean you are shorting SCTY? Guess you will make a pile of money.
    �
  • 1/1/2015
    guest
    interesting points, thank you for your analysis and thoughts.

    I think it may be much simpler to sum up Solarcity's business model: they sell electricity. All the financing, all the cost reductions, everything Solarcity does is based off the idea of selling electricity on par or cheaper then the local utility in today's dollars.

    When a person hears a sales pitch from Solarcity, they only want to beat what they are currently paying their current utility. They're not interested in solar equipment, they are not generally interested (or don't care) about solar in general. They don't want to worry about anything, so they want a turn key, insured product at the end of the day. They want just the cheaper electricity.

    Thats it. And, Solarcity knows this. If you look the vast majority of its products and sales, they all revolve around cost per kWh a person pays at the end of the day. (This includes the loan product since they base monthly payments on beating the local monthly utility bill in cost on the customer.)

    solarcity beats the solar competition in the market share game because the market is so vast and untouched that they are able to reach far more people and also establish a strong brand on a simple concept of no fuss cheaper electricity. It's like the Wild West out there. The bigger more robust solar operations will lay more land stakes then the smaller guy. This game is about meeting the massive demand and smaller operations can't achieve the same kind of awareness or movement the bigger guys can.
    �
  • 1/1/2015
    guest
    What's the issue with declining earnings per employee, if the company hires people who bring more revenue than they cost?

    This could be a problem if:
    1) the company's sales stagnate (hint: they don't)
    1) the solar market has limited potential (hint: it hasn't)
    2) the hired employees don't increase sales (hint: they are)
    �
  • 1/1/2015
    guest
    The revenues as increasing significantly. Gross profits have also significantly increased year over year.

    Remember revenues are spread out over 20 years, so annual revenue you see today is a fraction of total revenue.

    The actual numbers show they are growing significantly, hiring around 300 people a month right now, doubling the physical operational buildings/centers.

    They are paying up front for long term revenue streams that last 20-30 years.

    its better to look at assets and liabilities, but more importantly, what are their revenue generating assets...
    �
  • 1/1/2015
    guest
    No accounting background, I see. Installation labor is capitalized as part of the asset created. They have sold most of their future revenue stream.
    �
  • 1/1/2015
    guest
  • 1/1/2015
    guest
    Very excited I'll get the opportunity to signifcianty
    increase my position around $50. The drop from $63 to $53 was in my view due to broad market and end of quarter window dressing, and some technical damage. The market is not pricing in any of the events that have happened over the past few months.
    �
  • 1/1/2015
    guest
    Thanks for this @electracity, Seeking Alpha is known the world over for being the mecca of truth NOT! I wouldn't read an article there if you paid me! But thanks for trying. Shesh!

    - - - Updated - - -

    Best of luck friend!:smile: With ya' all the way! BTW, where the heck is ' F ' ? Don't have to answer of course! :biggrin:
    �
  • 1/1/2015
    guest
    It appears that the ITC subsidy is being held as a lead weight on solar ppa's. I am not so worried about that. It looks like the incentive that the tax break gives may cause less people to switch to solar, but a side effect will be that installation will be markedly more expensive without the tax break. If it's more expensive, I would imagine that more people might be interested in a ppa agreement rather than laying out more cash upfront.

    Recently, it was announced that utilities are going to be entering the home solar market.
    Largest Southern Co. subsidiary enters rooftop solar market - SFGate
    This indicates to me that the loss of tax based incentives is not a large deal because if it was, the utilities would not enter the market just as the subsidies died. I do see this as a big blow to solar city in the sense that they will have a large competitor. One of scty's biggest barriers against competition is just how capital intensive its operation is. However, if there's anyone that can raise capital well its utilities- they seem to sell stock and raise money all the time.
    �
  • 1/1/2015
    guest
    You might be onto something about reducing the ITC having the potential to increase the share of PPA financing. I think bottom line for many solar customers is that they just want to save a few cents off the utility rate while doing something good for the environment, and that is exactly what PPAs deliver with convenience and minimal risk.

    I do think the loss of ITC will be a much bigger hit to utility solar than distributed solar. Essentially utilities are running into a generation glut. Distributed solar has the virtue of locking in demand at predetermined rates. This is what utilities will need in a glut. Moreover, the smartest investment for utilities going forward will be batteries. With batteries they can integrate distributed renewables and satisfy many regulatory objectives. The business model for utilities will have to change. They will not be able to continue a model based on generating power. The genetor glut will wipe out the economics of that model. Instead, they need to move toward a business model based on providing energy services. This is exactly where Southern Co is going with rooftop solar. They are providing an energy service that is backed up with the full capabilities of the grid. So this is a fundamental shift in business model. Utilities will also need to embrace aggregated DER services. Utilities need to specialize in the coordination of electricity production, use and sharing, and become agnostic toward who produces the power. If their business model is not agnostic to power producers, they will be burnt by the generator glut. So the fundamental problem I see with utility solar is that it positions utilities as generators, not energy coordinators. The subtle distinction between utility solar and community solar is very important to understand.
    �
  • 1/1/2015
    guest
    Why does the oil and gas industry have over 12 tax breaks, compared to 1 for the solar industry? The game is significantly skewed promoting emphatically an extremely uneven playing field. One that is rigged for oil and gas in a major way. There is no even playing field for competitors in the energy business. This is clearly a monopolist system that is wildly out of line with our federal and state legal precedent becoming more so with each passing day.

    if we are to even the playing field and let ALL energy industry players "stand on their own two feet", we should demand the same 12 tax breaks for the oil and gas industry to be eliminated.

    The ITC will stay in play, it will be extended. Regardless, I think years down the line as solar takes over a large percentage of our energy generation nationally, the fossil fuel based utility/energy industry are the ones to be really worried about the impact of losing subsidies since they will not have the monopolist leverage they clearly once had in the good old days.
    �
  • 1/1/2015
    guest
    The SCTY stock has been in a downtrend since the May monthly options expired May 22. I had a feeling that the range-bound trading between $50-$60 SCTY has been stuck in since last October would still continue and wanted to sell at $62 and wait to buy back around $50. When it appeared to consolidate at $60, I hadn't checked back in a while and missed the opportunity.
    �
  • 1/1/2015
    guest
    Hmm. I like this analysis, but if this is the way of analyzing the company, SolarCity looks like a bad investment. In New York you can easily beat SolarCity's rates by shopping around, or even by changing the 'electricity provider' through your existing utility. This would mean that SolarCity's business model is based on a small number of extremely overpriced utility markets, which is a very sharp limit on expansion. :-(

    If SolarCity actually managed to lock themselves in as the lowest-cost provider, they'd be golden, of course. Maybe their new high-efficiency-panel factory and automated racking installation will do that, so that would be a bull case...
    �
  • 1/1/2015
    guest
    In the simple sense, this is what the cost of a solarcity install represents to the customer: 1/3 equipment and direct labor, 2/3 everything else. A more mature solar market will squeeze out this inefficiency.
    What solarcity sells is extremely expensive solar financing to people who could get a much lower cost HELOC. They are "rent to own" style finance company selling to the upper middle class. Congrats to the clever marketers who figured out an effective sales pitch, but it won't last.
    Solarcity is efficient at installations, but not as a company. The investor relations person who reads this thread needs to be paid. Someone needs to pay for the CFO 450,000 stock options.
    �
  • 1/1/2015
    guest

    It is interesting isn't it? But you have to do a clear comparison of what is offered by Solarcity compared to everyone else. The sum total value of what Solarcity offers is better for a vast amount of people, about 38% of the market thus far.

    Completely insured system, for the entire 20-30 year contract. If it doesn't produce, you don't pay your lease/ppa/loan payment. People value their time and peace of mind much higher then some think. They also value their credit scores as well as their debt levels/ liquid cash(savings account). If they can de-risk an long term energy saving opportunity, they will. If they can achieve savings without risk, they will do that more readily then take on more responsibility with less overall value for the perception of cheaper solar.

    It's not just my thoughts, it's nearly 40% of the residential market, and an increasing number of the commercial, schools and government marketplace. As I've read, Solarcity is also nearing the #1 spot in commercial as well right now.

    The numbers are showing up for us all to see too. I've been checking in on the Solarcity Now website and have noticed they are saving new signed up customers well over 300k/year(I saw one day at over 450k). That's each day they are signing up these new customers and those are the savings just for that day's work for solarcity's salespeople.

    So, if you do rough math, Solarcity supplies roughly of 60-80% of electricity to a home. If they are saving a conservative average of 10% on the total electric bill, the total electric bill for a daily pull on energy sales of 300k is $3mln. So at an average of 70% of the total electric bill, Solarcity is generating conservatively $2.1mln in annual energy sales per day right now.

    At this rate(conservative), they are on track for over $765mln in 12 months worth of energy sales. By this, it looks clear solarcity's product is hitting the right value cord with a large number (and growing number) of consumers right now.
    �
  • 1/1/2015
    guest
    anyone read "the economics of load defection" from rocky mountain institute dealing with PV + battery? The Economics of Load Defection
     seems to bear out that PV + batteries are pretty inevitable
    �
  • 1/1/2015
    guest
    They are the equivalent of a 1980's mini computer maker. When mainframes were disrupted, companies like DEC and Wang had big sales for a few years.

    The primary benefit of solar comes from disintermediation. Solar is very reliable, with primary electronics having good warranties. Ultimately the solar business, like the computer business, comes down to manufacturers with meaningful IP, and their buyers. There's minimal value in selling and installing computers today. There won't be much value in selling installing solar as the market matures. Solar is much more of a commodity than computers too.

    If solarcity's model works for solar, it should work for roofing too. A national company should be able to dominate the roofing market through efficiencies of scale. They could even start manufacturing their own roofing products to minimize cost. But that is just silly, isn't it? Because while you could start a national roofing company and have big sales, but you could never compete with the efficiencies of a local, competitive roofing installer.

    Solarcity isn't necessary. Their financing isn't needed in their residential market segment. They don't add significant value to a home installation. They are a large, well organized sales force with a good, but misleading, pitch. They may have accumulated a future revenue stream to support a market cap of a couple billion. But that accumulation is probably just the temporary benefit of being an early entrant with the right plan for initial success.

    - - - Updated - - -

    I think by 2020 it will be unusual to install solar without at least a modest battery. From 2020 onward, in places like California, PV direct to grid will likely be very inexpensive. The grid charge will be separate from electricity pricing. People with PPA contracts will be paying grid charges on top of their PPA rate. Most will not have a system compatible with batteries, and won't have good options to change equipment.

    Signing a 15-20 year PPA or lease is truly a strange choice.
    �
  • 1/1/2015
    guest
    electracity - what do you say to those that do not want another loan because they already have them on their house and cars?
    �
  • 1/1/2015
    guest
    solarcity sells electricity. Everything else supports that. Like AT&T sells minutes, not phones, or like Apple Music sells access, not songs.

    solarcity is getting into manufacturing to sell cheaper electricity, not sell panels.

    Tesla energy storage is not a product in itself, but rather, a means to achieving cheaper electricity.

    Cheaper electricity opens up a wider global market which is nearly infinite in annual sales. That's the endgame here.
    �
  • 1/1/2015
    guest

    Its funny people are use roofing to Prove that Solar is not viable to go nationwide. The problem with this line of thinking is the largest roofing companies are all national companies. Companies like Aspen Contracting and the other companies that these guys create when they run their roofing name into the ground. Much like Solar City , they install a lot more than the local roofers when hail and hurricanes hit because they go after business and know how to scale. For the most part the people running these roofing companies successfully are not very bright and nowhere near the level of competence that Solar City management has.
    �
  • 1/1/2015
    guest
    You unbox your computer and plug it in.

    Car dealerships don't make anything.
    WalMart doesn't make anything.
    Amazon doesn't make anything.

    There really should be large national roofing companies. (There probably are, but they do business construction and hire subcontractors). But besides local variability, nobody has done it yet, because the normal approach to business is to exploit information asymmetry and aversion to risk to increase profit. There are companies like dealerships that continue to do that. But then there are companies like WalMart and Amazon that destroy the competition by being good at exploiting economies of scale.

    The judgment on the long-term value of SolarCity is not to say that they're acting like car dealers, the market will become like retail, therefore they'll fail, it's to ask whether they can adapt. Can they get low system prices? Can they lower soft costs? Can they offer low-cost financing? They're very obviously working on the first two, and the third, well, we'll only find out when they need to do it. If they do that well, they can be like a WalMart or Amazon, always working to lower costs, always trying to beat competition and varying margin depending on competitive environment.
    �
  • 1/1/2015
    guest
    There is no better financing then the "my solar loan"(with insurance and guarenteed production).

    Again, Solarcity is about selling cheaper electricity. That's it. That's what the business model is about. Not about equipment or storage. It's about price per kWh.

    Roofing isn't a comparable business in my opinion.

    a consumer sees their current utility bill and want a cheaper bill with the same level of risk/non involvement as with traditional utilities. The vast majority of home owners don't want to add energy production to their list of responsibilities in their daily lives. They expect no fuss no muss, unfettered energy supply from the energy provider when they pay their price/kWh.

    This is exactly why Solarcity appeals to a major portion of the market. As Solarcity reduces that price/kWh with the same peace of mind and production guarantee, they will keep opening up a bigger market, eventually expanding to all 50 states and across the globe... Again, at that point it becomes a near infinite energy market that has never been accessible to a single electricity company before scaled distributed generation.
    �
  • 1/1/2015
    guest
    I'm so conflicted about what to do with SolarCity in terms of signing up with them or not.

    I pay about $125-150 a month in grid electricity now. At least a third of that goes to charging the car. My goal is to go completely off-grid with a combo of solar and battery. But I don't wanna pay a huge amount. I don't actually relish the idea of paying SolarCity even some monthly bill while they own the equipment on my roof. So I'm in this holding pattern, waiting for next-gen PowerWalls and PowerPacks and cheaper solar. Would prefer to just own all the equipment when I finally get away from grid. If TSLA would hurry up and get to $1000/shr....
    �
  • 1/1/2015
    guest
    Over the length of the agreement they are selling very expensive electricity. The number is 10% lower to start compared to the POCO. That is the hook that catches the low information consumer.

    If they were truly offering value, they couldn't securitize their sales.

    - - - Updated - - -

    Not the thread to discuss your issue. Visit a solar forum and learn why you will not be going off grid.
    �
  • 1/1/2015
    guest
    Nonsense.
    �
  • 1/1/2015
    guest
    the panels on the roof are not important, it's the production of electricity. You don't light your house with panels. You light your house with electricity. Solarcity specifically guarentee production of electricity. If you want to own the panels, then you can do the my solar loan, but that depends if you can actually use the tax credits after standard deductions. If not, lease/ppa might be best.

    Again, in my opinion, the goal is cheaper electricity. If you can save $20 dollars a month now, that's much better then waiting 2-5 years to save $20 later. What's $480-$1,200 worth in savings before you decide to buy 2-5 years from now?
    �
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